SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-12
Aehr Test Systems
------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
--------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
N/A
--------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
N/A
--------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
N/A
--------------------------------------------------------------------
(5) Total fee paid:
N/A
--------------------------------------------------------------------
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
N/A
--------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
N/A
--------------------------------------------------------------------
(3) Filing Party:
N/A
--------------------------------------------------------------------
(4) Date Filed:
N/A
--------------------------------------------------------------------
[LOGO]AEHR TEST SYSTEMS
AEHR TEST SYSTEMS
400 Kato Terrace
Fremont, California 94539
-----------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 17, 2002
-----------------------------
TO THE SHAREHOLDERS OF
AEHR TEST SYSTEMS:
You are cordially invited to attend the Annual Meeting of Shareholders
(the "Annual Meeting") of Aehr Test Systems, a California corporation (the
"Company") to be held on October 17, 2002, at 4:00 p.m., at 400 Kato Terrace,
Fremont, California 94539, for the following purposes:
1. To elect five directors.
2. To ratify the selection of PricewaterhouseCoopers LLP as the
Company's independent accountants for the fiscal year ending May 31,
2003.
3. To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
Only holders of record of the Common Stock at the close of business on
September 4, 2002 will be entitled to notice of and to vote at the Annual
Meeting. Please sign, date and mail the enclosed proxy so that your shares may
be represented at the Annual Meeting if you are unable to attend and vote in
person.
By Order of the Board of Directors,
/s/ RHEA J. POSEDEL
RHEA J. POSEDEL
Chief Executive Officer and
Chairman of the Board of Directors
AEHR TEST SYSTEMS
400 Kato Terrace
Fremont, California 94539
---------------
PROXY STATEMENT
---------------
ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement is being furnished to the Shareholders (the
"Shareholders") of Aehr Test Systems, a California corporation (the "Company"),
in connection with the solicitation of proxies by the Board of Directors for use
at the Annual Meeting of Shareholders (the "Annual Meeting") of the Company to
be held on October 17, 2002 and at any adjournments thereof.
At the Annual Meeting, the Shareholders will be asked:
1. To elect five directors.
2. To ratify the selection of PricewaterhouseCoopers LLP as the
Company's independent accountants for the fiscal year ended May 31,
2003.
3. To transact such other business as may properly come before the
Annual Meeting or any adjournments of the Annual Meeting.
The Board of Directors has fixed the close of business on September 4,
2002 as the record date for the determination of the holders of Common Stock
entitled to notice of and to vote at the Annual Meeting. Each such Shareholder
will be entitled to one vote for each share of Common Stock ("Common Share")
held on all matters to come before the Annual Meeting and may vote in person or
by proxy authorized in writing.
This Proxy Statement and the accompanying form of proxy are first being
sent to holders of the Common Shares on or about September 27, 2002.
THE ANNUAL MEETING
Date, Time and Place
The Annual Meeting will be held on October 17, 2002 at 4:00 p.m., local
time, at 400 Kato Terrace, Fremont, California 94539.
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 4, 2002 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. As
of the Record Date, there were 7,183,786 Common Shares 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 Company a written
notice of revocation or a duly executed proxy bearing a later date or by
attending the meeting and voting in person.
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
1
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 meeting prior to the voting of the intention to cumulate votes. On
all other matters, each share has one vote.
Proxies are being solicited by the Company. 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 or
telegram.
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. Shares that are voted "FOR," "AGAINST" or "WITHHELD FROM" a matter are
treated as being present at the meeting for purposes of establishing a quorum
and are also treated as shares "represented and voting" (the "Votes Cast") at
the Annual Meeting with respect to such matter.
While there is no definitive statutory or case law authority in California
as to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining both (i) the presence or absence
of a quorum for the transaction of business and (ii) the total number of Votes
Cast with respect to a proposal (other than the election of directors). In the
absence of controlling precedent to the contrary, the Company intends to treat
abstentions in this manner. Accordingly, abstentions will have the same effect
as a vote against the proposal.
Broker non-votes may be counted for purposes of determining the presence
or absence of a quorum for the transaction of business, but will not be counted
for purposes of determining the number of Votes Cast with respect to the
proposal on which the broker has expressly not voted. Thus, a broker non-vote
will not affect the outcome of the voting on a proposal.
Deadline for Receipt of Shareholder Proposals for 2003 Annual Meeting
Shareholders are entitled to present proposals for action at a forthcoming
meeting if they comply with the requirements of the proxy rules promulgated by
the Securities and Exchange Commission ("SEC"). Proposals of shareholders of the
Company intended to be presented for consideration at the Company's 2003 Annual
Meeting of Shareholders must be received by the Company no later than May 31,
2003, in order that they may be included in the proxy statement and form of
proxy related to that meeting.
Shareholder Information
IN COMPLIANCE WITH RULE 14A-3 PROMULGATED UNDER THE SECURITIES EXCHANGE
ACT OF 1934, THE COMPANY HEREBY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH
PERSON UPON WRITTEN REQUEST, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K,
INCLUDING THE FINANCIAL STATEMENTS AND FINANCIAL SCHEDULES THERETO. REQUESTS FOR
SUCH COPIES SHOULD BE DIRECTED TO AEHR TEST SYSTEMS, 400 KATO TERRACE, FREMONT,
CA 94539, ATTENTION: INVESTOR RELATIONS.
2
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, 2002, 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 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)
---------------- ------ ----------
Named Executive Officers and Directors:
Rhea J. Posedel (3).................................................... 1,042,647 14.4%
Robert R. Anderson (4)................................................. 92,500 1.3%
William W. R. Elder (5)................................................ 52,083 *
Mukesh Patel (6)....................................................... 35,000 *
Mario M. Rosati (7) ................................................... 209,340 2.9%
Carl J. Meurell (8) ................................................... 154,271 2.1%
Gary L. Larson (9) .................................................... 84,407 1.2%
David S. Hendrickson (10).............................................. 41,978 *
Christopher S. Noe (11)................................................ 30,437 *
All Directors and Executive Officers as a group (11 persons) (12)...... 1,829,235 23.8%
Principal Shareholders:
Private Capital Management, Inc. (13) ................................. 1,514,968 21.1%
8889 Pelican Bay Blvd., Naples, FL 34108
State of Wisconsin Investment Board (14) .............................. 1,147,000 16.0%
121 East Wilson Street, Madison, WI 53707
Wellington Management Company, LLP (15) ............................... 736,900 10.3%
75 State Street, 19th Floor, Boston, MA 02109
Dimensional Fund Advisors Inc. (16) ................................... 372,500 5.2%
1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401
------------------------
* Represents less than 1%
(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) Shares of Common Stock subject to options that are currently exercisable
or exercisable within 60 days of August 31, 2002 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 20,000 shares held by Vivian Owen, Mr. Posedel's wife, 7,950
shares held by Rhea J. Posedel, trustee for Natalie Diane Posedel, Mr.
Posedel's daughter, and 77,916 shares issuable upon the exercise of stock
options exercisable within 60 days of August 31, 2002.
(4) Includes 20,000 shares issuable upon the exercise of stock options within
60 days of August 31, 2002.
3
(5) Includes 27,083 shares issuable upon the exercise of stock options
exercisable within 60 days of August 31, 2002.
(6) Includes 30,000 shares issuable upon the exercise of stock options within
60 days of August 31, 2002.
(7) Includes 3,040 shares held of record by WS Investment Company 87A. Mr.
Rosati is a general partner of WS Investment Company 87A and disclaims
beneficial ownership of the shares held by WS Investment Company 87A
except to the extent of his proportionate partnership interest therein.
Also 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 1/9/90 and
27,083 shares issuable upon the exercise of stock options exercisable
within 60 days of August 31, 2002.
(8) Includes 153,541 shares issuable upon the exercise of stock options
within 60 days of August 31, 2002.
(9) Includes 50,227 shares issuable upon the exercise of stock options within
60 days of August 31, 2002.
(10) Includes 41,978 shares issuable upon the exercise of stock options within
60 days of August 31, 2002.
(11) Includes 28,437 shares issuable upon the exercise of stock options within
60 days of August 31, 2002. Mr. Noe's employment with the Company
terminated on September 20, 2002.
(12) Includes 37,033 shares held in the name of Carl N. Buck and 505,804
shares issuable upon the exercise of stock options within 60 days of
August 31, 2002.
(13) Based solely on Form 13F Holdings Report filed with the SEC by Private
Capital Management ("PCM") for the period ended June 30, 2002. PCM has
shared investment power and shared voting power with respect to the
shares.
(14) Based solely on Form 13F Holdings Report filed with the SEC by the State
of Wisconsin Investment Board ("SWIB") for the period ended June 30,
2002. SWIB has sole investment and sole voting power with respect to the
shares.
(15) Based solely on Form 13F Holdings Report filed with the SEC by Wellington
Management Company, LLP ("WMC") for the period ended June 30, 2002. WMC,
in its capacity as investment advisor, may be deemed to have beneficial
ownership of the 736,900 shares which are held of record by investment
advisory clients of WMC. WMC has sole investment power and no voting
power with respect to 234,600 shares and shared investment and shared
voting power with respect to the remaining shares.
(16) Based solely on Form 13F Holdings Report filed with the SEC by
Dimensional Fund Advisors Inc. ("DFA") for the period ended June 30,
2002. DFA has sole investment and sole voting power with respect to the
shares.
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, five directors are to be elected to serve until the
next Annual Meeting or until their successors are elected and qualified. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the election of the five nominees named below, all of whom are presently
directors of the Company. Each nominee has consented to be named a nominee in
this Proxy Statement and to continue to serve as a director if elected. Should
any nominee become unable or decline to serve as a director or should additional
persons be nominated at the meeting, the proxy holders intend to vote all
proxies received by them in such a manner as will assure the election of as many
nominees listed below as possible (or, if new nominees have been designated by
the Board of Directors, in such a manner as to elect such nominees) and the
specific nominees to be voted for will be determined by the proxy holders. The
Company is not aware of any reason that any nominee will be unable or will
decline to serve as a director. There are no arrangements or understandings
between any director or executive officer and any other person pursuant to which
he is or was to be selected as a director or officer of the Company.
4
The names of the nominees and certain information about them are set forth
below:
Director
Name of Nominee Age Position Since
--------------- --- -------- -------
Rhea J. Posedel 60 Chairman of the Board and 1977
Chief Executive Officer
Robert R. Anderson (1) 64 Director 2000
William W.R. Elder (1)(2) 63 Director 1989
Mukesh Patel (1) 44 Director 1999
Mario M. Rosati (2) 56 Director and Secretary 1977
------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
The principal occupation of each of the Board members during the past five
years is set forth below. There is no family relationship between any director
or executive officer of the Company.
RHEA J. POSEDEL is a founder of the Company and has served as Chief
Executive Officer and Chairman of the Board of Directors since its inception in
1977. From the Company's inception through May 2000, Mr. Posedel also served as
President. Prior to founding the company, Mr. Posedel held various project
engineering and engineering managerial positions at Lockheed Martin Corporation
(formerly "Lockheed Missile & Space Corporation"), Ampex Corporation, and Cohu,
Inc. He received a B.S. in Electrical Engineering from the University of
California, Berkeley, an M.S. in Electrical Engineering from San Jose State
University and an M.B.A. from Golden Gate University.
ROBERT R. ANDERSON was appointed to the Company's Board of Directors in
October 2000. Mr. Anderson is a private investor. From January 1994 to January
2001, he was Chairman of Silicon Valley Research, Inc., a semiconductor design
automation software company, and its Chief Executive Officer from December 1996
to August 1998, and from April 1994 to July 1995. He also served as Chairman of
Yield Dynamics, Inc., a private semiconductor process control software company,
from October 1998 to October 2000, and as Chief Executive Officer from October
1998 to April 2001. Mr. Anderson co-founded KLA Instruments Corporation, now
KLA-Tencor Corporation, a supplier of semiconductor process control systems, in
1975 and served in various capacities including Chief Operating Officer, Chief
Financial Officer, Vice Chairman and Chairman before he retired from that
company in 1994. Mr. Anderson is a director of MKS Instruments, Inc., Metron
Technology N.V. and Trikon Technologies, Inc. He also serves as a director for
two private development stage companies, and as a trustee of Bentley College.
WILLIAM W. R. ELDER has been a director of the Company since 1989. Dr.
Elder was the Chief Executive Officer of Genus, Inc. ("Genus"), a semiconductor
company, from his founding of Genus in 1981 to September 1996, and has been
serving in that same position again since April 1998. Dr. Elder has been a
director of Genus since its inception. Dr. Elder holds a B.S.I.E. and an
honorary Doctorate Degree from the University of Paisley in Scotland.
MUKESH PATEL was appointed to the Company's Board of Directors in June
1999. Mr. Patel co-founded SMART Modular Technologies, Inc., where he has served
on its Board of Directors since its inception and he acted in various executive
capacities from 1989 to 1999. Mr. Patel holds a B.S. degree in Engineering with
emphasis on digital electronics from Bombay University, India. Mr. Patel is a
director of Sparkolor Corp., Nazomi Communications Inc., and Parama Networks.
MARIO M. ROSATI has been a director of the Company since 1977. He is a
member of the law firm Wilson Sonsini Goodrich & Rosati, Professional
Corporation which he joined in 1971. Mr. Rosati is a graduate of Boalt Hall,
University of California at Berkeley. Mr. Rosati is a director of Genus, Inc.,
interWAVE Communications International, Ltd., Sanmina Corporation, Symyx
Technologies, Inc., The Management Network Group, Inc., and Vivus Inc., as well
as several privately-held companies.
5
Board Meetings and Committees
The Board of Directors held a total of four (4) meetings during the fiscal
year ended May 31, 2002. No incumbent director during his period of service in
such fiscal year attended fewer than 75% of the aggregate of all meetings of the
Board of Directors and the committees of the Board upon which such director
served. The Board of Directors has two committees, the Audit Committee and the
Compensation Committee.
The Compensation Committee of the Board of Directors currently consists of
Messrs. Elder and Rosati. The Compensation Committee held one (1) meeting during
fiscal year 2002. 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 Board of Directors has no nominating committee or any committee
performing such function.
REPORT OF THE AUDIT COMMITTEE (1)
The Audit Committee of the board of directors of the Company serves as
representatives 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,
consisting of Messrs. Patel, Anderson and Elder, held three (3) meetings in
fiscal year 2002. Each member is an independent director in accordance with the
Nasdaq National Market Audit Committee requirements. The Audit Committee
evaluates the scope of the annual audit, reviews audit results, consults with
management and the Company's independent accountants prior to the presentation
of financial statements to stockholders 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 financial statements and for the Company's financial reporting
process. The Company's independent accountants, PricewaterhouseCoopers LLP
("PwC"), are responsible for expressing an opinion on the conformity of the
Company's audited financial statements to generally accepted accounting
principles. The Audit Committee has reviewed and discussed with management the
audited financial statements for the year ended May 31, 2002. PwC, the Company's
independent accountants for fiscal year 2002, issued their unqualified report
dated July 23, 2002 on the Company's financial statements.
The Audit Committee has also discussed with PwC the matters required to be
discussed by AICPA Statement on Auditing Standards No. 61, "Communication with
Audit Committees." The Audit Committee has also received the written disclosures
and the letter from PwC required by Independence Standards Board Standard No. 1,
"Independence Discussions with Audit Committees," and has conducted a discussion
with PwC relative to its independence. The Audit Committee has considered
whether PwC's provision of non-audit services is compatible with its
independence. The Audit Committee has an Audit Committee Charter.
Based on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors of Aehr Test Systems that the
Company's audited financial statements for the fiscal year ended May 31, 2002 be
included in the Annual Report on Form 10-K.
AUDIT COMMITTEE
Mukesh Patel
Robert R. Anderson
William W.R. Elder
6
(1) The information regarding the Audit Committee is not "soliciting" material
and is not deemed "filed" with the SEC, and is not incorporated by reference
into any filings of the Company under the Securities Act or the Exchange Act,
whether made before or after the date hereof and irrespective of any general
incorporation language contained in such filing.
Audit Fees
The following table sets forth the aggregate fees billed or to be billed
by PricewaterhouseCoopers LLP for the following services during fiscal 2002:
DESCRIPTION OF SERVICES
-----------------------
Audit fees (1) $ 89,450
Financial information system design and
implementation fees (2) --
All other fees (3) 103,516
--------
TOTAL $192,966
========
(1) Represents the aggregate fees billed or to be billed for professional
services rendered for the audit of the Company's fiscal 2002 annual
financial statements and for the review of the financial statements
included in the Company's quarterly reports during such period.
(2) Represents the aggregate fees billed for operating or supervising the
operation of the Company's information system or managing the Company's
local area network and/or designing or implementing a hardware or software
system that aggregates data or generates information that is significant
to the generation of the Company's financial statements.
(3) Represents the aggregate fees billed in fiscal 2002 for services other
than audit and other than financial information system design and
implementation including fees for tax services and registration
statements.
Director Compensation
Rhea J. Posedel, the only inside director of the Company, does not receive
any cash compensation for his services as a member of the Board of Directors.
Each outside director receives (1) an annual retainer of $5,000, (2) $1,000 for
each regular board meeting he attends, and (3) $500 for each committee meeting
he attends if not held in conjunction with a regular board meeting, in addition
to being reimbursed for certain expenses incurred in attending Board and
committee meetings. An inside director is a director who is a regular employee
of the Company, whereas an outside director is not an employee of the Company.
Directors are eligible to participate in the Company's stock option plans. In
fiscal 2000, outside directors William Elder, Mario Rosati, David Torresdal and
Mukesh Patel were each granted options to purchase 5,000 shares at $5.06 per
share and an additional option to purchase 15,000 shares at $3.88 per share was
granted to Mukesh Patel. In fiscal 2001, outside directors William Elder, Mario
Rosati and Mukesh Patel were each granted options to purchase 5,000 shares at
$6.25 per share, additional options to purchase 20,000 shares at $4.00 per share
were each granted to William Elder and Mario Rosati, and an option to purchase
15,000 shares at $6.00 was granted to outside director Robert Anderson. In
fiscal 2002, outside directors William Elder, Mario Rosati, Mukesh Patel and
Robert Anderson were each granted options to purchase 5,000 shares at $3.85 per
share.
7
Vote Required
The five nominees receiving the highest number of affirmative votes of the
shares entitled to be voted for them shall be elected as directors. Votes
withheld from any director are counted for purposes of determining the presence
or absence of a quorum for the transaction of business, but have no other legal
effect in the election of directors under California law. See "Quorum;
Abstentions; Broker Non-Votes."
MANAGEMENT RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE NOMINEES LISTED ABOVE
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has selected PricewaterhouseCoopers
LLP, as the Company's independent accountants, to audit the financial statements
of the Company for the current fiscal year ending May 31, 2003, and recommends
that Shareholders vote for ratification of such appointment. Representatives of
PricewaterhouseCoopers LLP are expected to be present at the meeting with the
opportunity to make a statement if they desire to do so, and are expected to be
available to respond to appropriate questions.
MANAGEMENT RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP
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, 2002, 2001 and 2000 by the Chief Executive Officer
and each of the four other most highly compensated executive officers with
annual compensation in excess of $100,000 for the fiscal year ended May 31,
2002.
Summary Compensation Table
Long-term
Compensation
------------
Annual Compensation Securities
Fiscal ------------------- Underlying All Other
Name and Principal Position Year Salary ($) Bonus ($) Options ($) Compensation ($)
--------------------------- ---- ---------- --------- ----------- ----------------
Rhea J. Posedel..................... 2002 $200,199 -- $1,935 $ 5,795(1)
Chief Executive Officer and 2001 $220,613 $55,755 $7,183 $ 3,341(2)
Chairman of the Board of 2000 $199,912 -- $1,896 $ 1,879(3)
Directors
Carl J. Meurell........................ 2002 $197,397 $10,000 $1,935 $13,968(1)
President and Chief Operating 2001 $197,067 $58,488 $7,183 $ 2,755(2)
Officer 2000 $176,032 $52,539(4) $1,896 $ 8,089(3)
Gary L. Larson...................... 2002 $166,503 -- $1,935 $ 7,341(1)
Vice President of Finance and 2001 $166,176 $33,709 $6,576 $ 3,380(2)
Chief Financial Officer 2000 $149,827 -- $1,776 $ 2,673(3)
David S. Hendrickson.............. 2002 $175,792 $14,280 $1,935 $ 5,491(1)
Vice President of Engineering 2001 $128,455 $28,735 $5,195 $ 2,278(2)
2000 -- -- -- --
Christopher S. Noe ................... 2002 $151,353 $33,530(5) $1,920 $14,986(1)
Vice President of Sales 2001 $ 14,424 $ 6,527(6) -- $ 191(2)
2000 -- -- -- --
8
-------------------------
(1) Consists of health and life insurance premiums and medical costs paid by
the Company during the year ended May 31, 2002.
(2) Consists of health and life insurance premiums and medical costs paid by
the Company during the year ended May 31, 2001.
(3) Consists of health and life insurance premiums and medical costs paid by
the Company during the year ended May 31, 2000.
(4) Represents commissions earned by Mr. Meurell in the position of Vice
President of Worldwide Sales during the year ended May 31, 2000.
(5) Represents commissions earned by Mr. Noe in the position of Vice President
of Sales during the year ended May 31, 2002.
(6) Represents commissions earned by Mr. Noe in the position of Vice President
of Sales during the year ended May 31, 2001.
Stock Option Grants and Exercises
The following table sets forth the number and terms of options granted to
the persons named in the Summary Compensation Table during the fiscal year ended
May 31, 2002.
Option Grants in Last Fiscal Year
Potential Realizable
Individual Grants Value at Assumed
----------------------------------------------------------- Annual Rates of
Number of % of Total Stock Price
Securities Options Appreciation for
Underlying Granted to Exercise Option Term(4)
Options Employees in Price Expiration -------------------
Name Granted(1) Fiscal Year(2) ($/Share)(3) Date 5% ($) 10% ($)
---- ---------- -------------- ------------ ---------- -------- ---------
Rhea J. Posedel 30,000 19.1% $4.95 6/21/2008 $41,459 $114,577
Carl J. Meurell 15,000 9.5% $4.50 6/21/2008 $27,479 $ 64,038
Gary L. Larson 10,000 6.4% $4.50 6/21/2008 $18,320 $ 42,692
David S. Hendrickson -- -- -- -- -- --
Christopher S. Noe -- -- -- -- -- --
-------------
(1) The options were granted under the 1996 Stock Option Plan and vest over
four years.
(2) Based on an aggregate of 157,316 options granted by the Company in the
year ended May 31, 2002 to employees and consultants to the Company,
including the named executive officers.
(3) The exercise price per share of each option was equal to the fair market
value of the Common Stock on the date of grant as determined by the Board
of Directors, except the exercise price of the options granted to Mr.
Posedel was equal to 110% of the fair market value of the Common Stock on
the date of the grant.
(4) This column sets forth hypothetical gains or "option spreads" for the
options at the end of their respective seven-year terms, as calculated in
accordance with the rules of the SEC. Each gain is based on an arbitrarily
assumed annualized rate of compound appreciation of the market price at
the date of grant of 5% and 10% from the date the option was granted to
the end of the option term. The 5% and 10% rates of appreciation are
specified by the rules of the SEC and do not represent the Company's
estimate or projection of future Common Stock prices. The Company does not
necessarily agree that this method properly values an option. Actual
gains, if any, on option exercises are dependent on the future performance
of the Company's Common Stock and overall market conditions and the timing
of option exercises, if any.
9
The following table provides information concerning option exercises by
the persons named in the Summary Compensation Table during the fiscal year ended
May 31, 2002 and the value of unexercised options at such date.
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
Shares Fiscal Year-End(#)(1) Fiscal Year-End($)(2)
Acquired on Value --------------------------- ---------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ------------ ----------- ------------- ----------- -------------
Rhea J. Posedel.......... -- -- 69,062 60,938 $45,356 $57,756
Carl J. Meurell.......... -- -- 130,519 84,481 $50,421 $28,714
Gary L. Larson........... -- -- 46,894 31,106 $45,025 $36,907
David S. Hendrickson..... -- -- 33,332 56,668 -- --
Christopher S. Noe....... -- -- 20,312 54,688 $27,401 $73,774
--------------
(1) The Company has not granted any stock appreciation rights and its stock
plans do not provide for the granting of such rights.
(2) Calculated by determining the difference between the fair market value of
the securities underlying the options at year end ($5.949 per share as of
May 31, 2002) and the exercise price of the options.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
General
In its ordinary course of business, the Company enters into transactions
with certain of its directors and officers. The Company believes that each such
transaction has been on terms no less favorable for the Company than could have
been obtained in a transaction with an independent third party.
Legal Counsel
During fiscal 2002, Mario M. Rosati, a member of the Board of Directors of
the Company, was also a member of the law firm of Wilson Sonsini Goodrich &
Rosati ("WSGR"). The Company retained WSGR as its legal counsel during the
fiscal year. The Company plans to retain WSGR as its legal counsel again during
fiscal 2003.
Indebtedness of Management
On October 26, 2000, the Company received a promissory note signed by Mr.
Gary L. Larson, the Chief Financial Officer and Vice President of Finance, for
the principal sum of $84,000. This note bore interest at the rate of 6.75% per
annum and was due in full on February 15, 2002, unless repaid on an earlier
date. The funds were used by Mr. Larson to exercise options for 21,000 shares of
common stock of the Company. This transaction was reported on a Form 4 to the
Securities and Exchange Commission in fiscal 2001. This promissory note was
subsequently settled during fiscal 2002.
Change of Control Severance Agreement
On April 23, 2001, the Company has entered into a Change of Control
Severance Agreement with Mr. Christopher S. Noe and on January 24, 2001, the
Company has entered into Change of Control Severance Agreements with Mr. Carl N.
Buck, Mr. David S. Hendrickson, Mr. Gary L. Larson, Mr. Carl J. Meurell and Mr.
Rhea J. Posedel pursuant to which those executives would be entitled to a
payment in the event of a termination of employment for specified reasons
following a change of control of the Company. For this purpose, a change of
control of the Company means a merger or consolidation of the Company, a sale by
the Company of all or substantially all of its assets, the acquisition of
beneficial ownership of a majority of the outstanding voting securities of the
Company by any person or a change in the composition of the Board as a
10
result of which fewer than a majority of the directors are incumbent directors.
Termination of employment for purposes of these agreements means a discharge of
the executive by the Company, other than for specified causes including
dishonesty, conviction of a felony, misconduct or wrongful acts. Termination
also includes resignation following the occurrence of an adverse change in the
executive'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 in fiscal 2003 following
a change of control, the amounts payable to Messrs. Buck, Hendrickson, Larson,
Meurell and Posedel would be approximately $75,000, $92,000, $130,000, $159,000
and $218,000, respectively.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Messrs. Elder and Rosati. No
interlocking relationship exists between the Company's Board of Directors and
Compensation Committee and the board of directors or compensation committee of
any other company.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Exchange Act of 1933, as amended, or the
Securities Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the following report and
the Performance Graph shall not be incorporated by reference into any such
filings.
General
The objectives of the overall executive compensation program are to
attract, retain, motivate and reward Company executives while aligning their
compensation with the achievements of key business objectives, maximization of
shareholder value and optimal satisfaction of customers.
The Compensation Committee is responsible for:
1. Determining the specific executive compensation methods to be used
by the Company and the participants in each of those specific
programs;
2. Determining the evaluation criteria and timeliness to be used in
those programs;
3. Determining the processes that will be followed in the ongoing
administration of the programs; and
4. Determining their role in the administration of the programs.
All of the actions take the form of recommendations to the full Board of
Directors where final approval, rejection or redirection will occur. The
Compensation Committee is responsible for administering the compensation
programs for all Company officers. The Compensation Committee has delegated the
responsibility of administering the compensation programs for all other Company
employees to the Company's officers.
Compensation Vehicles
Currently, the Company uses the following executive compensation vehicles:
o Cash-based programs: Base salary, Annual Incentive Bonus Plan,
Annual Profit Sharing Plan, and a Sales Incentive Commission Plan;
and
o Equity-based programs: 1996 Incentive Stock Option Plan, the 1997
Employee Stock Purchase Plan and the Employee Stock Bonus Plan.
These programs apply to the Chief Executive Officer and all executive
level positions, except for the Sales Incentive Commission Plan, which only
includes executives directly responsible for sales activities. 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.
11
The criteria for determining the appropriate salary level, bonus and stock
option grants for the Chief Executive Officer and each of the executive officers
include (a) Company performance as a whole, (b) business unit performance (where
appropriate) and (c) individual performance objectives. 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,
timely new product introduction, and shareholder value (usually measured by the
Company stock price). Individual performance is measured to specific objectives
relevant to the individual's position and a specific time frame.
These criteria are usually related to a fiscal year time period, but may,
in some cases, be measured over a shorter or longer time frame.
The processes used by the Compensation Committee include the following
steps:
1. The Compensation Committee periodically receives information
comparing the Company's pay levels to other companies in similar
industries, other leading companies (regardless of industry) and
competitors. Primarily national and regional compensation surveys
are used.
2. At or near the start of each evaluation cycle, the Compensation
Committee meets with the Chief Executive Officer to review, revise
as needed, and agree on the performance objectives set for the other
executives. 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 their respective performance objectives.
3. Throughout the performance cycle review, feedback is provided by the
Chief Executive Officer, the Compensation Committee and full Board,
as appropriate.
4. At the end of the performance cycle, the Chief Executive Officer
evaluates each executive's relative success in meeting the
performance goals. The Chief Executive Officer makes recommendations
on salary, bonus and stock options, utilizing the comparative
results as a factor. Also included in the decision criteria are
subjective factors such as teamwork, leadership contributions and
ongoing changes in the business climate. The Chief Executive Officer
reviews the recommendations and obtains Compensation Committee
approval. The Compensation Committee also determines the level of
salary and bonus and the terms of stock option grants for the Chief
Executive Officer.
5. The final evaluations and compensation decisions are discussed with
each executive by the Chief Executive Officer or Compensation
Committee, as appropriate.
Policy on Deductibility of Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code") limits the tax deduction to $1 million for compensation paid to its five
most highly compensated executive officers, unless certain requirements are met.
One requirement is that the Compensation Committee consists entirely of outside
directors as defined in the Code, and the Company's Compensation Committee meets
this requirement. Another requirement is that compensation over $1 million must
be based upon Company attainment of pre-established, objective performance
goals. The Company believes that all compensation paid to its five most highly
compensated executive officers in fiscal 2002 is fully deductible. The
Committee's present intention is to comply with the requirements of Section
162(m) unless and until the Committee determines that compliance would not be in
the best interest of the Company and its shareholders.
The Compensation Committee feels that the compensation vehicles used by
the company, generally administered through the process as outlined above,
provide a fair and balanced executive compensation program related to the proper
business issues. In addition, it should be noted that compensation vehicles will
be reviewed and, as appropriate, revised in order to attract and retain new
executives in addition to rewarding performance on the job.
COMPENSATION COMMITTEE
William W. R. Elder
Mario M. Rosati
12
Company Performance
The following graph shows a comparison of total shareholder return for
holders of the Company's Common Stock from August 15, 1997, the date of the
Company's initial public offering, through May 31, 2002 compared with The Nasdaq
Stock Market (U.S.) Index and the Philadelphia Semiconductor Index. The graph
assumes that $100 was invested in the Company's Common Stock, in the Nasdaq
Stock Market (U.S.) Index and the Philadelphia Semiconductor Index on August 15,
1997, and that all dividends were reinvested. The Company believes that while
total shareholder return can be an important indicator of corporate performance,
the stock prices of semiconductor equipment companies like Aehr Test Systems are
subject to a number of market-related factors other than company performance,
such as competitive announcements, mergers and acquisitions in the industry, the
general state of the economy, and the performance of other semiconductor
equipment company stocks.
[The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T]
Cumulative Total Return
------------------------------------------------------------------------
8/15/97 5/31/98 5/31/99 5/31/00 5/31/01 5/31/02
------------------------------------------------------------------------
AEHR TEST SYSTEMS 100.00 50.52 33.33 48.05 33.33 49.58
NASDAQ STOCK MARKET (U.S.) 100.00 113.53 160.13 219.45 136.17 104.78
PHILADELPHIA SEMICONDUCTOR 100.00 73.81 118.50 276.59 135.95 124.73
13
As the JP Morgan H&Q Semiconductor Index, against which the Company
historically gauged the performance of the Company's Common Stock, is no longer
active, the Company presents an additional graph for comparison. The graph below
shows a comparison of total shareholder return for holders of the Company's
Common Stock from August 15, 1997, the date of the Company's initial public
offering, through May 31, 2001 compared with The Nasdaq Stock Market (U.S.)
Index, the Philadelphia Semiconductor Index, and the JP Morgan H&Q Semiconductor
Index. The graph assumes that $100 was invested in the Company's Common Stock,
in the Nasdaq Stock Market (U.S.) Index, the Philadelphia Semiconductor Index,
and the JP Morgan H&Q Semiconductor Index on August 15, 1997, and that all
dividends were reinvested. The Company believes that while total shareholder
return can be an important indicator of corporate performance, the stock prices
of semiconductor equipment companies like Aehr Test Systems are subject to a
number of market-related factors other than company performance, such as
competitive announcements, mergers and acquisitions in the industry, the general
state of the economy, and the performance of other semiconductor equipment
company stocks.
[The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T]
Cumulative Total Return
----------------------------------------------------------
8/15/97 5/31/98 5/31/99 5/31/00 5/31/01
----------------------------------------------------------
AEHR TEST SYSTEMS 100.00 50.52 33.33 48.05 33.33
NASDAQ STOCK MARKET (U.S.) 100.00 113.51 160.26 219.68 136.35
PHILADELPHIA SEMICONDUCTOR 100.00 73.81 118.50 276.59 135.95
JP MORGAN H & Q SEMICONDUCTOR 100.00 68.70 112.24 327.00 188.47
14
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires that directors, certain
officers of the Company and ten percent 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 Forms 3 and 4 and amendments
thereto furnished to the Company pursuant to Rule 16a-3(e) and Forms 5 and
amendments thereto furnished to the Company with respect to its most recent
fiscal year, and any written representations referred to in Item 405(b)(2)(i) of
Regulation S-K stating that no Forms 5 were required, the Company believes that,
during the fiscal year 2002, all Section 16(a) filing requirements applicable to
the Company's officers, directors and ten percent shareholders were filed on a
timely basis.
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 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,
/s/ Rhea J. Posedel
RHEA J. POSEDEL
Chief Executive Officer and
Chairman of the Board of Directors
Dated: September 27, 2002
15
--------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
AEHR TEST SYSTEMS
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 17, 2002
The undersigned Shareholder of Aehr Test Systems, a California
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement and hereby appoints Rhea J. Posedel and Gary L.
Larson, or either of them, proxies and attorneys-in-fact, with full power to
each of substitution, on behalf and in the name of the undersigned, to represent
the undersigned at the Annual Meeting of Shareholders of Aehr Test Systems to be
held on October 17, 2002, at 4:00 p.m., local time, at 400 Kato Terrace,
Fremont, California 94539, and at any adjournments thereof and to vote all
shares of Common Stock which the undersigned would be entitled to vote if then
and there personally present, on the matters set forth on the reverse side of
this card.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR RATIFICATION OF THE
APPOINTMENT OF THE COMPANY'S INDEPENDENT ACCOUNTANTS AND AS SAID PROXIES DEEM
ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING AND ANY
ADJOURNMENT(S) THEREOF.
PLEASE SIGN AND DATE ON REVERSE SIDE
--------------------------------------------------------------------------------
DETACH PROXY CARD HERE
--------------------------------------------------------------------------------
1. ELECTION OF DIRECTORS:
FOR all nominees listed WITHHOLD AUTHORITY
|_| below (except as indicated |_| to vote for all
to the contrary below). nominees listed
below
IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE(S), STRIKE
A LINE THROUGH THAT NOMINEE'S NAME IN THE LIST BELOW:
Rhea J. Posedel Robert R. Anderson
William W. R. Elder Mukesh Patel Mario M. Rosati
2. PROPOSAL TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT ACCOUNTANTS:
|_| FOR |_| AGAINST |_| ABSTAIN
3. OTHER BUSINESS. In their discretion, the proxies are authorized to vote
upon such other business as may properly come before the meeting and at
any and all adjournments thereof. The Board of Directors at present knows
of no other business to be presented by or on behalf of Aehr Test Systems
or the Board of Directors at the meeting.
The undersigned hereby ratifies and
confirms all that the attorneys and
proxies, or any of them, or their
substitutes, shall lawfully do or
cause to be done by virtue hereof, and
hereby revokes any and all proxies
heretofore given by the undersigned to
vote at the meeting. The undersigned
acknowledges receipt of the Notice of
Annual Meeting and the Proxy Statement
accompanying such notice.
--------------------------------------
Dated: _________________________ ,2002
ADDRESS LABEL
______________________________________
THIS SPACE MUST BE LEFT BLANK Signature
-------------------------------------- ______________________________________
Signature
Please date this proxy card and sign
above exactly as your name appears on
this card. Joint owners should each
sign personally. Corporate proxies
should be signed by an authorized
officer. Executors, administrators,
trustee, etc., should give their full
titles.
--------------------------------------------------------------------------------