AEHR TEST SYSTEMS
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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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Definitive Proxy
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Definitive
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Pursuant to §240.14a-12
_________________________
Aehr
Test Systems
___________________________
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of Registrant as Specified in its Charter)
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AEHR TEST SYSTEMS
400 Kato Terrace
Fremont, California 94539
_____________________________
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD ON OCTOBER 23, 2018
_____________________________
To The Shareholders of
Aehr Test Systems:
You are
cordially invited to attend the Annual Meeting of Shareholders, or
the Annual Meeting, of Aehr Test Systems, a California corporation,
or the Company, to be held on October 23, 2018, 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 six
directors.
2.
To approve an
amendment to the Company’s Amended and Restated 2006 Employee
Stock Purchase Plan to increase the number of shares reserved for
issuance thereunder by an additional 350,000 shares.
3.
To ratify the
selection of BPM LLP as the Company’s independent registered
public accounting firm for the fiscal year ending May 31,
2019.
4.
To approve, on an
advisory 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 adjournments thereof.
Only
shareholders of record at the close of business on September 6,
2018 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 2018 ANNUAL
MEETING OF SHAREHOLDERS. THE PROXY STATEMENT AND THE RELATED PROXY
FORM ARE BEING DISTRIBUTED ON OR ABOUT SEPTEMBER 26, 2018. YOU CAN
VOTE YOUR SHARES USING ONE OF THE FOLLOWING METHODS:
●
COMPLETE
AND RETURN A WRITTEN PROXY CARD; OR
●
ATTEND
THE COMPANY’S 2018 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 23,
2018:
The
Company’s Proxy Statement, form of proxy card and 2018 Annual
Report are available at: www.aehr.com under the heading
“Investors” and the subheading “Annual
Reports/Proxies.”
AEHR TEST SYSTEMS
400 Kato Terrace
Fremont, California 94539
_______________
PROXY STATEMENT
_______________
2018 ANNUAL MEETING OF SHAREHOLDERS
This
Proxy Statement is being furnished to the shareholders of Aehr Test
Systems, a California corporation, or the Company, in connection
with the solicitation of proxies by the Board of Directors, or the
Board, for use at the Annual Meeting of Shareholders of the
Company, or the Annual Meeting, to be held on Tuesday, October 23,
2018 at 4:00 p.m. local time, and at any adjournments
thereof.
At the
Annual Meeting, the shareholders will be asked:
1.
To elect six
directors.
2.
To approve an
amendment to the Company’s Amended and Restated 2006 Employee
Stock Purchase Plan to increase the number of shares reserved for
issuance thereunder by an additional 350,000 shares.
3.
To ratify the
selection of BPM LLP as the Company’s independent registered
public accounting firm for the fiscal year ending May 31,
2019.
4.
To approve, on an
advisory 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 adjournments thereof.
The
Board of Directors has fixed the close of business on September 6,
2018 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, 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, 2018, 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, 2018.
THE ANNUAL MEETING
Date, Time and Place
The
Annual Meeting will be held on October 23, 2018 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.
1
Record Date and Shares Entitled to Vote
Shareholders of
record at the close of business on September 6, 2018, or the Record
Date, are entitled to notice of and to vote at the Annual Meeting.
As of the Record Date, there were 22,245,095 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 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 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.
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, the meeting may be adjourned
to a subsequent date for the purposes of obtaining a quorum. 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 shares
that are voted “FOR,” “AGAINST” or
“ABSTAIN” are also treated as shares entitled to vote,
or the Votes Cast, at the Annual Meeting with respect to such
matter.
While
there is no definitive statutory or case law authority in
California as to the proper treatment of abstentions, the Company
believes that abstentions should be counted for purposes of
determining both (i) the presence or absence of a quorum for the
transaction of business and (ii) the total number of Votes Cast
with respect to a proposal (other than the election of directors).
In the absence of controlling precedent to the contrary, the
Company intends to treat abstentions in this manner. Accordingly,
abstentions will have the same effect as a vote against the
proposal.
Broker
non-votes (i.e. votes from shares of record by brokers as to which
the beneficial owners have no voting instructions) will be counted
for purposes of determining the presence or absence of a quorum for
the transaction of business, but will not be counted for purposes
of determining the number of Votes Cast with respect to the
proposal on which the broker has expressly not voted. Thus, a
broker non-vote will be counted for purposes of determining whether
a quorum exists but will not otherwise affect the outcome of the
voting on a proposal. With respect to a proposal that requires a
majority of the outstanding shares (such as an amendment to the
articles of incorporation); however, a broker non-vote has the same
effect as a vote against the proposal.
Deadline for Receipt of Shareholder Proposals for 2019 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 intended to be presented for
consideration at the Company's 2019 Annual Meeting of Shareholders
must be received by the Company no later than May 31, 2019, in
order that they may be included in the proxy statement and form of
proxy related to that meeting.
2
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.
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,” and selecting the legend of
“Headquarters” on the map.
Internet Availability of Proxy Materials
This
Proxy Statement, the form of proxy card and 2018 Annual Report are
available on the Company’s website www.aehr.com under the
heading “Investors” and the subheading “Annual
Reports/Proxies.”
3
PROPOSAL 1
ELECTION OF DIRECTORS
At the
Annual Meeting, six directors are to be elected to serve until the
next Annual Meeting or until their successors are elected and
qualified. Unless otherwise instructed, the proxy holders will vote
the proxies received by them for the election of the six nominees
named below. Each nominee has consented to be named a nominee in
this Proxy Statement and to continue to serve as a director if
elected. Should any nominee become unable or decline to serve as a
director or should additional persons be nominated at the meeting,
the proxy holders intend to vote all proxies received by them in
such a manner as will assure the election of as many nominees
listed below as possible (or, if new nominees have been designated
by the Board of Directors, in such a manner as to elect such
nominees) and the specific nominees to be voted for will be
determined by the proxy holders. The Company is not aware of any
reason that any nominee will be unable or will decline to serve as
a director. There are no arrangements or understandings between any
director or executive officer and any other person pursuant to
which he is or was to be selected as a director or officer of the
Company.
The
names of the nominees, ages as of May 31, 2018, and certain
information about them as of the Record Date are set forth
below:
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Name of Nominee
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Age
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Position
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Director Since
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Rhea J. Posedel
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75
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Chairman
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1977
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Gayn Erickson
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53
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President and Chief Executive Officer
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2012
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William W.R. Elder (1)(2)(3)
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79
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Director
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1989
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Mario M. Rosati
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72
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Director
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1977(4)
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John M. Schneider (1)(3)
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51
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Director
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|
2014
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Howard T. Slayen (1)(2)
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71
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Director
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2008
|
_________________________________________
(1)
Member of the Audit
Committee
(2)
Member of the
Compensation Committee
(3)
Member of the
Corporate Governance and Nominating Committee
(4)
Mr. Rosati was a
member of the Board of Directors from 1977 to September 2008 and
then rejoined the Board of Directors in February 2009
RHEA J. POSEDEL
is a founder of the
Company and has served as the Chairman of the Board of Directors
since the Company’s inception in 1977. He also served as
Executive Chairman of the Company from January 2012 to March 2013.
Mr. Posedel served as Chief Executive Officer of the Company since
the Company’s inception in 1977 until January 2012. From the
Company’s inception through May 2000, Mr. Posedel also served
as President of the Company. Prior to founding the Company, Mr.
Posedel held various project engineering and engineering managerial
positions at Lockheed Martin Corporation, Ampex Corporation, and
Cohu, Inc. Mr. Posedel 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.
Mr.
Posedel brings to the Board of Directors senior leadership
experience, industry and technical expertise, and a deep knowledge
of the Company’s operations, strategy and
vision.
GAYN
ERICKSON
has served as President, Chief Executive Officer
and member of the Board of Directors of the Company since January
2012. Prior to joining the Company, Mr. Erickson served as
corporate officer, Senior Vice President and General Manager of
Verigy Ltd.’s memory test business from February 2006 until
October 2011. Prior to that, he was Vice President of Marketing and
Sales for Agilent Technologies' Semiconductor Memory Test products.
He has over 30 years of executive and general
4
management,
operations, marketing, sales and R&D program management
experience, dating back to the late 1980s 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.
DR. WILLIAM W. R. ELDER, OBE
has been a
director of the Company since 1989. From 1981 to 1996, Dr. Elder
was the Chief Executive Officer of Genus, Inc., a semiconductor
equipment company, and then again from 1998 until the company was
acquired by AIXTRON AG in 2005. Dr. Elder retired from AIXTRON AG
in December 2007. Dr. Elder was the President and Chief Executive
Officer of Maskless Lithography, Inc., a capital equipment start-up
company based in San Jose, California, from 2010 until the sale of
its assets to Chimeball Technology, a Taiwanese equipment company,
in 2015. Dr. Elder received a B.S.I.E. and an honorary Doctorate
Degree from the University of Paisley in Scotland.
As the
former President and Chief Executive Officer of a semiconductor
equipment company, Dr. Elder brings to the Board of Directors
senior leadership experience, strong industry knowledge and
operations expertise.
MARIO M. ROSATI
was a director of the
Company from 1977 to 2008, and then rejoined the Board of Directors
in 2009. Mr. Rosati is a member of the law firm Wilson Sonsini
Goodrich & Rosati, Professional Corporation, which he joined in
1971. Mr. Rosati is a director of Sanmina Corporation, a
publicly-held electronics manufacturing services company, as well
as several privately-held companies. Mr. Rosati received a B.A.
from the University of California, Los Angeles and a J.D. from the
University of California, Berkeley School of Law.
As a
senior partner in a major Silicon Valley based law firm, Mr. Rosati
brings legal expertise in the oversight of legal and regulatory
compliance, mergers and acquisitions and financing experience to
the Board of Directors. Mr. Rosati also brings to the Board of
Directors a strong background in advising high-tech companies
through his public company board experience.
JOHN M. SCHNEIDER
has
been a director of the Company since December 2014. Mr.
Schneider has been the owner and 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 both investment
companies to his existing partner. Mr. Schneider is currently
the owner and President of JMS Capital Group, LLC, which is a
holding company encompassing JMS Wealth Services, PWA Construction
(dba JMS Development) and PWA Real Estate (dba JMS Real
Estate). Mr. Schneider graduated from the University of
Pittsburgh 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.
As the
founder of multiple investment companies, Mr. Schneider brings to
the Board of Directors a strong expertise in business development,
financing and investment activities. Mr. Schneider also brings to
the Board of Directors a strong background in advising companies
through his private company board experience.
HOWARD T. SLAYEN
has been a director of the Company
since 2008. Since June 2001, Mr. Slayen has been providing
independent financial consulting services to various organizations
and clients. From October 1999 to May 2001, Mr. Slayen served
as Executive Vice President and Chief Financial Officer of Quaartz
Inc., a web-hosted communications company. From 1971 to September
1999,
5
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 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 six
nominees receiving the highest number of affirmative votes of the
shares present or represented and entitled to be voted for them
shall be elected as directors. Votes withheld from any director are
counted for purposes of determining the presence or absence of a
quorum for the transaction of business, but have no other legal
effect in the election of directors under California law. See
“
Quorum; Abstentions; Broker
Non-Votes
.”
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
“FOR”
THE ELECTION OF THE
NOMINEES LISTED ABOVE.
6
Board Matters and Corporate Governance
Board Meetings and Committees
The
Board of Directors held a total of four meetings during the fiscal
year ended May 31, 2018. No incumbent director during his period of
service in such fiscal year attended fewer than 75% of the
aggregate of all meetings of the Board of Directors and the
committees of the Board upon which such director
served.
The
Board of Directors has three committees: the Audit Committee, the
Compensation Committee and the Corporate Governance and Nominating
Committee.
The
Audit Committee currently consists of directors Messrs. Elder,
Schneider and 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 Audit Committee held six meetings during fiscal year 2018. 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. A copy of the Audit
Committee charter is available on the Company’s website at
www.aehr.com under the heading “Investor Relations” and
the subheading “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. Elder and 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 held one meeting
during fiscal year 2018. The Compensation Committee reviews and
advises the Board of Directors regarding all forms of compensation
to be provided to the officers, employees, directors and
consultants of the Company. The Compensation Committee is governed
by a written charter approved by the Board of Directors. The
Company maintains a copy of the Compensation Committee charter on
its website at www.aehr.com under the heading “Investor
Relations” and the subheading “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. Elder and Schneider, 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 reviews and makes
recommendations to the Board of Directors regarding matters
concerning corporate governance; reviews the composition and
evaluates the performance of the Board of Directors; selects, or
recommends for the selection of the Board of Directors, director
nominees; evaluates director compensation; reviews the composition
of committees of the Board of Directors and recommends persons to
be members of such committee; and reviews conflicts of interest of
members of the Board of Directors and corporate officers. The
Corporate Governance and Nominating Committee is governed by a
written charter approved by the Board of Directors. The Corporate
Governance and Nominating Committee of the Board of
Directors
did not hold
any meetings during the fiscal year ended May 31, 2018. The Company
maintains a copy of the Corporate Governance and Nominating
Committee charter on its website at www.aehr.com under the heading
“Investor Relations” and the subheading
“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:
7
Aehr
Test Systems
400
Kato Terrace
Fremont,
CA 94539
Attn:
Secretary
In
addition, procedures for shareholder direct nomination of directors
are discussed under “Deadline for Receipt of Shareholder
Proposals” above.
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. They should be
committed to enhancing shareholder value and should have sufficient
time to carry out their duties and to provide insight and practical
wisdom based on experience. Their service on other boards of public
companies should be limited to a number that permits them, given
their individual circumstances, to perform responsibly all director
duties. Each director must represent the interests of all
shareholders.
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. The Board of
Directors may also review materials provided by professional search
firms or other parties in connection with a candidate who is not
recommended by a shareholder. In evaluating such recommendations,
the Board of Directors seeks to achieve a balance of knowledge,
experience and capability on the Board.
The
Company seeks board members whose background, skills and experience
will best assist the Company in the oversight of its business and
operations. This includes understanding of and experience in
manufacturing, technology, finance, and legal and regulatory
compliance. Senior leadership experience and public company board
experience are two of the key qualities evaluated when considering
nominees for the Company’s Board of Directors. A goal of the
nomination process is 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 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.
8
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
“Investor
Relations” and the subheading “Corporate
Governance.”
The Company will
disclose any amendment to the Code of Conduct and Ethics or waiver
of a provision of the Code of Conduct and Ethics, including the
name of the officer to whom the waiver was granted, on the
Company’s website at www.aehr.com under the heading
“Investor Relations” and the subheading
“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.
Communications with the Board
The
Company does not have a formal policy regarding shareholder
communication with the Board of Directors. However, shareholders
may communicate with the Board by submitting a letter to the
attention of the Chairman of the Board, c/o Aehr Test Systems, 400
Kato Terrace, Fremont, CA 94539. Communication received in writing
will be collected, organized and processed by the Chairman of the
Board who will distribute the communications to the members of the
Board of Directors, as appropriate, depending on the facts and
circumstances outlined in the communication received.
9
PROPOSAL 2
AMENDMENT TO THE AMENDED AND RESTATED
2006 EMPLOYEE STOCK PURCHASE PLAN
The
Board of Directors is proposing that the Amended and Restated 2006
Employee Stock Purchase Plan (the "ESPP") be amended to increase
the number of shares authorized thereunder by an additional 350,000
Shares of Common Stock ("Shares"). The Company previously reserved
1,500,000 Shares 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 our 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 2016, 2017 and 2018, the
numbers of Shares purchased under the ESPP were 85,817 Shares,
150,711 Shares, and 236,808 Shares, respectively.
●
66 employees
participated in the most recently completed offering period under
the ESPP, purchasing approximately 120,758 Shares (with an
approximate value of $119,068 on the date of purchase) at an
average purchase price of $0.986 per Share.
●
As of August 31,
2018, there were 64 employees eligible to participate in the ESPP,
all 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 of
Directors in October
2006 and approved by our shareholders on October
26, 2006. Our Board of Directors 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
10
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 of
Director or other committee (including the Compensation Committee)
administering the ESPP that are designed to achieve desired tax or
other objectives.
Shares Available for Issuance
As
of August 31, 2018, a total of 144,625 Shares were available for
sale under the ESPP. If our shareholders approve this proposal, a
total of 494,625 Shares will be reserved for issuance under the
ESPP.
Administration
Our
Board of Directors or the 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 Aehr Test Systems (or Aehr Test Systems’
designated subsidiaries or affiliates) 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.
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
11
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 Aehr Test Systems or one of Aehr Test
Systems’ designated subsidiaries or affiliates terminates. On
the first day of each offering period, each participant
automatically is granted a right to purchase shares of our common
stock. This purchase right expires at the end of the offering
period or upon termination of employment, whichever is earlier, but
is exercised on the last trading day of the offering period to the
extent of the contributions made during such offering
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 offering 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 offering period, generally through
payroll deductions. The number of whole shares that a participant
may purchase in each offering period will be determined by dividing
the total amount of a participant’s contributions during that
offering period by the purchase price; provided, however, that a
participant may not purchase more than 3,000 shares each offering
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
offering 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 an
offering period at any time by written or electronic notice without
affecting his or her eligibility to participate in future offering
periods. Once a participant withdraws from a particular offering
period, however, that participant may not participate again in the
same offering period. To participate in a subsequent offering
period, the participant must deliver a new subscription agreement
to 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.
12
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 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 of Directors 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.
13
Certain Federal Income Tax Information
The
following brief summary of the effect of the U.S. federal income
taxation upon the participant and Aehr Test Systems with respect to
the shares purchased under the ESPP does not purport to be complete
and does not discuss the tax consequences of a participant’s
death or the income tax laws of any state or foreign country in
which the participant may reside.
The
ESPP, and the right of U.S. participants to make purchases
thereunder, is intended to qualify under the provisions of
Sections 421 and 423 of the Code. Under these provisions, no
income will be taxable to a participant until the shares purchased
under the ESPP are sold or otherwise disposed of. Upon sale or
other disposition of the shares, the participant will generally be
subject to tax in an amount that depends upon the holding period.
If the shares are sold or otherwise disposed of more than two years
from the first day of the applicable offering period and one year
from the applicable date of purchase, the participant will
recognize ordinary income measured as the lesser of (a) the
excess of the fair market value of the shares at the time of such
sale or disposition over the purchase price, or (b) an amount
equal to 15% of the fair market value of the shares as of the first
day of the applicable offering period. Any additional gain will be
treated as long-term capital gain. If the shares are sold or
otherwise disposed of before the expiration of these holding
periods, the participant will recognize ordinary income generally
measured as the excess of the fair market value of the shares on
the date the shares are purchased over the purchase price. Any
additional gain or loss on such sale or disposition will be
long-term or short-term capital gain or loss, depending on how long
the shares have been held from the date of purchase. Aehr Test
Systems generally is not entitled to a deduction for amounts taxed
as ordinary income or capital gain to a participant except to the
extent of ordinary income recognized by participants upon a sale or
disposition of shares prior to the expiration of the holding
periods described above.
THE
FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF THE U.S. FEDERAL
INCOME TAXATION UPON PARTICIPANTS AND AEHR TEST SYSTEMS UNDER THE
ESPP. IT DOES NOT PURPORT TO BE COMPLETE AND DOES NOT DISCUSS THE
TAX CONSEQUENCES OF A PARTICIPANT’S DEATH OR THE PROVISIONS
OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE, OR FOREIGN
COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE.
Vote Required and Board of Directors’
Recommendation
The
amendment of the ESPP must be approved by a majority of the votes
cast, meaning that the amendment of the ESPP will be approved only
if the number of votes “FOR” approval of the amendment
of the ESPP exceeds the number of votes “AGAINST”
approval of the amendment of the ESPP.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
VOTE “FOR”
THE AMENDMENT TO THE
AMENDED
AND RESTATED 2006 EMPLOYEE STOCK PURCHASE PLAN
14
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC
ACCOUNTING FIRM
The
Board of Directors 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, 2019, and recommends that shareholders
vote for ratification of such appointment. In the event of a
negative vote on such ratification, the Audit Committee and the
Board of Directors will reconsider their selection. Even if the
selection is ratified, the Audit Committee and the Board of
Directors in their discretion may direct the appointment of a
different independent registered public accounting firm at any time
during the year.
Representatives of
BPM 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.
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, 2018 and
2017:
DESCRIPTION OF SERVICES
|
|
2018
|
2017
|
|
Audit
Fees
|
$
166,649
|
$
161,852
|
|
All
Other Fees
|
--
|
64,395
|
|
Total
Fees
|
$
166,649
|
$
226,247
|
Audit Fees
. Aggregate fees billed or to
be billed for professional services rendered for the audit of the
Company’s fiscal 2018 and fiscal 2017 annual consolidated
financial statements and for the review of the condensed
consolidated financial statements included in the Company’s
quarterly reports during such periods.
All Other Fees
. Aggregate fees billed
or to be billed for professional services rendered for review of
the Company’s Registration Statement on Form S-8 and Form
S-3.
The
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 2018, 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, 2019 will be considered approved if a majority of
the shares of Common Stock present or represented by proxy at the
Annual Meeting vote “FOR” the resolution.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
VOTE “FOR” THE
RATIFICATION OF THE APPOINTMENT OF BPM LLP AS THE COMPANY’S
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM FOR FISCAL 2019.
15
PROPOSAL 4
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 in this Proxy Statement on page 18, the Company believes
that the 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 Compensation Discussion and
Analysis section, as well as the Summary Compensation Table 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 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.
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.
Vote Required and Recommendation of the Board of
Directors
The
advisory vote on executive compensation will be considered approved
if a majority of the shares of Common Stock present or represented
by proxy at the Annual Meeting vote “FOR” the
resolution. 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 2018
Annual Meeting of Shareholders.”
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
VOTE “FOR” THE
APPROVAL OF THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE
OFFICERS.
16
EXECUTIVE OFFICERS
The
names of the executive officers of the Company, ages as of May 31,
2018, and certain information about them as of the mailing date of
this Proxy Statement are set forth below:
|
Name
|
Age
|
Position
|
|
Gayn
Erickson
|
53
|
President and Chief
Executive Officer
|
|
Kenneth B.
Spink
|
57
|
Vice President of
Finance and Chief Financial Officer
|
|
Mark D.
Allison
|
61
|
Vice President of
Worldwide Sales
|
|
Carl N.
Buck
|
65
|
Vice President of
Marketing
|
|
Donald P. Richmond
II (1)
|
62
|
Vice President of
Engineering
|
|
David S.
Hendrickson (2)
|
61
|
Chief Technology
Officer
|
|
David
Fucci
|
68
|
Vice President of
Operations
|
|
Kunio
Sano
|
62
|
President, Aehr
Test Systems Japan K.K.
|
-------------------------------------
(1)
Mr. Richmond was
elected Vice President of Engineering on March 25,
2018
(2)
Mr.
Hendrickson’s title was changed effective on March 25,
2018
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 has
more than 30 years of accounting and finance experience in high
tech, public accounting, leasing, service and construction
industries. He was previously the Corporate Accounting Manager at
Applied Materials and began his career with the accounting firm
Deloitte. Mr. Spink received a B.S. in Business Administration from
California State University, Hayward.
MARK
D. ALLISON
joined the
Company as Vice President of Worldwide Sales in August 2013.
From October 2011 to August 2013, Mr. Allison operated Mark Allison
Consulting, providing strategic planning and sales/marketing
services to companies in the semiconductor and IT industries.
From September 2006 to October 2011, Mr. Allison served as Vice
President of Marketing at Verigy Ltd., a manufacturer of
semiconductor test equipment. Prior to that, Mr. Allison held
various sales, marketing, general management and test engineering
positions at companies including Advantest, Integrated Measurement
Systems, Megatest, Micron and Texas Instruments. Mr. Allison
received his B.S.E.E. from the University of Notre
Dame.
CARL
N. BUCK
joined the Company as a Product Marketing Manager in
1983 and held various positions until he was elected Vice President
of Engineering in November 1992, Vice President of Research and
Development Engineering in November 1996, Vice President of
Marketing in September 1997, Vice President of Contactor Business
Group in May 2002, 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 1978 to 1983, Mr. Buck served as
Product Marketing Manager at Intel Corporation, an integrated
circuit and microprocessor company. Mr. Buck received a B.S.E.E.
from Princeton University, an M.S. in Electrical Engineering from
the University of Maryland and an M.B.A. from Stanford
University.
DONALD P. RICHMOND II
joined the
Company as a Senior Electrical Engineer for Aehr’s Wafer
Level Test and Burn-in solutions in 1998, and has held several key
positions before he was elected Vice President of Engineering in
March 2018. Prior to joining the Company, Mr. Richmond was
co-founder,
17
member
of the Board of Directors, and Vice President of Operations at
ChipScale Inc. / Micro SMT Inc., a leader in chip scale packaging
of semiconductor ICs & discrete circuits. Prior to that, Mr.
Richmond served as president of TEAM Holdings LTD. / TEAM
International LTD., a semiconductor packaging subcontractor. Mr.
Richmond has over 40 years of executive and 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. Richmond
received a B.S.E.E. Technology from DeVry Institute
Arizona.
DAVID S.
HENDRICKSON
joined
the Company in October 2000 as Vice President of Engineering and
was elected Chief Technology Officer in March 2018. From 1999 to
2000, Mr. Hendrickson served as Platform General Manager, and from
1995 to 1999 as Engineering Director and Software Director of
Siemens Medical (formerly Acuson Corporation), a medical ultrasound
products company. From 1990 to 1995, Mr. Hendrickson served as
Director of Engineering and Director of Software of Teradyne Inc.
(formerly Megatest Corporation), a manufacturer of semiconductor
capital equipment. Mr. Hendrickson received a B.S. in Computer
Science from Illinois Institute of Technology.
DAVID
FUCCI
joined the
Company as Vice President of Operations in June 2014. From
February 2003 to May 2014, Mr. Fucci served as Vice President of
Manufacturing Operations/Vice President of Quality & Compliance
at DCG Systems, a leading provider of design-to-test solutions for
the global semiconductor industry. DCG Systems was a division of
Credence Systems Corporation, a provider of test solutions for the
semiconductor industry, until 2008. Mr. Fucci was Director of
Worldwide Operations/Supply Chain Management at Wireless Online,
Inc. 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
Boston University.
KUNIO SANO
joined the Company as 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
Department at Tokyo Electron Yamanashi Limited, a leading worldwide
semiconductor equipment manufacturer. Prior to that, Mr. Sano held
a development engineering position at TOKICO LTD. and test
engineering and design positions at Oki Engineering Co., Ltd. Mr.
Sano received a B.S.E.E. from Sagami Institute of Technology 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.
18
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, and
national and regional compensation surveys to provide information
and recommendations to establish specific compensation packages for
executive officers.
Role of Compensation Committee
The
Company’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. Elder and 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.
determining the
specific executive officer compensation methods to be used by the
Company and the participants in each of those specific
programs;
2.
determining the
evaluation criteria and timelines to be used in those
programs;
3.
determining the
processes that will be followed in the ongoing administration of
the programs; and
4.
determining their
role in the administration of the programs.
Many
of the actions take the form of recommendations to the full Board
of Directors where final approval, rejection or redirection may
occur. The Compensation Committee is responsible for administering
the compensation programs for all Company executive officers. The
Compensation Committee has delegated the responsibility of
administering the compensation programs for all other Company
employees to the Company's officers.
Elements of Compensation
In
structuring the Company’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
19
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, Employee Stock Ownership Plan, or ESOP, and life
insurance, are designed to provide support to executive officers
and their families.
Currently, the
Company uses the following executive officer compensation
vehicles:
●
Cash-based
programs: base salary, annual bonus plan and a revenue commission
plan; and
●
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, which only applies to Mark Allison, the
Vice President of Worldwide Sales. 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 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 2018, the Company’s Compensation Committee determined
the maximum eligible cash bonus levels for Gayn Erickson, Kenneth
B. Spink and David S. Hendrickson were up to 100%, 60% and 60% of
their base salaries, respectively. Based on the Company performance
for the year, the Compensation Committee awarded $3,988, $1,810 and
$2,020 to Gayn Erickson, Kenneth B. Spink and David S. Hendrickson,
respectively. Donald P. Richmond II was elected Vice President of
Engineering in March 2018, and was not eligible for cash bonus in
fiscal 2018. 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.
Revenue Commission
During
fiscal 2018, Mark Allison, the Vice President of Worldwide Sales,
was eligible to receive revenue commission based on achievement of
revenue objectives or quotas. Mark Allison receives a standard
commission for revenue up to 100% of quota and accelerated
commissions based on revenue above quota. Commissions are
considered earned at the time of revenue recognition and are paid
after the close of the quarter of revenue recognition.
20
Under
this plan, Mark Allison, the Vice President of Worldwide Sales,
earned $66,794 in fiscal 2018 and was paid $66,472 during fiscal
2018. This $66,472 included $16,106 that was earned in fiscal 2017.
The remaining $16,428 earned in fiscal 2018 was paid to Mark
Allison in fiscal 2019. Commissions earned by Mark Allison in
fiscal 2018 are included in the annual compensation salary column
in the Summary Compensation Table on page 23.
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 Company 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 officer’s awards based on the
factors described above and competitive practices in the
Company’s industry. The Company believes that stock option
ownership is an important factor in aligning corporate and
individual goals. The Company utilizes equity-based compensation,
including stock options and RSUs, to encourage long-term
performance with corporate performance and extended executive
officer tenure producing potentially significant
value.
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.
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 fiscal year time period, but may,
in some cases, be measured over a shorter or longer time
frame.
The
processes used by the Compensation Committee include the following
steps:
1.
The
Compensation Committee periodically reviews information comparing
the Company’s compensation levels to other companies in
similar industries, other leading companies (regardless of
industry) and competitors. Primarily, personal knowledge of
semiconductor equipment industry compensation practices,
compensation data in SEC filings, and national and regional
compensation surveys are used.
2.
At or
near the start of each evaluation cycle, the Compensation Committee
meets with the Chief Executive Officer to review, revise as needed,
and agree on the performance objectives set for the other executive
officers. The Chief Executive Officer and Compensation Committee
jointly set the Company objectives to be used. The business unit
and individual objectives are formulated jointly by the Chief
Executive Officer and the specific individual. The Compensation
Committee also, with the Chief Executive Officer, jointly
establishes and agrees on respective performance objectives of each
executive officer.
3.
Throughout the
performance cycle review, feedback is provided by the Chief
Executive Officer, the Compensation Committee and the Board of
Directors, as appropriate.
4.
At the
end of the performance cycle, the Chief Executive Officer evaluates
each other executive officers’ relative success in meeting
the performance goals. The Chief Executive Officer makes
recommendations on salary, bonus and equity awards, utilizing the
comparative results as a factor. Also included in the decision
criteria are subjective factors such as teamwork,
leadership
21
contributions and
ongoing changes in the business climate. The Chief Executive
Officer reviews the recommendations and obtains Compensation
Committee approval.
5.
The
final evaluations and compensation decisions are discussed with
each executive officer by the Chief Executive Officer or
Compensation Committee, as appropriate.
In
fiscal 2018, the Company granted a total of 368,651 RSUs and
options to purchase shares of the Company’s common stock of
which a total of 173,551 RSUs and options were granted to the
Company’s executive officers, representing 47.1% of all RSUs
and options granted in fiscal 2018. 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, ESOP,
and ESPP. The executive officers participate on the same basis as
other employees, except that the company made 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 2018, except that Mark
Allison received auto allowance payments. During fiscal 2018, 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 ESOP. The Company is not required to make contributions to the
401(k) plan and did not make any during fiscal 2018. During fiscal
2018, the Company contributed $60,000 to the Company’s
ESOP.
The
Company entered into Change of Control Severance Agreements on
January 24, 2001 with David S. Hendrickson; on January 3, 2012 with
Gayn Erickson; on August 12, 2013 with Mark Allison; on September
9, 2015 with Kenneth B. Spink; and on March 26, 2018 with Donald P.
Richmond II; pursuant to which those executives would be entitled
to a payment in the event of a termination of employment for
specified reasons following a change of control of the Company. For
this purpose, a change of control of the Company means a merger or
consolidation of the Company, a sale by the Company of all or
substantially all of its assets, the acquisition of beneficial
ownership of a majority of the outstanding voting securities of the
Company by any person or a change in the composition of the Board
as a result of which fewer than a majority of the directors are
incumbent directors. Termination of employment for purposes of
these agreements means a discharge of the executive 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’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, Hendrickson, Richmond and
Spink based on their base salaries at May 31, 2018, would be
approximately $99,589, $460,822, $139,117, $106,459 and $170,366,
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, 2018 (the last
business day of the last fiscal year) of $2.60 and the exercise
price of the stock options for Messrs. Allison, Erickson,
Hendrickson, Richmond and Spink would be $9,767, $27,836, $8,471,
$11,995 and $12,959, 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, 2018 of $2.60 for Messrs. Allison, Erickson,
Hendrickson, Richmond and Spink would be $12,594, $44,920, $15,389,
$0 and $18,915, 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
22
fiscal
year 2018. In setting both the cash-based and the equity-based
elements of Mr. Erickson’s compensation, the Compensation
Committee considered the company’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 2018, Mr.
Erickson received stock options under the Company’s 2016
Equity Incentive Plan for 34,200 shares, which vest over four year.
Additionally, Mr. Erickson received RSUs under the Company’s
2016 Equity Incentive Plan for 11,400 shares, which vest over four
years. The Compensation Committee believes Mr. Erickson’s
fiscal year 2018 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.
Policy on Deductibility of Compensation
The
Company is required to disclose the Company’s policy
regarding qualifying executive compensation for deductibility under
Section 162(m) of the Internal Revenue Code of 1986, as
amended, which provides that, for purposes of the regular income
tax, the otherwise allowable deduction for compensation paid or
accrued with respect to the executive officers of a publicly-held
company, which is not performance-based compensation, is limited to
no more than $1 million per year. To the extent such
compensation to be paid to such executive officers exceeds the
$1 million limit per officer, such excess will be treated as
performance-based compensation.
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, 2018, 2017 and 2016 by the
Company’s Chief Executive Officer, Chief Financial Officer
and each of the three other most highly compensated executive
officers for the fiscal year ended May 31, 2018. We refer to these
executive officers as our named executive officers.
Summary Compensation Table
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
Incentive
Plan
|
All
Other
|
|
|
|
Name and
Principal Position
|
|
Fiscal
Year
|
Salary
|
Bonus
|
Stock Awards
(1)
|
Option Awards
(1)
|
Compensation
(2)
|
Compensation
(3)
|
Total
|
|
Gayn Erickson
|
|
2018
|
$
288,343
|
$
3,988
|
$
44,802
|
$
84,592
|
--
|
$
30,248
(4)
|
$
451,973
|
|
President and
Chief
Executive
Officer
|
|
2017
|
$
275,018
|
--
|
$
82,740
|
$
48,019
|
--
|
$
32,691
|
$
438,468
|
|
|
|
2016
|
$
273,192
|
--
|
$
75,600
|
--
|
--
|
$
34,061
|
$
382,853
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth B.
Spink
|
|
2018
|
$
217,627
|
$
1,811
|
$
18,864
|
$
62,311
|
--
|
$
14,945
(5)
|
$
315,558
|
|
Vice President of
Finance
and Chief Financial
Officer
|
|
2017
|
$
190,008
|
--
|
--
|
$
19,535
|
--
|
$
15,237
|
$
234,860
|
|
|
|
2016
|
$
173,983
|
--
|
--
|
--
|
--
|
$
12,237
|
$
186,220
|
|
|
|
|
|
|
|
|
|
|
|
|
David S.
Hendrickson
|
|
2018
|
$
227,460
|
$
2,020
|
$
18,424
|
$
31,974
|
--
|
$
36,552
(6)
|
$
316,430
|
|
Chief Technology
Officer
|
|
2017
|
$
232,149
|
$
15,000
|
$
6,300
|
$
11,214
|
--
|
$
42,093
|
$
306,756
|
|
|
|
2016
|
$
232,149
|
--
|
--
|
--
|
--
|
$
42,154
|
$
274,303
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark Allison
|
|
2018
|
$
180,003
|
--
|
$
9,825
|
$
17,052
|
$
66,794
|
$
26,850
(7)
|
$
300,524
|
|
Vice President
of
Worldwide
Sales
|
|
2017
|
$
180,003
|
--
|
$
8,400
|
$
14,952
|
$
45,544
|
$
25,036
|
$
273,935
|
|
|
|
2016
|
$
181,207
|
--
|
--
|
--
|
$
38,367
|
$
15,215
|
$
234,789
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald P. Richmond
II
|
|
2018
|
$
184,349
|
--
|
--
|
$
71,697
|
--
|
$
14,450
(8)
|
$
270,496
|
|
Vice President of
Engineering
|
|
|
|
|
|
|
|
|
|
(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 10 of the Notes
to the Consolidated Financial Statements included in Aehr
Test’s Annual report on Form 10-K for fiscal filed with the
SEC on August 28, 2018.
23
(2)
Commissions
earned.
(3)
Consists of
contributions made by the Company under its ESOP, health and life
insurance premiums, medical costs and auto allowance paid by the
Company.
(4)
Includes health and
life insurance premiums and medical costs paid by the Company in
the amount of $27,669.
(5)
Includes health and
life insurance premiums and medical costs paid by the Company in
the amount of $12,969.
(6)
Includes health and
life insurance premiums and medical costs paid by the Company in
the amount of $34,478.
(7)
Includes health and
life insurance premiums and medical costs in the amount of $19,176,
and auto allowance in the amount of $5,400 paid by the
Company.
(8)
Includes health and
life insurance premiums and medical costs paid by the Company in
the amount of $12,905.
Grants of Plan Based Awards in Fiscal 2018
The
following table provides information with regard to each grant of
an award made to the named executive officers during the fiscal
year ended May 31, 2018.
|
|
|
|
|
All
Other
|
|
|
|
|
|
|
|
All
Other
|
Option
|
|
|
|
|
|
|
|
Stock
|
Awards:
|
|
|
|
|
|
Estimated Future
Payouts
|
|
Awards:
|
Number
of
|
Exercise
|
Grant
Date
|
|
|
|
Under
Non-Equity
|
|
Number
of
|
Securities
|
Price
of
|
Fair Value
of
|
|
|
|
Incentive
Plan Awards (1)
|
Grant
|
Shares of
Stock
|
Underlying
|
Option
|
Stock
Option
|
|
|
Name
|
Target
($)
|
Maximum
($)
|
Date
|
Or Units
(2)
|
Option #
(3)
|
Awards ($)
(4)
|
Awards
($)
|
|
Gayn
Erickson
|
$
144,385
|
$
288,769
|
7/11/17
|
11,400
|
--
|
--
|
$
44,802
|
|
|
|
|
7/11/17
|
--
|
34,200
|
$
3.93
|
$
77,757
|
|
|
|
|
|
|
|
|
|
|
Kenneth B.
Spink
|
$
65,553
|
$
131,105
|
7/11/17
|
4,800
|
--
|
--
|
$
18,864
|
|
|
|
|
7/11/17
|
--
|
24,400
|
$
3.93
|
$
55,476
|
|
|
|
|
|
|
|
|
|
|
David S.
Hendrickson
|
$
73,127
|
$
146,254
|
7/11/17
|
4,688
|
--
|
--
|
$
18,424
|
|
|
|
|
7/11/17
|
--
|
14,063
|
$
3.93
|
$
31,974
|
|
|
|
|
|
|
|
|
|
|
Mark Allison
(5)
|
$
--
|
$
--
|
7/11/17
|
2,500
|
--
|
--
|
$
9,825
|
|
|
|
|
7/11/17
|
--
|
7,500
|
$
3.93
|
$
17,052
|
|
|
|
|
|
|
|
|
|
|
Donald P. Richmond
II
|
$
--
|
$
--
|
7/11/17
|
--
|
6,000
|
$
3.93
|
$
13,642
|
|
|
|
|
3/25/18
|
--
|
34,000
|
$
2.42
|
$
51,748
|
(1)
Reflects the target
and maximum values of cash bonus award to the named executive
officers in fiscal 2018. The cash bonus award amounts actually
earned by the named executive officers in fiscal 2018 are shown in
the Summary Compensation Table for fiscal 2018 under the heading
“Bonus” refer to “Compensation Discussion and
Analysis” above for a description of the cash bonus
compensation.
(2)
Officers received
RSUs under the Company’s 2016 Equity Incentive Plan which
vest over four years.
(3)
The stock options
granted in fiscal 2018 are generally exercisable starting one month
after the date of grant, with 1/48
th
of the shares
covered thereby becoming exercisable at that time and with an
additional 1/48
th
of the total number
of option shares becoming exercisable each month
thereafter,
24
with
full vesting occurring on the fourth anniversary of the date of
grant. These options generally expire seven years from the date of
grant.
(4)
Options are granted
at an exercise price equal to the fair market value of the
Company’s Common Stock, as determined by reference to the
closing price reported by the Nasdaq Capital Market on the date of
grant.
(5)
Mr.
Allison is eligible to receive revenue commission instead of a cash
bonus award. Mr. Allison is eligible to receive $75,000 at the
target worldwide consolidated revenues, plus 0.452% of worldwide
consolidated revenues above target worldwide consolidated
revenues.
25
Outstanding Equity Awards at Fiscal 2018 Year-End
The
following table presents certain information concerning the
outstanding equity awards held as of May 31, 2018 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
|
Date
|
|
|
|
|
|
|
|
|
|
Gayn
Erickson
|
17,277
|
$
44,920
|
201,667
|
--
|
$
0.590
|
1/3/2019
|
|
|
|
|
55,000
|
--
|
$
1.271
|
6/26/2019
|
|
|
|
|
95,000
|
--
|
$
1.280
|
6/25/2020
|
|
|
|
|
93,749
|
6,251
|
$
2.710
|
8/20/2021
|
|
|
|
|
43,937
|
13,063
|
$
2.100
|
4/21/2022
|
|
|
|
|
19,593
|
23,157
|
$
1.680
|
7/25/2023
|
|
|
|
|
7,123
|
27,077
|
$
3.930
|
7/11/2024
|
|
|
|
|
|
|
|
|
|
Kenneth
B. Spink
|
7,275
|
$
18,915
|
3,438
|
--
|
$
1.280
|
6/25/2020
|
|
|
|
|
11,250
|
750
|
$
2.710
|
8/20/2021
|
|
|
|
|
7,322
|
2,178
|
$
2.100
|
4/21/2022
|
|
|
|
|
19,333
|
9,667
|
$
2.300
|
9/9/2022
|
|
|
|
|
8,250
|
9,750
|
$
1.680
|
7/25/2023
|
|
|
|
|
5,083
|
19,317
|
$
3.930
|
7/11/2024
|
|
|
|
|
|
|
|
|
|
David
S. Hendrickson
|
5,919
|
$
15,389
|
20,000
|
--
|
$
1.280
|
6/25/2020
|
|
|
|
|
52,734
|
3,516
|
$
2.710
|
8/20/2021
|
|
|
|
|
19,270
|
5,730
|
$
2.100
|
4/21/2022
|
|
|
|
|
5,156
|
6,094
|
$
1.680
|
7/25/2023
|
|
|
|
|
2,929
|
11,134
|
$
3.930
|
7/11/2024
|
|
|
|
|
|
|
|
|
|
Mark
Allison
|
4,844
|
$
12,594
|
85,000
|
--
|
$
1.730
|
8/12/2020
|
|
|
|
|
32,812
|
2,188
|
$
2.710
|
8/20/2021
|
|
|
|
|
15,416
|
4,584
|
$
2.100
|
4/21/2022
|
|
|
|
|
6,875
|
8,125
|
$
1.680
|
7/25/2023
|
|
|
|
|
1,562
|
5,938
|
$
3.930
|
7/11/2024
|
|
|
|
|
|
|
|
|
|
Donald
P. Richmond II
|
--
|
$
--
|
10,000
|
--
|
$
1.271
|
6/26/2019
|
|
|
|
|
16,000
|
--
|
$
1.280
|
6/25/2020
|
|
|
|
|
14,062
|
938
|
$
2.710
|
8/20/2021
|
|
|
|
|
7,708
|
2,292
|
$
2.100
|
4/21/2022
|
|
|
|
|
4,583
|
5,417
|
$
1.680
|
7/25/2023
|
|
|
|
|
1,250
|
4,750
|
$
3.930
|
7/11/2024
|
|
|
|
|
1,416
|
32,584
|
$
2.420
|
3/25/2025
|
(1)
RSUs generally vest
starting three month after the date of grant, and with an
additional 1/16
th
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, 2018 of $2.60.
26
(3)
Stock
options outstanding are generally exercisable starting one month
after the date of grant, and with an additional 1/48
th
of the total number
of option shares becoming exercisable each month thereafter, with
full vesting occurring on the fourth anniversary of the date of
grant.
Stock Awards Vested and Option Exercises in Fiscal
2018
The
following table provides information concerning option exercises
and RSUs vested by the named executive officers during the fiscal
year ended May 31, 2018.
|
|
Stock Awards
|
Option Awards
|
||
|
|
Number of Shares
|
Value
|
Number of Shares
|
Value
|
|
|
Acquired on
|
Realized on
|
Acquired on
|
Realized on
|
|
Name
|
Vesting (#)
|
Vesting ($) (1)
|
Exercise (#)
|
Exercise ($) (2)
|
|
Gayn
Erickson
|
5,701
|
$
17,704
|
140,000
|
$
346,665
|
|
Kenneth
B. Spink
|
2,400
|
7,453
|
--
|
--
|
|
David
S. Hendrickson
|
1,817
|
5,592
|
110,000
|
182,140
|
|
Mark
Allison
|
1,718
|
5,380
|
--
|
--
|
|
Donald
P. Richmond II
|
--
|
--
|
--
|
--
|
(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.
27
Potential Payments Upon Termination or Change of
Control
The
following table shows the potential payments upon termination or
change of control for the named executive officers as of May 31,
2018.
|
|
Involuntary
|
|
|
Termination not
for
|
|
Named Executive
Benefits and Payments
|
Cause Following
a
|
|
Upon
Termination:
|
Change of
Control (1)
|
|
Gayn
Erickson
|
|
|
Base
salary
|
$
433,153
|
|
Medical
continuation
|
27,669
|
|
Value
of accelerated stock options (2)
|
27,836
|
|
Value
of accelerated RSUs (3)
|
44,920
|
|
|
|
|
Kenneth B.
Spink
|
|
|
Base
salary
|
$
163,882
|
|
Medical
continuation
|
6,484
|
|
Value
of accelerated stock options (2)
|
12,959
|
|
Value
of accelerated RSUs (3)
|
18,915
|
|
|
|
|
David S.
Hendrickson
|
|
|
Base
salary
|
$
121,878
|
|
Medical
continuation
|
17,239
|
|
Value
of accelerated stock options (2)
|
8,471
|
|
Value
of accelerated RSUs (3)
|
15,389
|
|
|
|
|
Mark
Allison
|
|
|
Base
salary
|
$
90,002
|
|
Medical
continuation
|
9,588
|
|
Value
of accelerated stock options (2)
|
9,767
|
|
Value
of accelerated RSUs (3)
|
12,954
|
|
|
|
|
Donald P. Richmond
II
|
|
|
Base
salary
|
$
100,006
|
|
Medical
continuation
|
6,453
|
|
Value
of accelerated stock options (2)
|
11,995
|
|
Value
of accelerated RSUs (3)
|
--
|
(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,
2018 of $2.60 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, 2018 of $2.60.
28
Director Compensation
Rhea J.
Posedel and Gayn Erickson, inside directors of the Company, do not
receive any compensation for their services as members of the Board
of Directors. An inside director is a director who is a regular
employee of the Company, whereas an outside director is not an
employee of the Company. Each outside director received (1) an
annual retainer of $25,000 paid in quarterly installments, (2)
$2,500 for each regular board meeting such member attended, and (3)
$1,250 for each special telephonic board meeting such member
attended. Committee members attending a committee meeting not held
in conjunction with a regular board meeting received the following
amounts: Audit Committee chair - $2,000; Audit Committee member -
$1,500; Compensation Committee chair - $1,750; and other committee
members - $1,250. Committee members attending a committee meeting
held in conjunction with a regular board meeting received 50% of
the amounts noted above for each respective committee member.
Outside directors are also reimbursed for certain expenses incurred
in attending board and committee meetings.
Directors are also
eligible to participate in the Company’s Equity Incentive
Plans. On October 26, 2017, outside directors William Elder, Mario
Rosati, John Schneider and Howard Slayen were each granted options
to purchase 10,000 shares at $3.46 per share.
The
following table sets forth the compensation paid by the Company
during the fiscal year ended May 31, 2018 to the Company’s
directors other than Mr. Erickson:
Director Compensation
|
|
|
|
Fees
Earned
|
Option
|
Stock
|
Non-equity
|
All
Other
|
Total
|
|
|
|
|
or Paid
in
|
Awards
|
Awards
|
Incentive
Plan
|
Compensation
|
Compensation
|
|
Name
|
|
Year
|
Cash
($)
|
($)
(1)
|
($)
|
Compensation
($)
|
($)
(2)
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
Rhea J. Posedel
|
|
2018
|
$
100,006
(3)
|
$
40,925
|
--
|
$
690
(4)
|
$
19,095
|
$
160,716
|
|
Robert R. Anderson(5)
|
|
2018
|
23,000
|
--
|
--
|
--
|
--
|
23,000
|
|
William W. R. Elder
|
|
2018
|
41,000
|
19,305
|
--
|
--
|
--
|
60,305
|
|
Mario M. Rosati
|
|
2018
|
35,000
|
19,305
|
--
|
--
|
--
|
54,305
|
|
John M. Schneider
|
|
2018
|
43,500
|
19,305
|
--
|
--
|
--
|
62,805
|
|
Howard T. Slayen
|
|
2018
|
45,500
|
19,305
|
--
|
--
|
--
|
64,805
|
(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. The assumptions used to calculate the value of
awards are set forth in Note 1 of the Notes to the Consolidated
Financial Statements included in Aehr Test’s Annual Report on
Form 10-K for fiscal filed with the SEC on August 28, 2018. At the
end of fiscal 2018, the aggregate number of option awards
outstanding for each director was as follows: 106,500 held by Rhea
Posedel; 43,376 held by Robert Anderson; 84,440 held by William
Elder; 193,254 held by Mario Rosati; 69,259 held by John Schneider;
and 134,296 held by Howard Slayen. Options granted generally vest
at either one-twelfth (1/12
th
) or
one-forty-eighth (1/48
th
) 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 $18,367, and contributions made by the Company under
its ESOP in the amount of $728.
(3)
Reflects salary
earned by Rhea Posedel in fiscal 2018 as an employee of the
Company.
(4)
Reflects bonus
earned by Rhea Posedel in fiscal 2018 as an employee of the
Company.
29
(5)
Robert Anderson
resigned as a member of the Board of Directors on October 26, 2017,
and his last date to exercise his outstanding options is October
26, 2018.
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
During
fiscal 2018, Mr. Mario M. Rosati, a member of the Board of
Directors of the Company, was also a member of the law firm of
Wilson Sonsini Goodrich & Rosati, Professional Corporation, or
WSGR. The Company retained WSGR as its legal counsel during the
fiscal year. The Company plans to retain WSGR as its legal counsel
again during fiscal 2019.
Compensation Committee Interlocks and Insider
Participation
The
Compensation Committee currently consists of Messrs. Elder and
Slayen. 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
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
William
W.R. Elder
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, 2018, 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, 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)
|
1,031,126
|
4.6
%
|
|
Gayn Erickson
(4)
|
890,433
|
3.9
%
|
|
William W. R. Elder
(5)
|
214,999
|
1.0
%
|
|
Mario M. Rosati
(6)
|
420,939
|
1.9
%
|
|
John M. Schneider
(7)
|
637,687
|
2.9
%
|
|
Howard T. Slayen
(8)
|
332,691
|
1.5
%
|
|
Kenneth B. Spink
(9)
|
97,986
|
*
|
|
David S.
Hendrickson (10)
|
105,292
|
*
|
|
Mark Allison
(11)
|
159,005
|
*
|
|
Donald P. Richmond
II (12)
|
122,130
|
*
|
|
All Directors and
Executive Officers as a group (13 persons) (13)
|
4,373,261
|
18.3
%
|
|
|
|
|
|
Principal
Shareholders:
|
|
|
|
QVT Financial LP
(14)
1177
Avenue of the Americas, 9
th
Floor, New York, NY
10036
|
1,847,215
|
7.7
%
|
|
AWM Investment
Company, Inc. (15)
527
Madison Avenue, Suite 2600, New York, NY 10022
|
1,801,926
|
8.1
%
|
*
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 22,245,095 shares of Common Stock outstanding
on August 31, 2018. Shares of Common Stock subject to options that
are currently exercisable or exercisable within 60 days of August
31, 2018 and shares of Common Stock subject to RSUs that are
subject to vest within 60 days of August 31, 2018 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 899,214
shares held by the Rhea J. Posedel Family Trust, and 84,750 shares
issuable upon the exercise of stock options exercisable within 60
days of August 31, 2018.
(4)
Includes 510,440
shares issuable upon the exercise of stock options exercisable and
1,603 RSUs vesting within 60 days of August 31, 2018.
31
(5)
Includes 3,000
shares held by Derek S. Elder, Mr. Elder’s son, 111,800
shares held by William WR
Elder & Gloria
L S Elder, Trustees of the Elder Family Trust DTD 12/02/88, and
84,440 shares
issuable upon the
exercise of stock options exercisable within 60 days of August 31,
2018.
(6)
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,
22,500 shares held by WS Investment Company, LLC (2001A) for which
Mr. Rosati is a general partner, 23,468 shares held by Mario M.
Rosati and Danelle Storm Rosati, Trustees of the Rosati Family
Trust U/D/T dated May 23, 1997, and 193,254 shares issuable upon
the exercise of stock options exercisable within 60 days of August
31, 2018.
(7)
Includes 331,800 shares held in a Schwab
IRA for which Mr. Schneider is the owner, 205,676 shares held by
Dharma Group Insurance Co for which Mr. Schneider is an affiliate,
28,632 shares held by PWA Real Estate, LLC for which Mr. Schneider
is an affiliate, and 68,634 shares issuable upon the exercise of
stock options exercisable within 60 days of August 31,
2018.
(8)
Includes 109,220
shares issuable upon the exercise of stock options exercisable
within 60 days of August 31, 2018.
(9)
Includes 65,624
shares issuable upon the exercise of stock options exercisable and
675 RSUs vesting within 60 days of August 31, 2018.
(10)
Includes 89,805
shares issuable upon the exercise of stock options exercisable and
527 RSUs vesting within 60 days of August 31, 2018.
(11)
Includes 149,030
shares issuable upon the exercise of stock options exercisable and
469 RSUs vesting within 60 days of August 31, 2017.
(12)
Includes 63,624
shares issuable upon the exercise of stock options exercisable
within 60 days of August 31, 2018.
(13)
Includes 1,685,850
shares issuable upon the exercise of stock options exercisable and
4,368 RSUs vesting within 60 days of August 31, 2018.
(14)
Based on
information reported by QVT Financial LP (“QVT”) on
Schedule 13G filed with the SEC on February 9, 2017. QVT has shared
voting and dispositive power with respect to all of the shares. The
shares are issuable upon conversion of outstanding convertible
notes issued to QVT Fund LP and Quintessence Fund L.P. which are
affiliates of QVT.
(15)
Based
on information reported by AWM Investment Company, Inc. on Schedule
13G filed with the SEC on February 13, 2018.
32
REPORT OF THE AUDIT COMMITTEE
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 From 10-K for fiscal year
2018. BPM LLP, the Company’s independent registered public
accounting firm for fiscal year 2018, issued their unqualified
report dated August 28, 2018 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. 1301,
“Communications with Audit 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, 2018 be included in
the Company’s Annual Report on Form 10-K.
AUDIT
COMMITTEE
William
W.R. Elder
John M.
Schneider
Howard
T. Slayen
33
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, 2018, except that the three Form 4s of John
Schneider reporting stock sales on July 26, 2017, on August 2, 2017
and on August 4, 2017 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,
GAYN
ERICKSON
President and Chief Executive Officer
Dated:
September 26, 2018
34
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