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 No. __)
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Aehr Test Systems |
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400 Kato Terrace
Fremont, California 94539
_____________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 26, 2017
_____________________________
TO THE SHAREHOLDERS OF
AEHR TEST SYSTEMS:
You are cordially invited to attend the Annual Meeting of Shareholders or the Annual Meeting,(the “Annual Meeting”), of Aehr Test Systems, a California corporation (“Aehr” or the Company,“Company”), to be held on October 26, 2017,18, 2022, at 4:00 p.m., at the Company’s corporate headquarters located at 400 Kato Terrace, Fremont, California 94539, for the following purposes:
1. | To elect seven directors of the Company to hold office until the next annual meeting or the election of their successors. | |
2. | To approve an amendment to the Company's Amended and Restated 2006 Employee Stock Purchase Plan (the "ESPP") to increase the number of shares reserved for issuance thereunder by an additional 350,000 shares of common stock of the Company ("Common Stock"). | |
3. | To ratify the selection of BPM LLP as the Company’s independent registered public accounting firm for the fiscal year ending May 31, 2023. | |
4. | To approve, on an advisory (non-binding) basis, the compensation of the Company’s named executive officers. | |
5. | To transact such other business as may properly come before the Annual Meeting or any postponements or adjournments thereof. | |
Only shareholders of record at the close of business on September 6, 20172, 2022 will be entitled to notice of and to vote at the Annual Meeting.
By Order of the Board of Directors,  | ||
| ||
GAYN ERICKSON President and Chief Executive Officer |
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 20172022 ANNUAL MEETING OF SHAREHOLDERS. THE PROXY STATEMENT AND THE RELATED PROXY FORM ARE BEING DISTRIBUTED ON OR ABOUT SEPTEMBER 26, 2017.23, 2022. YOU CAN VOTE YOUR SHARES USING ONE OF THE FOLLOWING METHODS:
· | COMPLETE AND RETURN A WRITTEN PROXY CARD; OR | |
· | ATTEND THE COMPANY’S 2022 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 ANNUAL MEETING TO BE HELD OCTOBER 26, 2017:
The Company’s Proxy Statement, form of proxy card and 20172022 Annual Report are available at: www.aehr.com under the heading “Investors”“Investor Relations” and the subheading “Annual Reports/Proxies.Proxy Statements.”
AEHR TEST SYSTEMS
400 Kato Terrace
Fremont, California 94539
_______________
PROXY STATEMENT
_______________
2022 ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement is being furnished to the shareholders of Aehr Test Systems, a California corporation (“Aehr” or the Company,“Company”), in connection with the solicitation of proxies by the Board of Directors or the Board,(the “Board”), for use at the Annual Meeting of Shareholders of the Company or the Annual Meeting,(the “Annual Meeting”), to be held on Thursday,Tuesday, October 26, 201718, 2022 at 4:00 p.m. local time, and at any postponements, adjournments or other delays thereof.
At the Annual Meeting, the shareholders will be asked:
1. | To elect seven directors of the Company to hold office until the next annual meeting or the election of their successors. | |
2. | To approve an amendment to the Company's Amended and Restated 2006 Employee Stock Purchase Plan (the "ESPP") to increase the number of shares reserved for issuance thereunder by an additional 350,000 shares of common stock of the Company ("Common Stock"). | |
3. | To ratify the selection of BPM LLP as the Company’s independent registered public accounting firm for the fiscal year ending May 31, 2023. | |
4. | To approve, on an advisory (non-binding) basis, the compensation of the Company’s named executive officers. | |
5. | To transact such other business as may properly come before the Annual Meeting or any postponements or adjournments thereof. |
The Board of Directors has fixed the close of business on September 6, 20172, 2022 as the record date for the determination of the holders of Common Stock entitled to notice of and to vote at the Annual Meeting.Meeting (the “Record Date”). Each such shareholder will be entitled to one vote for each share of Common Stock, or Common 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, 2017,2022, is 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 26, 2017.
THE ANNUAL MEETING
Date, Time and Place
The Annual Meeting will be held on October 26, 201718, 2022 at 4:00 p.m., local time, at 400 Kato Terrace, Fremont, California 94539.
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General
The Company’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 6, 2017, or the Record Date are entitled to notice of and to vote at the Annual Meeting. As of the Record Date, there were 21,532,09627,394,478 shares of Common Stock outstanding and entitled to vote.
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 prior to the Annual Meeting a written notice of revocation or a duly executed proxy bearing a later date or by attending the meetingAnnual Meeting and voting in person.
Confidentiality of Votes
The Company handles proxy instructions, ballots, and voting tabulations that identify individual stockholders in a manner that protects your voting privacy. The Company will not disclose your vote either among its employees or to third parties, except, as we deem necessary: (1) to meet applicable legal requirements, (2) to allow for the tabulation of votes and certification of the vote, or (3) to facilitate a successful proxy solicitation. Occasionally, stockholders provide on their proxy card written comments, which the Company may forward to its management.
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’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’s name has been properly placed in nomination prior to the voting and the shareholder, or any other shareholder, has given notice at the meetingAnnual 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’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, then a majority of the shares present may adjourn the meeting may be adjourned to a subsequent date for the purposes of obtaining a quorum. Shares that are voted “FOR,” “AGAINST” or“AGAINST,” “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” or “ABSTAIN” are also treated as shares entitled to vote, orcounted toward 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 Castshares represented at the Annual Meeting and entitled to vote 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, butbusiness.
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If you provide specific instructions with regard to certain items, the Company will vote your shares as you instruct on such items. If no instructions are indicated, the proxy holders will vote the shares as recommended by the Board.
Voting Requirements to Approve Proposals
A plurality of the votes cast is required for the election of the directors, which means that the nominees for director receiving the highest number of affirmative votes will be elected as directors.
The affirmative “FOR” vote of a majority of the votes cast on the proposal is required to (i) approve an amendment to the ESPP and its material terms, (ii) ratify the appointment of BPM LLP as our independent registered public accounting firm, and (iii) approve, on an advisory and nonbinding basis, our executive compensation. If a stockholder abstains from voting on any of these proposals, that abstention will have the same effect as if the stockholder voted “AGAINST” the proposal. Broker non-votes, if any, will have no impact on the outcome of these proposals.
Approval of executive compensation arrangements is an advisory vote. Accordingly, the results will not be counted for purposesbinding on us, the Board or the Compensation Committee; however, the Compensation Committee will consider the outcome of determining the number of Votes Castvotes when evaluating our executive compensation principles, design and practices.
If you hold shares beneficially in street name and do not provide your broker with respect to the proposalvoting instructions, your shares may constitute “broker nonvotes.” Generally, broker nonvotes occur on which the broker has expressly not voted. Thus,a matter when a broker non-vote will be countedis not permitted to vote on that matter without instructions from the beneficial owner and the beneficial owner does not provide voting instructions. In tabulating the voting result for purposes of determining whether a quorum exists butany particular proposal, we will not otherwiseconsider broker nonvotes to be votes cast on that proposal. Thus, broker nonvotes will not affect the outcome of any matter being voted on at the voting onmeeting, assuming that a proposal. With respectquorum is obtained. The Company considers abstentions 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 hasbe votes cast; accordingly, abstentions have the same effect as a votevotes against the proposal.
The Company encourages shareholders to provide instructions to the shareholders’ bank or brokerage firm by voting the shareholders’ proxy. This action ensures the shares will be voted at the meeting in accordance with the shareholders’ wishes.
Deadline for Receipt of Shareholder Proposals for 20182023 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, or SEC. Proposals of shareholders of the Company intendedmay submit proposals on matters appropriate for shareholder action at meetings of the Company’s shareholders in accordance with Rule 14a-8 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). For such proposals to be presented for consideration atincluded in the Company's 2018proxy materials relating to its 2023 Annual Meeting of Shareholders, all applicable requirements of Rule 14a-8 must be satisfied and such proposals must be received by the Company no later than May 31, 2018,26, 2023. Such proposals should be delivered to Aehr Test Systems, 400 Kato Terrace, Fremont, California 94539, Attn: Secretary.
If a shareholder does not comply with the requirements of Rule 14a-4(c)(2) under the Exchange Act, the Company may exercise discretionary voting authority under proxies that it solicits to vote 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, AS AMENDED, THE COMPANY HEREBY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH PERSON, A COPY OF THE COMPANY’S ANNUAL REPORT ON FORM 10-K, INCLUDING THE CONSOLIDATED FINANCIAL STATEMENTS.
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: 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.
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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, or by visiting the Company’s website www.aehr.com under the heading “Contact Us” and the subheading “Offices.“Offices,”
Internet Availability of Proxy Materials
This Proxy Statement, the form of proxy card and 20172022 Annual Report are available on the Company’s website www.aehr.com under the heading “Investors”“Investor Relations” and the subheading “Annual Reports/Proxies.Proxy Statements.”
How to Vote
If your shares are registered in your name with our transfer agent, you may vote your shares by returning a signed and dated proxy card (a prepaid reply envelope is provided for your convenience), or you may vote in person by ballot at the Annual Meeting. Based on your proxy cards, the proxy holders will vote your shares according to your directions.
If your shares are held in “street name” through a bank, broker or other nominee, you may vote through your bank, broker or other nominee by completing and returning the voting instruction form provided by your bank, broker or other nominee.
You may also attend the Annual Meeting and vote in person by ballot if you have a “legal proxy” from your bank, broker or other nominee giving you the right to vote your shares at the Annual Meeting.
Voting results of the Annual Meeting
The Company will announce the preliminary voting results at the Annual Meeting. The Company will also disclose voting results on a Form 8-K it will file with the Securities and Exchange Commission (the “SEC”) within four business days after the Annual Meeting, which Form 8-K will also be available on the Company’s investor relations website.
How can Shareholders Contact the Company’s Transfer Agent
You can contact our transfer agent by either writing via U.S. mail to Computershare, P.O. Box 43078, Providence, RI 02940-3078, or via courier service to Computershare, 150 Royall St., Canton, MA 02021, or by telephoning 1-800-962-4284 (US, Canada, Puerto Rico), 1-781-575-3100 (non-US) or via email at web.queries@computershare.com, shareholder website is www.computershare.com/investor.
Additional Matters Presented at Annual Meeting
Other than the items of business we describe in this proxy statement, we are not aware of any other business to be acted upon at the Annual Meeting. If you grant a proxy, the persons named as proxy holders, Gayn Erickson and Kenneth B. Spink, our President and Chief Executive Officer and Vice President of Finance and Chief Financial Officer, respectively, or either of them or their substitutes, will have the discretion to vote your shares on any additional matters properly presented for a vote at the meeting. If for any reason any of the nominees is not available as a candidate for director, the persons named as proxy holders will vote your proxy for such other candidate or candidates as the Board may nominate.
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PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, sixseven directors are to be elected to servehold office 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 sixseven 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 or she is or was to be selected as a director or officer of the Company.
The names of the nominees, ages as of May 31, 2017,2022, and certain information about them as of the Record Date are set forth below:
| Name of Nominee | Age | Position | Director Since | |||
| Rhea J. Posedel | 75 | Chairman | 1977 | |||
| Gayn Erickson | 53 | President and Chief Executive Officer | 2012 | |||
| William W.R. Elder (2)(3) | 78 | Director | 1989 | |||
| Mario M. Rosati | 71 | Director | 1977 (4) | |||
| John M. Schneider (1)(3) | 50 | Director | 2014 | |||
| Howard T. Slayen (1) | 70 | Director | 2008 |
Name of Nominee |
| Age |
| Position |
| Director Since |
Rhea J. Posedel |
| 79 |
| Chairman |
| 1977 |
Gayn Erickson |
| 57 |
| President and Chief Executive Officer |
| 2012 |
Fariba Danesh (2) |
| 64 |
| Director |
| 2021 |
Laura Oliphant (1)(2)(3) |
| 59 |
| Director |
| 2019 |
Mario M. Rosati (3) |
| 76 |
| Director |
| 1977 |
Geoffrey G. Scott (1)(3) |
| 73 |
| Director |
| 2020 |
Howard T. Slayen (1)(2) |
| 75 |
| Director |
| 2008 |
______________________
(1) | Member of the Audit Committee |
(2) | Member of the Compensation Committee |
(3) | Member of the Corporate Governance and Nominating Committee |
RHEA J. POSEDEL
is a founder of the Company and has served as the Chairman of the BoardMr. 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.
GAYN ERICKSON
has served as President, Chief Executive Officer and a member of the Board| 5 |
when he began his career in semiconductor test with Hewlett-Packard's Automated Test Group. Mr. Erickson received a B.S. in Electrical Engineering from Arizona State University.
Mr. Erickson brings to the Board of Directors senior leadership experience, semiconductor test industry and technical expertise, and strategic business development experience.
FARIBA DANESH has been a director of the Company since 1989.May 2021. Ms. Danesh is currently Chief Operating Officer at PsiQuantum, a quantum computing startup based in Palo Alto, California that is using silicon photonics to build the world’s first useful quantum computer, applying existing semiconductor and photonics manufacturing processes. Prior to joining PsiQuantum in January 2021, Ms. Danesh served for nine years as Chief Executive Officer of Glo AB, a venture-funded photonics/compound semiconductor company that designs and develops microLEDs chips and panels suitable for high brightness display applications. Prior to that, she was SVP, General Manager Fiber Optics Products Division of Avago Technologies (now Broadcom) for three years, where she had complete P&L responsibility for a $400 million annual revenue photonics business. Prior to Avago, Ms. Danesh held executive positions as EVP of global operations at Maxtor Corp, COO of Finisar, and CEO of Genoa Corp. Ms. Danesh received a BS in Biochemistry from Santa Clara University.
As a technology industry veteran, with 30 years of executive-level technology and operating leadership in multiple enterprise and consumer hardware markets, with special emphasis on semiconductor, photonics, telecommunications, and data storage, Ms. Danesh brings to the Board extensive knowledge, experience, and contacts in the compound semiconductor and optical semiconductor spaces.
LAURA OLIPHANT has been a director of the Company since July 2019. From 19812016 to 1996, Dr. Elder2018, she was the Chief Executive Officer of Genus, Inc.,Translarity, a semiconductor equipment company,venture funded probe card company. From 2001 to 2016, she served as an Investment Director at Intel Capital, Intel’s venture capital organization, where she made and then again from 1998 untilmanaged investments in the company was acquired by AIXTRON AG in 2005. Dr. Elder retired from AIXTRON AG in December 2007. Dr. Elder was the President and Chief Executive Officer of Maskless Lithography, Inc., asemiconductor capital equipment start-up company basedand materials area and received Intel’s highest award for the strategic impact of her contributions. Dr. Oliphant is a National Association of Corporate Directors (NACD) Board Leadership Fellow and was named to the 2022 NACD Directorship 100 for her strategic impact in San Jose, California, from 2010 until the sale of its assets to Chimeball Technology, a Taiwanese equipment company, in 2015. Dr. Elderboardroom. She received a B.S.I.E.BE in Chemical Engineering from Manhattan College in Riverdale, New York, and an honorary Doctorate DegreePhD in Chemical Engineering from the University of Paisley in Scotland.
As a Process Engineer and an Investment Director of the former President and Chief Executive Officerventure capital arm of aone of the world’s largest semiconductor equipment company,companies, Dr. ElderOliphant brings to the Board a broad range of Directors senior leadership experience in the semiconductor equipment space and a strong industry knowledgebackground in business development and operations expertise.
MARIO M. ROSATI
was a director of the Company from 1977 to 2008, and then rejoined the BoardAs a retired 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.Board. Mr. Rosati also brings to the Board of Directors a strong background in advising high-tech companies through his public company board experience.
GEOFFREY G. SCOTT has been a director of the Company since December 2014.September 2020. Since his retirement from Scott Asset Management in 2017, Mr. SchneiderScott has been the owner anda private investor. From 1995 to 2017, he was President of PWA Real Estate and PWA Construction, since their creation in 2008 and 2014, respectively. Mr. Schneider was the owner, President and CEO of Private Wealth Advisors and PWA Securities, a SEC-registered Registered Investment Advisor and FINRA-registered Broker/Dealer since their creation in 2003 and 2008, respectively. In July 2015, Mr. Schneider sold his ownership position in bothScott Asset Management, an investment companiesgroup focused on industry leading small cap companies. From 1991 to his existing partner. Mr. Schneider is currently the owner and1995, he served as Vice President of JMSMerrill Lynch in the Capital Group, LLC, which isMarkets Group. From 1973 to 1990, he was employed by Chase Manhattan Bank in the Corporate Banking Group. He received a holding company encompassing JMS Wealth Services, PWA Construction (dba JMS Development) and PWA Real Estate (dba JMS Real Estate). Mr. Schneider graduatedB.A. from the University of PittsburghDartmouth College.
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With past board experience with a Bachelor of Arts Degree in Economics, obtaining their "Honors in Economics" distinction. He is also a graduate of the College of Financial Planning in Denver, Colorado and is a Certified Financial Planner.
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 company. From 1971 to September 1999, Mr. Slayen held various positions with PricewaterhouseCoopers/Coopers & Lybrand, including his last position as a Corporate Finance Partner. Mr. Slayen currently serves as a director or committee member for several non-profit organizations. Mr. Slayen received a B.A. from Claremont McKenna College and a J.D. from the University of California, Berkeley School of Law.As the former Vice President and Chief Financial Officer of a high-tech company, former Corporate Finance Partner for a large international accounting firm, and former chair of the audit committee of two other public technology companies, 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 prior public company board experience.
Vote Required and Recommendation of the Board of Directors
The sixseven nominees receiving the highest number of affirmative votes of the shares present or represented and entitled to be voted for themvote at the Annual Meeting shall be elected as directors. Votes withheld from
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE ELECTION OF THE
NOMINEES LISTED ABOVE.
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Director Compensation
Gayn Erickson, inside director of the Company during fiscal year 2022, did not receive any compensation for his services as member of the Board. An inside director are counted for purposesis a director who is a regular employee of determining the presence or absenceCompany, whereas an outside director is not an employee of the Company. Rhea Posedel retired as an employee of the Company, effective July 26, 2019, and accordingly became an outside director as of that date. Rhea Posedel’s compensation as a quorum forChairman of the transaction of business, but have no other legal effectBoard was $70,000 paid in quarterly installments starting in the electionsecond quarter of directors under California law. See “Quorum; Abstentions; Broker Non-Votes.”
Directors are also eligible to participate in the Company’s Equity Incentive Plans. There were no options granted to Directors during fiscal year 2022. On October 19, 2021, outside directors Fariba Danesh, Laura Oliphant, Mario Rosati, Geoffrey Scott and Howard Slayen were each granted restricted stock units of 2,015 shares and Rhea Posedel was granted restricted stock units of 3,023 shares.
The following table sets forth the compensation paid by the Company during the fiscal year ended May 31, 2022 to the Company’s outside directors:
Director Compensation
Name |
| Year |
| Fees Earned or Paid in Cash ($) |
|
| Option Awards ($) (1) |
|
| Stock Awards ($) |
|
| Non-equity Incentive Plan Compensation ($) |
|
|
All Other Compensation ($) |
|
|
Total Compensation ($) |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Fariba Danesh |
| 2022 |
|
| 56,250 |
|
|
| -- |
|
| $40,000 |
|
|
| -- |
|
|
| -- |
|
| $96,250 |
| ||
Laura Oliphant |
| 2022 |
|
| 62,000 |
|
|
| -- |
|
|
| 40,000 |
|
|
| -- |
|
|
| -- |
|
|
| 102,000 |
|
Rhea J. Posedel |
| 2022 |
|
| 70,000 |
|
|
| -- |
|
|
| 60,000 |
|
|
| -- |
|
| $23,580 | (2) |
|
| 153,580 |
| |
Mario M. Rosati |
| 2022 |
|
| 53,750 |
|
|
| -- |
|
|
| 40,000 |
|
|
| -- |
|
|
| -- |
|
|
| 93,750 |
|
Geoffrey G. Scott |
| 2022 |
|
| 59,750 |
|
|
| -- |
|
|
| 40,000 |
|
|
| -- |
|
|
| -- |
|
|
| 99,750 |
|
Howard T. Slayen |
| 2022 |
|
| 63,000 |
|
|
| -- |
|
|
| 40,000 |
|
|
| -- |
|
|
| -- |
|
|
| 103,000 |
|
________________
(1) | The amounts reported represent the aggregate grant date fair value of equity awards granted in the fiscal year, as determined pursuant to ASC 718. The assumptions used to calculate the value of awards are set forth in Note 11 of the Notes to the Consolidated Financial Statements included in Aehr Test’s Annual Report on Form 10-K for fiscal 2022 filed with the SEC on August 26, 2022. At the end of fiscal 2022, the aggregate number of option awards outstanding for each director was as follows: 15,000 held by Fariba Danesh; 10,000 held by Laura Oliphant; 107,956 held by Rhea Posedel; 74,108 held by Mario Rosati; 25,000 held by Geoffrey Scott and 80,871 held by Howard Slayen. Options granted generally vest at either 100 percent of shares on the date of grant or one-twelfth (1/12th) or one-forty-eighth (1/48th) of the shares each month after the date of grant, so long as the optionee remains a director of the Company. | |
(2) | Includes health and life insurance premiums and medical costs paid by the Company in the amount of $23,580. |
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Board Matters and Corporate Governance
Board Meetings and Committees
The Board of Directors held a total of sevensix meetings during the fiscal year ended May 31, 2017.2022. No incumbent director during his or her period of service in such fiscal year attended fewer than 75% of the aggregate number 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 Corporate Governance and Nominating Committee.
The Audit Committee currently consists of directors Messrs. Anderson, SchneiderOliphant, Scott and Slayen, each of whom is an independent member of the Board, of Directors, as defined by the NasdaqNASDAQ Capital Market (“Nasdaq”), director independence standards, as well as applicable SEC rules, as currently in effect. The Audit Committee Chair is Howard Slayen. The Audit Committee held four meetings during fiscal year 2017.2022. More information regarding the functions performed by the Committee is set forth in the section entitled “Report of the Audit Committee.” The Audit Committee is governed by a written charter approved by the Board of Directors.Board. A copy of the Audit Committee charter is available on the Company’s website at www.aehr.com under the heading “Investors”“Investor Relations” and the subheading “Investor Relations.“Corporate Governance.” The Board of Directors has determined that Mr. Slayen is an audit committee financial expert as defined by the rules of the SEC.
The Compensation Committee of the Board of Directors currently consists of Messrs. Andersondirectors Danesh, Oliphant and Elder,Slayen, each of whom is an independent member of the Board, of Directors, as defined by the Nasdaq director independence standards, as well as applicable SEC rules, as currently in effect. The Compensation Committee Chair is Laura Oliphant. The Compensation Committee held one meetingthree meetings during fiscal year 2017.2022. 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.Board. The Company maintains a copy of the Compensation Committee charter on its website at www.aehr.com under the heading “Investors”“Investor Relations” and the subheading “Investor Relations.“Corporate Governance.” More information regarding the Compensation Committee’s processes and procedures can be found herein in the section entitled “Compensation Discussion and Analysis.”
The Corporate Governance and Nominating Committee of the Board of Directors currently consists of Messrs. Elderdirectors Oliphant, Rosati and Schneider,Scott, each of whom is an independent member of the Board, of Directors, as defined by the Nasdaq director independence standards, as well as applicable SEC rules, as currently in effect. The Corporate Governance and Nominating Committee Chair is Mario Rosati. The Corporate Governance and Nominating 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;Board; 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 Corporate Governance and Nominating Committee is governed by a written charter approved by the Board of Directors.Board. The Corporate Governance and Nominating Committee of the Board of Directors did not hold any meetingsheld one meeting during the fiscal year ended May 31, 2017.2022. The Company maintains a copy of the Corporate Governance and Nominating Committee charter on its website at www.aehr.com under the heading “Investors”“Investor Relations” and the subheading “Investor Relations.“Corporate Governance.”
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 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” below. Any shareholder recommendations proposed for consideration by the Board of Directors should include the candidate’s name and qualifications for Board membership and should be addressed to:
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Aehr Test Systems
400 Kato Terrace
Fremont, CA 94539
Attn: Secretary
Director Qualifications
Members of the Board should have the highest professional and personal ethics and values, consistent with the Company’s Code of Conduct and Ethics adopted by the Board. They should have broad experience at the policy-making level in business. TheyMembers should be committed to enhancing shareholder value and should havebe able to devote sufficient time and resources to carry out their duties and to provide insight and practical wisdom based on experience. Their service on other boards of public companiescompany boards should be limited to a number that permits them, given their individual circumstances, to responsibly perform responsibly all of their duties as a director duties.of the Company. Each director must represent the interests of all shareholders.
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’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.Board. 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.Board. A goal of the nomination process is for the Board of Directors to be comprised of directors with a 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 at May 31, 2022 each of its current directors, except for Rhea J. Posedel, the Company’s Chairman, and Gayn Erickson, the Company’s President and Chief Executive Officer, is independent within the meaning of the Nasdaq 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’s annual meetings of shareholders, directors are encouraged to attend annual meetings of the Company’s 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’s website at www.aehr.com under the heading “Investors”“Investor Relations” and the subheading “Investor Relations.“Corporate Governance.” The
| 10 |
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’s website at www.aehr.com under the heading “Investors”“Investor Relations” and the subheading “Investor Relations.“Corporate Governance.”
Board Leadership Structure and Role in Risk Oversight
The Board of Directors maintains a structure that currently separates the positions of Chairman of the Board of Directors and Chief Executive Officer with Rhea J. Posedel currently serving in the position of Chairman of the Board of Directors and Gayn Erickson currently serving in the position of Chief Executive Officer of the Company, and with an Audit Committee, Corporate Governance and Nominating 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 lead independent director nor does the Board have a specific role in risk oversight of the Company. The Chairman of the Board, 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.
Board Diversity
The following Board Diversity Matrix presents our Board diversity statistics in accordance with Nasdaq Rule 5606, as self-disclosed by our directors. Our Board satisfies the diversity objectives of Nasdaq Rule 5605(f)(2) for Smaller Reporting Companies by having at least two directors who identify as female (as defined by Nasdaq Rules). As we pursue future Board recruitment efforts, our Nominating Committee will continue to seek candidates who can contribute to the diversity of views and perspectives of the Board. This includes seeking out individuals of diverse ethnicities, a balance in terms of gender, and individuals with diverse perspectives informed by other personal and professional experiences.
Board Diversity Matrix (As of September 2, 2022) | ||||
Board Size: | ||||
Total Number of Directors | 7 | |||
| Female | Male | Non-Binary | Did not Disclose Gender |
Gender: | ||||
Directors | 2 | 5 | 0 | 0 |
Number of Directors who identify in Any of the Categories Below: | ||||
Alaskan Native or Native American | 0 | 1 | 0 | 0 |
White | 2 | 5 | 0 | 0 |
Two or More Races or Ethnicities | 0 | 1 | 0 | 0 |
Communications with the Board
The Company does not have a formal policy regarding shareholder communication with the Board of Directors.Board. 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.
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PROPOSAL 2
AMENDMENT TO THE AMENDED AND RESTATED
2006 EMPLOYEE STOCK PURCHASE PLAN
The Board is proposing that the ESPP be amended to increase the number of shares authorized thereunder by an additional 350,000 shares of Common Stock (the “Shares”). The Company previously reserved 2,200,000 Shares for issuance under the ESPP. If this proposal is approved by the Company’s shareholders, a total of 2,550,000 Shares will be reserved for issuance under the ESPP.
If the amendment is approved, the ESPP will continue to be a significant part of our overall equity compensation strategy, especially with respect to our non-executive employees. The ESPP allows our employees to buy Shares at a discount through payroll deductions. In the highly competitive technology industry in which we compete for talent, we believe that offering an employee stock purchase program is critical to our ability to remain competitive. If the amendment of the ESPP is not approved by the Company’s shareholders, we may be restricted in our ability to offer competitive compensation to existing employees and qualified candidates, and our business and ability to increase long-term shareholders value could be adversely affected.
Description of the ESPP
The following paragraphs provide a summary of the principal features of the ESPP and its operation. However, this summary is not a complete description of all of the provisions of the ESPP and is qualified in its entirety by the specific language of the ESPP.
Additional Information Regarding the ESPP
· | The actual number of Shares that will be purchased under the ESPP cannot be determined because such number will depend on a number of indeterminable factors (including the number of participants, the rates at which participants make contributions to the ESPP, and our stock price). However, in fiscal years 2020, 2021 and 2022, the numbers of Shares purchased under the ESPP were 136,303 Shares, 147,026 Shares, and 177,673 Shares, respectively. | |
· | 50 employees participated in the most recently completed offering period under the ESPP, purchasing 102,345 Shares (with a value of $232,720 on the date of purchase) at an average purchase price of $2.2739 per Share. | |
· | As of August 31, 2022, there were 74 employees eligible to participate in the ESPP, 63 of which were participating in the offering period then in progress under the ESPP. |
Summary of the ESPP
The following is a summary of the principal features of the ESPP and its operation.
General
The ESPP originally was adopted by our Board in October 2006 and approved by our shareholders on October 26, 2006. Our Board subsequently approved the amendment and restatement of the ESPP in September 2016, which was approved by our shareholders on October 18, 2016. The purpose of the ESPP is to provide eligible employees with an opportunity to purchase shares of our common stock through contributions, generally through payroll deductions. The ESPP permits the administrator to grant purchase rights that qualify for preferential tax treatment under Section 423 of the Internal Revenue Code of 1986, as amended (the “Code”) and purchase rights that do not qualify under Code Section 423 pursuant to rules, procedures or sub-plans adopted by our Board or other committee (including the Compensation Committee) administering the ESPP that are designed to achieve desired tax or other objectives.
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Shares Available for Issuance
As of August 31, 2022 a total of 258,362 Shares were available for sale under the ESPP. If our shareholders approve this proposal, a total of 608,362 Shares will be available for issuance under the ESPP.
Administration
Our Compensation Committee administers the ESPP. All questions of interpretation or application of the ESPP are determined by the administrator and its decisions are final and binding upon all participants. The administrator has full and exclusive discretionary authority to construe, interpret, and apply the terms of the ESPP, to designate separate offerings under the ESPP, to adjudicate disputed claims under the ESPP, and to establish such procedures that it deems necessary for the administration of the ESPP. The administrator is further authorized to adopt rules and procedures regarding eligibility to participate, the definition of “compensation,” handling of contributions, and making of contributions to the ESPP, among other responsibilities.
Eligibility
Each employee of the Company is eligible to participate in the ESPP, except that no employee will be eligible to participate in the ESPP to the extent that (i) immediately after the grant, such employee would own 5% or more of the combined voting power of all classes of capital stock of Aehr Test Systems or its parents or subsidiaries, or (ii) his or her rights to purchase stock under all of Aehr Test Systems’ employee stock purchase plans accrues at a rate that exceeds $25,000 worth of stock (determined as of the fair market value of the shares on the beginning of the offering period) for each calendar year. In addition, the administrator, in its sole discretion and prior to an offering date, may determine that an individual will not be eligible to participate if he or she: (i) has not completed at least 2 years of service since his or her last hire date (or such lesser period of time as may be determined by the administrator in its discretion), (ii) customarily works not more than 20 hours per week (or such lesser period of time as may be determined by the administrator in its discretion), (iii) customarily works not more than 5 months per calendar year (or such lesser period of time as may be determined by the administrator in its discretion), (iv) is an executive, officer or other manager, or (v) is a highly compensated employee under Section 414(q) of the Code.
Offering Period
Unless otherwise determined by the administrator, each offering period under the ESPP will have a duration of approximately 24 months, commencing on the first trading day on or after April 1 of each year and terminating on the first trading day on or after April 1, approximately 24 months later, and commencing on the first trading day on or after October 1 of each year and terminating on the first trading day on or after October 1, approximately 24 months later. The administrator, in its discretion, may modify the terms of offering periods before they begin, provided that no offering period may last more than 27 months. Each offering period will contain purchase periods during which Shares may be purchased. Unless the administrator provides otherwise, purchase periods will commence on the first trading day on or after April 1 and October 1 and terminate on the first trading day on or after October 1 of the same year and April 1 of the following year, respectively.
Participation
The ESPP permits participants to purchase Shares through payroll deductions of up to 10% of their eligible compensation, which includes base straight time gross earnings and commissions (to the extent such commissions are an integral, recurring part of compensation), but exclusive of payments for incentive compensation, bonuses, payments for overtime and shift premium, equity compensation income and other similar compensation. 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 terminates. On the first day of each offering period, each participant automatically is granted a right to purchase shares of our common stock at the end of each purchase period occurring during such offering period. This purchase right expires at the end of the offering
| 13 |
period or upon termination of employment, whichever is earlier, but is exercised on the last day of each applicable purchase period to the extent of the contributions made during such purchase period.
Purchase Price
Unless and until the administrator determines otherwise, the purchase price will be 85% of the lesser of the fair market value of our common stock on (i) the first day of the offering period, or (ii) the last day of the applicable purchase period, subject to compliance with the Code and the terms of the ESPP. The fair market value of our common stock on any relevant date will be the closing price of our stock as reported on the Nasdaq Capital Market.
Payroll Deductions; Payment for Shares
Contributions are accumulated throughout each purchase period, generally through payroll deductions. The number of whole shares that a participant may purchase in each of the two purchase periods per year will be determined by dividing the total amount of a participant’s contributions 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 generally may change the rate of payroll deductions in an offering period, including to cease deductions (change contribution rate to 0%) but remain eligible to purchase shares on the next purchase date with funds previously contributed. No fractional shares will be purchased under the ESPP and any contributions accumulated in a participant’s account that are not sufficient to purchase a full share will be retained in participant’s account or refunded as soon as administratively possible after the end of the applicable purchase period.
All participant contributions are credited to the participant’s account, are generally only withheld in whole percentages and are included with Aehr Test Systems’ general funds where permissible. Funds received by Aehr Test Systems pursuant to purchases under the ESPP will be added to the company’s general funds but will not be segregated unless required by applicable law. A participant generally may not make additional contributions into his or her account outside the regularly established process.
Withdrawal
Generally, a participant may withdraw all of his or her contributions from a purchase 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 Aehr Test Systems.
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 ESPP and the contributions credited to the participant’s account (to the extent not used to make a purchase of our 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 right to purchase shares under the ESPP will automatically be terminated.
Adjustments upon Changes in Capitalization, Dissolution, Liquidation, Merger or Change of Control
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 Aehr Test Systems, or other change in the corporate structure of Aehr Test Systems affecting our 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 that may be delivered under the ESPP, the purchase price per share, the number of shares of common stock covered by each right to purchase shares under the ESPP that
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has not yet been exercised, and the maximum number of shares a participant can purchase during an offering period.
Dissolution or Liquidation
In the event of Aehr Test Systems’ proposed dissolution or liquidation, the administrator will shorten any offering period then in progress by setting a new purchase date and any offering periods will end on the new purchase date. The new purchase date will be prior to the dissolution or liquidation. If the administrator shortens any offering periods then in progress, the administrator will notify each participant in writing, at least ten business days prior to the new purchase date, that the purchase date has been changed to the new purchase date and that the right to purchase shares under the ESPP will be exercised automatically on the new purchase date, unless the participant has already withdrawn from the offering period.
Change in Control
In the event of a merger or “change in control,” as defined in the ESPP, each right to purchase shares under the ESPP will be assumed or an equivalent right to purchase shares will be substituted by the successor corporation or a parent or subsidiary of such successor corporation. In the event the successor corporation refuses to assume or substitute for the ESPP purchase rights, the administrator will shorten the offering period with respect to which such ESPP purchase right relates by setting a new purchase date on which such offering period will end. The new purchase date will be prior to the merger or change in control. If the administrator shortens any offering periods, then in progress, the administrator will notify each participant in writing, prior to the new purchase date, that the purchase date has been changed to the new purchase date and that the right to purchase shares under the ESPP will be exercised automatically on the new purchase date, unless the participant has already withdrawn from the offering period.
Amendment and Termination of the ESPP
The administrator may at any time amend, suspend, or terminate the ESPP, including the term of any offering period then outstanding. Generally, no such termination can adversely affect previously granted rights to purchase shares under the ESPP. The ESPP will continue until terminated by our Board in accordance with the terms of the ESPP.
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. For illustrative purposes, the following table sets forth (i) the number of shares of our common stock that were purchased during the last fiscal year under the ESPP, (ii) the average price per share paid for such shares, and (iii) the fair market value at the date of purchase.
Name of Individual or Group |
| Number of Shares Purchased |
|
| Weighted Average Per Share Purchased ($) |
|
| Weighted Average Fair Market Value at Date of Purchased ($) |
| |||
Gayn Erickson, President and Chief Executive Officer |
|
| 3,896 |
|
| $ | 2.1845 |
|
| $ | 43,510 |
|
Vernon Rogers, Executive VP of Sales and Marketing |
|
| -- |
|
| $ | -- |
|
| $ | -- |
|
David S. Hendrickson, Chief Technology Officer |
|
| 3,000 |
|
| $ | 2.1845 |
|
| $ | 29,760 |
|
All executive officers, as a group |
|
| 21,184 |
|
| $ | 2.0437 |
|
| $ | 237,219 |
|
All employees who are not executive officers, as a group |
|
| 156,489 |
|
| $ | 2.1385 |
|
| $ | 1,727,177 |
|
_______________
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PROPOSAL 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The BoardAudit Committee of Directorsthe Board of the Company has selected BPM LLP, as the Company’s independent registered public accounting firm, to audit the consolidated financial statements of the Company for the fiscal year ending May 31, 2018,2023, and the Board 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 theirits selection. Even if the selection is ratified, the Audit Committee and the Board of Directors in theirits discretion may direct the appointment of a different independent registered public accounting firm at any time during the year.
Representatives of BPM LLP are expected to be present at the meeting withand will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.
Independent Registered Public Accounting Firm’s Fees
The following table sets forth the aggregate fees billed or to be billed by BPM LLP for the fiscal years ended May 31, 20172022 and 2016:
DESCRIPTION OF SERVICES
2017 | 2016 | |
| Audit Fees | $161,852 | $156,980 |
| All Other Fees | 64,395 | 13,650 |
| Total Fees | $226,247 | $170,630 |
|
| 2022 |
|
| 2021 |
| ||
Audit Fees |
| $ | 250,545 |
|
| $ | 181,929 |
|
All Other Fees |
|
| 58,887 |
|
|
| 4,991 |
|
Total Fees |
| $ | 309,432 |
|
| $ | 186,920 |
|
Audit Fees
. Aggregate fees billed or to be billed for professional services rendered for the audit of the Company’s fiscalAll Other Fees
. Aggregate fees billed or to be billed for professional services rendered for review of the Company’s RegistrationThe Audit Committee pre-approves all audit and other permitted non-audit services provided by the 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-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 2017,2022, all audit and non-audit services were pre-approved in accordance with the Company’s policy.
Vote Required and Recommendation of the Board of Directors
The ratification of the appointment of BPM LLP as the Company’s independent registered public accounting firm for the fiscal year ending May 31, 2018 will be considered approved if a2023 requires the affirmative vote of the majority of the shares of Common Stock present or represented by proxy at the Annual Meeting voteand entitled to vote. If a stockholder abstains from voting, that abstention will have the same effect as if the stockholder voted “AGAINST” this proposal. Broker non-votes, if any, will have no impact on the outcome of this proposal.
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” the resolution.
THE APPOINTMENT OF BPM LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM FOR FISCAL 2023.
| 16 |
PROPOSAL 3
APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS
In accordance with the Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, and the related rules enacted by the SEC, the Company is submitting an advisory “say-on-pay” resolution for shareholder consideration.
As described in the Compensation Discussion and Analysis section presented inof this Proxy Statement, on page 13, the Company believes that theits executive compensation program is designed to support the Company’s long-term success by achieving the following objectives:
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. |
The Company urges shareholders to read the Compensationsection of this Proxy Statement captioned “Compensation Discussion and Analysis section,Analysis”, as well as the Summary“Summary Compensation TableTable” and the related compensation tables and narrative that follow it. This information provides detailed information regarding the Company’s executive compensation program, policy and processes, as well as the compensation of named executive officers. The program balances medium termmedium-term and long-term compensation elements to achieve the defined objectives and link executive compensation with shareholder value.
This vote is advisory and, therefore, will not be binding upon the Company, the Compensation Committee or the Board of Directors.Board. Although this resolution is non-binding, the Compensation Committee and the Board of Directors value the opinions that shareholders express in their vote and will review and consider the outcome of the vote when making future executive compensation decisions.
The Board of Directors strongly endorses the Company’s actions in this regard and unanimously recommends that shareholders vote “FOR” the following resolution at the Annual Meeting:
“RESOLVED, that the shareholders of Aehr Test Systems, or the Company, approve, on an advisory basis, the compensation of the Company’s named executive officers described in the Compensation Discussion and Analysis section, the Summary Compensation Table, and the related compensation tables and narrative in the Proxy Statement for the Company’s 20172022 Annual Meeting of Shareholders.”
Vote Required and Recommendation of the Board
The advisory vote on executive compensation will be considered approved, on a non-binding, advisory basis, if it receives the affirmative vote of the company’s named executive officers.
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE APPROVAL OF THE
COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS.
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EXECUTIVE OFFICERS
The names of the executive officers of the Company, ages as of May 31, 2017,2022, and certain information about them as of the mailing date of this Proxy Statement are set forth below:
Name | Age | Position | |||
Gayn Erickson | 57 | President and Chief Executive Officer | |||
Kenneth B. Spink | 61 | Vice President of Finance and Chief Financial Officer | |||
Donald P. Richmond II | 66 | ||||
Vice President of Engineering | |||||
David | 65 | Chief Technology Officer | |||
Michael Brannan | 54 | Former Vice President of Operations (1) | |||
Adil Engineer | 45 | Chief Operating Officer (2) | |||
Vernon Rogers | 55 | Executive Vice President of Sales and Marketing | |||
Alistair N. Sporck | 64 | Vice President, Contactor Business Unit (3) | |||
_____________
(1) | Mr. Michael Brannan resigned from Aehr Test Systems | |
(2) | Mr. Adil Engineer was elected Chief Operating Officer on April 6, 2022. | |
(3) | Mr. Alistair N. Sporck was elected Vice President, Contactor Business Unit on July 18, 2022. |
GAYN ERICKSON
See “Proposal 1 – Election of Directors” above.KENNETH B. SPINK
joined the Company in 2008 as Corporate Controller and was elected Vice President of Finance, Chief Financial Officer in September 2015. Mr. Spink hasDONALD P. RICHMOND II joined the Company as a Product Marketing ManagerSenior Electrical Engineer for Aehr’s Wafer Level Test and Burn-in solutions in 19831998, and has held variousseveral key positions untilbefore he was elected Vice President of Engineering in November 1992,March 2018. Prior to joining the Company, Mr. Richmond was co-founder, member of the Board, and Vice President of Research and Development EngineeringOperations at ChipScale Inc. / Micro SMT Inc., a leader in November 1996, Vice Presidentchip scale packaging of Marketing in September 1997, Vice President of Contactor Business Group in May 2002, Vice President of Marketing and Contactor Business Group in October 2005, Vice President of Sales and Marketing in October 2011, and currently as Vice President of Marketing of the Company. From 1978semiconductor ICs & discrete circuits. Prior to 1983,that, Mr. BuckRichmond served as Product Marketing Manager at Intel Corporation, an integrated circuitpresident of TEAM Holdings LTD. / TEAM International LTD., a semiconductor packaging subcontractor. Mr. Richmond has over 40 years of executive and microprocessor company.general management, operations, customer support and R&D program management experience dating back to the mid-1970s when he began his career in semiconductor design with Signetics Corporation. Mr. BuckRichmond received a B.S.E.E. Technology from Princeton University, an M.S. in Electrical Engineering from the University of Maryland and an M.B.A. from Stanford University.
DAVID S. HENDRICKSON
joined the Company in October 2000 as Vice President of Engineering and was elected Chief Technology Officer inMICHAEL BRANNAN joined the Company as Vice President of Manufacturing and Operations in June 2014.March 2020 and resigned in January 2022. Prior to joining Aehr, Mr. Brannan was President and CEO of Harbor Electronics, a leading design & printed circuit board fabrication company delivering test tooling solutions to the semiconductor test industry, from 2015 to 2018. From February 20032006 to May 2014,2015, he had also held
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senior manager roles at Xcerra (formerly LTX and ECT) and at Kulicke & Soffa Interconnect which involved critical new platform qualifications from all the major ATE suppliers. Mr. FucciBrannan was an alumnus of Santa Clara University where he was a combined science major in PsychoBiology.
ADIL ENGINEER joined the Company as Chief Operating Officer in April 2022. Prior to joining Aehr, Mr. Engineer served as Head of Operations at Tecan, a Swiss company manufacturing medical test and diagnostic tools, devices, and solutions, where he oversaw operations for Tecan’s primary site in the US for manufacturing. He started his career with semiconductor equipment company KLA-Tencor where he spent 11 years and also worked at Coherent and Kateeva in positions of increasing responsibility in manufacturing, manufacturing engineering, new product introduction, and supply chain. Adil has built a career in operations and supply chain and has been in the semiconductor and medical equipment field for over 20 years. Mr. Engineer received a bachelor’s degree in Chemical Engineering from TKIET, and a Graduate Certificate in Management Science and Engineering from Stanford University.
VERNON ROGERS joined the Company as Executive Vice President of Manufacturing Operations/Vice PresidentSales and Marketing in October 2018. Prior to joining Aehr, Mr. Rogers served as head of Quality & Compliancesales and marketing at DCG Systems, a leading provider of design-to-test solutions forGES preceding its acquisition by Kimball Electronics. Mr. Rogers, over the globalpast 22 years, has held numerous senior executive sales, marketing and operations management positions, successfully building multi-channel sales distribution and support organizations at both public and start-up technology companies in the semiconductor industry. DCG Systems was a division ofand system level test space. His career has focused on nanoscale inspection, manufacturing, and test technologies with such leaders as LitePoint (acquired by Teradyne), Credence Systems Corporation (acquired by Xcerra), NPTest (acquired by Credence Systems) and Schlumberger Automated Test Equipment. He also oversaw sales for FlexStar Technology, a provider ofBay Area leader in hard disk drives (HDD) and solid-state disk drives (SSD) test solutions for the semiconductor industry, until 2008.and burn-in. Mr. Fucci was Director of Worldwide Operations/Supply Chain Management at Wireless Online, Inc.Rogers received a B.S. in Electrical Engineering from 2000 to 2002. Prior to that, he was Senior Director of Manufacturing Operations for MicroTouch Systems. Mr. Fucci received his B.S.E.E. from the Northeastern University and an M.B.A. from BostonNorth Dakota State University.
ALISTAIR N. SPORCK joined the Company as Vice President, Contactor Business Unit in July 2022. Prior to joining Aehr, Mr. Sporck ran his own company supplying various components to the probe card industry. Mr. Sporck was Vice President of New System Development, 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 Development Engineering DepartmentDesign at Tokyo Electron Yamanashi Limited,Formfactor Inc., a leading worldwide semiconductor equipment manufacturer. Prior to that,probe card supplier, for 17 years. He began his career at LSI Logic (now part of Broadcom) where he worked for 13 years in various positions in Product Engineering. Mr. Sano held a development engineering position at TOKICO LTD. and test engineering and design positions at Oki Engineering Co., Ltd. Mr. SanoSporck received a B.S.E.E.B.S. in Electrical Engineering from Sagami Institutethe University of TechnologyCalifornia, and a M.S. in Kanagawa, Japan.
COMPENSATION DISCUSSION AND ANALYSIS
General Philosophy
The Company compensates the Company’s executive officers through a combination of base salary, cash bonus and equity compensation designed to be competitive with comparable companies. The Company’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’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. |
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To achieve these objectives, the Company has implemented and maintains compensation plans that tie a significant portion of executive officers’ overall compensation to the Company’s financial performance and stock price. In determining the compensation for the Company’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’s overall performance and contribution to the Company in determining compensation. 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’s executive officers is competitive and consistent with the Company’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, independent advisors and consultants, and national and regional compensation surveys to provide information and recommendations to establish specific compensation packages for executive officers.
Overall Compensation
The criteria for determining the appropriate salary level, bonus and equity awards for each of the executive officers include: (a) Company performance as a 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’s position and a specific time frame.
These criteria are usually related to a given fiscal year, 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 compensation levels to other companies in similar industries, other leading companies (regardless of industry) and competitors. Personal knowledge of semiconductor equipment industry compensation practices, compensation data in SEC filings, and national and regional compensation surveys are also used. For fiscal 2023, the Company employed an independent consultant to review executive compensation and provide recommendations to the Compensation Committee. | |
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 the Board, 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 equity awards, 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. |
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Role of Compensation Committee
The Company’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’s Board, of Directors, and currently consists of Messrs. Andersondirectors Danesh, Oliphant and Elder,Slayen, each of whom is an “outside director” for purposes of Section 162(m) of the Internal Revenue Code and a “non-employee director” for purposes of Rule 16b-3 under the Exchange Act.
The Company’s Compensation Committee has primary responsibility for ensuring that the Company’s executive officer compensation and benefit program is consistent with the Company’s compensation philosophy and corporate governance guidelines and for determining the executive compensation packages offered to the Company’s executive officers.
The Compensation Committee is responsible for:
1. | reviewing and approving the annual base salary for the Company’s executive officers, as well as any other benefits, compensation or employment-related arrangements, including (i) annual or special incentive bonuses, including the specific goals and amounts, (ii) equity compensation, and/or (iii) employment agreements, severance arrangements, and change in control agreements; | |
2. | making recommendations to the Board with respect to incentive compensation plans, including reservation of shares for issuance under employee benefit plans; | |
3. | reviewing the performance of the Company’s Chief Executive Officer; | |
4. | making recommendations to the Board on the Company’s executive compensation practices and policies, including the evaluation of performance by the Company’s executive officers and issues of management succession. |
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’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’s work. Once base salary levels are initially determined, increases in base salary are provided to recognize an executive officer’s specific performance achievements.
The Company utilizes equity-based compensation, including stock options and restricted stock units, or RSUs, 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’s shareholders. Executive officers whose skills and results the Company deems to be critical to the Company’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, commissions, and RSUs that allow the Company to remain competitive with other companies while providing additional compensation for an executive officer’s outstanding results and for the achievement of corporate objectives.
Core benefits, such as the Company’s basic health benefits, 401(k) program, the Company’s Employee Stock Ownership Plan or ESOP,(the “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 commission plans; and |
| 21 |
· | Equity-based programs: The 2016 Equity Incentive Plan, the Amended and Restated 2006 Employee Stock Purchase Plan, or ESPP, and the ESOP. |
These programs apply to all executive level positions, except for the revenue commission plan,plans, which only applies to Mark Allison,Gayn Erickson, the Chief Executive Officer, and Vernon Rogers, the Executive Vice President of Worldwide Sales.Sales and Marketing. 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’s compensation philosophy, the Company has structured each element of the Company’s executive officer compensation program as described below.
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’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’s structures as needed after considering the recommendations of management. The Company’s Compensation Committee reviews the salaries of the Company’s executive officers annually, and the Company’s Compensation Committee grants increases in salaries based on individual performance during the prior calendar year, provided that any increases are within the guidelines determined by the Compensation Committee for each position.
Annual Bonus
The Company’s executive annual bonus plan provides for cash bonus awards, dependent upon attaining stated corporate objectives and personal performance goals. The Company’s executive officers are eligible to receive cash bonuses based upon the Company’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 quarterly or 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’s goal of strengthening the connection between the interests of management and the Company’s shareholders.
In fiscal 2017,2022, the Company’s Compensation Committee determined the maximum eligible cash bonus levels based upon the Company’s achievement of certain financial goals for Gayn Erickson the Company’s Chief Executive Officer, Kenneth B. Spink, Chief Financial Officer, David Fucci, Vice President of Operations, and David S. Hendrickson Vice President of Engineering were up to 100%, 60%, 60%90% and 30%20% of their base salaries, respectively. Additionally,Vernon Rogers was not eligible for the Company’s financial goal cash bonus in fiscal 2022. In addition, the Compensation Committee approved a profit-sharing bonus payable semi-annually based on Company net profit for Gayn Erickson, Vernon Rogers and David S. Hendrickson, was eligible to receive a maximum bonuseach at 5% of $50,000, depending upon performance against milestones.their base salaries. Based on the Company performance for the year, the Compensation Committee awarded $15,000 toapproved a cash bonus for Gayn Erickson and David S. Hendrickson at 200% of target of $272,884 and $51,189, respectively, and a profit sharing bonus for Gayn Erickson, Vernon Rogers and David S. Hendrickson of $15,160, $13,126 and $12,797, respectively. Additionally, in fiscal 2022, the Compensation Committee approved a personal performance cash bonus for Gayn Erickson, Vernon Rogers and David S. Hendrickson and no cash bonusesat a target of $33,750, $61,500 and $63,267, respectively. Based upon personal performance against milestones for fiscal 2022, the Compensation Committee awarded $9,575, $8,325 and $21,050 to other named executive officers.Gayn Erickson, Vernon Rogers and David S. Hendrickson, respectively. 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.
Booking Commission
During fiscal 2017, Mark Allison,2022, Vernon Rogers, the Executive Vice President of Worldwide Sales and Marketing, was eligible to receive revenuea booking commission based on achievement of revenuebooking objectives or quotas. Mark AllisonVernon Rogers receives a standard commission rate of 0.375% for revenuebookings up to 100% of quota and an accelerated commissions basedcommission rate of 0.75% on revenuebookings above quota. Commissions are considered earned at the time of revenue recognitionbooking and are paid after the close of the quartermonth of revenue recognition.
Under this plan, Mark Allison, the Vice President of Worldwide Sales,Mr. Rogers earned $45,544$320,377 in fiscal 2017 and was paid $33,586 during fiscal 2017. This $33,586 included $4,147 that was earned in fiscal 2016. The remaining $16,106 earned in fiscal 2017 was paid to Mark Allison in fiscal 2018. Commissions earned by Mark Allison in fiscal 2017 are2022 which is included in the annual non-equity incentive plan compensation salary column in the Summary Compensation Table on page 18.
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Revenue Commission
During fiscal 2022, Gayn Erickson, the Company’s Chief Executive Officer, was eligible to receive a revenue commission rate of 0.209% for revenue up to 100% of target and an accelerated commission rate of 0.418% on revenue above target. The commission would be payable upon the Company’s quarterly achievement of a GAAP profit, before bonus, of $50,000 or more. Under this plan, the Compensation Committee awarded to Gayn Erickson $140,055 cash bonus in fiscal 2022, which is included in the annual non-equity incentive plan compensation column in the Summary Compensation Table on page 25.
Equity Compensation
The Company awards equity compensation to the Company’s executive officers based on the performance of the executive officer and guidelines related to each executive officer’s position in the Company. The CompanyBoard determines the Company’s equity compensation guidelines based on information derived from the Company’s experience with other companies and, with respect to the Company’s executive officers, informal surveys of companies in the Company’s industry. The Company typically bases awards to newly hired executive officers and for continuing executive officers on these guidelines as well as an executive officer’s performance for the prior fiscal year. The Company evaluates each executive
The Company’s Compensation Committee generally grants stock options and RSUs to executive officers. Such grants are typically made at 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’s standard practice is to make stock option grants effective on or shortly after the executive officer’s hire date.
In fiscal 2017,2022, the Company granted a total of 524,449706,254 RSUs and options to purchase shares of the Company’s common stock of which RSUs and options covering a total of 195,000 RSUs and options475,156 shares were granted to the Company’s executive officers, representing 37.2%67.3% of all RSUs and options granted in fiscal 2017.2022. The Company’s Compensation Committee does not apply a formula for allocating equity awards to executive officers. Instead, the Company’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.
Other Benefits
Executive officers are eligible to participate in all of the Company’s employee benefit plans, such as medical, dental, group life, disability, and accidental death and dismemberment insurance, the Company’s 401(k) plan, the Company’s 2016 Equity Incentive Plan, the ESOP, and the ESPP. The executive officers participate on the same basis as other employees, except that the company madeCompany makes payments for a supplemental insurance to cover the uninsured out-of-pocket amounts related to healthcare for the executive officers. Other than these payments, there were no other special benefits or perquisites provided to any executive officer in fiscal 2017,2022, except that only Mark Allison, the Vice President of Worldwide Sales, receivesVernon Rogers received auto allowance payments. During fiscal 2017,2022, the Company made payments for health and life insurance premiums and medical costs as reflected in the Summary Compensation Table below under the “All Other Compensation” column. The Company does not maintain any pension plan, retirement benefit or deferred compensation arrangement other than the Company’s 401(k) plan and the ESOP. The Company is not required to make contributions to the 401(k) plan and did not make any during fiscal 2017.2022. During fiscal 2017,2022, the Company contributed $60,000$250,000 to the Company’s ESOP.
The Company entered into Change of Control Severance Agreements on January 24, 2001 with Mr. David S. Hendrickson; on January 3, 2012 with Mr. Gayn Erickson; on AugustOctober 12, 20132018 with Mr. Mark Allison;Vernon Rogers; and on June 2, 2014January 24, 2001 with Mr. David Fucci; and on September 9, 2015 with Mr. Kenneth B. Spink;S. Hendrickson; 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
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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 officer 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 officer’sexecutive’s position, duties, compensation or work conditions. The amounts payable under the agreements will change from year to year based on the executive’s compensation.
In the event of a termination following a change of control, the amounts payable to Messrs. Allison, Erickson, Fucci,Rogers and Hendrickson and Spink based on their base salaries at May 31, 2017,2022, would be approximately $99,000, $442,000, $102,000, $136,000$489,793, $151,437 and $153,000,$146,243, respectively. In addition to the amounts payable to the executive officers mentioned in the previous sentence, the aggregate values of the acceleration of vesting of the executive officers’ unvested stock options based on the spread between the closing price of the Company’s Common Stock on May 31, 20172022 (the last business day of the last fiscal year) of $4.58$8.38 and the exercise price of the stock options for Messrs. Allison, Erickson, Fucci,Rogers and Hendrickson and Spink would be $93,802, $230,863, $108,148, $93,571 and $99,233,$293,138, $210,997and $53,851, respectively, and the aggregate values of the acceleration of vesting of the executive officers’ unvested RSUs based on the closing price of the Company’s Common Stock on May 31, 20172022 of $4.58$8.38 for Messrs. Allison, Erickson, Fucci,Rogers and Hendrickson and Spink would be $18.604, $53,027, $18,604, $13,960$718,166, $186,556 and $22,328,$119,138, 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 Mr. Gayn Erickson, the Company’s Chief Executive Officer, in fiscal year 2017.2022. In setting both the cash-based and the equity-based elements of Mr. Erickson’s compensation, the Compensation Committee considered the company’sCompany’s performance, competitive forces taking into account Mr. Erickson’s experience and knowledge, and Mr. Erickson’s leadership in achieving the Company’s long-term goals. During fiscal year 2017,2022, Mr. Erickson received stock options$140,055 as part of his revenue commission arrangement, as described above under the Company’s 2006 Equity Incentive Plansection titled “Revenue Commission,” and a total of $297,619 cash bonus for 42,750 shares, which vest over four year. Additionally, Mr. Erickson received RSUs under the Company’s 2006 Equity Incentive Plan for 14,250 shares, which vest over four years, and 35,000 shares, which vest subject to the achievement of acertain financial goals and his personal performance condition. This performance condition was met in fiscal year 2017.bonus. The Compensation Committee believes Mr. Erickson’s fiscal year 20172022 compensation was fair relative to the Company’s performance and Mr. Erickson’s individual performance and leadership, and that it rewards him for this performance and will serve to retain him as a key employee.
Tax and Accounting Considerations
The Compensation Committee takes the applicable tax and accounting requirements into consideration in designing and overseeing our executive compensation program.
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended, which provides that, for purposes ofgenerally limits the regularamount we may deduct from our federal income tax, the otherwise allowable deductiontaxes for compensation paid or accrued with respect to theour Chief Executive Officer and certain other current and former executive officers that are “covered employees” within the meaning of a publicly-held company, which is not performance-based compensation, is limitedSection 162(m) to no more than $1 million per year. Toindividual per year, subject to certain exceptions. Although the extentCompensation Committee may consider the tax implications as one factor in making compensation decisions for our covered employees, the Compensation Committee also considers other factors in making such decisions, including ensuring that our executive compensation program supports our business strategy. Consequently, the Compensation Committee retains the discretion and flexibility to be paid to suchcompensate our named executive officers exceedsin a manner consistent with the $1 millionobjectives of our executive compensation program and the best interests of the Company and our shareholders, which may include providing for compensation that is not deductible by the Company due to the deduction limit per officer, such excessof Section 162(m).
Accounting for Stock-Based Compensation
The Compensation Committee takes accounting considerations into account in designing compensation plans and arrangements for our executive officers and other employees. Chief among these is Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC Topic 718”), the standard which governs the accounting treatment of certain stock-based compensation. Among other things, ASC Topic 718 requires us to record a compensation expense in our income statement for all equity
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awards granted to our executive officers and other employees. This compensation expense is based on the grant date “fair value” of the equity award and, in most cases, will be treated as performance-based compensation.
Compensation of Executive 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 years ended May 31, 2017, 20162022, 2021 and 20152020 by the Company’s Chief Executive Officer, Chief Financial Officer and each of the threetwo other most highly compensated executive officers with annual compensation in excess of $100,000 for the fiscal yearsyear ended May 31, 2017, 2016 and 2015.
Summary Compensation Table
Non-Equity | |||||||||
| Name and | Fiscal | Stock | Option | Incentive Plan | All Other | ||||
| Principal Position | Year | Salary (1) | Bonus | Awards (2) | Awards (2) | Compensation (3) | Compensation (4) | Total | |
| Gayn Erickson | 2017 | $275,018 | -- | $82,740 | $48,019 | -- | $32,691(5) | $438,468 | |
| President and Chief | 2016 | $273,192 | -- | $75,600 | -- | -- | $34,061 | $382,853 | |
| Executive Officer | 2015 | $275,018 | -- | -- | $249,859 | -- | $26,517 | $551,394 | |
| Kenneth B. Spink | 2017 | $190,008 | -- | $10,080 | $19,535 | -- | $15,237(6) | $234,860 | |
| Vice President of Finance | 2016 | $173,983 | -- | -- | -- | -- | $12,237 | $186,220 | |
| and Chief Financial Officer | |||||||||
| David S. Hendrickson | 2017 | $232,149 | $15,000 | $6,300 | $11,214 | -- | $42,093(7) | $306,756 | |
| Vice President of Engineering | 2016 | $232,149 | -- | -- | -- | -- | $42,154 | $274,303 | |
| 2015 | $232,149 | -- | -- | $131,234 | -- | $38,793 | $402,176 | ||
| Mark Allison | 2017 | $180,003 | -- | $8,400 | $14,952 | $45,544 | $25,036(8) | $273,935 | |
| Vice President of | 2016 | $181,207 | -- | -- | -- | $38,367 | $15,215 | $234,789 | |
| Worldwide Sales | 2015 | $179,780 | -- | -- | $87,517 | $27,850 | $7,224 | $302,371 | |
| David Fucci | 2017 | $174,013 | -- | $8,400 | $16,900 | -- | $31,177(9) | $230,490 | |
| Vice President of Operations | 2016 | $174,013 | -- | -- | -- | -- | $30,118 | $204,131 | |
| 2015 | $162,635 | -- | -- | $144,384 | -- | $22,799 | $329,818 | ||
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Name and Principal Position |
| Fiscal Year |
| Salary |
|
| Bonus |
|
| Stock Awards (1) |
|
| Option Awards (1) |
|
| Compensation (2) |
|
| Compensation (3) |
|
| Total |
| |||||||
Gayn Erickson |
| 2022 |
| $ | 299,262 |
|
| $ | 297,619 |
|
| $ | 353,737 | (4) |
| $ | 24,633 |
|
| $ | 140,055 |
|
| $ | 3,088,308 | (5) |
| $ | 4,203,614 |
|
President and Chief |
| 2021 |
| $ | 225,460 |
|
| $ | -- |
|
| $ | 211,922 |
|
| $ | 4,315 | �� |
| $ | -- |
|
| $ | 42,996 |
|
| $ | 484,693 |
|
Executive Officer |
| 2020 |
| $ | 288,766 |
|
| $ | 20,000 |
|
| $ | 26,094 |
|
| $ | 133,093 |
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| $ | 29,352 |
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| $ | 35,948 |
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| $ | 533,253 |
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Vernon Rogers |
| 2022 |
| $ | 259,103 |
|
| $ | 21,451 |
|
| $ | 214,387 | (6) |
| $ | -- |
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| $ | 320,377 |
|
| $ | 88,095 | (7) |
| $ | 903,413 |
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Executive Vice President of |
| 2021 |
| $ | 186,550 |
|
| $ | -- |
|
| $ | 87,506 |
|
| $ | -- |
|
| $ | 63,078 |
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| $ | 52,661 |
|
| $ | 389,795 |
|
Sales and Marketing |
| 2020 |
| $ | 250,016 |
|
| $ | 22,500 |
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| -- |
|
| $ | 38,748 |
|
| $ | 70,639 |
|
| $ | 51,393 |
|
| $ | 433,296 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
David S. Hendrickson |
| 2022 |
| $ | 251,162 |
|
| $ | 85,036 |
|
| $ | 307,210 | (8) |
| $ | 7,029 |
|
| $ | -- |
|
| $ | 45,198 | (9) |
| $ | 695,635 |
|
Chief Technology Officer |
| 2021 |
| $ | 176,254 |
|
| $ | -- |
|
| $ | 38,817 |
|
| $ | -- |
|
| $ | -- |
|
| $ | 36,378 |
|
| $ | 251,449 |
|
|
| 2020 |
| $ | 214,692 |
|
| $ | 10,000 |
|
| $ | -- |
|
| $ | 22,280 |
|
| $ | -- |
|
| $ | 36,041 |
|
| $ | 283,013 |
|
___________________
(1) | The amounts reported represent the aggregate grant date fair value of equity awards granted in the respective fiscal years, as determined pursuant to ASC 718 (but excluding the effect of estimated forfeitures for performance-based awards). The assumptions used to calculate the value of awards are set forth in Note 11 of the Notes to the Consolidated Financial Statements included in Aehr’s Annual report on Form 10-K for fiscal 2022 filed with the SEC on August 26, 2022. | |
(2) | Revenue and booking commissions earned. | |
(3) | Consists of contributions made by the Company under the ESOP, gain from the exercise of non-qualified stock options, health and life insurance premiums, medical costs and auto allowance paid by the Company. | |
(4) | Includes restricted stock units issued for bonus. | |
(5) | Includes gain from the exercise of non-qualified stock options of $3,042,096, as well as health and life insurance premiums and medical costs paid by the Company in the amount of $34,987. | |
(6) | Includes restricted stock units issued for bonus. | |
(7) | Includes health and life insurance premiums and medical costs in the amount of $40,357, gain from the exercise of non-qualified stock options of $24,513, and auto allowance in the amount of $12,000 paid by the Company. | |
(8) | Includes restricted stock units issued for bonus. | |
(9) | Includes health and life insurance premiums and medical costs paid by the Company in the amount of $36,543. |
| 25 |
Grants of Plan Based Awards in Fiscal 2017
The following table provides information with regard to each grant of an award made to the persons named in the Summary Compensation Tableexecutive officers during the fiscal year ended May 31, 2017.
All Other | |||||||
All Other | Option | ||||||
Stock | Awards: | ||||||
Estimated Future Payouts | Awards: | Number of | Exercise | Grant Date | |||
Under Non-Equity | Number of | Securities | Price of | Fair Value of | |||
Incentive Plan Awards (1) | Grant | Shares of Stock | Underlying | Option | Stock Option | ||
| Name | Target ($) | Maximum ($) | Date | Or Units (2) | Option # (3) | Awards ($) (4) | Awards ($) |
| Gayn Erickson | $137,509 | $275,018 | 7/25/16 | 49,250 | -- | -- | $82,740 |
| 7/25/16 | -- | 42,750 | $1.68 | $42,614 | |||
| Kenneth B. Spink | $57,002 | $114,005 | 7/25/16 | 6,000 | -- | -- | $10,080 |
| 7/25/16 | -- | 18,000 | $1.68 | $17,942 | |||
| David S. Hendrickson | $85,000 | $119,645 | 7/25/16 | 3,750 | -- | -- | $6,300 |
| 7/25/16 | -- | 11,250 | $1.68 | $11,214 | |||
| Mark Allison (5) | $-- | $-- | 7/25/16 | 5,000 | -- | -- | $8,400 |
| 7/25/16 | -- | 15,000 | $1.68 | $14,952 | |||
| David Fucci | $52,200 | $104,400 | 7/25/16 | 5,000 | -- | -- | $8,400 |
| 7/25/16 | -- | 15,000 | $1.68 | $14,952 | |||
|
| Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) |
|
| Grant |
| All Other Stock Awards: Number of Shares of Stock or |
|
| All Other Option Awards: Number of Securities Underlying |
|
| Exercise Price of Option |
|
| Grant Date Fair Value of Stock/Option |
| |||||||||
Name |
| Target ($) |
|
| Maximum ($) |
|
| Date |
| Units (2) |
|
| Option # (3) |
|
| Awards ($) |
|
| Awards ($) |
| ||||||
Gayn Erickson (4) |
| $ | 151,602 |
|
| $ | 288,044 |
|
| 07/13/21 |
|
| 51,741 |
|
|
| -- |
|
|
| -- |
|
| $ | 151,601 |
|
|
|
|
|
|
|
|
|
|
| 07/13/21 |
|
| 68,988 |
|
|
| -- |
|
|
| -- |
|
| $ | 202,135 |
|
Vernon Rogers (5) |
| $ | 13,126 |
|
| $ | 13,126 |
|
| 07/13/21 |
|
| 13,439 |
|
|
| -- |
|
|
| -- |
|
| $ | 39,376 |
|
|
|
|
|
|
|
|
|
|
| 07/13/21 |
|
| 59,730 |
|
|
| -- |
|
|
| -- |
|
| $ | 175,009 |
|
David S. Hendrickson (6) |
| $ | 38,392 |
|
| $ | 63,986 |
|
| 07/13/21 |
|
| 7,863 |
|
|
| -- |
|
|
| -- |
|
| $ | 23,039 |
|
|
|
|
|
|
|
|
|
|
| 11/16/21 |
|
| 1,359 |
|
|
| -- |
|
|
| -- |
|
| $ | 33,391 |
|
|
|
|
|
|
|
|
|
|
| 07/13/21 |
|
| 34,942 |
|
|
| -- |
|
|
| -- |
|
| $ | 102,380 |
|
|
|
|
|
|
|
|
|
|
| 11/16/21 |
|
| 6,040 |
|
|
| -- |
|
|
| -- |
|
| $ | 148,403 |
|
___________________
(1) | Reflects the target and maximum values of cash bonus awards based upon the Company’s achievement of certain financial goals, excluding commissions, to the named executive officers in fiscal 2022. Based on the Company performance for the year, the named executive officers earned maximum values of cash bonus awards. |
(2) | Officers received RSUs under the Company’s 2016 Equity Incentive Plan which vest over four years on July 13, 2021. Officers received RSU performance grants on July 13, 2021, and November 16, 2021, which vested on May 31, 2022, based upon the Company’s achievement of certain financial goals . |
(3) | There were no options granted to named executive officers during fiscal 2022. |
(4) | Besides bonus on the Company’s financial goals, Mr. Erickson is eligible to receive a cash bonus based on personal performance milestones with a target of $33,750. These cash bonus award amounts of $9,575 actually earned by Mr. Erickson in fiscal 2022 are included in the Summary Compensation Table for fiscal 2022 under the heading “Bonus.” Additionally, Mr. Erickson is eligible to receive revenue commission only when the Company’s quarterly GAAP profit, before bonus, is equal $50,000 or more. Revenue commission is calculated at 0.209% for revenue up to 100% of target and an accelerated commission rate of 0.418% on revenue above target. The commission amounts actually earned by Mr. Erickson in fiscal 2022 are shown in footnote (2) of Summary Compensation Table for fiscal 2022. Included in the stock awards is a performance grant of 68,988 RSU’s, with a fair value of $202,135, which vested on May 31, 2022 based upon attainment of fiscal 2022 revenue goals. |
(5) | Besides bonus on the Company’s financial goals, Mr. Rogers is eligible to receive a cash bonus based on personal performance milestones with a target of $61,500. These cash bonus award amounts of $8,325 actually earned by Mr. Rogers in fiscal 2022 are included in the Summary Compensation Table for fiscal 2022 under the heading “Bonus.” Additionally, Mr. Rogers is eligible to receive a booking commission without maximum amounts. Booking commission is calculated at 0.375% for revenue up to 100% of target and an accelerated commission rate of 0.75% on revenue above target. The commission amounts actually earned by Mr. Rogers in fiscal 2022 are shown in footnote (2) of the Summary Compensation Table for fiscal 2022. Included in the stock awards is a performance grant of 59,730 RSU’s, with a fair value of $175,009, which vested on May 31, 2022 based upon attainment of fiscal 2022 revenue goals. |
| 26 |
(6) | In addition to a bonus based on the Company’s financial goals, Mr. Hendrickson is eligible to receive a cash bonus based on personal performance milestones with a target of $63,267. These cash bonus award amounts of $21,050 actually earned by Mr. Hendrickson in fiscal 2022 are included in the Summary Compensation Table for fiscal 2022 under the heading “Bonus.” Included in the stock awards are performance grants of 34,942 RSU’s with a fair value of $102,380, and 6,040 RSU’s with a fair value of $148,403, which vested on May 31, 2022 based upon attainment of fiscal 2022 revenue goals. |
Outstanding Equity Awards at Fiscal 20172022 Year-End
The following table presents certain information concerning the outstanding equity awards held as of May 31, 20172022 by each named executive officer.
| Stock Awards | Option Awards | |||||||
| Number of Shares | Market Value of Shares | Number of Securities | Option | Option | ||||
| of Stock or Units | of Stock or Units | Underlying Unexercised Options (3) | Exercise | Expiration | ||||
| Name | Unvested (1) | Unvested (2) | Exercisable | Unexercisable | Price (4) | Date (5) | ||
| Gayn Erickson | 11,578 | $53,027 | 341,667 | -- | $0.590 | 1/3/2019 | ||
| 55,000 | -- | $1.271 | 6/26/2019 | |||||
| 93,020 | 1,980 | $1.280 | 6/25/2020 | |||||
| 68,749 | 31,251 | $2.710 | 8/20/2021 | |||||
| 29,686 | 27,314 | $2.100 | 4/21/2022 | |||||
| 8,905 | 33,845 | $1.680 | 7/25/2023 | |||||
| Kenneth B. Spink | 4,875 | $22,328 | 3,125 | 313 | $1.280 | 6/25/2020 | ||
| 8,250 | 3,750 | $2.710 | 8/20/2021 | |||||
| 4,947 | 4,553 | $2.100 | 4/21/2022 | |||||
| 12,083 | 16,917 | $2.300 | 9/9/2022 | |||||
| 3,750 | 14,250 | $1.680 | 7/25/2023 | |||||
| David S. Hendrickson | 3,048 | $13,960 | 15,000 | -- | $1.250 | 7/8/2018 | ||
| 40,000 | -- | $1.271 | 6/26/2019 | |||||
| 73,437 | 1,563 | $1.280 | 6/25/2020 | |||||
| 38,671 | 17,579 | $2.710 | 8/20/2021 | |||||
| 13,020 | 11,980 | $2.100 | 4/21/2022 | |||||
| 2,343 | 8,907 | $1.680 | 7/25/2023 | |||||
| Mark Allison | 4,062 | $18,604 | 79,687 | 5,313 | $1.730 | 8/12/2020 | ||
| 24,062 | 10,938 | $2.710 | 8/20/2021 | |||||
| 10,416 | 9,584 | $2.100 | 4/21/2022 | |||||
| 3,125 | 11,875 | $1.680 | 7/25/2023 | |||||
| David Fucci | 4,062 | $18,604 | 58,333 | 21,667 | $2.275 | 6/2/2021 | ||
| 10,416 | 9,584 | $2.100 | 4/21/2022 | |||||
| 3,125 | 11,875 | $1.680 | 7/25/2023 | |||||
|
| Stock Awards |
|
| Option Awards | ||||||||||||||||||
|
| Number of Shares of Stock or Units | �� |
| Market Value of Shares of Stock or Units |
|
| Number of Securities Underlying Unexercised Options (3) |
|
| Option Exercise |
|
| Option Expiration | |||||||||
Name |
| Unvested (1) |
|
| Unvested (2) |
|
| Exercisable |
|
| Unexercisable |
|
| Price |
|
| Date | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Gayn Erickson |
|
| 85,700 |
|
| $ | 718,166 |
|
|
| 27,610 |
|
|
| -- |
|
| $ | 1.680 |
|
| 7/25/2023 | |
|
|
|
|
|
|
|
|
|
|
| 23,856 |
|
|
| -- |
|
| $ | 3.930 |
|
| 7/11/2024 | |
|
|
|
|
|
|
|
|
|
|
| 74,746 |
|
|
| 6,251 |
|
| $ | 2.400 |
|
| 8/17/2025 | |
|
|
|
|
|
|
|
|
|
|
| 29,355 |
|
|
| 37,918 |
|
| $ | 1.635 |
|
| 7/16/2026 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Vernon Rogers |
|
| 22,262 |
|
| $ | 186,556 |
|
|
| 127,134 |
|
|
| 20,834 |
|
| $ | 2.030 |
|
| 10/23/2025 | |
|
|
|
|
|
|
|
|
|
|
| 28,332 |
|
|
| 11,668 |
|
| $ | 1.635 |
|
| 7/16/2026 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
David S. Hendrickson |
|
| 14,217 |
|
| $ | 119,138 |
|
|
| 11,250 |
|
|
| -- |
|
| $ | 1.680 |
|
| 7/25/2023 | |
|
|
|
|
|
|
|
|
|
|
| 14,063 |
|
|
| -- |
|
| $ | 3.930 |
|
| 7/11/2024 | |
|
|
|
|
|
|
|
|
|
|
| 21,562 |
|
|
| 1,438 |
|
| $ | 2.400 |
|
| 8/17/2025 | |
|
|
|
|
|
|
|
|
|
|
| 16,291 |
|
|
| 6,709 |
|
| $ | 1.635 |
|
| 7/16/2026 | |
___________________
(1) | RSUs generally vest starting three months after the date of grant, and with an additional 1/16th of the total number of RSUs vesting each three months thereafter, with full vesting occurring on the fourth anniversary of the date of grant. |
(2) | Market value of RSUs was based on the closing price of the Company’s Common Stock on May 31, 2022 of $8.38. |
(3) | Stock options outstanding are generally exercisable starting one month after the date of grant, with an additional 1/48th of the total number of option shares becoming exercisable each month thereafter, with full vesting occurring on the fourth anniversary of the date of grant. |
| 27 |
Stock Awards Vested and Option Exercises in Fiscal 2017
The following table provides information concerning option exercises and RSUs vested by the persons named in the Summary Compensation Tableexecutive officers during the fiscal year ended May 31, 2017.
Stock Awards | Option Awards | |||
Number of Shares | Value | Number of Shares | Value | |
Acquired on | Realized on | Acquired on | Realized on | |
| Name | Vesting (#) | Vesting ($) (1) | Exercise (#) | Exercise ($) (2) |
| Gayn Erickson | 37,672 | $183,662 | -- | -- |
| Kenneth B. Spink | 1,125 | $3,795 | 18,487 | $10,644 |
| David S. Hendrickson | 702 | $2,368 | 25,000 | $48,562 |
| Mark Allison | 938 | $3,165 | -- | -- |
| David Fucci | 938 | $3,165 | -- | -- |
|
| Stock Awards |
|
| Option Awards |
| ||||||||||
|
| Number of Shares |
|
| Value |
|
| Number of Shares |
|
| Value |
| ||||
|
| Acquired on |
|
| Realized on |
|
| Acquired on |
|
| Realized on |
| ||||
Name |
| Vesting (#) |
|
| Vesting ($) (1) |
|
| Exercise (#) |
|
| Exercise ($) (2) |
| ||||
Gayn Erickson |
|
| 98,803 |
|
| $ | 917,485 |
|
|
| 264,214 |
|
| $ | 3,412,606 |
|
Vernon Rogers |
|
| 67,290 |
|
|
| 572,235 |
|
|
| 52,032 |
|
|
| 627,740 |
|
David S. Hendrickson |
|
| 45,866 |
|
|
| 385,896 |
|
|
| 81,250 |
|
|
| 739,313 |
|
____________________
(1) | The aggregate value realized upon vesting of RSUs represents the closing price of the Company’s Common Stock reported by the Nasdaq Capital Market on the vesting date multiplied by the number of RSUs vested. | |
(2) | The aggregate value realized upon exercise of stock options represents the difference between the exercise price and the closing price of the Company’s Common Stock reported by the Nasdaq Capital Market on the exercise date multiplied by the number of options exercised. |
| 28 |
Potential Payments Upon Termination or Change of Control
The following table shows the potential payments upon termination or change of control for the persons named in the Summary Compensation Tableexecutive officers as of May 31, 2017.
|
|
| ||
Named Executive Officer Benefits and Payments Upon Termination: |
| Involuntary Termination not for Cause Following a Change of Control (1) |
| |
Gayn Erickson |
|
|
| |
Base salary |
| $ | 454,806 |
|
Medical continuation |
|
| 34,987 |
|
Value of accelerated stock options (2) |
|
| 293,138 |
|
Value of accelerated RSUs (3) |
|
| 718,166 |
|
|
|
|
|
|
Vernon Rogers |
|
|
|
|
Base salary |
| $ | 131,259 |
|
Medical continuation |
|
| 20,178 |
|
Value of accelerated stock options (2) |
|
| 210,997 |
|
Value of accelerated RSUs (3) |
|
| 186,556 |
|
|
|
|
|
|
David S. Hendrickson |
|
|
|
|
Base salary |
| $ | 127,972 |
|
Medical continuation |
|
| 18,271 |
|
Value of accelerated stock options (2) |
|
| 53,851 |
|
Value of accelerated RSUs (3) |
|
| 119,138 |
|
____________________
(1) | 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. Involuntary termination not for cause means a discharge of the executive by the Company, other than for specified causes including dishonesty, conviction of a felony, misconduct or wrongful acts, and also includes resignation following the occurrence of an adverse change in the executive officer’s position, duties, compensation or work conditions. |
(2) | 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 31, 2022 of $8.38 and the exercise price of the stock options. |
(3) | Represents the aggregate value of the acceleration of vesting of the executive officer’s unvested RSUs based on the closing price of the Company’s Common Stock on May 31, 2022 of $8.38. |
Fees Earned | Option | Stock | Non-equity | All Other | Total | ||||
or Paid in | Awards | Awards | Incentive Plan | Compensation | Compensation | ||||
| Name | Year | Cash ($) | ($) (1) | ($) | Compensation ($) | ($) (2) | ($) | ||
| Rhea J. Posedel | 2017 | $100,006(3) | $17,942 | -- | -- | $17,808 | $135,756 | ||
| Robert R. Anderson | 2017 | 23,000 | $16,557 | $31,750 | -- | -- | $71,307 | ||
| William W. R. Elder | 2017 | 20,000 | $16,557 | $29,250 | -- | -- | $65,807 | ||
| Mario M. Rosati | 2017 | 20,000 | $16,557 | $27,500 | -- | -- | $64,057 | ||
| John M. Schneider | 2017 | 23,000 | $16,557 | $32,000 | -- | -- | $71,557 | ||
| Howard T. Slayen | 2017 | 24,000 | $16,557 | $33,500 | -- | -- | $74,057 |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Review, Approval or Ratification of Transactions with Related Persons
In its ordinary course of business, the Company may enter 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’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’s Audit Committee as required by the Audit Committee’s charter. We have not adopted specific standards for approval of these transactions, but instead we review each such transaction on a case by case basis.
Legal Counsel
The Company retained WSGRLatham & Watkins LLP as its legal counsel during the fiscal year. The Company plans to retain WSGR as its legal counsel again during fiscal 2018.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee currently consists of Messrs. Andersondirectors Danesh, Oliphant and Elder.Slayen. No interlocking relationship exists between the Company’s Board of Directors and Compensation Committee and the board of directorsBoard or compensation committee of any other company.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
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 discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.
COMPENSATION COMMITTEE | ||
Fariba Danesh | ||
�� | Laura Oliphant | |
Howard T. Slayen |
| 30 |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS
AND MANAGEMENT
The following table sets forth certain information regarding the beneficial ownership of the Company’s Common Stock as of August 31, 2017,2022, 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’s Common Stock, (ii) each director of the Company, (iii) each of the Company’s named 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 Owned(1) | ||
| Beneficial Owner | Number | Percent(2) |
| Directors and Named Executive Officers: | ||
| Rhea J. Posedel (3) | 1,011,860 | 4.7% |
| Gayn Erickson (4) | 899,533 | 4.1% |
| Robert R. Anderson (5) | 805,451 | 3.7% |
| William W. R. Elder (6) | 233,767 | 1.1% |
| Mario M. Rosati (7) | 410,939 | 1.9% |
| John M. Schneider (8) | 688,105 | 3.2% |
| Howard T. Slayen (9) | 322,691 | 1.5% |
| Kenneth B. Spink (10) | 64,791 | * |
| David S. Hendrickson (11) | 192,930 | * |
| Mark Allison (12) | 138,466 | * |
| David Fucci (13) | 86,355 | * |
| All Directors and Executive Officers as a group (13 persons) (14) | 5,111,069 | 21.9% |
| Principal Shareholders: | ||
QVT Financial LP (15) 1177 Avenue of the Americas, 9th Floor, New York, NY 10036 | 1,847,215 | 7.9% |
|
| Shares Beneficially Owned (1) |
| |||||
Beneficial Owner |
| Number |
|
| Percent (2) |
| ||
Directors and Named Executive Officers: |
|
|
|
|
|
| ||
Rhea J. Posedel (3) |
|
| 777,328 |
|
|
| 2.8 | % |
Gayn Erickson (4) |
|
| 647,676 |
|
|
| 2.4 | % |
Fariba Danesh (5) |
|
| 17,020 |
|
| * |
| |
Laura Oliphant (6) |
|
| 33,197 |
|
| * |
| |
Mario M. Rosati (7) |
|
| 354,118 |
|
|
| 1.3 | % |
Geoffrey G. Scott (8) |
|
| 391,704 |
|
|
| 1.4 | % |
Howard T. Slayen (9) |
|
| 266,633 |
|
|
| 1.0 | % |
Vernon Rogers (10) |
|
| 236,658 |
|
| * |
| |
David S. Hendrickson (11) |
|
| 124,371 |
|
| * |
| |
All Directors and Executive Officers as a group (13 persons) (12) |
|
| 3,198,647 |
|
|
| 11.3 | % |
|
|
|
|
|
|
|
|
|
Principal Shareholders: |
|
|
|
|
|
|
|
|
Collaborative Holdings Management LP (13) 347 Bowery, 2nd Floor, New York, New York 10003 |
|
| 1,533,440 |
|
|
| 5.6 | % |
FRM LLC (14) 245 Summer Street, Boston, Massachusetts 02210 |
|
| 1,848,531 |
|
|
| 6.8 | % |
____________________
* | 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. |
(2) | Percentage ownership is based on 27,394,478 shares of Common Stock outstanding on August 31, 2022. Shares of Common Stock subject to options that are currently exercisable or exercisable within 60 days of August 31, 2022 and shares of Common Stock subject to RSUs that are subject to vest within 60 days of August 31, 2022 are deemed to be outstanding and to be beneficially owned by the person holding such options for the purpose of computing the percentage ownership of such person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. |
(3) | Includes 615,578 shares held by the Rhea J. Posedel Family Trust, 107,956 shares issuable upon the exercise of stock options exercisable within 60 days of August 31, 2022, and 5,000 RSUs vesting within 60 days of August 31, 2022. |
(4) | Includes 119,024 shares issuable upon the exercise of stock options exercisable and 13,242 RSUs vesting within 60 days of August 31, 2022. |
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(5) | Includes 6,708 shares held by the Fariba Danesh Revocable Trust U/A DTD 06/28/2001, 5,312 shares issuable upon the exercise of stock options exercisable within 60 days of August 31, 2022, and 5,000 RSUs vesting within 60 days of August 31, 2022. |
(6) | Includes 21,010 shares held by Laura A Oliphant TTEE Oliphant Family Living Trust U/A DTD 05/11/1999, 7,187 shares issuable upon the exercise of stock options exercisable within 60 days of August 31, 2022, and 5,000 RSUs vesting within 60 days of August 31, 2022. |
(7) | Includes 27,000 shares held by Mario M. Rosati and Douglas Laurice, trustees for the benefit of Mario M. Rosati, 151,016 shares held by Mario M. Rosati, Trustee of the Mario M. Rosati Trust, U/D/T dated 1/5/90, 60,196 shares held by Mario M. Rosati and Danelle Storm Rosati, Trustees of the Rosati Family Trust U/D/T dated May 23, 1997, 74,108 shares issuable upon the exercise of stock options exercisable within 60 days of August 31, 2022, and 5,000 RSUs vesting within 60 days of August 31, 2022. |
(8) | Includes 63,524 shares held by Geoffrey Scott Living Trust and 140,000 shares held by Caroline Scott Living Trust, 17,812 shares issuable upon the exercise of stock options exercisable within 60 days of August 31, 2022, and 5,000 RSUs vesting within 60 days of August 31, 2022. |
(9) | Includes 80,871 shares issuable upon the exercise of stock options exercisable within 60 days of August 31, 2022, and 5,000 RSUs vesting within 60 days of August 31, 2022.. |
(10) | Includes 180,466 shares issuable upon the exercise of stock options exercisable and 3,225 RSUs vesting within 60 days of August 31, 2022. |
(11) | Includes 67,000 shares issuable upon the exercise of stock options exercisable and 2,094 RSUs vesting within 60 days of August 31, 2022. |
(12) | Includes 809,121 shares issuable upon the exercise of stock options exercisable and 57,396 RSUs vesting within 60 days of August 31, 2022. |
(13) | Based on information reported by Collaborative Holdings management LP on Schedule 13G/A filed with the SEC on February 14, 2022. |
(14) | Based on information reported by FRM LLC on Schedule 13G filed with the SEC on February 9, 2022. |
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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’s financial accounting and reporting system of internal control, audit process and process for monitoring compliance with laws and regulations. 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’s management has primary responsibility for preparing the Company’s consolidated financial statements and for the Company’s financial reporting process. The Company’s independent registered public accounting firm, BPM LLP, is responsible for expressing an opinion on the conformity of the Company’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 contained in the Company’s Annual Report on Form 10-K for fiscal year 2017.2022. BPM LLP, the Company’s independent registered public accounting firm for fiscal year 2017,2022, issued their unqualified report dated August 29, 201726, 2022 on the Company's consolidated financial statements.
The Audit Committee has also discussed with BPM LLP the matters required to be discussed by the Auditing Standards No. 16,1301, “Communications with Audit Committee.”Committee” issued by the Public Company Accounting Oversight Board. The Audit Committee has also received the written disclosures and the letter from BPM LLP 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 LLP relative to its independence. The Audit Committee has considered whether BPM LLP's provision of non-audit services is compatible with its independence.
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, 20172022 be included in the Company’s Annual Report on Form 10-K.
AUDIT COMMITTEE | |
Laura Oliphant Geoffrey G. Scott Howard T. Slayen |
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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 10% shareholders file reports of ownership and changes in ownership with the SEC as to the Company’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, 2017, except the following: one Form 4 of Gayn Erickson reporting shares of common stock issued upon vesting of performance based RSUs on February 21, 2017, and one Form 4 of David Fucci, reporting stock sales on October 17, 2016, which were inadvertently filed late.
FINANCIAL STATEMENTS
The Company’s Annual Report to Shareholders for the last fiscal year is being mailed with this Proxy Statement to shareholders entitled to notice of the meeting. The Annual Report includes the consolidated financial statements, unaudited selected consolidated financial data and management’s discussion and analysis of financial condition and results of operations.
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,  | ||
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| GAYN ERICKSON President and Chief Executive Officer | ||
Dated: September 23, 2022 |
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