UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment
(Amendment No. __)
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_________________________Aehr Test Systems
-----------------------------------------------
(Name___________________________
(Name of Registrant as Specified in its Charter)
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AEHR TEST SYSTEMS
AEHR TEST SYSTEMS
400 Kato Terrace
Fremont, California 94539
_____________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 27, 2009
2010
_____________________________
To The Shareholders of
Aehr Test Systems:
TOTHESHAREHOLDERSOF
AEHRTESTSYSTEMS: |
You are cordially invited to attend the Annual Meeting of Shareholders, (the "Annual Meeting")or the Annual Meeting, of Aehr Test Systems, a California corporation, (the
"Company"),or the Company, to be held on October 27, 2009,2010, at 4:00 p.m., at the Company'sCompany’s corporate headquarters located at 400 Kato Terrace, Fremont, California 94539, for the following purposes:
1. To elect six directors.
2. To approve an amendment to the Company's 2006 Equity Incentive Plan to
increase the number
1. | To elect six directors. |
2. | To ratify the selection of Burr Pilger Mayer, Inc. as the Company’s independent registered public accounting firm for the fiscal year ending May 31, 2011. |
3. | To transact such other business as may properly come before the Annual Meeting or any adjournments thereof. |
Only shareholders of shares reserved for issuance thereunder by an
additional 800,000 shares.
3. To approve an amendment to the Company's 2006 Employee Stock Purchase
Plan to increase the number of shares reserved for issuance thereunder
by an additional 250,000 shares.
4. To ratify the selection of Burr, Pilger & Mayer LLP as the Company's
independent registered public accounting firm for the fiscal year
ending May 31, 2010.
5. To approve an amendment to the Company's restated articles of
incorporation authorizing the Board of Directors, in its discretion,
to effect a reverse stock split of the Company's Common Stock pursuant
to which any whole number of outstanding shares between and including
Two (2) and Five (5) would be combined into one share of Common Stock
and to concurrently decrease the authorized number of shares of Common
Stock on a proportional basis.
6. To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
Only holders of record of Common Stock at the close of business on September 8, 20092010 will be entitled to notice of and to vote at the Annual Meeting. Please sign, date and mail the enclosed proxy so that your shares may
be represented at the Annual Meeting if you are unable to attend and vote in
person. If you attend the Annual Meeting, you may vote in person even if you
return a proxy.
By Order of the Board of Directors,
-------------------------------------
RHEA J. POSEDEL
Chief Executive Officer and
Chairman of the Board of Directors
YOUR VOTE IS IMPORTANT
THIS PROXY STATEMENT IS FURNISHED IN CONNECTION WITH THE SOLICITATION OF PROXIES BY THE COMPANY, ON BEHALF OF THE BOARD OF DIRECTORS, FOR THE 2010 ANNUAL MEETING OF SHAREHOLDERS. THE PROXY STATEMENT AND THE RELATED PROXY FORM ARE BEING DISTRIBUTED ON OR ABOUT SEPTEMBER 27, 2010. YOU CAN VOTE YOUR SHARES USING ONE OF THE FOLLOWING METHODS:
COMPLETE AND RETURN A WRITTEN PROXY CARD; OR
ATTEND THE COMPANY’S 2010 ANNUAL MEETING OF SHAREHOLDERS AND VOTE.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE POSTAGE-PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. ANY SHAREHOLDER ATTENDING THE MEETING MAY VOTE IN PERSON EVEN IF HE OR SHE HAS RETURNED A PROXY CARD.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS FOR THE SHAREHOLDERANNUAL MEETING TO BE HELD OCTOBER 27, 2009:
2010:
The Company'sCompany’s Proxy Statement, form of proxy card and 2010 Annual Report are available at: www.aehr.com under the heading "Investors"“Investors” and the subheading "Proxy Materials"“Proxy Materials”.
AEHR TEST SYSTEMS
400 Kato Terrace
Fremont, California 94539
_______________
PROXY STATEMENT
_______________
2009
2010 ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement is being furnished to the Shareholders (the
"Shareholders")shareholders of Aehr Test Systems, a California corporation, (the "Company"),or the Company, in connection with the solicitation of proxies by the Board of Directors, or the Board, for use at the Annual Meeting of Shareholders (the "Annual Meeting") of the Company, or the Annual Meeting, to be held on Wednesday, October 27, 20092010 at 4:00 p.m. local time, and at any adjournments thereof.
At the Annual Meeting, the Shareholdersshareholders will be asked:
1. To elect six directors.
2. To approve an amendment to the Company's 2006 Equity Incentive Plan to
increase the number of shares reserved for issuance thereunder by an
additional 800,000 shares.
3. To approve an amendment to the Company's 2006 Employee Stock Purchase
Plan to increase the number of shares reserved for issuance thereunder
by an additional 250,000 shares.
4. To ratify the selection of Burr, Pilger & Mayer LLP as the Company's
independent registered public accounting firm for the fiscal year
ending May 31, 2010.
5. To approve an amendment to the Company's restated articles of
incorporation authorizing the Board of Directors, in its discretion,
to effect a reverse stock split of the Company's Common Stock pursuant
to which any whole number of outstanding shares between and including
Two (2) and Five (5) would be combined into one share of Common Stock
and to concurrently decrease the authorized number of shares of Common
Stock on a proportional basis.
6. To transact such other business as may properly come before the Annual
Meeting or any adjournments of the Annual Meeting.
1. | To elect six directors. |
2. | To ratify the selection of Burr Pilger Mayer, Inc. as the Company’s independent registered public accounting firm for the fiscal year ending May 31, 2011. |
3. | To transact such other business as may properly come before the Annual Meeting or any adjournments of the Annual Meeting. |
The Board of Directors has fixed the close of business on September 8, 20092010 as the record date for the determination of the holders of Common Stock entitled to notice of and to vote at the Annual Meeting. Each such Shareholdershareholder will be entitled to one vote for each share of Common Stock, ("or Common Share")Share, held on all matters to come before the Annual Meeting and may vote in person or by proxy authorized in writing.
The Company’s Annual Report on Form 10-K, containing financial statements for the fiscal year ended May 31, 2010, are being mailed with these proxy solicitation materials to all shareholders entitled to vote. This Proxy Statement and the accompanying form of proxy are first being sent to holders of the Common Shares on or about September 28, 2009.
27, 2010.
THE ANNUAL MEETING
Date, Time and Place
The Annual Meeting will be held on October 27, 20092010 at 4:00 p.m., local time, at 400 Kato Terrace, Fremont, California 94539.
General
The Company'sCompany’s principal office is located at 400 Kato Terrace, Fremont, California 94539 and its telephone number is (510) 623-9400.
Record Date and Shares Entitled to Vote
Shareholders of record at the close of business on September 8, 2009 (the
"Record Date")2010, or the Record Date, are entitled to notice of and to vote at the Annual Meeting. As of the Record Date, there were 8,495,6928,678,736 shares of Common Stock outstanding and entitled to vote.
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Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before its use by delivering to the Secretary of the Company a written notice of revocation or a duly executed proxy bearing a later date or by attending the meeting and voting in person.
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Voting and Proxy Solicitation
Each shareholder voting for the election of directors may cumulate his or her votes, giving one candidate a number of votes equal to the number of directors to be elected multiplied by the number of shares that the shareholder is entitled to vote, or distributing the shareholder'sshareholder’s votes on the same principle among as many candidates as the shareholder chooses. No shareholder shall be entitled to cumulate votes for any candidate unless the candidate'scandidate’s name has been properly placed in nomination prior to the voting and the shareholder, or any other shareholder, has given notice at the meeting prior to the voting of the intention to cumulate votes. On all other matters, each share has one vote.
The Company is soliciting proxies for the Annual Meeting from its shareholders. The cost of this solicitation will be borne by the Company. The Company may reimburse brokerage firms and other persons representing beneficial owners of shares for their expenses in forwarding solicitation material to such beneficial owners. Proxies may also be solicited by certain of the Company'sCompany’s directors, officers and regular employees, without additional compensation, personally or by telephone, facsimile or special delivery letter.
Quorum; Abstentions; Broker Non-Votes
The required quorum for the transaction of business at the Annual Meeting is a majority of the shares of Common Stock issued and outstanding on the Record Date. Votes cast by proxy or in person at the Annual Meeting will be tabulated by the Inspector of Elections, appointed for the meeting, who will determine whether or not a quorum is present. If the shares present, in person and by proxy, do not constitute the required quorum, the meeting may be adjourned to a subsequent date for the purposes of obtaining a quorum. Shares that are voted "FOR," "AGAINST"“FOR,” “AGAINST” or "WITHHELD FROM"“WITHHELD FROM” a matter are treated as being present at the meeting for purposes of establishing a quorum and shares that are voted "FOR," "AGAINST"“FOR,” “AGAINST” or "ABSTAIN"“ABSTAIN” are also treated as shares entitled to vote, (the "Votes Cast")or the Votes Cast, at the Annual Meeting with respect to such matter.
While there is no definitive statutory or case law authority in California as to the proper treatment of abstentions, the Company believes that abstentions should be counted for purposes of determining both (i) the presence or absence of a quorum for the transaction of business and (ii) the total number of Votes Cast with respect to a proposal (other than the election of directors). In the absence of controlling precedent to the contrary, the Company intends to treat abstentions in this manner. Accordingly, abstentions will have the same effect as a vote against the proposal.
Broker non-votes (i.e. votes from shares of record by brokers as to which the beneficial owners have no voting instructions) will be counted for purposes of determining the presence or absence of a quorum for the transaction of business, but will not be counted for purposes of determining the number of Votes Cast with respect to the proposal on which the broker has expressly not voted. Thus, a broker non-vote will be counted for purposes of determining whether a quorum exists but will not otherwise affect the outcome of the voting on a proposal. With respect to a proposal that requires a majority of the outstanding shares (such as an amendment to the articles of incorporation), however, a broker non-vote has the same affect as a vote against the proposal.
Deadline for Receipt of Shareholder Proposals for 20102011 Annual Meeting
Shareholders are entitled to present proposals for action at a forthcoming meeting if they comply with the requirements of the proxy rules promulgated by the Securities and Exchange Commission, ("SEC").or SEC. Proposals of shareholders of the Company intended to be presented for consideration at the Company's 20102011 Annual Meeting of Shareholders must be received by the Company no later than May 31, 2010,2011, in order that they may be included in the proxy statement and form of proxy related to that meeting.
Shareholder Information
IN COMPLIANCE WITH RULE 14A-3 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, THE COMPANY HEREBY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH PERSON, A COPY OF THE COMPANY'SCOMPANY’S ANNUAL REPORT ON FORM 10-K, INCLUDING THE CONSOLIDATED FINANCIAL STATEMENTS.
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If you share an address with another shareholder, only one annual report and proxy statement may be delivered to all shareholders sharing your address unless the Company has contrary instructions from one or more shareholders. Shareholders sharing an address may request a separate copy of the annual report or proxy statement by writing to: Aehr Test Systems, 400 Kato Terrace, Fremont, CA 94539, Attention:
2
Investor Relations or by calling investor relations at (510) 623-9400, and the Company will promptly deliver a separate copy. If you share an address with another shareholder and you are receiving multiple copies of annual reports or proxy statements, you may write us at the address above to request delivery of a single copy of these materials in the future.
How to Obtain Directions to Location of Annual Meeting
The Annual Meeting is being held at the time and place set forth above. You can obtain directions to attend the Annual Meeting and vote your shares in person by calling the Company at (510) 623-9400.
Internet Availability of Proxy Materials
This Proxy Statement, the form of proxy card and the2010 Annual Report are available on ourthe Company’s website www.aehr.com under the heading "Investors"“Investors” and the subheading "Proxy Materials"“Proxy Materials”.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS
AND MANAGEMENT
The following table sets forth certain information regarding the beneficial ownership of the Company'sCompany’s Common Stock as of August 31, 2009,2010, or some other practical date in cases of the principal shareholders, by: (i) each person (or group of affiliated persons) known to the Company to be the beneficial owner of more than 5% of the Company'sCompany’s Common Stock, (ii) each director of the Company, (iii) each of the Company'sCompany’s executive officers named in the Summary Compensation Table appearing herein, and (iv) all directors and executive officers of the Company as a group:
|
| Shares Beneficially | ||
Beneficial Owner |
| Number |
| Percent(2) |
Directors and Named Executive Officers: |
|
|
|
|
Rhea J. Posedel (3) |
| 1,143,456 |
| 12.9% |
Robert R. Anderson (4) |
| 184,436 |
| 2.1% |
William W. R. Elder (5) |
| 136,000 |
| 1.6% |
Mukesh Patel (6) |
| 51,929 |
| * |
Mario M. Rosati (7) |
| 242,967 |
| 2.8% |
Howard T. Slayen (8) |
| 27,500 |
| * |
Gary L. Larson (9) |
| 167,788 |
| 1.9% |
Joel Bustos (10) |
| 70,892 |
| * |
David S. Hendrickson (11) |
| 127,493 |
| 1.4% |
Gregory M. Perkins (12) |
| 59,852 |
| * |
All Directors and Executive Officers as a group (12 persons) (13) |
| 2,372,658 |
| 25.0% |
|
|
|
|
|
Principal Shareholders: |
|
|
|
|
State of Wisconsin Investment Board (14) |
| 651,793 |
| 7.5% |
___________________
* | Represents less than 1% of the Common Shares |
(1) | Beneficial ownership is determined in accordance with the rules of the SEC. Unless otherwise indicated in the footnotes to this table, the persons and entities named in the table have represented to the Company that they have sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable. Unless otherwise indicated, the address of each of the individuals listed in the table is c/o Aehr Test Systems, 400 Kato Terrace, Fremont, California 94539. |
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(2) | Shares |
(3) | Includes 9,950 shares held by Natalie Diane Posedel, |
(4) | Includes 66,936 shares issuable upon the exercise of stock options exercisable within 60 days of August 31, 2010. |
(5) | Includes 3,000 shares held by Derek S. Elder and 3,000 shares held by Corwin W. |
(6) | Includes 25,000 shares issuable upon the exercise of stock options exercisable within 60 days of August 31, 2010. |
(7) | Includes 27,000 shares held by Mario M. Rosati |
(8) | Includes 17,500 shares issuable upon the exercise of stock options exercisable within 60 days of August 31, 2010. |
(9) | Includes 98,249 shares issuable upon the exercise of stock options exercisable within 60 days of August 31, 2010. |
(10) | Includes 70,123 shares issuable upon the exercise of stock options exercisable within 60 days of August 31, 2010. Mr. Bustos |
(11) | Includes 125,580 shares issuable upon the exercise of stock options exercisable within 60 days of August 31, 2010. |
(12) | Includes 59,852 shares issuable upon the exercise of stock options exercisable within 60 days of August 31, 2010. |
(13) | Includes 813,743 shares issuable upon the exercise of stock options exercisable within 60 days of August 31, 2010. |
(14) | Based solely on Schedule 13G/A filed February 16, 2010 with the SEC by the State of Wisconsin Investment Board, |
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Equity Compensation Plan Information
The following table gives information about the Company'sCompany’s Common Stock that may be issued upon the exercise of options, warrants and rights under all of the Company'sCompany’s existing equity compensation plans as of May 31, 2009.
| (a) | (b) | (c) | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||||
| Equity compensation plans approved by security holders | 2,027,168 | (1) | $3.77 | 1,161,813 | ||||||||||
| Equity compensation plans not approved by security holders | — | — | — | |||||||||||
| Total | 2,027,168 | $3.77 | 1,161,813 | |||||||||||
(1) Issued pursuant to the Company'sCompany’s 1996 Stock Option Plan and the 1997 Employee Stock Purchase Plan, ("Stock Option Plans") and the Company'sCompany’s 2006 Equity Incentive Plan and 2006 Employee Stock Purchase Plan, which require the approval of and have been approved by the Company'sCompany’s shareholders. See description of the stock option plans below.
Stock Option Plans below.
Stock Option Plans
On October 26, 2006, the Company'sCompany’s shareholders approved the Company’s 2006 Equity Incentive Plan (the "2006Plan. A total of 2,000,000 shares of Common Stock have been reserved for issuance under the Company’s 2006 Equity Incentive Plan").Plan. Options granted under the 2006 Equity Incentive Plan are generally for periods not to exceed ten years (five years if the option is an incentive stock option granted to a 10% shareholder) and are generally granted at the fair market value of the stock at the date of grant as determined by the Board of Directors.
The 2006 Equity Incentive Plan replaces the Amended and Restated 1996 Stock Option Plan, (the "1996or the 1996 Stock Option Plan")Plan, which would otherwise have expired in 2006. A total of 1,950,000 shares of Common Stock have been reserved for issuance under the 1996 Stock Option Plan. The 1996 Stock Option Plan will continue to govern awards previously granted under that plan. However, the shares represented by options granted under the 1996 Stock Option Plan that terminate without being exercised are added to the shares available for grant under the 2006 Equity Incentive Plan. More information regarding the 2006 Equity Incentive Plan is set forth
in the section entitled "Amendment to the 2006 Equity Incentive Plan".
As of May 31, 2009,2010, out of the 2,172,0002,947,000 shares authorized for grant under the 1996 Stock Option Plan and 2006 Equity Incentive Plan, approximately 1,636,0001,949,000 shares had been granted. Because Rhea J. Posedel owns more than 10% of the Company'sCompany’s outstanding Common Stock, the exercise price of any incentive stock option granted to him is set at a 10% premium above the market price on the date of the grant. All other exercise prices are equal to the closing price of the Company'sCompany’s Common Stock on the date of the grant as reported on the NASDAQ Global Market.
On October 26, 2006, the Company'sCompany’s shareholders approved the 2006 Employee Stock Purchase Plan (the "2006 Employee Stock Purchase Plan").Plan. A total of 200,000450,000 shares of the Company'sCompany’s Common Stock were reserved for issuance under the 2006 Employee Stock Purchase Plan. The 2006 Employee Stock Purchase Plan has consecutive, overlapping, twenty-four month offering periods. Each twenty-four month offering period includes four six-month purchase periods. The offering periods generally begin on the first trading day on or after April 1 and October 1 each year. The first exercise date under the 2006 Employee Stock Purchase Plan was April 1, 2007. All employees who work a minimum of 20 hours per week and are customarily employed by the Company (or an affiliate thereof) for at least five months per calendar year are eligible to participate. Under this plan, shares are purchased through employee payroll deductions at exercise prices equal to 85% of the lesser of the fair market value of the Company'sCompany’s Common Stock at either the first day of an offering
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period or the last day of the purchase period. If a participant'sparticipant’s rights to
5
The 2006 Employee Stock Purchase Plan replaces the 1997 Employee Stock Purchase Plan which would have otherwise expired in 2007. For the yearfiscal years ended May 31, 2010, 2009 and 2008, approximately 89,000, 73,000 and 34,000 shares of Common Stock, respectively, were issued under the 1997 Employee Stock Purchase Plan and the 2006 Employee Stock Purchase Plan.plans. As of May 31, 2009, 519,2762010, 608,000 shares have been issued under 1997 Employee Stock
Purchase Plan and the 2006 Employee Stock Purchase Plan.both employee stock purchase plans. Because Rhea J. Posedel owns more than 10% of the Company'sCompany’s outstanding Common Stock, he is precluded from participating in the 1997 Employee Stock Purchase Plan and the 2006 Employee Stock Purchase Plan.
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PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, six directors are to be elected to serve until the next Annual Meeting or until their successors are elected and qualified. Unless otherwise instructed, the proxy holders will vote the proxies received by them for the election of the six nominees named below. Each nominee has consented to be named a nominee in this Proxy Statement and to continue to serve as a director if elected. Should any nominee become unable or decline to serve as a director or should additional persons be nominated at the meeting, the proxy holders intend to vote all proxies received by them in such a manner as will assure the election of as many nominees listed below as possible (or, if new nominees have been designated by the Board of Directors, in such a manner as to elect such nominees) and the specific nominees to be voted for will be determined by the proxy holders. The Company is not aware of any reason that any nominee will be unable or will decline to serve as a director. There are no arrangements or understandings between any director or executive officer and any other person pursuant to which he is or was to be selected as a director or officer of the Company.
The names of the nominees and certain information about them as of the Record Date are set forth below:
| Name of Nominee | Age | Position | Director Since | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Rhea J. Posedel | 68 | Chairman of the Board and Chief Executive Officer | 1977 | |||||||||||
| Robert R. Anderson (1)(2) | 72 | Director | 2000 | |||||||||||
| William W.R. Elder (2)(3) | 71 | Director | 1989 | |||||||||||
| Mukesh Patel (1)(3) | 52 | Director | 1999 | |||||||||||
| Mario M. Rosati | 64 | Director | 1977 | (4) | ||||||||||
| Howard T. Slayen (1) | 63 | Director | 2008 | |||||||||||
(1) | Member of |
(2) | Member of the Compensation Committee |
(3) | Member of the Nominating and Governance Committee |
(4) | Mr. Rosati was a member of the Board of Directors from 1977 to September 2008 and |
The principal occupation of each of the Board membersdirectors during the past five years is set forth below. There is no family relationship between any director or executive officer of the Company.
RHEA J. J. POSEDEL is a founder of the Company and has served as Chief Executive Officer and Chairman of the Board of Directors since the Company'sCompany’s inception in 1977. From the Company'sCompany’s inception through May 2000, Mr. Posedel also served as President of the Company. Prior to founding the Company, Mr. Posedel held various project engineering and engineering managerial positions at Lockheed Martin Corporation (formerly Lockheed Missile & Space Corporation), Ampex Corporation, and Cohu, Inc. Mr. Posedel received a B.S. in Electrical Engineering from the University of California, Berkeley, an 6
As Chief Executive Officer and founder of the Company, Mr. Posedel brings to the Board of Directors senior leadership experience, industry and technical expertise and a deep knowledge of the Company’s operations, strategy and vision.
ROBERT R. ANDERSON has been a director of the Company since October 2000. Mr. Anderson currently is a director of MKS Instruments, Inc., a semiconductor components and equipment supplier. Mr. Anderson also serves as a director for Energetiq Technology, Inc., a private company. Mr.
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Anderson was co-founder, Chief Financial Officer and Chief Operating Officer of KLA Instruments, a supplier of process control and yield management solutions for the semiconductor and related nanoelectronics industries, from 1975 through 1994. Mr. Anderson is a graduate of Bentley University and served as a trustee of Bentley University from 1993 through 2004.
Mr. Anderson brings to the Board of Directors a strong background in advising high-tech companies through his public company board experience. As the co-founder, Chief Financial Officer and Chief Operating Officer of a high-tech company, Mr. Anderson brings to the Board of Directors expertise in the semiconductor equipment industry, business development, mergers and acquisition and financing and senior management experience.
WILLIAM W. R. ELDER has been a director of the Company since 1989. From 1981 to 1996, Dr. Elder was the Chief Executive Officer of Genus, Inc., a semiconductor equipment company, and then again from 1998 until the company was acquired by AIXTRON AG ("AIXTRON") in 2005. Dr. Elder retired from AIXTRON AG in December 2007. Dr. Elder is currently President and CEOChief Executive Officer of Maskless Lithography Inc., a capital equipment start-up company based in San Jose, California. Dr. Elder received a B.S.I.E. and an honorary Doctorate Degree from the University of Paisley in Scotland.
As President and Chief Executive Officer of a semiconductor equipment company, Dr. Elder brings to the Board of Directors senior leadership experience, strong industry knowledge and operations expertise.
MUKESH PATEL has been a director of the Company since June 1999. Mr. Patel was President and Chief Executive Officer of Metta Technology, which he co-founded in 2004, until November 2006, when LSI Logic Corporation acquired it. He founded Sparkolor Corporation which was acquired by Intel Corporation in late 2002, and co-founded SMART Modular Technologies, Inc. (", or SMART Modular"),Modular, a publicly-held high value added memory products company which was acquired by Solectron Corporation in late 1999. From February 1989 to July 1995, Mr. Patel served as Vice President and General Manager Memory Product Division of SMART Modular and from August 1995 to August 1998 andhe served as Vice President, Engineering. Mr. Patel also serves as a director of SMART Modular and for several privately-held companies. Mr. Patel received a B.S. degree in Engineering with an emphasis in digital electronics from Bombay University, India.
As the co-founder, President and Chief Executive Officer of a high-tech company, Mr. Patel brings to the Board of Directors a strong background in semiconductor memory markets and technology, expertise in business development, mergers and acquisition and financing and senior management experience. Mr. Patel also brings to the Board of Directors a strong background in advising high-tech companies through his public company board experience.
MARIO M. ROSATI was a director of the Company from 1977 to 2008, and then rejoined the Board of Directors in 2009. Mr. Rosati is a member of the law firm Wilson Sonsini Goodrich & Rosati, Professional Corporation which he joined in 1971. Mr. Rosati is a director of Sanmina-SCI Corporation, ana publicly-held electronics manufacturing services company and a publicly-held company, as well as several privately-held companies. Mr. Rosati received a B.A. from the University of California, Los Angeles and a J.D. from the University of California, Berkeley School of Law.
As a senior partner in a major Silicon Valley based law firm, Mr. Rosati brings legal expertise in the oversight of legal and regulatory compliance, mergers and acquisitions and financing experience to the Board of Directors. Mr. Rosati also brings to the Board of Directors a strong background in advising high-tech companies through his public company board experience.
HOWARD T. SLAYEN has been a director of the Company since 2008. Since June 2001, Mr. Slayen has been providing independent financial consulting services to various organizations and clients. From October 1999 to May 2001, Mr. Slayen served as Executive Vice President and Chief Financial Officer of Quaartz Inc., a web-hosted communications business.company. From 1971 to September 1999,
8
Mr. Slayen held various positions with PricewaterhouseCoopers/Coopers & Lybrand, including his last position as a Corporate Finance Partner. Mr. Slayen currently is a director of Lantronix, Inc., a provider ofpublicly-held embedded networking solutions.solutions company. Mr. Slayen received a B.A. from Claremont McKenna College and a J.D. from the University of California, Berkeley School of Law.
As Vice President and Chief Financial Officer of a high-tech company, and as Corporate Finance Partner for a large international accounting firm, Mr. Slayen brings to the Board of Directors senior leadership experience, expertise in accounting and financial reporting, financing and investing activities, and internal control and compliance. Mr. Slayen also brings to the Board of Directors a strong background in advising high-tech companies through his public company board experience.
Board Matters and Corporate Governance
Board Meetings and Committees
The Board of Directors held a total of four (4) meetings during the fiscal year ended May 31, 2009.2010. No incumbent director during his period of service in such fiscal year attended fewer than 75% of the aggregate of all meetings of the Board of Directors and the committees of the Board upon which such director served.
The Board of Directors has three committees: the Audit Committee, the Compensation Committee and the Nominating and Governance Committee.
The Audit Committee of the Board of Directors is comprised entirely of independent directors, as defined by the NASDAQ Stock Market LLC director independence standards, as well as applicable SEC rules, as currently in effect. More information regarding the functions performed by the Committee, its membership, and the number of meetings held during the fiscal year, is set forth in the section entitled "Report“Report of the Audit Committee."” The Audit Committee is governed by a written charter approved by the
7
www.aehr.com.(the "Exchange Act").
or the Exchange Act.
The Compensation Committee of the Board of Directors currently consists of Messrs. Anderson and Elder, each of whom is an independent member of the Board of Directors, as defined by the NASDAQ Stock Market LLC director independence standards, as well as applicable SEC rules, as currently in effect. The Compensation Committee held one (1) meeting during fiscal year 2009.2010. The Compensation Committee reviews and advises the Board of Directors regarding all forms of compensation to be provided to the officers, employees, directors and consultants of the Company. The Compensation Committee is governed by a written charter approved by the Board of Directors. The Company maintains a copy of the Compensation Committee charter on its website: www.aehr.com.www.aehr.com. More information regarding the Compensation Committee'sCommittee’s processes and procedures can be found herein in the section entitled "Compensation“Compensation Discussion and Analysis."
”
The Nominating and Governance Committee of the Board of Directors currently consists of Messrs. Elder and Patel, each of whom is an independent member of the Board of Directors, as defined by the NASDAQ Stock Market LLC director independence standards, as well as applicable SEC rules, as currently in effect. The Nominating and Governance Committee held one (1) meeting during
fiscal year 2009. The Nominating and Governance Committee reviews and makes recommendations to the Board of Directors regarding matters concerning corporate governance; reviews the composition and evaluates the performance of the Board of Directors; selects, or recommends for the selection of the Board of Directors, director nominees; evaluates director compensation; reviews the composition of committees of the Board of Directors and recommends persons to be members of such committee; and reviews conflicts of interest of members of the Board of Directors and corporate officers. The Nominating and Governance Committee is governed by a written charter approved by the Board of Directors. The Company maintains a copy of the Nominating and Governance Committee charter on its website: www.aehr.com.
www.aehr.com.
9
Shareholder Recommendations
The policy of the Board of Directors is to consider properly submitted shareholder recommendations for candidates for membership on the Board as described below under "Identifying“Identifying and Evaluating Nominees for Directors."” In evaluating such recommendations, the Board of Directors seeks to achieve a balance of knowledge, experience and capability on the Board and to address the membership criteria set forth under "Director Qualifications"“Director Qualifications” below. Any shareholder recommendations proposed for consideration by the Board of Directors should include the candidate'scandidate’s name and qualifications for Board membership and should be addressed to:
Aehr Test Systems
400 Kato Terrace
Fremont, CA 94539
Attn: Secretary
In addition, procedures for shareholder direct nomination of directors are discussed under "Deadline“Deadline for Receipt of Shareholder Proposals"Proposals” above.
Director Qualifications
Members of the Board should have the highest professional and personal ethics and values, consistent with the Company'sCompany’s Code of Conduct and Ethics adopted by the Board. They should have broad experience at the policy-making level in business. They should be committed to enhancing shareholder value and should have sufficient time to carry out their duties and to provide insight and practical wisdom based on experience. Their service on other boards of public companies should be limited to a number that permits them, given their individual circumstances, to perform responsibly all director duties. Each director must represent the interests of all shareholders.
8
Identifying and Evaluating Nominees for Directors
The Board of Directors utilizes a variety of methods for identifying and evaluating nominees for director. The Board of Directors periodically assesses the appropriate size of the Board, and whether any vacancies on the Board are expected due to retirement or otherwise. In the event that vacancies are anticipated, or otherwise arise, the Board of Directors considers various potential candidates for director. Candidates may come to the attention of the Board of Directors through current Board members, professional search firms, shareholders or other persons. These candidates are evaluated at regular or special meetings of the Board of Directors, and may be considered at any point during the year. As described above, the Board of Directors considers properly submitted shareholder recommendations for candidates for the Board. Following verification of the shareholder status of persons proposing candidates, any recommendations are aggregated and considered by the Board of Directors at a regularly scheduled meeting prior to the issuance of the proxy statement for the Company'sCompany’s annual meeting. If any materials are provided by a shareholder in connection with the recommendation of a director candidate, such materials are forwarded to the Board of Directors. The Board of Directors may also review materials provided by professional search firms or other parties in connection with a candidate who is not recommended by a shareholder. In evaluating such recommendations, the Board of Directors seeks to achieve a balance of knowledge, experience and capability on the Board.
The Company seeks board members whose background, skills and experience will best assist the Company in the oversight of its business and operations. This includes understanding of and experience in manufacturing, technology, finance, and legal and regulatory compliance. Senior leadership experience and public company board experience are two of the key qualities evaluated when considering nominees for the Company’s Board of Directors. A goal of the nomination process is to provide a Board with a
10
diverse set of skills and experience to provide oversight and advice concerning the Company’s current business and growth strategies.
The Board of Directors has determined that each of its current directors, except for Rhea J. Posedel, the Company'sCompany’s Chief Executive Officer, is independent within the meaning of the NASDAQ Stock Market LLC director independence standards, as well as applicable SEC rules, as currently in effect.
Annual Meeting Attendance
Although the Company does not have a formal policy regarding attendance by members of the Board at the Company'sCompany’s annual meetings of shareholders, directors are encouraged to attend annual meetings of the Company'sCompany’s shareholders. All fivesix members of the Board of Directors attended the 2008
annual meeting2009 Annual Meeting of shareholders.
Shareholders.
Code of Conduct and Ethics
The Board of Directors has adopted a Code of Conduct and Ethics for all directors, officers and employees of the Company, which includes the Chief Executive Officer, Chief Financial Officer and any other principal accounting officer. The Code of Conduct and Ethics may be found on the Company'sCompany’s website at www.aehr.com.www.aehr.com. The Company will disclose any amendment to the Code of Conduct and Ethics or waiver of a provision of the Code of Conduct and Ethics, including the name of the officer to whom the waiver was granted, on the Company'sCompany’s website at www.aehr.com, on the Investors page.
Board Leadership Structure and Role in Risk Oversight
The Board of Directors maintains a structure with the Chief Executive Officer of the Company holding the position as Chairman of the Board of Directors, and with an Audit Committee, Nominating and Governance Committee and Compensation Committee for oversight of specific areas of responsibility. The Company believes that this structure is appropriate and allows for efficient and effective oversight, given the Company’s relatively small size (both in terms of number of employees and in scope of operational activities directly conducted by the Company) and its corporate strategy. The Board of Directors does not have a specific role in risk oversight of the Company. The Chairman and Chief Executive Officer, the Committees of the Board and, as needed, other executive officers and employees of the Company provide the Board of Directors with information regarding the Company’s risks. The Board of Directors, or the Committee with special responsibility for oversight of the area implicated by the highlighted risks, then uses this information to perform its oversight role and inform its decision making with respect to such areas of risk.
Communications with the Board
The Company does not have a formal policy regarding shareholder communication with the Board of Directors. However, shareholders may communicate with the Board by submitting a letter to the attention of the Chairman of the Board, c/o Aehr Test Systems, 400 Kato Terrace, Fremont, CA 94539. Communication received in writing will be collected, organized and processed by the Chairman of the Board who will distribute the communications to the members of the Board of Directors, as appropriate, depending on the facts and circumstances outlined in the communication received.
11
REPORT OF THE AUDIT COMMITTEE (1)
The Audit Committee of the Board of Directors of the Company serves as the representative of the Board for general oversight of the Company'sCompany’s financial accounting and reporting system of internal control, audit process and process for monitoring compliance with laws and regulations. The Audit Committee, 9
five (5)four meetings in fiscal year 2009.2010. Each member is an independent director in accordance with the NASDAQ Global Market Audit Committee requirements as currently in effect. The Audit Committee evaluates the scope of the annual audit, reviews audit results, consults with management and the Company's independent registered public accounting firm prior to the presentation of financial statements to shareholders and, as appropriate, initiates inquiries into aspects of the Company's financial affairs.
The Company'sCompany’s management has primary responsibility for preparing the Company'sCompany’s consolidated financial statements and for the Company'sCompany’s financial reporting process. The Company'sCompany’s independent registered public accounting firm, Burr Pilger & Mayer, LLP ("BPM")Inc., or BPM, is responsible for expressing an opinion on the conformity of the Company'sCompany’s audited consolidated financial statements to accounting principles generally accepted in the United States of America. The Audit Committee has reviewed and discussed with management the audited consolidated financial statements for the year ended May 31, 2009.2010. BPM, the Company'sCompany’s independent registered public accounting firm for fiscal year 2009,2010, issued their unqualified report dated September 1, 2009August 26, 2010 on the Company's consolidated financial statements.
The Audit Committee has also discussed with BPM the matters required to be discussed by Statement on Auditing Standards No. 61, "Communication“Communication with Audit Committees"Committees”, as amended, as adopted by the Public Company Accounting Oversight Board in Rule 3200T. The Audit Committee has also received the written disclosures and the letter from BPM required by the applicable Public Company Accounting Oversight Board requirements for independent accountant communications with audit committees concerning auditor independence, and has conducted a discussion with BPM relative to its independence. The Audit Committee has considered whether BPM's provision of non-audit services is compatible with its independence. The Audit Committee has an Audit Committee
Charter.
Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors of Aehr Test Systems that the Company's audited consolidated financial statements for the fiscal year ended May 31, 20092010 be included in the Company'sCompany’s Annual Report on Form 10-K.
AUDIT COMMITTEE
Howard T. Slayen
Robert R. Anderson
Mukesh Patel
(1) The information regarding the Audit Committee is not "soliciting"“soliciting” material and is not deemed "filed"“filed” with the SEC, and is not to be incorporated by reference into any filings of the Company under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language contained in such filing.
Director Compensation
Rhea J. Posedel, the only inside director of the Company, does not receive any cash compensation for his services as a member of the Board of Directors. An inside director is a director who is a regular employee of the Company, whereas an outside director is not an employee of the Company. In response to the current slowdown in the semiconductor manufacturing industry and the related impact on the Company'sCompany’s net revenues, during fiscal 2009 the Company implemented a temporary reduction in fees paid to the Board of Directors. Under the current reduced fees each outside director receives (1) an annual
12
retainer of $25,000,$15,000, (2) $1,250$1,500 for each regular board meeting he attends, and (3) $625$750 for a special telephonic meeting he attends. In addition, each outside Committee member receives the payment in the following amounts for each Committee meeting he attends a committee meeting if the meeting is not held on the same day as a regular meeting of the Board of Directors.Directors: $1,200 for the Chairman of the Audit Committee; $900 for each regular Audit Committee Member; $1,050 for the Chairman of the Compensation Committee; and $750 for each regular Compensation Committee Member. If the committeeCommittee meeting is held on the same day as a regular meeting of the Board of Directors, then the committeeCommittee members shall be paid 50% of the following amounts: Audit
10
Committee Chairman - $1,000, Audit Committee Member - $ $750, Compensation
Committee Chairman - $875, and Other Committee Members - $625.above amounts. Outside directors are also reimbursed for certain expenses incurred in attending board and committee meetings. Directors are eligible to participate in the Company'sCompany’s stock option plans. In each of fiscal 2007 and 2008, outside directors Robert Anderson, William Elder, Mukesh Patel, and Mario Rosati were each granted options to purchase 5,000 shares at $7.28 per share and $6.07 per share,
respectively.share. In fiscal 2009, outside directors Robert Anderson, William Elder and Mukesh Patel were each granted options to purchase 5,000 shares at $2.30 per share, an option to purchase 3,750 shares at $1.29 per share was granted to outside director Mario M. Rosati and an option to purchase 15,000 shares at $2.30 was granted to outside director Howard T. Slayen. In fiscal 2010, outside directors Robert Anderson, William Elder, Mukesh Patel, Mario Rosati and Howard T. Slayen were each granted options to purchase 5,000 shares at $0.85 per share. All exercise prices are equal to the closing price of the Company'sCompany’s Common Stock on the date of the grant as reported on the NASDAQ Global Market. eligible to participate in the
Company's stock option plans. In each of fiscal 2007 and 2008, outside
directors Robert Anderson, William Elder, Mukesh Patel, and Mario Rosati were
each granted options to purchase 5,000 shares at $7.28 per share and $6.07 per
share, respectively. In fiscal 2009, outside directors Robert Anderson,
William Elder and Mukesh Patel were each granted options to purchase 5,000
shares at $2.30 per share, an option to purchase 3,750 shares at $1.29 per
share was granted to outside director Mario M. Rosati and an option to purchase
15,000 shares at $2.30 was granted to outside director Howard T. Slayen. All
exercise prices are equal to the closing price of the Company's Common Stock on
the date of the grant as reported on the NASDAQ Global Market.
The Company has agreed to indemnify each director against certain claims and expenses for which the director might be held liable in connection with past or future service on the Board. In addition, the Company maintains an insurance policy insuring its officers and directors against such liabilities.
The following table sets forth the compensation paid by the Company during the fiscal year ended May 31, 20092010 to the Company'sCompany’s non-executive officer directors:
Director Compensation
| Name | Year | Fees Earned or Paid in Cash | Option Award (2) | Total Compensation | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Rhea J. Posedel (1) | 2010 | — | — | — | ||||||||||||||
| Robert R. Anderson | 2010 | $21,550 | $8,213 | $29,763 | ||||||||||||||
| William W.R. Elder | 2010 | $18,250 | $8,213 | $26,463 | ||||||||||||||
| Mukesh Patel | 2010 | $21,550 | $8,213 | $29,763 | ||||||||||||||
| Mario M. Rosati | 2010 | $17,000 | $7,043 | $24,043 | ||||||||||||||
| Howard T. Slayen | 2010 | $22,350 | $10,678 | $33,028 | ||||||||||||||
(1) | Rhea J. |
(2) | Reflects the dollar amount recognized for financial statement reporting purposes for the fiscal year ended May 31, 2010 in accordance with the provisions of Financial Accounting Standards Board, or FASB, Accounting Standards Codification 718, or ASC 718, “Compensation – Stock Compensation,” (formerly FASB Statement 123R), and thus includes amounts from awards granted in and prior to fiscal 2010. See Note 1 of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for fiscal 2010 filed with the SEC on August 27, 2010 regarding the assumptions underlying valuation of equity awards. The full grant date fair value of the awards granted to each outside director in fiscal 2010, computed in accordance with ASC 718, was equal to $2,731. At the end of fiscal 2010, the aggregate number of option awards outstanding for each director was as follows: 66,936 held by Robert R. |
13
Vote Required
The six nominees receiving the highest number of affirmative votes of the shares present or represented and entitled to be voted for them shall be elected as directors. Votes withheld from any director are counted for purposes of determining the presence or absence of a quorum for the transaction of business, but have no other legal effect in the election of directors under California law. See "Quorum;“Quorum; Abstentions; Broker Non-Votes."
11
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE NOMINEES ISTEDLISTED ABOVE
14
PROPOSAL 2
AMENDMENT TO THE 2006 EQUITY INCENTIVE PLAN
Proposal
The Board of Directors is proposing that the 2006 Equity Incentive Plan
be amended to increase the number of shares authorized thereunder by an
additional 800,000 shares of Common Stock. The Company previously reserved
1,200,000 shares of Common Stock for issuance under the 2006 Equity Incentive
Plan, plus (i) 181,405 shares that were reserved but not issued under the 1996
Stock Option Plan, (ii) any shares subject to stock options or similar awards
granted under the 1996 Stock Option Plan that expire or otherwise terminate
without having been exercised in full and (iii) any shares issued pursuant to
awards granted under the 1996 Stock Option Plan that are forfeited to or
repurchased by the Company.
The Board of Directors is proposing this amendment in order to allow for
sufficient stock options to cover the Company's needs for at least the next
fiscal year.
Participation in the 2006 Equity Incentive Plan
The grant of options, stock purchase rights, stock bonus awards and long-
term performance awards under the 2006 Equity Incentive Plan to employees,
including the executive officers named in the Summary Compensation Table
herein, is subject to the discretion of the plan administrator. As of the date
of this proxy statement, there has been no determination by the plan
administrator with respect to future awards under the 2006 Equity Incentive
Plan. Accordingly, future awards are not determinable. No stock bonus awards
or long-term performance awards were granted during the last fiscal year. The
following table sets forth information with respect to the grant of options to
the executive officers named in the Summary Compensation Table, to all current
executive officers as a group, to all outside directors as a group and to all
other employees as a group during the last fiscal year:
Amended Plan Benefits
2006 Equity Incentive Plan
Weighted
Securities Average
ame of Individual Underlying Exercise Price
Or Options Share ($/share)
Identity of Group and Position Granted(#) ($/share)
- ----------------------------------------- ---------- --------------
Rhea J. Posedel 54,000 $7.01
Gary L. Larson 27,000 $6.52
Joel Bustos 27,000 $6.52
David S. Hendrickson 36,000 $6.52
Gregory M. Perkins 27,000 $6.52
All current Executive Officers as a group 207,000 $6.65
All outside Directors as a group 33,750 $2.19
All other employees (including all current
Officers who are not Executive Officers)
as a group 314,200 $6.00
12
Summary of Stock Plan
Purpose. The purposes of the 2006 Equity Incentive Plan are to attract
and retain the best available personnel, to provide additional incentive to
employees, directors and consultants of the Company and to promote the success
of the Company's business.
Status of Shares. As of August 31, 2009, options to purchase a total of
1,427,759 (net of cancelled or expired options) shares were outstanding under
the 2006 Equity Incentive Plan. In addition, options to
purchase 103,708 (plus any shares that might in the future be returned to the
plan as a result of cancellations or expiration of options) shares remained
available for future grant thereunder. As discussed above, shares represented
by options granted under the 1996 Stock Option Plan that terminate without
being exercised are added to the shares available for future grant under the
2006 Equity Incentive Plan.
Eligibility; Administration. Under the 2006 Equity Incentive Plan,
employees may be granted "incentive stock options" intended to qualify within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code") and employees, directors and consultants may be granted "non-
statutory stock options" not intended to qualify under such statute. The 2006
Equity Incentive Plan is administered by the Board of Directors of the Company,
or by a committee appointed by the Board of Directors and consisting of at
least two members of the Board, which determine the terms of options granted,
including the exercise price, the number of shares subject of the option and
the options' exercisability. The Board or its committee has sole discretion to
interpret any provision of the 2006 Equity Incentive Plan.
Exercise Price. The exercise price of options granted under the 2006
Equity Incentive Plan is determined by the Board of Directors or its committee.
The exercise price of incentive stock options may not be less than 100% of the
fair market value of the Common Stock on the date the option is granted.
However, the exercise price of incentive stock options granted to an optionee
who owns more than 10% of the voting power or value of all classes of stock of
the Company must not be less than 110% of the fair market value on the date of
grant. The Common Stock is currently traded on the NASDAQ Global Market.
While the Company's stock is traded on the NASDAQ Global Market, the fair
market value is the reported closing price on the date of grant.
Exercisability. Options granted to new optionees under the 2006 Equity
Incentive Plan generally become exercisable starting one month after the date
of grant with 1/48th of the shares covered thereby becoming exercisable at that
time and with an additional 1/48th of the total number of option shares
becoming exercisable each month thereafter, with full vesting occurring on the
fourth anniversary of the date of grant. The term of an option may not exceed
ten years. No option may be transferred by the optionee other than by will or
the laws of descent or distribution. Each option may be exercised, during the
lifetime of the optionee, only by such optionee.
Stock Purchase Rights. The 2006 Equity Incentive Plan permits the
Company to grant rights to purchase Common Stock. After the Board or Committee
determines that it will offer stock purchase rights under the 2006 Equity
Incentive Plan, it shall advise the offeree in writing or electronically of the
terms, conditions and restrictions related to the offer, including the number
of shares that the offeree shall be entitled to purchase, and the time within
which the offeree must accept such offer. The offer shall be accepted by
execution of a stock purchase agreement or a stock bonus agreement in the form
determined by the Board or Committee.
Unless the Board or Committee determines otherwise, the stock purchase
agreement or a stock bonus agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's employment with the Company for any reason. The purchase price for
shares repurchased pursuant to the stock purchase agreement or a stock bonus
agreement shall be the original price paid by the purchaser and may be paid by
cancellation of any indebtedness of the purchaser to the Company. The
repurchase option shall lapse at such rate as the Board or Committee may
determine.
Amendment and Termination. The Board may at any time amend or terminate
the 2006 Equity Incentive Plan without approval of the shareholders; provided,
however, that the Company will obtain shareholder approval of any amendment to
the 2006 Equity Incentive Plan to the extent necessary to comply with Rule 16b-
3 under the Securities Exchange Act of 1934 (the "Exchange Act"), with Section
422 of the Code, or with any other applicable law or regulation, including
requirements of the NASDAQ Stock Market LLC or any established stock exchange.
Any amendment or termination of the 2006 Equity
13
Incentive Plan is subject to the rights of optionees under agreements entered
into prior to such amendment or termination.
Certain Federal Tax Information
An optionee who is granted an incentive stock option will not recognize
taxable income either at the time the option is granted or at the time it is
exercised, although exercise of the option may subject the optionee to the
alternative minimum tax. The Company will not be allowed a deduction for
federal income tax purposes as a result of the exercise of an incentive stock
option regardless of the applicability of the alternative minimum tax. Upon
the sale or exchange of the shares at least two years after grant of the option
and one year after exercise of the option, any gain will be treated as long-
term capital gain. If these holding periods are not satisfied at the time of
sale, the optionee will recognize ordinary income equal to the difference
between the exercise price and the lower of (i) the fair market value of the
stock at the date of the option exercise or (ii) the sale price of the stock,
and the Company will be entitled to a deduction in the same amount. (Different
rules may apply upon a premature disposition by an optionee who is an officer,
director or 10% shareholder of the Company.) Any additional gain or loss
recognized on such a premature disposition of the shares will be characterized
as capital gain or loss. If the Company grants an incentive stock option and
as a result of the grant the optionee has the right in any calendar year to
exercise for the first time one or more incentive stock options for shares
having an aggregate fair market value (under all plans of the Company and
determined for each share as of the date the option to purchase the share was
granted) in excess of $100,000, then the excess shares must be treated as non-
statutory options.
An optionee who is granted a non-statutory stock option will also not
recognize any taxable income upon the grant of the option. However, upon
exercise of a non-statutory stock option, the optionee will recognize ordinary
income for tax purposes measured by the excess of the then fair market value of
the shares over the exercise price. Any taxable income recognized by an
optionee who is an employee of the Company will be subject to tax withholding
by the Company. Upon resale of the shares by the optionee, any difference
between the sales price and the fair market value at the time of exercise, to
the extent not recognized as ordinary income as described above, will be
treated as capital gain or loss. The Company will be allowed a deduction for
federal income tax purposes equal to the amount of ordinary income recognized
by the optionee.
Vote Required
Approval of the amendment to the 2006 Equity Incentive Plan requires the
affirmative vote of the Votes Cast (which affirmative vote must constitute at
least a majority of the required quorum). The effect of an abstention is the
same as that of a vote against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE AMENDMENT
TO THE 2006 EQUITY INCENTIVE PLAN
14
PROPOSAL 3
AMENDMENT TO THE 2006 EMPLOYEE STOCK PURCHASE PLAN
Proposal
The Board of Directors is proposing that the 2006 Employee Stock Purchase
Plan (the "ESPP") be amended to increase the number of shares authorized
thereunder by an additional 250,000 shares of Common Stock. The Company
previously reserved 600,000 shared of Common Stock for issuance under the ESPP.
The Board of Directors is proposing this amendment in order to enable the
Company to continue its policy of encouraging employee equity participation in
the Company by enabling employees to purchase the Company's Common Stock at a
discount from the market price through voluntary payroll deductions. The
Management also believes the continued opportunity for employees equity
participation will promote the attraction, retention and motivation of
employees.
Participation in the 2006 Employee Stock Purchase Plan
Participation in the ESPP is voluntary and is dependent on each eligible
employee's election to participate and his or her determination as to the level
of payroll deductions. Accordingly, future purchases under the ESPP are not
determinable. Outside directors are not eligible to participate in the ESPP.
No purchases have been made under the ESPP since its amendment by the Board.
However, purchases were made under the ESPP prior to such amendment. The
following table sets forth certain information regarding shares purchased under
the ESPP during the last fiscal year and the payroll deductions accumulated at
the end of the last fiscal year in accounts under the ESPP for each of the
executive officers named in the Summary Compensation Table, for all current
executive officers as a group and for all other employees who participated in
the ESPP as a group:
Amended Plan Benefits
2006 Employee Stock Purchase Plan
Payroll
Number of Dollar Deductions as
Name of Individual Shares Value of
or Identity of Group and Purchased (1) Fiscal Year
Position (#) ($) End
- -------------------------------- --------- ------- -------------
Rhea J. Posedel -- -- --
Gary L. Larson 6,000 $ 2,237 $ 1
Joel Bustos 294 $ 160 --
David S. Hendrickson -- -- --
Gregory M. Perkins -- -- --
All current executive officers as a group 11,985 $ 4,464 $ 1
All other employees (including all
current officers who are not executive
officers) as a group 60,643 $19,314 $19,447
- -------------------------------
(1) Market value of shares on date of purchase, minus the purchase price
under the ESPP.
Summary of Stock Plan
Purpose. The purpose of the ESPP is to provide employees of the Company
who participate in the ESPP with an opportunity to purchase shares of the
Company's Common Stock through payroll deductions.
15
Administration. The Board or a committee appointed by the Board
(referred to herein as the "Administrator") administers the ESPP. All
questions of interpretation or application of the ESPP are determined by the
Administrator and its decisions are final, conclusive and binding upon all
participants.
Eligibility. Each of the Company's employees or the employees of the
Company's designated subsidiaries who is a common law employee and whose
customary employment with the Company or one of the Company's designated
subsidiaries is at least twenty hours per week and more than five months in a
calendar year is eligible to participate in the ESPP; except that no employee
will be granted an option under the ESPP (i) to the extent that, immediately
after the grant, such employee would own 5% or more of the total combined
voting power of all classes of the Company's capital stock or the capital stock
of one of the Company's designated subsidiaries, or (ii) to the extent that his
or her rights to purchase stock under all of the Company's employee stock
purchase plans accrues at a rate which exceeds $25,000 worth of stock
(determined at the fair market value of the shares at the time such option is
granted) for each calendar year.
Offering Date. Each offering period under the ESPP will expire on the
earliest to occur of (i) the completion of the purchase of shares on the last
exercise date occurring within twenty-four months of the offering date of such
option, (ii) such shorter offering period as may be determined by the
Administrator, or (iii) the date on which an eligible employee ceases to be a
participant under the ESPP. Each offering period will generally consist of a
number of purchase periods after which shares will be purchased. Until the
Administrator determines otherwise, a purchase period will be approximately six
months and run from April 1 to October 1 and October 1 to April 1. To
participate in the ESPP, an eligible employee must authorize payroll deductions
pursuant to the ESPP. Such payroll deductions may not exceed 10% of a
participant's compensation during the offering period. Once an employee
becomes a participant in the ESPP, the employee automatically will participate
in each successive offering period until the employee withdraws from the ESPP
or the employee's employment with the Company or one of the Company's
designated subsidiaries terminates. At the beginning of each offering period,
each participant automatically is granted an option to purchase shares of the
Company's Common Stock. The option expires at the end of the offering period
or upon termination of employment, whichever is earlier, but is exercised at
the end of each purchase period to the extent of the payroll deductions
accumulated during such purchase period.
Purchase Price. Shares of the Company's Common Stock may be purchased
under the ESPP at a purchase price not less than 85% of the lesser of the fair
market value of the Company's Common Stock on (i) the first day of an offering
period, or (ii) the last day of the purchase period. The fair market value of
the Company's Common Stock on any relevant date will be the closing price per
share as reported on the NASDAQ Global Market, or the mean of the closing bid
and asked prices, if no sales were reported, as quoted on such exchange or
reported in The Wall Street Journal.
Payment of Purchase Price; Payroll Deductions. The purchase price of the
shares is accumulated by payroll deductions throughout each purchase period.
The number of shares of the Company's Common Stock that a participant may
purchase in each purchase period during an offering period will be determined
by dividing the total amount of payroll deductions withheld from the
participant's compensation during that purchase period by the purchase price;
provided, however, that a participant may not purchase more than 3,000 shares
each purchase period. During an offering period, a participant may discontinue
his or her participation in the ESPP, and may decrease or increase the rate of
payroll deductions in an offering period within limits set by the
Administrator.
All payroll deductions made for a participant are credited to the
participant's account under the ESPP, are withheld in whole percentages only
and are included with the Company's general funds. Funds received by the
Company pursuant to exercises under the ESPP are also used for general
corporate purposes. A participant may not make any additional payments into
his or her account.
Withdrawal. Generally, a participant may withdraw from an offering
period at any time by written or electronic notice without affecting his or her
eligibility to participate in future offering periods. Once a participant
withdraws from a particular offering period, however, that participant may not
participate again in the same offering period. To participate in a subsequent
offering period, the participant must deliver a new subscription agreement to
the Company.
Termination of Employment. Upon termination of a participant's
employment for any reason, including disability or death, he or she will be
deemed to have elected to withdraw from the plan and the payroll deductions
credited to the participant's account (to the extent not used to make a
purchase of the Company's Common Stock) will be returned to him or her or, in
the case of death, to the person or persons entitled thereto as provided in the
ESPP, and such participant's option will automatically be terminated.
16
Changes in Capitalization. In the event that any dividend or other
distribution (whether in the form of cash, Common Stock, other securities, or
other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Common Stock or other securities of the Company, or
other change in the corporate structure of the Company affecting the Common
Stock such that an adjustment is appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the ESPP, then the Administrator will adjust the number and class of
Common Stock which may be delivered under the ESPP, the purchase price per
share and the number of shares of Common Stock covered by each option under the
ESPP which has not yet been exercised, and the maximum number of shares a
participant can purchase during a purchase period.
Dissolution or Liquidation. In the event of the Company's proposed
dissolution or liquidation, the Administrator will shorten any purchase periods
and offering periods then in progress by setting a new exercise date and any
offering periods will end on the new exercise date. The new exercise date will
be prior to the dissolution or liquidation. If the Administrator shortens any
purchase periods and offering periods then in progress, the Administrator will
notify each participant in writing, at least ten business days prior to the new
exercise date, that the exercise date has been changed to the new exercise date
and that the option will be exercised automatically on the new exercise date,
unless the participant has already withdrawn from the offering period.
Change of Control. In the event of a merger or "change of control," as
defined in the ESPP, each option under the ESPP will be assumed or an
equivalent option will be substituted by such successor corporation or a parent
or subsidiary of such successor corporation. In the event the successor
corporation refuses to assume or substitute for the options, the Administrator
will shorten any purchase periods and offering periods then in progress by
setting a new exercise date and any offering periods will end on the new
exercise date. The new exercise date will be prior to the merger or change of
control. If the Administrator shortens any purchase periods and offering
periods then in progress, the Administrator will notify each participant in
writing, at least ten business days prior to the new exercise date, that the
exercise date has been changed to the new exercise date and that the option
will be exercised automatically on the new exercise date, unless the
participant has already withdrawn from the offering period.
Amendment and Termination of the Plan.
The Administrator may at any time terminate or amend the ESPP including
the term of any offering period then outstanding. Generally, no such
termination can adversely affect options previously granted.
New Plan Benefits
Participation in the ESPP is voluntary and is dependent on each eligible
employee's election to participate and his or her determination as to the level
of payroll deductions. Accordingly, future purchases under the ESPP are not
determinable. Non-employee directors are not eligible to participate in the
ESPP.
Certain Federal Income Tax Information
The following brief summary of the effect of federal income taxation upon
the participant and the Company with respect to the shares purchased under the
ESPP does not purport to be complete, and does not discuss the tax consequences
of a participant's death or the income tax laws of any state or foreign country
in which the participant may reside.
The ESPP, and the right of participants to make purchases thereunder, is
intended to qualify under the provisions of Sections 421 and 423 of the Code.
Under these provisions, no income will be taxable to a participant until the
shares purchased under the ESPP are sold or otherwise disposed of. Upon sale
or other disposition of the shares, the participant will generally be subject
to tax in an amount that depends upon the
17
holding period. If the shares are sold or otherwise disposed of more than two
years from the first day of the applicable offering period and one year from
the applicable date of purchase, the participant will recognize ordinary income
measured as the lesser of (a) the excess of the fair market value of the shares
at the time of such sale or disposition over the purchase price, or (b) an
amount equal to 15% of the fair market value of the shares as of the first day
of the applicable offering period. Any additional gain will be treated as
long-term capital gain. If the shares are sold or otherwise disposed of before
the expiration of these holding periods, the participant will recognize
ordinary income generally measured as the excess of the fair market value of
the shares on the date the shares are purchased over the purchase price. Any
additional gain or loss on such sale or disposition will be long-term or short-
term capital gain or loss, depending on how long the shares have been held from
the date of purchase. The Company generally is not entitled to a deduction for
amounts taxed as ordinary income or capital gain to a participant except to the
extent of ordinary income recognized by participants upon a sale or disposition
of shares prior to the expiration of the holding periods described above.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON PARTICIPANTS AND THE COMPANY UNDER THE ESPP. IT DOES NOT PURPORT TO BE
COMPLETE, AND DOES NOT DISCUSS THE TAX CONSEQUENCES OF A PARTICIPANT'S DEATH OR
THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN
COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE.
Vote Required
Approval of the amendment to the ESPP requires the affirmative vote of
the Votes Cast (which affirmative vote must constitute at least a majority of
the required quorum). The effect of an abstention is the same as that of a
vote against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE AMENDMENT
TO THE 2006 EMPLOYEE STOCK PURCHASE PLAN
18
PROPOSAL 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors of the Company has selected Burr Pilger & Mayer, LLP,Inc., as the Company'sCompany’s independent registered public accounting firm, to audit the consolidated financial statements of the Company for the fiscal year ending May 31, 2010,2011, and recommends that shareholders vote for ratification of such appointment. In the event of a negative vote on such ratification, the Audit Committee and the Board of Directors will reconsider their selection. Even if the selection is ratified, the Audit Committee and the Board of Directors in their discretion may direct the appointment of a different independent registered public accounting firm at any time during the year.
Representatives of Burr Pilger & Mayer, LLPInc. are expected to be present at the meeting with the opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions.
Principal
Independent Registered Public Accounting Firm’s Fees and Services
The following table sets forth the aggregate fees billed or to be billed by Burr Pilger & Mayer, LLPInc. for the following services for the fiscal years ended May 31, 20092010 and 2008:
DESCRIPTION OF SERVICES
| 2010 | 2009 | ||||
| Audit | $174,450 | $159,395 | |||
| TOTAL | $174,450 | $159,395 |
Audit Fees.Fees. Aggregate fees billed or to be billed for professional services rendered for the audit of the Company'sCompany’s fiscal 20092010 and fiscal 20082009 annual consolidated financial statements, for the review of the condensed consolidated financial statements included in the Company'sCompany’s quarterly reports during such periods and for the review of the Company'sCompany’s Registration Statement on Form S-8.
The Audit Committee pre-approves all audit and other permitted non-audit services provided by the Company'Company’ independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year, and any pre-approval is detailed as to the particular service or category of services and is subject to a budget. The Audit Committee may also pre-
approvepre-approve particular services on a case-by-case basis. The Audit Committee has delegated the authority to grant pre-approvals to the committee chair, when the full Audit Committee is unable to do so. These pre-approvals are reviewed by the full Audit Committee at its next regular meeting. In fiscal 2009,2010, all audit and non-audit services were pre-approved in accordance with the Company'sCompany’s policy.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF BURR PILGER & MAYER, LLP
19
INC.
15
COMPENSATION OF AMENDMENT TO THE COMPANY'S RESTATED ARTICLES OF INCORPORATION
TO EFFECT A REVERSE STOCK SPLIT OF THE COMPANY'S COMMON STOCK
EXECUTIVE OFFICERS
EXECUTIVE OFFICERS
The Company is seeking shareholder approval of an amendment to the
Company's restated articles of incorporation to effect a reverse stock splitnames of the Company's Common Stock pursuant to which any whole number of outstanding
shares between and including two (2) to five (5) would be combined into one
share of Common Stock and to concurrently decrease the authorized number of
shares of Common Stock on a proportional basis and to authorize the Board of
Directors to select and file one such amendment at any time prior to the first
anniversary of the Annual Meeting; provided that, the Board of Directors is not
obligated to effect a stock split in that time period unless the Board of
Directors deems it to be in the best interests of the corporation and the
shareholders.
Overview
The Board of Directors recommends the shareholders approve an amendment
to the Company's restated articles of incorporation (the "Articles") to effect
a reverse stock split of all outstanding shares of the Company's Common Stock
at an exchange ratio ranging from one-for-two (1:2) to one-for-five (1:5) and
to concurrently decrease the authorized number of shares of Common Stock on a
proportional basis. You are now being asked to vote upon this amendment to the
Articles. Should we receive the required shareholder approval, the Board of
Directors will have the sole authority to elect, at any time prior to the first
anniversary of this Annual Meeting: (1) whether or not to effect a reverse
stock split, and (2) if so, the number of whole shares of Common Stock between
and including two (2) and five (5) which will be combined into one share of
Common Stock with a proportional reduction in the number of authorized shares
of Common Stock. The Board of Directors believes that providing the flexibility
for the Board of Directors to choose an exact split ratio based on then-current
market conditions is in the best interestsexecutive officers of the Company and its shareholders.
By obtaining shareholder approval of a reverse stock split at the Annual
Meeting, the Board of Directors will be able to determine the most appropriate
time to effectuate the reverse stock split, based on factors suchcertain information about them as prevailing
market conditions and trading price. If approved by the shareholders, and
following such approval, the Board of Directors determines that a reverse stock
split is in the best interests of the Company and its shareholders, the reverse
stock split will become effective upon filing an amendment with the Secretary
of State of the State of California in the form attached hereto as Appendix A.
The amendment will contain the number of shares selected by the Board of
Directors within the limitsRecord Date are set forth below:
| Name | Age | Position |
Rhea J. Posedel | 68 | Chief Executive Officer and Chairman of the Board |
Gary L. Larson | 60 | Vice President of Finance and Chief Financial Officer |
Carl N. Buck | 58 | Vice President of Marketing and Contactor Business Group |
David S. Hendrickson | 53 | Vice President of Engineering |
Gregory M. Perkins | 56 | Vice President of Worldwide Sales and Service |
Kunio Sano | 54 | President, Aehr Test Systems Japan K.K. |
RHEA J. POSEDEL See “Proposal 1 – Election of Directors” above. |
GARY L. LARSON joined the Company in this proposalApril 1991 as Chief Financial Officer and was elected Vice President of Finance in February 1992. From 1986 to be combined into one
share1990, he served as Chief Financial Officer, and from 1988 to 1990 also as President and Chief Operating Officer of Common Stock. Upon filingNanometrics Incorporated, a manufacturer of the amendment, the number of authorizedmeasurement and issued and outstanding shares of Common Stock would be reduced in
accordance with the split ratio determined by the Board of Directors.
Except for adjustments that may result from the treatment of fractional
shares as described below, each shareholder will hold the same percentage of
outstanding Common Stock immediately following the reverse stock split as such
shareholder held immediately prior to the reverse stock split.
Reasonsinspection equipment for the Reverse Stock Split
The Board of Directors believes that a reverse stock split and
corresponding reduction in the total number of authorized shares of Common
Stock may be desirable and should be approved by shareholders for a number of
reasons, including:
Potential Increased Investor Interest. The Board of Directors believes
that the increased market price of the Common Stock expected as a result of
implementing a reverse stock split and corresponding
20
reduction in the total number of authorized shares of Common Stock will improve
the marketability and liquidity of the Common Stock and will encourage interest
and trading in the Common Stock. Many brokerage houses and institutional
investors have internal policies and practices that either prohibit them from
investing in low-priced stocks or tend to discourage individual brokers from
recommending low-priced stocks to their customers. In addition, some of those
policies and practices may function to make the processing of trades in low-
priced stocks economically unattractive to brokers. Moreover, because brokers'
commissions on low-priced stocks generally represent a higher percentage of the
stock price than commissions on higher-priced stocks, the current average price
per share of Common Stock can result in individual shareholders paying
transaction costs representing a higher percentage of their total share value
than would be the case if the share price were substantially higher. Although
it should be noted that the liquidity of the Common Stock may be harmed by the
proposed reverse split given the reduced number of shares that would be
outstanding after the reverse stock split, the Board of Directors is hopeful
that the anticipated higher market price will reduce, to some extent, the
negative effects on the liquidity and marketability of the Common Stock
inherent in some of the policies and practices of institutional investors and
brokerage houses described above.
Reduced Risk of NASDAQ Delisting. On September 15, 2009, the Companysemiconductor industry. Mr. Larson received a letterB.S. in Mathematics/Finance from the Listing Qualifications Department of the NASDAQ
Stock Market LLC informing it that for the previous thirty consecutive trading
days, the bid price of the Company's Common Stock had closed below the minimum
$1.00 per share requirement for continued listing set forth in Marketplace Rule
4450(a)(1), and that, in accordance with Marketplace Rule 5810(c)(3)(A), the
Company was being provided 180 calendar days, or until March 15, 2010, to
regain compliance with the minimum $1.00 per share bid price requirement.
Compliance will be achieved if the bid price of the Common Stock closes at or
above $1.00 per share for a minimum of ten consecutive trading days prior to
March 15, 2010. Approval of this proposal would provide the Company with the
ability to increase the share price of the Common Stock above $1.00 per share
in the event that the Company is unable to comply with Marketplace Rule
4450(a)(1) prior to the annual meeting of shareholders in 2010.
Effects of the Reverse Stock Split
Reduction of Shares Held by Individual Shareholders. After the effective
date of the proposed reverse stock split, each shareholder will own fewer
shares of Common Stock. However, the proposed reverse stock split will affect
all of the shareholders uniformly and will not affect any shareholder's
percentage ownership interests, except to the extent that the reverse split
results in any of the shareholders owning a fractional share as described
below. Proportionate voting rights and other rights and preferences of the
holders of Common Stock will not be affected by the proposed reverse stock
split (other than as a result of the payment of cash in lieu of fractional
shares). For example, a holder of 2% of the voting power of the outstanding
shares of Common Stock immediately prior to reverse stock split would continue
to hold 2% of the voting power of the outstanding shares of Common Stock
immediately after the reverse stock split. The number of shareholders of record
will not be affected by the proposed reverse stock split (except to the extent
that any shareholder holds only a fractional share interest and receives cash
for such interest after the proposed reverse stock split). However, if the
proposed reverse stock split is implemented, it will increase the number of
shareholders of the Company who own "odd lots" of less than 100 shares of
Common Stock. Brokerage commissions and other costs of transactions in odd lots
may be higher than the costs of transactions of more than 100 shares of Common
Stock.
Reduction in Total Outstanding and Authorized Shares. The proposed
reverse split will reduce the total number of authorized and outstanding shares
of Common Stock by the split ratio determined by the Board of Directors within
the limits set forth in this proposal. The following table contains approximate
information relating to the Common Stock under certain of the possible split
ratios based on share information as of September 8, 2009 (in thousands):
21
Pre Reverse 1-for- 1-for- 1-for- 1-for-
Split Two Three Four Five
- ----------------------------- ----------- ------ ------ ------ ------
Authorized 75,000 37,500 25,000 18,750 15,000
Outstanding 8,496 4,248 2,832 2,124 1,699
Reserved for future issuance
pursuant to outstanding
equity grants 2,068 1,034 689 517 414
Reserved for future issuance
pursuant to stock option
plan 104 52 35 26 21
Reserved for future issuance
Pursuant to employee
purchase plan 81 40 27 20 16
Authorized and unreserved 64,251 32,126 21,417 16,063 12,850
====== ====== ====== ====== ======
Change in Number and Exercise Price of Employee and Director Equity
Awards. The proposed reverse stock split will reduce the number of shares of
Common Stock available for issuance under our employee and director equity
plans in proportion to the exchange ratio selected by the Board of Directors
within the limits set forth in this proposal. Under the terms of our
outstanding equity awards, the proposed reverse stock split will cause a
reduction in the number of shares of Common Stock issuable upon exercise or
vesting of such awards in proportion to the exchange ratio of the reverse stock
split and will cause a proportionate increase in the exercise price of such
awards to the extent they are stock options. The number of shares authorized
for future issuance under our equity plans will also be proportionately
reduced. The number of shares of Common Stock issuable upon exercise or vesting
of outstanding equity awards will be rounded to the nearest whole share and no
cash payment will be made in respect of such rounding.
Regulatory Effects. The Company's Common Stock is currently registered
under Section 12(b) of the Exchange Act, and the Company is subject to the
periodic reporting and other requirements of the Exchange Act. The proposed
reverse stock split will not affect the registration of the Common Stock under
the Exchange Act or our obligation to publicly file financial and other
information with the SEC. If the proposed reverse stock split is implemented,
the Common Stock will continue to trade on The NASDAQ Global Market under the
symbol "AEHR" (although NASDAQ would likely add the letter "D" to the end of
the trading symbol for a period of 20 trading days to indicate that the reverse
stock split has occurred).
No Going Private Transaction. Notwithstanding the decrease in the number
of outstanding shares following the proposed reverse stock split, the Board of
Directors does not intend for this transaction to be the first step in a series
of plans or proposals of a "going private transaction" within the meaning of
Rule 13e-3 of the Exchange Act.
Risks of Proposed Reverse Split
The proposed reverse stock split may not increase our stock price, which
would prevent the Company from realizing some of the anticipated benefits of
the reverse stock split.
The Board of Directors expects that the reverse split will increase the
price per share of our Common Stock, which in turn would, among other things,
broaden the class of investors who invest in our stock, help increase analyst
and broker interest in our stock and reduce the possibility that our stock
trades below $1.00 per share for an extended period of time, which could cause
our stock to be delisted from the NASDAQ Global Market. While the Board of
Directors expects that a reverse stock split of our Common Stock will increase
the market price of our Common Stock, the effect of a reverse split upon the
market
22
price of our Common Stock cannot be predicted with any certainty. The market
price of our Common Stock is primarily driven by other factors unrelated to the
number of shares outstanding, including our current and expected future
performance, conditions in the semiconductor industry and stock market
conditions generally. Therefore, it is possible that the per share price of our
Common Stock after the reverse split will not rise in proportion to the
reduction in the number of shares of our Common Stock outstanding resulting
from the reverse stock split, which could cause the Company to fail to realize
the anticipated benefits of the reverse stock split.
The proposed reverse stock split may decrease the liquidity of our stock.
The liquidity of our Common Stock may be harmed by the proposed reverse
split given the reduced number of shares that would be outstanding after the
reverse stock split, particularly if the stock price does not increase as a
result of the reverse stock split.
Board Discretion to Implement the Reverse Stock Split
If the reverse stock split is approved by the shareholders, it will be
effected, if at all, only upon a determination by the Board of Directors that a
reverse stock split is in the best interests of the Company and the
shareholders. Such determination shall be based upon certain factors, including
our then current stock price, the existing and expected marketability and
liquidity of our Common Stock, prevailing market conditions, the likely effect
on the market price of our Common Stock and desire to continue to meet the
listing requirements for the NASDAQ Global Market. Notwithstanding approval of
the reverse stock split by the shareholders, the Board of Directors may, in its
sole discretion, abandon the proposed amendment to the articles of
incorporation and determine not to effect the reverse stock split. If the Board
of Directors fails to implement the reverse stock split prior to the one year
anniversary of the Annual Meeting, shareholder approval again would be required
prior to implementing any reverse stock split.
Effective Date
The proposed reverse stock split would become effective on the date of
filing of a certificate of amendment to the Articles with the office of the
Secretary of State of the State of California. Except as explained below with
respect to fractional shares, on the effective date, shares of Common Stock
issued and outstanding immediately prior thereto will be combined and
converted, automatically and without any action on the part of the
shareholders, into new shares of Common Stock in accordance with the reverse
stock split ratio determined by the Board of Directors within the limits set
forth in this proposal and the authorized number of shares of Common Stock will
be reduced on a proportional basis to the exchange ratio implemented.
Payment for Fractional Shares
No fractional shares of Common Stock will be issued as a result of the
proposed reverse stock split. Instead, shareholders who otherwise would be
entitled to receive fractional shares, upon surrender to the exchange agent of
such certificates representing such fractional shares, will be entitled to
receive cash in an amount equal to the product obtained by multiplying (a) the
closing sales price of our Common Stock on the effective date as reported on
the NASDAQ Global Market by (b) the number of shares of our Common Stock held
by such shareholder that would otherwise have been exchanged for such
fractional share interest.
Exchange of Stock Certificates
As soon as practicable after the effective date, shareholders will be
notified that the reverse split has been effected. The Company's transfer agent
will act as exchange agent for purposes of implementing
23
the exchange of stock certificates for record holders (i.e. shareholders who
hold their shares directly in their own name and not through a broker). Record
holders of pre-reverse split shares who hold physical stock certificates will
be asked to surrender to the exchange agent certificates representing pre-
reverse split shares in exchange for a book entry with the transfer agent or
certificates representing post-reverse split shares in accordance with the
procedures to be set forth in a letter of transmittal to be sent by us. No new
certificates will be issued to a shareholder until such shareholder has
surrendered such shareholder's outstanding certificate(s) together with the
properly completed and executed letter of transmittal to the exchange agent.
RECORD SHAREHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT
SUBMIT ANY CERTIFICATE(S) UNTIL REQUESTED TO DO SO.
For beneficial holders of pre-reverse split shares (i.e., shareholders
who hold their shares through a broker), your broker will make the appropriate
adjustment to the number of shares held in your account following the effective
date of the reverse split.
Effect on Registered "Book-Entry" Holders of Common Stock (i.e. shareholders
that are registered on the transfer agent's books and records but do not hold
stock certificates)
Certain holders of common stock may hold some or all of their shares
electronically in book-entry form with the transfer agent. These shareholders
do not have stock certificates evidencing their ownership of the Common Stock.
They are, however, provided with a statement reflecting the number of shares
registered in their accounts.
If a shareholder holds registered shares in book-entry form with the
transfer agent, no action needs to be taken to receive post-reverse stock split
shares or cash payment in lieu of any fractional share interest, if applicable.
If a shareholder is entitled to post-reverse stock split shares, a transaction
statement will automatically be sent to the shareholder's address of record
indicating the number of shares of Common Stock held following the reverse
stock split.
If a shareholder is entitled to a payment in lieu of any fractional share
interest, a check will be mailed to the shareholder's registered address as
soon as practicable after the effective date. By signing and cashing the check,
shareholders will warrant that they owned the shares of Common Stock for which
they received a cash payment. The cash payment is subject to applicable federal
and state income tax and state abandoned property laws. In addition,
shareholders will not be entitled to receive interest for the period of time
between the effective date of the reverse stock split and the date payment is
received.
Accounting Consequences
The par value per share of our Common Stock will remain unchanged at
$0.01 per share after the reverse stock split. As a result, on the effective
date of the reverse split, the stated capital on our consolidated balance sheet
attributable to Common Stock will be reduced and the additional paid-in-capital
account will be increased by the amount by which the stated capital is reduced.
Per share net income or loss will be increased because there will be fewer
shares of our Common Stock outstanding. The Company does not anticipate that
any other accounting consequences, including changes to the amount of stock-
based compensation expense to be recognized in any period, will arise as a
result of the reverse stock split.
No Appraisal Rights
Our shareholders are not entitled to dissenter's or appraisal rights
under California corporate law with respect to the proposed amendment to the
Articles to effect the reverse split.
24
Material Federal U.S. Income Tax Consequences of the Reverse Stock Split
The following is a summary of important tax considerations of the
proposed reverse stock split. It addresses only shareholders who hold the pre-
reverse split shares and post-reverse split shares as capital assets. It does
not purport to be complete and does not address shareholders subject to special
rules, such as financial institutions, tax-exempt organizations, insurance
companies, dealers in securities, mutual funds, foreign shareholders,
shareholders who hold the pre-reverse split shares as part of a straddle,
hedge, or conversion transaction, shareholders who hold the pre-reverse split
shares as qualified small business stock within the meaning of Section 1202 of
the Internal Revenue Code of 1986, as amended (the "Code"), shareholders who
are subject to the alternative minimum tax provisions of the Code, and
shareholders who acquired their pre-reverse split shares pursuant to the
exercise of employee stock options or otherwise as compensation. This summary
is based upon current law, which may change, possibly even retroactively. It
does not address tax considerations under state, local, foreign, and other
laws. Furthermore, we have not obtained a ruling from the Internal Revenue
Service or an opinion of legal or tax counsel with respect to the consequences
of the reverse stock split. Each shareholder is advised to consult his or her
tax advisor as to his or her own situation.
The reverse stock split is intended to constitute a reorganization within
the meaning of Section 368 of the Code. Assuming the reverse split qualifies as
a reorganization, a shareholder generally will not recognize gain or loss on
the reverse stock split, except to the extent of cash, if any, received in lieu
of a fractional share interest in the post-reverse split shares. The aggregate
tax basis of the post-reverse split shares received will be equal to the
aggregate tax basis of the pre-reverse split shares exchanged therefor
(excluding any portion of the holder's basis allocated to fractional shares),
and the holding period of the post-reverse split shares received will include
the holding period of the pre-reverse split shares exchanged.
A holder of the pre-reverse split shares who receives cash will generally
recognize gain or loss equal to the difference between the portion of the tax
basis of the pre-reverse split shares allocated to the fractional share
interest and the cash received. Such gain or loss will be a capital gain or
loss and will be short term if the pre-reverse split shares were held for one
year or less and long term if held more than one year. No gain or loss will be
recognized byHarvey Mudd College.
CARL N. BUCK joined the Company as a resultProduct Marketing Manager in 1983 and held various positions until he was elected Vice President of Engineering in November 1992, Vice President of Research and Development Engineering in November 1996, Vice President of Marketing in September 1997, Vice President of Contactor Business Group in May 2002 and Vice President of Marketing and Contactor Business Group in October 2005. From 1978 to 1983, Mr. Buck served as Product Marketing Manager at Intel Corporation, an integrated circuit and microprocessor company. Mr. Buck received a B.S.E.E. from Princeton University, an M.S. in Electrical Engineering from the reverse stock split.
Vote Required
ApprovalUniversity of Maryland and an M.B.A. from Stanford University.
DAVID S. HENDRICKSON joined the amendmentCompany as Vice President of Engineering in October 2000. From 1999 to 2000, Mr. Hendrickson served as Platform General Manager, and from 1995 to 1999 as Engineering Director and Software Director of Siemens Medical (formerly Acuson Corporation), a medical ultrasound products company. From 1990 to 1995, Mr. Hendrickson served as Director of Engineering and Director of Software of Teradyne Inc. (formerly Megatest Corporation), a manufacturer of semiconductor capital equipment. Mr. Hendrickson received a B.S. in Computer Science from Illinois Institute of Technology.
GREGORY M. PERKINS joined the Articles requiresCompany as Vice President of Worldwide Sales and Service in June 2004. From 2001 to 2003, Mr. Perkins served as Vice President of North America Customer Operations and then Vice President of North American and European Sales, for Electroglas Corporation, a producer of semiconductor wafer probers. From 1999 to 2001, he served as Vice President of Sales at Advantest America, Inc., a semiconductor tester company, and from 1997 to 1999 as Vice President of Worldwide Sales and Field Operations at LTX Corporation, a semiconductor tester company. From 1978 to 1997, Mr. Perkins held multiple management positions over 19 years with General Electric Company
16
including Senior Vice President of Marketing and Business Development for GE Capital Computer Leasing. Mr. Perkins received a B.S. in Environmental Health Technologies from Quinnipiac University.
KUNIO SANO joined the affirmative voteCompany as Vice President, Aehr Test Systems Japan K.K., the Company’s subsidiary in Japan, in June 1998 and was elected President, Aehr Test Systems Japan K.K. in January 2001. From 1991 to 1998, he served as Manager of the Votes Cast (which affirmative vote must constituteDevelopment Engineering Department at leastTokyo Electron Yamanashi Limited, a majorityleading worldwide semiconductor equipment manufacturer. Mr. Sano received a B.S.E.E. from Sagami Institute of the required quorum). The effect of an abstention is the same as that of a
vote against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE AMENDMENT TO
THE COMPANY'S RESTATED ARTICLES OF INCORATION TO EFFECT A REVERSE STOCK SPLIT
OF THE COMPANY'S COMMON STOCK
25
COMPENSATION OF EXECUTIVE OFFICERS
Technology in Kanagawa, Japan.
COMPENSATION DISCUSSION AND ANALYSIS
General Philosophy
The Company compensates the Company'sCompany’s executive officers through a combination of base salary, cash bonus and equity compensation designed to be competitive with comparable companies. The Company'sCompany’s primary objectives of the overall executive compensation program are to attract, retain, motivate and reward Company executive officers while aligning their compensation with the achievements of key business objectives and maximization of shareholder value.
The Company'sCompany’s compensation programs are designed to:
1. reward executive officers for performance and link executive compensation
to the creation of shareholder value through the use of performance and
equity-based compensation;
2. attract, retain and motivate highly qualified executive officers by
compensating them at a level that is competitive with other companies in
similar industries;
3. share the risks and rewards of the Company's business with the Company's
executive officers; and
4. maximize long-term shareholder returns by utilizing compensation funds in
a cost-effective manner.
1. | reward executive officers for performance and link executive compensation to the creation of shareholder value through the use of performance and equity-based compensation; |
2. | attract, retain and motivate highly qualified executive officers by compensating them at a level that is competitive with other companies in similar industries; |
3. | share the risks and rewards of the Company’s business with the Company’s executive officers; and |
4. | maximize long-term shareholder returns by utilizing compensation funds in a cost-effective manner. |
To achieve these objectives, the Company has implemented and maintains compensation plans that tie a significant portion of executive officers'officers’ overall compensation to the Company'sCompany’s financial performance and Common Stock price. In determining the compensation for the Company'sCompany’s executive officers, the Company considers a number of factors, including information regarding comparably sized companies in the semiconductor equipment and materials industries in the United States. The Company also considers the level of the executive officer, the geographical region in which the executive officer resides and the executive officer'sofficer’s overall performance and contribution to the Company. The compensation packages provided by the Company to its executive officers, including the named executive officers, include both cash-based and equity-based compensation. A component of these compensation packages is linked to the performance of individual executive officers as well as Company-wide performance objectives. The Compensation Committee ensures that the total compensation paid to the Company'sCompany’s executive officers is competitive and consistent with the Company'sCompany’s compensation philosophy and corporate governance guidelines. The Compensation Committee relies upon Company employees, personal knowledge of semiconductor equipment industry compensation practices, compensation data in SEC filings, and national and regional compensation surveys to provide information and recommendations to establish specific compensation packages for executive officers.
Role of Compensation Committee
The Company'sCompany’s executive officer compensation program is overseen and administered by the Compensation Committee. The Compensation Committee reviews and advises the Board of Directors regarding all forms of compensation to be provided to the executive officers of the Company. The Compensation Committee is appointed by the Company'sCompany’s Board of Directors, and consists of Messrs. Anderson and Elder, each of whom is an "outside director"“outside director” for purposes of Section 162(m) of the Internal Revenue Code and a "non-employee director"“non-employee director” for purposes of Rule 16b-3 under the Exchange Act.
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The Company'sCompany’s Compensation Committee has primary responsibility for ensuring that the Company'sCompany’s executive officer compensation and benefit program is consistent with the Company'sCompany’s compensation philosophy and corporate governance guidelines and is responsible for determining the executive compensation packages offered to the Company'sCompany’s executive officers.
The Compensation Committee is responsible for:
26
1. Determining the specific executive officer compensation methods to be
used by the Company and the participants in each of those specific
programs;
2. Determining the evaluation criteria and timelines to be used in those
programs;
3. Determining the processes that will be followed in the ongoing
administration of the programs; and
4. Determining their role in the administration of the programs.
1. | Determining the specific executive officer compensation methods to be used by the Company and the participants in each of those specific programs; |
2. | Determining the evaluation criteria and timelines to be used in those programs; |
3. | Determining the processes that will be followed in the ongoing administration of the programs; and |
4. | Determining their role in the administration of the programs. |
Many of the actions take the form of recommendations to the full Board of Directors where final approval, rejection or redirection may occur. The Compensation Committee is responsible for administering the compensation programs for all Company executive officers. The Compensation Committee has delegated the responsibility of administering the compensation programs for all other Company employees to the Company's officers.
Elements of Compensation
In structuring the Company'sCompany’s compensation program, the Compensation Committee seeks to select the types and levels of compensation that will further its goals of rewarding performance, linking executive officer compensation to the creation of shareholder value, attracting and retaining highly qualified executive officers and maximizing long-term shareholder returns.
The Company designs base salary to provide the essential reward for an executive officer'sofficer’s work. Once base salary levels are initially determined, increases in base salary are provided to recognize an executive officer'sofficer’s specific performance achievements.
The Company utilizes equity-based compensation, including stock options, to ensure that the Company has the ability to retain executive officers over a longer period of time, and to provide executive officers with a form of reward that aligns their interests with those of the Company'sCompany’s shareholders. Executive officers whose skills and results the Company deems to be critical to the Company'sCompany’s long-term success are eligible to receive higher levels of equity-based compensation.
The Company also utilizes various forms of performance-based compensation, including cash bonuses and commissions that allow the Company to remain competitive with other companies while providing additional compensation for an executive officer'sofficer’s outstanding results and for the achievement of corporate objectives.
Core benefits, such as the Company'sCompany’s basic health benefits, 401(k) program, Employee Stock Ownership Plan, ("ESOP")or ESOP, and life insurance, are designed to provide support to executive officers and their families.
Currently, the Company uses the following executive officer compensation vehicles:
Cash-based programs: base salary, annual bonus plan and a sales commission plan; and
Equity-based programs: The 2006 Equity Incentive Plan, the 2006 Employee Stock Purchase Plan and the ESOP.
These programs apply to all executive level positions, except for the sales commission plan, which only applies to the Vice President of Worldwide Sales and Service. Periodically, but at least once near the close of each fiscal year, the Compensation Committee reviews the existing plans and recommends those that should be used for the subsequent year.
Consistent with the Company'sCompany’s compensation philosophy, the Company has structured each element of the Company'sCompany’s executive officer compensation program as described below.
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Base Salary
The Company creates a set of base salary structures that are both affordable and competitive in relation to the market. The Company determines the Company'sCompany’s executive officer salaries based on job responsibilities and individual experiences. The Company monitors base salary levels within the market and makes adjustments to the Company'sCompany’s structures as needed after considering the recommendations of management. The Company'sCompany’s Compensation Committee reviews the salaries of the Company'sCompany’s executive officers annually, and the Company'sCompany’s Compensation Committee grants increases in salaries based on
27
Annual Bonus
The Company'sCompany’s executive annual bonus plan provides for cash bonus awards, dependent upon attaining stated corporate objectives and personal performance goals. The Company'sCompany’s executive officers are eligible to receive cash bonuses based upon the Company'sCompany’s achievement of certain financial and performance goals set by the Compensation Committee. The Compensation Committee approves the performance criteria on an annual basis and these financial and performance goals typically have a one-year time horizon. The Compensation Committee believes that the practice of awarding incentive bonuses based on the achievement of performance goals furthers the Company'sCompany’s goal of strengthening the connection between the interests of management and the Company'sCompany’s shareholders. In fiscal 2010,2011, the Company’s Chief Executive Officer, isChief Financial Officer and Vice Presidents are eligible to receive a maximum cash bonus of up to 30% of his base salary and the Company's
Chief Financial Officer is eligible to receive a maximum cash bonus of up to
30% of his base salary. Vice Presidents are eligible are eligible to receive
maximum cash bonuses of up to 30%90% of their base salaries depending on individualCompany performance. At targeted Company financial performance for fiscal 2011, the bonuses earned by the Company’s Chief Executive Officer, Chief Financial Officer and company performance.
Vice Presidents will be less than 2% of base salaries.
In fiscal 2009,2010, the Company'sCompany’s Compensation Committee determined the maximum cash bonus levels for the Company'sCompany’s Chief Executive Officer, Chief Financial Officer and Vice Presidents to be 90%, 80% and up to 80%30% of base compensation, respectively.compensation. Based on the corporate financial performance for the year, the Compensation Committee awarded no cash bonuses of 17.83% to the Company'sCompany’s Chief Executive Officer, Chief Financial Officer and Vice Presidents. Joel Bustos, Vice President of Operations, did not receive a cash bonus as he terminated employment prior to the date that the bonus payments occurred. The annual incentive bonus plan is discretionary, and the Compensation Committee may modify, suspend, eliminate or adjust the plan, the goals and the total or individual payouts at any time.
Sales Commission
The sales commission plan is a sales commission program and provides a payout to the Vice President of Worldwide Sales and Service, ("VP-WSS")or VP-WSS, based on achievement of sales objectives or quotas. The VP-WSS receives a standard commission for sales up to 100% of quota and accelerated commissions based on sales above quota. Commissions are "earned"considered earned at the time of booking and
commissions are paid after the close of the quarter of booking. Under this plan, the VP-WSS earned $24,853$32,171 in fiscal 2009.2010. The VP-WSS was paid $34,451$29,470 during fiscal 2009.2010. This $34,451$29,470 included $11,365$1,767 that was earned in fiscal 2008.2009. The remaining $1,767$4,468 earned in fiscal 20092010 was paid to the VP-WSS in fiscal 2010.2011. The $34,451$32,171 in commissions paid toearned by the VP-WSS in fiscal 2010 is included in the annual compensation salary column in the Summary Compensation Table on page 26.
22.
Equity Compensation
The Company awards equity compensation to the Company'sCompany’s executive officers based on the performance of the executive officer and guidelines related to each executive officer'sofficer’s position in the Company. The Company determines the Company'sCompany’s option guidelines based on information derived from the Company'sCompany’s experience with other companies and, with respect to the Company'sCompany’s executive officers, informal surveys of companies in the Company'sCompany’s industry. The Company typically bases awards to newly hired executive officers on these guidelines and the Company bases the Company's award decisions for continuing executive officers on these guidelines as well as an executive officer'sofficer’s performance for the prior fiscal year. The Company evaluates each executive officer'sofficer’s awards based on the factors described above and competitive practices in the Company'sCompany’s industry. The Company believes that stock option ownership is an important factor in aligning corporate and individual goals. The
19
Company utilizes equity-based compensation, including stock options, to encourage long-term performance with corporate performance and extended executive officer tenure producing potentially significant value.
The Company'sCompany’s Compensation Committee generally grants stock options to executive officers. Such grants are typically made coincident withat the first meeting of the Board of Directors held each fiscal year. The Company believes annual awards at this time allow the Compensation Committee to consider a number of factors related to the option award decisions, including corporate performance for the prior fiscal year, executive officer performance for the prior fiscal year and expectations for the upcoming fiscal year. With respect to newly hired executive officers, the Company'sCompany’s standard practice is typically to make stock option grants effective on or shortly after the executive officer'sofficer’s hire date. The Company does not plan or time the 27
Company'sCompany’s stock option grants in coordination with the release of material non-
publicnon-public information for the purpose of affecting the value of executive officer compensation.
The criteria for determining the appropriate salary level, bonus and stock option grants for each of the executive officers includeinclude: (a) Company performance as a whole,whole; (b) business unit performance (where appropriate); and (c) individual performance. Company performance and business unit performance are measured against both strategic and financial goals. Examples of these goals are to obtain operating profit, revenue growth, and timely new product introduction. Individual performance is measured to specific objectives relevant to the executive officer'sofficer’s position and a specific time frame.
These criteria are usually related to a fiscal year time period, but may, in some cases, be measured over a shorter or longer time frame.
The processes used by the Compensation Committee include the following steps:
1. The Compensation Committee periodically reviews information comparing the Company's payCompany’s compensation levels to other companies in similar industries, other leading companies (regardless of industry) and competitors. Primarily, personal knowledge of semiconductor equipment industry compensation practices, compensation data in SEC filings, and national and regional compensation surveys are used.
2. At or near the start of each evaluation cycle, the Compensation Committee meets with the Chief Executive Officer to review, revise as needed, and agree on the performance objectives set for the other executive officers. The Chief Executive Officer and Compensation Committee jointly set the Company objectives to be used. The business unit and individual objectives are formulated jointly by the Chief Executive Officer and the specific individual. The Compensation Committee also, with the Chief Executive Officer, jointly establishes and agrees on respective performance objectives of each executive officer.
3. Throughout the performance cycle review, feedback is provided by the Chief Executive Officer, the Compensation Committee and fullthe Board of Directors, as appropriate.
4. At the end of the performance cycle, the Chief Executive Officer evaluates each other executive officers relative success in meeting the performance goals. The Chief Executive Officer makes recommendations on salary, bonus and stock options, utilizing the comparative results as a factor. Also included in the decision criteria are subjective factors such as teamwork, leadership contributions and ongoing changes in the business climate. The Chief Executive Officer reviews the recommendations and obtains Compensation Committee approval.
5. The final evaluations and compensation decisions are discussed with each executive officer by the Chief Executive Officer or Compensation Committee, as appropriate.
In fiscal 2009,2010, the Company granted a total of 554,950559,550 option shares of which a total of 207,000235,000 option shares were granted to the Company'sCompany’s executive officers, representing 37.3%42.0% of all option shares granted in fiscal 2009.2010. The Company'sCompany’s Compensation Committee does not apply a formula for allocating stock options to executive officers. Instead, the Company'sCompany’s Compensation Committee considers the role and responsibilities of the executive officers, competitive factors, the non-equity compensation received by the executive officers and the total number of options to be granted in the fiscal year. The description for the type of equity-based compensation program should be read in conjunction with "Equity“Equity Compensation Plan Information"Information” and "Stock“Stock Option Plans"Plans” in this Proxy Statement and the related notes in the "Notes“Notes to Consolidated Financial Statements"Statements” of the Company'sCompany’s Annual Report on Form 10-K for the fiscal year ended May 31, 2009.
2010.
20
Other Benefits
Executive officers are eligible to participate in all of the Company'sCompany’s employee benefit plans, such as medical, dental, group life, disability, and accidental death and dismemberment insurance, the Company'sCompany’s 401(k) plan, the Company'sCompany’s ESOP and ESPP. Because Rhea J. Posedel owns more than 10% of the Company'sCompany’s outstanding Common Stock he is precluded from participating in the ESPP. During fiscal 2009,2010, the Company made payments for health and life insurance premiums and medical costs as reflected in the Summary Compensation Table below under the All“All Other CompensationCompensation” column. Other than these payments, the executive officers participate on the same basis as other employees and there were no other special benefits or perquisites provided to any executive officer in fiscal 2009.2010. The Company does not
29
Company'sCompany’s 401(k) plan and ESOP. The Company is not required to make contributions to the 401(k) plan and did not make any contributions to the 401(k) plan during fiscal 2009.2010. During fiscal 2009,2010, the Company contributed $60,000$150,000 to the Company'sCompany’s ESOP.
The Company entered into Change of Control Severance Agreements on January 24, 2001 with Mr. Carl N. Buck, Mr. David S. Hendrickson, Mr. Gary L. Larson and Mr. Rhea J. Posedel,Posedel; on September 13, 2006 with Mr. Gregory M. Perkins andPerkins; on July 9, 2007 with Mr. Joel Bustos and on September 7, 2010 with Mr. Kunio Sano; pursuant to which those executives would be entitled to a payment in the event of a termination of employment for specified reasons following a change of control of the Company. For this purpose, a change of control of the Company means a merger or consolidation of the Company, a sale by the Company of all or substantially all of its assets, the acquisition of beneficial ownership of a majority of the outstanding voting securities of the Company by any person or a change in the composition of the Board as a result of which fewer than a majority of the directors are incumbent directors. Termination of employment for purposes of these agreements means a discharge of the executive by the Company, other than for specified causes including dishonesty, conviction of a felony, misconduct or wrongful acts. Termination also includes resignation following the occurrence of an adverse change in the executive'sexecutive’s position, duties, compensation or work conditions. The amounts payable under the agreements will change from year to year based on the executive'sexecutive’s compensation.
In the event of a termination in fiscal 20102011 following a change of control, the amounts payable to Messrs. Buck, Bustos, Hendrickson, Larson, Perkins, Posedel and PosedelSano would be approximately $90,000, $113,000, $119,000,$112,000, $120,000, $163,000, $99,000$102,000, $265,000 and $261,000,$99,000, respectively. In addition to the amount payable to the executive officers mentioned in the previous sentence, the aggregate values of the acceleration of vesting of the executive officer'sofficer’s unvested stock options based on the spread between the closing price of the Company'sCompany’s Common Stock on May 31, 200928, 2010 (the last business day of the fiscal year) of $0.93$2.34 and the exercise price of the stock options for Messrs. Buck, Bustos, Hendrickson, Larson, Perkins, Posedel and PosedelSano would be $0.
$24,663, $24,888, $25,114, $24,888, $24,888, $49,416 and $20,628, respectively.
Compensation of the Chief Executive Officer
The Compensation Committee used the same compensation policy described above for all executive officers to determine the compensation for Rhea J. Posedel, the Company'sCompany’s Chief Executive Officer, in fiscal year 2009.2010. In setting both the cash-based and the equity-based elements of Mr. Posedel'sPosedel’s compensation, the Compensation Committee considered the company'scompany’s performance, competitive forces taking into account Mr. Posedel'sPosedel’s experience and knowledge, and Mr. Posedel'sPosedel’s leadership in achieving the Company'sCompany’s long-term goals. During fiscal year 2009,2010, he received twoa stock option grant under the Company'sCompany’s 2006 Stock Option Plan for 54,00060,000 shares. This option vests over four years. The Compensation Committee believes Mr. Posedel'sPosedel’s fiscal year 20092010 compensation was fair relative to the Company'sCompany’s performance and Mr. Posedel'sPosedel’s individual performance and leadership, and that it rewards him for this performance and will serve to retain him as a key employee.
Policy on Deductibility of Compensation
The Company is required to disclose the Company'sCompany’s policy regarding qualifying executive compensation for deductibility under Section 162(m) of the Internal Revenue Code of 1986, as amended, which provides that, for purposes of the regular income tax, the otherwise allowable deduction for compensation paid or accrued with respect to the executive officers of a publicly-held company, which is
21
not performance-based compensation, is limited to no more than $1 million per year. It is not expected that the compensation to be paid to the Company'sCompany’s executive officers for fiscal 20092011 will exceed the $1 million limit per officer; however, to the extent such compensation to be paid to such executive officers exceeds the $1 million limit per officer, such excess will be treated as performance-based compensation.
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Compensation of Executive Officers
In response to the current slowdown in the semiconductor manufacturing
industry and the related impact on the Company's net revenues, during fiscal
2009 the Company implemented a temporary reduction in compensation paid to the
Officers.
The following table shows information concerning compensation awarded to, earned by or paid for services to the Company in all capacities during the fiscal yearyears ended May 31, 2010, 2009 and 2008 by the Chief Executive Officer and each of the four other most highly compensated executive officers with annual compensation in excess of $100,000 for the fiscal yearyears ended May 31, 2010, 2009 and 2008.
Summary Compensation Table
| Fiscal Year | Annual Compensation | Option Awards (3) | Long-term Compensation Securities Underlying Options (4) | All Other Compensation (5) | |||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Name and Principal Position | Salary (1) | Bonus (2) | Total | ||||||||||||||||||||||||||||
| Rhea J. Posedel | 2010 | $210,118 | $35,781 | $90,063 | $5,763 | $28,682 | $370,407 | ||||||||||||||||||||||||
| Chief Executive Officer and | 2009 | $236,287 | — | $101,443 | $2,706 | $24,465 | $364,901 | ||||||||||||||||||||||||
| Chairman of the Board of Directors | 2008 | $237,479 | $58,794 | $66,054 | $5,777 | $27,467 | $395,571 | ||||||||||||||||||||||||
| Gary L. Larson | 2010 | $190,946 | $33,530 | $61,867 | $5,910 | $7,765 | $300,018 | ||||||||||||||||||||||||
| Vice President of Finance and | 2009 | $205,759 | — | $70,283 | $2,706 | $8,103 | $286,851 | ||||||||||||||||||||||||
| Chief Financial Officer | 2008 | $207,763 | $45,823 | $59,001 | $5,777 | $6,981 | $325,345 | ||||||||||||||||||||||||
| Joel Bustos (6) | 2010 | $163,500 | — | $109,039 | $4,935 | $22,227 | $299,701 | ||||||||||||||||||||||||
| Vice President of Operations | 2009 | $196,668 | — | $112,130 | $2,665 | $23,973 | $335,436 | ||||||||||||||||||||||||
| 2008 | $183,500 | $40,268 | $81,415 | $4,307 | $25,828 | $335,318 | |||||||||||||||||||||||||
| David S. Hendrickson | 2010 | $182,001 | $33,867 | $63,189 | $5,047 | $28,452 | $312,556 | ||||||||||||||||||||||||
| Vice President of Engineering | 2009 | $208,234 | — | $73,425 | $2,706 | $26,493 | $310,858 | ||||||||||||||||||||||||
| 2008 | $202,186 | $54,491 | $49,991 | $5,619 | $26,679 | $338,966 | |||||||||||||||||||||||||
| Gregory M. Perkins (7) | 2010 | $185,922 | $29,235 | $49,008 | $5,586 | $21,614 | $291,365 | ||||||||||||||||||||||||
| Vice President of Worldwide | 2009 | $205,643 | — | $52,526 | $2,409 | $15,651 | $276,229 | ||||||||||||||||||||||||
| Sales and Service | 2008 | $237,157 | $10,386 | $43,242 | $5,777 | $16,456 | $313,018 | ||||||||||||||||||||||||
(1) | The amounts in this column include any salary contributed by the named executive officer to the Company’s 401(k) plan. |
(2) | Bonus amounts paid or accrued in fiscal 2010, 2009 and 2008 were made under the Company’s executive bonus plan. |
(3) | The amounts in this column represent the dollar amount recognized for financial statement reporting purposes computed in accordance with the provisions of FASB ASC 718 and thus include awards granted in and prior to fiscal 2010, 2009 and 2008.
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|
Stock Option Grants and Exercises
The following table provides information with regard to each grant of an award made to the persons named in the Summary Compensation Table during the fiscal year ended May 31, 2009.
2010.
Grants
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(4) | Mr. Bustos terminated employment in June 2010. |
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The following table presents certain information concerning the outstanding equity awards held as of May 31, 20092010 by each named executive officer.
Outstanding Equity
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| Options are granted at an exercise price equal to the fair market value of the Company’s Common Stock, as determined by reference to the closing price reported by the NASDAQ Global Market on | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(3) | These options generally expire five or seven years from the date of grant. |
(4) | Mr. Bustos terminated employment in June 2010. |
The following table provides information concerning option exercises by the persons named in the Summary Compensation Table during the fiscal year ended May 31, 20092010 and the value of unexercised options at such date.
Aggregated Option Exercises in Last Fiscal Year2010 and Fiscal 2010 Year-End Option Values
| Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Securities Underlying Unexercised Options at Fiscal Year-End(#)(1) | Value of Unexercised In-the-Money Options at Fiscal Year-End($)(2) | ||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Name | Exercisable | Unexercisable | Exercisable | Unexercisable | |||||||||||||||||||||||
| Rhea J. Posedel | 2,500 | — | 165,543 | 58,957 | $37,844 | $49,416 | |||||||||||||||||||||
| Gary L. Larson | 6,000 | 1,084 | 96,416 | 29,584 | $20,893 | $24,888 | |||||||||||||||||||||
| Joel Bustos (3) | — | — | 81,998 | 50,002 | $20,892 | $24,888 | |||||||||||||||||||||
| David S. Hendrickson | — | — | 112,560 | 33,440 | $21,026 | $25,114 | |||||||||||||||||||||
| Gregory M. Perkins | — | — | 49,956 | 28,230 | $20,893 | $24,888 | |||||||||||||||||||||
(1) | The Company has not granted any stock appreciation rights and its stock plans do not provide for the granting of |
(2) | Calculated by determining the difference between the fair market value of |
(3) | Mr. Bustos |
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The following table shows the potential payments upon termination or change of control for the persons named in the Summary Compensation Table during the fiscal year ended May 31, 2009.
2010.
Potential Payments Upon Termination or Change of Control for each Named
Executive Officer
Named Executive Benefits and Payments | Involuntary |
Rhea J. Posedel | |
Base salary | $236,101 |
Medical continuation | 28,682 |
Value of accelerated stock options (1) | 49,416 |
Gary L. Larson | |
Base salary | $156,702 |
Medical continuation | 5,824 |
Value of accelerated stock options (1) | 24,888 |
Joel Bustos (2) | |
Base salary | $100,913 |
Medical continuation | 11,113 |
Value of accelerated stock options (1) | 24,888 |
David S. Hendrickson | |
Base salary | $105,529 |
Medical continuation | 14,226 |
Value of accelerated stock options (1) | 25,114 |
Gregory M. Perkins | |
Base salary | $91,094 |
Medical continuation | 10,807 |
Value of accelerated stock options (1) | 24,888 |
(1) | Represents the aggregate value of the acceleration of vesting of the executive officer’s unvested stock options based on the spread between the closing price of the Company’s Common Stock on May 28, 2010 (the last business day of the fiscal year) of $2.34 and the exercise price of the stock options. Aggregate intrinsic value represents only the value for those options in which the exercise price of the option is less than the market value of the Company’s stock on May 28, 2010. |
(2) | Mr. Bustos terminated employment in June 2010. |
26
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Review, Approval or Ratification of Transactions with Related Persons
In its ordinary course of business, the Company enters into transactions with certain of its directors and officers. The Company believes that each such transaction has been on terms no less favorable for the Company than could have been obtained in a transaction with an independent third party. The Company'sCompany’s policy is to require that any transaction with a related party that is required to be reported under applicable SEC rules, be reviewed and approved according to an established procedure. Such a transaction is reviewed and approved by the Company'sCompany’s Audit Committee as required by the Audit Committee'sCommittee’s charter.
34
Legal Counsel
During fiscal 2009,2010, Mario M. Rosati, a member of the Board of Directors of the Company, was also a member of the law firm of Wilson Sonsini Goodrich & Rosati, Professional Corporation, ("WSGR").or WSGR. The Company retained WSGR as its legal counsel during the fiscal year. The Company plans to retain WSGR as its legal counsel again during fiscal 2010.
2011.
Change of Control Severance Agreement
The Company entered into Change of Control Severance Agreements on January 24, 2001 with Mr. Carl N. Buck, Mr. David S. Hendrickson, Mr. Gary L. Larson and Mr. Rhea J. Posedel,Posedel; on September 13, 2006 with Mr. Gregory M. Perkins andPerkins; on July 9, 2007 with Mr. Joel Bustos and on September 7, 2010 with Mr. Kunio Sano; pursuant to which those executives would be entitled to a payment in the event of a termination of employment for specified reasons following a change of control of the Company. For this purpose, a change of control of the Company means a merger or consolidation of the Company, a sale by the Company of all or substantially all of its assets, the acquisition of beneficial ownership of a majority of the outstanding voting securities of the Company by any person or a change in the composition of the Board as a result of which fewer than a majority of the directors are incumbent directors. Termination of employment for purposes of these agreements means a discharge of the executive by the Company, other than for specified causes including dishonesty, conviction of a felony, misconduct or wrongful acts. Termination also includes resignation following the occurrence of an adverse change in the executive'sexecutive’s position, duties, compensation or work conditions. The amounts payable under the agreements will change from year to year based on the executive'sexecutive’s compensation.
In the event of a termination in fiscal 20102011 following a change of control, the amounts payable to Messrs. Buck, Bustos, Hendrickson, Larson, Perkins, Posedel and PosedelSano would be approximately $90,000, $113,000, $119,000,$112,000, $120,000, $163,000, $99,000$102,000, $265,000 and $261,000,$99,000, respectively. In addition to the amount payable to the executive officers mentioned in the previous sentence, the aggregate values of the acceleration of vesting of the executive officer'sofficer’s unvested stock options based on the spread between the closing price of the Company'sCompany’s Common Stock on May 31, 200928, 2010 (the last business day of the fiscal year) of $0.93$2.34 and the exercise price of the stock options for Messrs. Buck, Bustos, Hendrickson, Larson, Perkins, Posedel and PosedelSano would be $0.
$24,663, $24,888, $25,114, $24,888, $24,888, $49,416 and $20,628, respectively.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Messrs. Anderson and Elder. No interlocking relationship exists between the Company'sCompany’s Board of Directors and Compensation Committee and the board of directors or compensation committee of any other company.
27
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Notwithstanding anything to the contrary set forth in any of the Company's previous filings under the Securities Exchange Act of 1933, as amended, or the Securities Act of 1934, as amended, that might incorporate future filings, including this Proxy Statement, in whole or in part, the following report and the Performance Graph shall not be incorporated by reference into any such filings and such information shall be entitled to the benefits provided in Item 306(c) and (d) of Regulation S-K and Item 7(d)(3)(v) of Schedule 14A.
The Compensation Committee feels that the compensation vehicles used by the Company, generally administered through the process as outlined above, provide a fair and balanced executive compensation program related to the proper business issues. In addition, it should be noted that compensation vehicles will be reviewed and, as appropriate, revised in order to attract and retain new executives in addition to rewarding performance on the job.
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K and, based on such review and 35
COMPENSATION COMMITTEE
Robert R. Anderson
William W.R. Elder
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires that directors, certain officers of the Company and ten percent Shareholders10% shareholders file reports of ownership and changes in ownership with the SEC as to the Company'sCompany’s securities beneficially owned by them. Such persons are also required by SEC rules to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of copies of such forms received by the Company, or on written representations from certain reporting persons, the Company believes that all Section 16(a) filing requirements applicable to its officers, directors and greater than ten percent beneficial owners were complied with during the fiscal year ended May 31, 2009.
2010.
FINANCIAL STATEMENTS
The Company'sCompany’s Annual Report to Shareholders for the last fiscal year is being mailed with this proxy statementProxy Statement to Shareholdersshareholders entitled to notice of the meeting. The Annual Report includes the consolidated financial statements, unaudited selected consolidated financial data and management'smanagement’s discussion and analysis of financial condition and results of operations.
28
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If any other matters properly come before the meeting, it is the intention of the persons named in the enclosed Proxy to vote the shares they represent as the Board of Directors may recommend.
By Order of the Board of Directors,
-------------------------------
RHEA J. POSEDEL
Chief Executive Officer and
Chairman of the Board of
Directors
By Order of the Board of Directors, |
|
RHEA J. POSEDEL |
Chief Executive Officer and |
Chairman of the Board of Directors |
Dated: September 28, 2009
36
27, 2010
29
| Using ablack ink pen, mark your votes with anX as shown in this example. Please do not write outside the designated areas. |  |
Annual Meeting Proxy Card
PLEASE FOLD ALONG THE PERFORATION, DETACH AND RESTATED ARTICLES OF INCORPORATION
OF AEHR TEST SYSTEMS
The undersigned, Rhea J. Posedel and Gary L. Larson, hereby certify that:
1. They are the Chief Executive Officer and Secretary, respectively, of
Aehr Test Systems, a California Corporation (the "Company").
2. The first paragraph of Article III of the Amended and Restated
Articles of Incorporation of the Company is amended in its entirety to read as
follows:
This corporation is authorized to issue two classes of shares to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares that this corporation is authorized to issue is [______]
million ([_______]) shares. The number of shares of Common Stock authorized is
[______] million ([_______]) shares. The par value of each share of Common
Stock is one cent ($0.01). The number of shares of Preferred Stock authorized
is ten million (10,000,000) shares. The par value of each share of Preferred
Stock is one cent ($0.01). Upon filing of these amended and restated articles
of incorporation, each [two (2) to five (5)]* outstanding shares of Common
Stock shall automatically and without any action on the part of the respective
holders thereof, be combined and converted into one (1) share of Common Stock.
No fractional shares shall be issued and, in lieu thereof, any holder of less
than one (1) share of Common Stock shall be entitled to receive cash for such
holder's fractional share based upon the closing sales price of the
corporation's Common Stock as reported on the NASDAQ Global Market, as of the
date this Certificate of Amendment is filed with the Secretary of State of the
State of California.
The undersigned further declare under penalty of perjury under the laws
of the State of California that the matters set forth in this certificate are
true and correct of their own knowledge.
Dated: _________ __, 200_
By:
----------------------
Rhea J. Posedel
Chief Executive Officer
By:
----------------------
Gary L. Larson
Secretary
* These amendments approve the combination of any whole number of shares of
Common Stock between and including two (2) and five (5) into one (1) share of
Common Stock and a corresponding reduction in the total number of shares of
Common Stock that the corporation is authorized to issue. By these
37
amendments, the shareholders would approve each of the four amendments proposed
by the Board of Directors. The Certificate of Amendment filed with the
Secretary of State of the State of California will include only that amendment
determined by the Board of Directors to be in the best interests of the
corporation and its shareholders. The other three proposed amendments will be
abandoned.RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Proposals — The Board of Directors may also elect not to do any reverse splitrecommends a voteFOR all the nominees listed and corresponding reduction in the total numberFOR Proposal 2.
| 1. Election of Directors: | 01 - Rhea J. Posedel 04 - Mukesh Patel | 02 - Robert R. Anderson 05 - Mario M. Rosati | 03 - William W. R. Elder 06 - Howard T. Slayen |  |
 | Mark here to vote FOR all nominees | | Mark here toWITHHOLD vote from all nominees | | For AllEXCEPT - To withhold authority to vote for any nominee(s), write the name(s) of such nominee(s) below. | ||||||
| ________________________________________________________ |
| For | Against | Abstain | |||||||
| 2. Proposal to ratify the appointment of Burr Pilger Mayer, Inc. as the Company’s independent registered public accounting firm. | | | | 3. In their discretion, upon such other matter or matters which may properly come before the meeting and any adjournment(s) thereof. |
Non-Voting Items
Change of shares of Common Stock that
corporation is authorized to issue, in which case all four proposed amendments
willAddress — Please print new address below.
Authorized Signatures — This section must be abandoned. In accordance with the resolutionscompleted for your vote to be adopted by the
shareholders, the Board of Directors will not implement any amendment providing
for a different split ratio.
38
counted. — Date and Sign Below
Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian or custodian, please give full title.
PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Proxy
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF AEHR TEST SYSTEMS
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON OCTOBER 27, 2009
2010
The undersigned Shareholdershareholder of Aehr Test Systems, a California corporation, hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders and Proxy Statement and hereby appoints Rhea J. Posedel and Gary L. Larson, or either of them, proxies and attorneys-in-fact, with full power to each of substitution, on behalf and in the name of the undersigned, to represent the undersigned at the Annual Meeting of Shareholders of Aehr Test Systems to be held on October 27, 2009,2010, at 4:00 p.m., local time, at 400 Kato Terrace, Fremont, California 94539, and at any adjournments thereof and to vote all shares of Common Stock which the undersigned would be entitled to vote if then and there personally present, on the matters set forth on the reverse side of this card.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED, WILL BE VOTED (1) FOR THE ELECTION OF THE NOMINATED DIRECTORS; (2) FOR THE
AMENDMENT TO THE 2006 EQUITY INCENTIVE PLAN, (3) FOR THE AMENDMENT TO THE 2006
EMPLOYEE STOCK PURCHASE PLAN, (4) FOR RATIFICATION OF THE APPOINTMENT OF THE COMPANY'SCOMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, (5) FOR an amendment
to the Company's restated articles of incorporation to effect a reverse stock
split of the Company's Common Stock and to concurrently decrease the authorized
number of shares of Common Stock on a proportional basis and to authorize the
Board of Directors to select and file one such amendment, AND (6)(3) AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING AND ANY ADJOURNMENT(S) THEREOF.
PLEASE SIGN AND DATE ON REVERSE SIDE
Important notice regarding the Internetinternet availability of proxy materials for the Annual Meeting of Shareholders
The Proxy Statement, Form of Proxy Card and 2010 Annual Report are available at:
www.aehr.com under the heading "Investors"“Investors” and the subheading "Proxy
Materials"“Proxy Materials”.
Annual Meeting Proxy Card
A Proposals - The Board of Directors recommends a vote FOR all the nominees
listed, FOR Proposal 2,
FOR Proposal 3, FOR Proposal 4 and FOR Proposal 5.
1. Election of Directors:
01 - Rhea J. Posedel 02 - Robert R. Anderson
03 - William W. R. Elder
04 - Mukesh Patel 05 - Mario M. Rosati
06 - Howard T. Slayen
[ ] Mark here to vote [ ] Mark here to WITHHOLD [ ] For All EXCEPT -
To withhold authority to vote for any
FOR all nominees vote from all nominees nominee(s), write the
name(s) of such nominee(s) below.
______________________________________________
2. PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S 2006 EQUITY INCENTIVE
PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER BY
AN ADDITIONAL 800,000 SHARES.
[ ] For [ ] Against [ ] Abstain
3. PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S 2006 EMPLOYEE STOCK
PURCHASE PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE
THEREUNDER BY AN ADDITIONAL 250,000 SHARES.
[ ] For [ ] Against [ ] Abstain
4. PROPOSAL TO RATIFY THE APPOINTMENT OF BURR, PILGER & MAYER LLP AS THE
COMPANY'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
[ ] For [ ] Against [ ] Abstain
5. PROPOSAL To approve an amendment to the Company's restated articles of
incorporation to effect a reverse stock split of the Company's Common
Stock pursuant to which any whole number of outstanding shares between
and including Two (2) and Five (5) would be combined into one share of
Common Stock and to concurrently decrease the authorized number of shares
of Common Stock on a proportional basis and to authorize the Board of
Directors to select and file one such amendment.
[ ] For [ ] Against [ ] Abstain
6. IN THEIR DISCRETION, UPON SUCH OTHER MATTER OR MATTERS WHICH MAY PROPERLY
COME BEFORE THE MEETING AND ANY ADJOURNMENT(S) THEREOF.
B Non-Voting Items
Change of Address - Please print new address below.
______________________________________________________________________________
C Authorized Signatures - This section must be completed for your vote to
be counted. - Date and Sign Below
This Proxy should be marked, dated, signed by the Shareholder(s) exactly as his
or her name appears hereon and returned promptly in the enclosed postage-paid
envelope. Persons signing in a fiduciary capacity should so indicate. If
shares are held by joint tenants or as community property, both should sign.
Date (mm/dd/yyyy) - Please print date below.
____________/___________/_______________
Signature 1 - Please keep signature within the box.
____________________________________________
Signature 2 - Please keep signature within the box.