AEHR TEST SYSTEMS
10-Ks and 10-Qs
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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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by the Registrant [ x ]
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Check
the appropriate box:
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Preliminary Proxy
Statement
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Use of the Commission Only (as permitted by Rule
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Definitive Proxy
Statement
[
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Definitive
Additional Materials
[
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Soliciting Material
Pursuant to §240.14a-12
_________________________
Aehr
Test Systems
___________________________
(Name
of Registrant as Specified in its Charter)
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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table below per Exchange Act Rules 14a-6(i)(1) and
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calculated and state how it was determined):
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Check box if any part of the fee is offset
as provided by Exchange Act Rule 0-11(a)(2) and identify the
filing for which the offsetting fee was paid previously. Identify
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AEHR TEST SYSTEMS
400 Kato Terrace
Fremont, California 94539
_____________________________
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD ON OCTOBER 20, 2020
_____________________________
To The Shareholders of
Aehr Test Systems:
You are
cordially invited to attend the Annual Meeting of Shareholders (the
“Annual Meeting”), of Aehr Test Systems, a California
corporation (“Aehr” or the “Company”), to
be held on October 20, 2020, at 4:00 p.m., at the Company’s
corporate headquarters located at 400 Kato Terrace, Fremont,
California 94539. Due to public health concerns resulting from the
COVID-19 pandemic, the Company will incorporate social distancing
guidelines at the Annual Meeting, and also present the Annual
Meeting via webcast. Login information for the webcast will be
provided on the Company’s website as of the date of this
notice. The Company encourages shareholders to attend the meeting
via webcast. You will not be able to vote while viewing the
webcast. However, if shareholders would like to attend the Annual
Meeting and vote in person, the Company will have the ability to
accept ballots at the Company during the Annual Meeting. The Annual
Meeting is being held for the following purposes:
1.
To elect six
directors of the Company to hold office until the next annual
meeting or the election of their successors.
2.
To approve an
amendment to the Company’s Amended and Restated 2006 Employee
Stock Purchase Plan (the “ESPP”) to increase the number
of shares reserved for issuance thereunder by an additional 350,000
shares of common stock of the Company (“Common
Stock”).
3.
To ratify the
selection of BPM LLP as the Company’s independent registered
public accounting firm for the fiscal year ending May 31,
2021.
4.
To approve, on an
advisory (non-binding) basis, the compensation of the
Company’s named executive officers.
5.
To transact such
other business as may properly come before the Annual Meeting or
any postponements or adjournments thereof.
Only
shareholders of record at the close of business on September 3,
2020 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 2020 ANNUAL
MEETING OF SHAREHOLDERS. THE PROXY STATEMENT AND THE RELATED PROXY
FORM ARE BEING DISTRIBUTED ON OR ABOUT SEPTEMBER 24, 2020. YOU CAN
VOTE YOUR SHARES USING ONE OF THE FOLLOWING METHODS:
●
COMPLETE
AND RETURN A WRITTEN PROXY CARD; OR
●
ATTEND
THE COMPANY’S 2020 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 20,
2020:
The
Company’s Proxy Statement, form of proxy card and 2020 Annual
Report are available at: www.aehr.com under the heading
“Investor Relations” and the subheading “Annual
Reports/Proxy Statements.”
AEHR TEST SYSTEMS
400 Kato Terrace
Fremont, California 94539
_______________
PROXY STATEMENT
_______________
2020 ANNUAL MEETING OF SHAREHOLDERS
This
Proxy Statement is being furnished to the shareholders of Aehr Test
Systems, a California corporation (“Aehr” or the
“Company”), in connection with the solicitation of
proxies by the Board of Directors (the “Board”), for
use at the Annual Meeting of Shareholders of the Company (the
“Annual Meeting”), to be held on Tuesday, October 20,
2020 at 4:00 p.m. local time, and at any postponements,
adjournments or other delays thereof. We refer to this annual
meeting, as it may be postponed, adjourned or delayed, as the
Annual Meeting.
At the
Annual Meeting, the shareholders will be asked:
1.
To elect six
directors of the Company to hold office until the next annual
meeting or the election of their successors.
2.
To approve an
amendment to the Company’s Amended and Restated 2006 Employee
Stock Purchase Plan (the “ESPP”) to increase the number
of shares reserved for issuance thereunder by an additional 350,000
shares of common stock of the Company (“Common
Stock”).
3.
To ratify the
selection of BPM LLP as the Company’s independent registered
public accounting firm for the fiscal year ending May 31,
2021.
4.
To approve, on an
advisory (non-binding) basis, the compensation of the
Company’s named executive officers.
5.
To transact such
other business as may properly come before the Annual Meeting or
any postponements or adjournments thereof.
The
Board has fixed the close of business on September 3, 2020 as the
record date for the determination of the holders of Common Stock
entitled to notice of and to vote at the Annual Meeting (the
“Record Date”). Each such shareholder will be entitled
to one vote for each share of Common Stock, or Common Share, held
on all matters to come before the Annual Meeting and may vote in
person or by proxy authorized in writing.
The
Company’s Annual Report on Form 10-K, containing financial
statements for the fiscal year ended May 31, 2020, 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 24, 2020.
THE ANNUAL MEETING
Date, Time and Place
The
Annual Meeting will be held on October 20, 2020 at 4:00 p.m., local
time, at 400 Kato Terrace, Fremont, California 94539. Due to public
health concerns resulting from the COVID-19 pandemic, the Company
will incorporate social distancing guidelines at the Annual
Meeting, and also present the Annual Meeting via webcast. Login
information for the webcast will be provided on the Company’s
website. You will not be able to vote while viewing the webcast.
The Company encourages shareholders to attend the Annual Meeting
via webcast. However, if shareholders would like to attend the
Annual Meeting and vote in person, the Company will have the
ability to accept ballots at the Company during the Annual
Meeting.
1
General
The
Company’s principal office is located at 400 Kato Terrace,
Fremont, California 94539 and its telephone number is (510)
623-9400.
Record Date and Shares Entitled to Vote
Shareholders of
record at the close of business on the Record Date are entitled to
notice of and to vote at the Annual Meeting. As of the Record Date,
there were 23,310,312 shares of Common Stock outstanding and
entitled to vote.
Revocability of Proxies
Any
proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the
Secretary of the Company prior to the Annual Meeting a written
notice of revocation or a duly executed proxy bearing a later date
or by attending the Annual Meeting and voting in person. If you
hold shares through a bank or brokerage firm, you must contact that
bank or brokerage firm to revoke any prior voting
instructions.
Confidentiality of Votes
The
Company handles proxy instructions, ballots, and voting tabulations
that identify individual stockholders in a manner that protects
your voting privacy. The Company will not disclose your vote either
among its employees or to third parties, except, as we deem
necessary: (1) to meet applicable legal requirements, (2) to allow
for the tabulation of votes and certification of the vote, or (3)
to facilitate a successful proxy solicitation. Occasionally,
stockholders provide on their proxy card written comments, which
the Company may forward to its management.
Voting and Proxy Solicitation
Each
shareholder voting for the election of directors may cumulate his
or her votes, giving one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of
shares that the shareholder is entitled to vote, or distributing
the shareholder’s votes on the same principle among as many
candidates as the shareholder chooses. No shareholder shall be
entitled to cumulate votes for any candidate unless the
candidate’s name has been properly placed in nomination prior
to the voting and the shareholder, or any other shareholder, has
given notice at the Annual 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
who will determine whether or not a quorum is present. If the
shares present, in person and by proxy, do not constitute the
required quorum, then a majority of the shares present may adjourn
the meeting to a subsequent date for the purposes of obtaining a
quorum. Shares that are voted “FOR,”
“AGAINST,” “WITHHELD,” or
“ABSTAIN” are counted toward the presence of a
quorum.
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 shares
represented at the Annual Meeting and entitled to vote with respect
to a proposal (other than the election of directors). In the
absence of controlling precedent to the contrary, the Company
intends to treat abstentions in this manner.
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.
2
If you
provide specific instructions with regard to certain items, the
Company will vote your shares as you instruct on such items. If no
instructions are indicated, the proxy holders will vote the shares
as recommended by the Board.
Voting Requirements to Approve Proposals
A
plurality of the votes cast is required for the election of the
directors, which means that the nominees for director receiving the
highest number of affirmative votes will be elected as
directors.
The
affirmative “FOR” vote of a majority of the votes cast
on the proposal is required to (i) approve our ESPP and its
material terms, (ii) ratify the appointment of BPM LLP as our
independent registered public accounting firm, and (iii) approve,
on an advisory and nonbinding basis, our executive compensation. If
a stockholder abstains from voting on any of these proposals, that
abstention will have the same effect as if the stockholder voted
“AGAINST” the proposal. Broker non-votes, if any, will
have no impact on the outcome of these proposals.
Approval of
executive compensation arrangements is an advisory vote.
Accordingly, the results will not be binding on us, the Board or
the Compensation Committee; however, the Compensation Committee
will consider the outcome of the votes when evaluating our
executive compensation principles, design and
practices.
If you
hold shares beneficially in street name and do not provide your
broker with voting instructions, your shares may constitute
“broker nonvotes.” Generally, broker nonvotes occur on
a matter when a broker is not permitted to vote on that matter
without instructions from the beneficial owner and the beneficial
owner does not provide voting instructions. In tabulating the
voting result for any particular proposal, we will not consider
broker nonvotes to be votes cast on that proposal. Thus, broker
nonvotes will not affect the outcome of any matter being voted on
at the meeting, assuming that a quorum is obtained. The Company
considers abstentions to be votes cast; accordingly, abstentions
have the same effect as votes against the matter.
The
Company encourages shareholders to provide instructions to the
shareholders’ bank or brokerage firm by voting the
shareholders’ proxy. This action ensures the shares will be
voted at the meeting in accordance with the shareholders’
wishes.
Deadline for Receipt of Shareholder Proposals for 2021 Annual
Meeting
Shareholders of the
Company may submit proposals on matters appropriate for shareholder
action at meetings of the Company’s shareholders in
accordance with Rule 14a-8 promulgated under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”).
For such proposals to be included in the Company's proxy materials
relating to its 2021 Annual Meeting of Shareholders, all applicable
requirements of Rule 14a-8 must be satisfied and such proposals
must be received by the Company no later than May 27, 2021. Such
proposals should be delivered to Aehr Test Systems, 400 Kato
Terrace, Fremont, California 94539, Attn: Secretary.
If a
shareholder does not comply with the requirements of Rule
14a-4(c)(2) under the Exchange Act, the Company may exercise
discretionary voting authority under proxies that it solicits to
vote in accordance with its best judgment.
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.
3
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.
Webcast
Login
information for the webcast will be provided on the Company’s
website www.aehr.com under the heading “Investor
Relations.”
Internet Availability of Proxy Materials
This
Proxy Statement, the form of proxy card and 2020 Annual Report are
available on the Company’s website www.aehr.com under the
heading “Investor Relations” and the subheading
“Annual Reports/Proxy Statements.”
How to Vote
If your
shares are registered in your name with our transfer agent, you may
vote your shares by returning a signed and dated proxy card (a
prepaid reply envelope is provided for your convenience), or you
may vote in person by ballot at the special meeting. Based on your
proxy cards, the proxy holders will vote your shares according to
your directions.
If your
shares are held in “street name” through a bank, broker
or other nominee, you may vote through your bank, broker or other
nominee by completing and returning the voting instruction form
provided by your bank, broker or other nominee.
You may
also attend the Annual Meeting and vote in person by ballot if you
have a “legal proxy” from your bank, broker or other
nominee giving you the right to vote your shares at the Annual
Meeting.
Voting results of the Annual Meeting
The
Company will announce the preliminary voting results at the Annual
Meeting. The Company will also disclose voting results on a Form
8-K it will file with the Securities and Exchange Commission (the
“SEC”) within four business days after the Annual
Meeting, which Form 8-K will also be available on the
Company’s investor relations website.
How can Shareholders Contact the Company’s Transfer
Agent
You can
contact our transfer agent by either writing via U.S. mail to
Computershare, P.O. Box 505000, Louisville, KY 40233-5000, or via
courier service to Computershare, 462 South 4th Street, Suite 1600,
Louisville, KY 40202, or by telephoning 1-800-736-3001 (US, Canada,
Puerto Rico), 1-781-575-3100 (non-US) or via email at
web.queries@computershare.com, shareholder website is
www.computershare.com/investor.
Additional Matters Presented at Annual Meeting
Other
than the items of business we describe in this proxy statement, we
are not aware of any other business to be acted upon at the Annual
Meeting. If you grant a proxy, the persons named as proxy holders,
Gayn Erickson and Kenneth B. Spink, our President and Chief
Executive Officer and Vice President of Finance and Chief Financial
Officer, respectively, or either of them or their substitutes, will
have the discretion to vote your shares on any additional matters
properly presented for a vote at the meeting. If for any reason any
of the nominees is not available as a candidate for director, the
persons named as proxy holders will vote your proxy for such other
candidate or candidates as the Board may nominate.
4
PROPOSAL 1
ELECTION OF DIRECTORS
At the
Annual Meeting, six directors are to be elected to hold office
until the next Annual Meeting or until their successors are elected
and qualified. Unless otherwise instructed, the proxy holders will
vote the proxies received by them for the election of the 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, 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, 2020, and certain information about them as of the
Record Date are set forth below:
|
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
|
|
77
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Chairman
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1977
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Gayn
Erickson
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55
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President
and Chief Executive Officer
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2012
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Laura
Oliphant (1)(2)(3)
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57
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Director
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2019
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Mario
M. Rosati (3)
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74
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Director
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1977
(4)
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Geoffrey
Scott (1)(3)
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71
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|
Director
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2020
(5)
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Howard
T. Slayen (1)(2)
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|
73
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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 from 1977 to September 2008 and then rejoined
the Board in February 2009
(5)
Mr. Scott joined
the Board on September 2, 2020.
RHEA J. POSEDEL
is a founder of the
Company and has served as the Chairman of the Board 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 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 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 32 years of executive and general management,
5
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 senior leadership experience,
semiconductor test industry and technical expertise, and strategic
business development experience.
LAURA OLIPHANT
has been a director of
the Company since July 2019. From 2016 to 2018, she was the Chief
Executive Officer of Translarity, a venture funded probe card
company. From 2001 to 2016, she served as an Investment Director at
Intel Capital, Intel’s venture capital organization, where
she made and managed investments in the semiconductor capital
equipment and materials area and received Intel’s highest
award for the strategic impact of her contributions. She is a
holder of the National Association of Corporate Directors Board
Leadership Fellowship. Dr. Oliphant received a BE in Chemical
Engineering from Manhattan College in Riverdale, New York, and PhD
in Chemical Engineering from the University of California,
Berkeley.
As a
process manager and a director of the venture capital arm of one of
the world’s largest semiconductor companies, Dr. Oliphant
brings to the Board a broad range of experience in the in
semiconductor equipment space and a strong background in business
development and financing and investment activities.
MARIO M. ROSATI
was a director of the
Company from 1977 to 2008, and then rejoined the Board in 2009. Mr.
Rosati had been a member of the law firm Wilson Sonsini Goodrich
& Rosati, Professional Corporation, which he joined in 1971,
until his retirement in January 2020. Mr. Rosati is also 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
retired senior partner in a major Silicon Valley based law firm,
Mr. Rosati brings legal expertise in the oversight of legal and
regulatory compliance, mergers and acquisitions and financing
experience to the Board. Mr. Rosati also brings to the Board a
strong background in advising high-tech companies through his
public company board experience.
GEOFFREY SCOTT
has been a director of
the Company since September 2020.
Since his retirement from Scott Asset Management
in 2017, Mr. Scott has been a private investor.
From 1995 to
2017, he was President of Scott Asset Management, an investment
group focused on industry leading small cap companies. From 1991 to
1995, he served as Vice President of Merrill Lynch in the Capital
Markets Group. From 1973 to 1990, he was employed by Chase
Manhattan Bank in the Corporate Banking Group. He received a B.A.
from Dartmouth College.
With
past board experience with emerging, fast growth companies, Mr.
Scott brings to the Board extensive experience both in corporate
finance and as a long-term investor.
HOWARD T. SLAYEN
has been a director of the Company
since 2008. Since June 2001, Mr. Slayen has been providing
independent financial consulting services to various organizations
and clients. From October 1999 to May 2001, Mr. Slayen served
as Executive Vice President and Chief Financial Officer of Quaartz
Inc., a web-hosted communications company. From 1971 to September
1999, Mr. Slayen held various positions with
PricewaterhouseCoopers/Coopers & Lybrand, including his last
position as a Corporate Finance Partner. Mr. Slayen currently
serves as a director or committee member for several non-profit
organizations. Mr. Slayen received a B.A. from Claremont McKenna
College and a J.D. from the University of California, Berkeley
School of Law.
As the
former Vice President and Chief Financial Officer of a high-tech
company, former Corporate Finance Partner for a large international
accounting firm, and former chair of the audit committee of two
other public technology companies, Mr. Slayen brings to the Board
senior leadership experience, expertise in accounting and financial
reporting, financing and investing activities, and
internal
6
control
and compliance. Mr. Slayen also brings to the Board a strong
background in advising high-tech companies through his prior public
company board experience.
Vote Required and Recommendation of the Board
The six
nominees receiving the highest number of affirmative votes of the
shares present or represented and entitled to vote at the Annual
Meeting shall be elected as directors.
the board unanimously recommends that shareholders vote
“for” the election of the
nominees listed above.
7
Director Compensation
Gayn
Erickson, inside director of the Company during fiscal year 2020,
did not receive any compensation for his services as member of the
Board. 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. Rhea Posedel retired as an employee of the Company,
effective July 26, 2019, and accordingly became an outside director
as of that date. Rhea Posedel’s compensation as a Chairman of
the Board was $70,000 paid in quarterly installments starting in
the second quarter of fiscal 2020, and was eligible to participate
in some of the Company’s benefit plans, such as medical,
dental, group life, disability, and accidental death and
dismemberment insurance. Each other outside director received (1)
an annual retainer of $40,000 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. The
Board and its committees may elect to waive Board fees, or receive
RSUs or stock options in lieu of cash Board fees. Outside directors
are also reimbursed for certain expenses incurred in attending
board and committee meetings.
On July
17, 2019, an option to purchase 15,000 shares at a price of $1.68
was granted to Laura Oliphant upon her appointment to the Board. On
April 21, 2020, stock options were issued in lieu of cash Board
fees for the fourth quarter of fiscal 2020. Rhea Posedel, Mario
Rosati, John Schneider and Howard Slayen were granted options to
purchase 17,956, 14,108, 14,365 and 16,160 shares, respectively, at
a price of $1.64 per share, and these options vested 100 percent of
shares on the date of grant. On April 21, 2020, Laura Oliphant was
granted restricted stock units of 9,451 shares in lieu of cash
Board fees for the fourth quarter of fiscal 2020. On July 14, 2020,
Laura Oliphant, Mario Rosati, and John Schneider were each granted
restricted stock units of 1,344 shares in lieu of cash Board fees
for the fourth quarter of fiscal 2020. On July 14, 2020, Howard
Slayen was granted options to purchase 2,263 shares at a price of
$1.86 per share and vested 100 percent of shares on the date of
grant
in lieu of cash
Board fees for the fourth quarter of fiscal 2020.
Directors are also
eligible to participate in the Company’s Equity Incentive
Plans. On October 22, 2019, outside directors Laura Oliphant, Mario
Rosati, John Schneider and Howard Slayen were each granted options
to purchase 10,000 shares at $1.77 per share, and Rhea Posedel was
granted options to purchase 18,000 shares at $1.77 per
share.
The
following table sets forth the compensation paid by the Company
during the fiscal year ended May 31, 2020 to the Company’s
directors other than Mr. Erickson:
Director Compensation
|
|
|
|
Fees Earned
or Paid in
|
Option
Awards
|
Stock
Awards
|
Incentive Plan
Compensation
|
All Other
Compensation
|
Total
Compensation
|
|
Name
|
|
Year
|
Cash ($)
|
($) (1)
|
($)
|
($)
|
($)
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
Rhea
J. Posedel
|
|
2020
|
$
54,232
(2)
|
$
36,413
|
--
|
--
|
$
21,339
(3)
|
$
111,984
|
|
Laura
Oliphant
|
|
2020
|
28,250
|
25,428
|
18,000
|
--
|
--
|
71,678
|
|
Mario
M. Rosati
|
|
2020
|
37,500
|
24,256
|
2,500
|
--
|
--
|
64,256
|
|
John
M. Schneider (4)
|
|
2020
|
42,000
|
24,506
|
2,500
|
--
|
--
|
69,006
|
|
Howard T.
Slayen
|
|
2020
|
44,750
|
28,755
|
--
|
--
|
--
|
73,505
|
8
(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 11 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, 2020. At the
end of fiscal 2020, the aggregate number of option awards
outstanding for each director was as follows: 130,456 held by Rhea
Posedel; 25,000 held by Laura Oliphant; 145,265 held by Mario
Rosati; 103,624 held by John Schneider; and 145,380 held by Howard
Slayen. Options granted generally vest at either 100 percent of
shares on the date of grant or 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 $19,232
salary earned by Rhea Posedel in fiscal 2020 for service as an
employee of the
Company.
(3)
Includes health and
life insurance premiums and medical costs paid by the Company in
the amount of $21,198, and contributions made by the Company under
its ESOP in the amount of $141.
(4)
John Schneider
resigned from the Board on September 2, 2020.
Board Matters and Corporate Governance
Board Meetings and Committees
The
Board held a total of seven meetings during the fiscal year ended
May 31, 2020. No incumbent director during his or her period of
service in such fiscal year attended fewer than 75% of the
aggregate number of all meetings of the Board and the committees of
the Board upon which such director served.
The
Board has three committees: the Audit Committee, the Compensation
Committee and the Corporate Governance and Nominating
Committee.
There
were several recent matters that impacted Board committee
assignments. Firstly, John Schneider resigned from the Board on
September 2, 2020. Mr. Schneider was a member of our Audit and
Corporate Governance and Nominating Committees. Secondly, Geoffrey
Scott was appointed to the Board of Directors on September 2, 2020.
Mr. Scott was appointed to the Audit and Corporate Governance and
Nominating Committees, but was not a member for fiscal year 2020,
notwithstanding his signature on the report of the Audit Committee
contained herein. Thirdly, Mario Rosati was appointed to the
Corporate Governance and Nominating Committee on September 2, 2020,
replacing Howard Slayen in this position. Lastly, Laura Oliphant
was appointed to the Corporate Governance and Nominating Committee
on September 2, 2020, adding an additional member to the
committee.
The
Audit Committee currently consists of directors Oliphant, Scott and
Slayen, each of whom is an independent member of the Board, as
defined by the NASDAQ Capital Market (“Nasdaq”),
director independence standards, as well as applicable SEC rules,
as currently in effect. The Audit Committee Chair is Howard Slayen.
The Audit Committee held four meetings during fiscal year 2020.
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. 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 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 currently consists of directors
Oliphant and Slayen, each of whom is an independent member of the
Board, as defined by the Nasdaq director independence standards, as
well as applicable SEC rules, as currently in effect. The
Compensation Committee
Chair is
Laura Oliphant. The Compensation
Committee held three meetings during fiscal year 2020. The
Compensation Committee reviews and advises the Board 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.
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
9
processes
and procedures can be found herein in the section entitled
“Compensation Discussion and Analysis.”
The
Corporate Governance and Nominating Committee of the Board
currently consists of directors Oliphant, Rosati and Scott, each of
whom is an independent member of the Board, as defined by the
Nasdaq director independence standards, as well as applicable SEC
rules, as currently in effect. The Corporate Governance and
Nominating Committee Chair is Mario Rosati. The Corporate
Governance and Nominating Committee reviews and makes
recommendations to the Board regarding matters concerning corporate
governance; reviews the composition and evaluates the performance
of the Board; selects, or recommends for the selection of the
Board, director nominees; evaluates director compensation; reviews
the composition of committees of the Board and recommends persons
to be members of such committee; and reviews conflicts of interest
of members of the Board and corporate officers. The Corporate
Governance and Nominating Committee is governed by a written
charter approved by the Board. The Corporate Governance and
Nominating Committee of the Board did not hold any meetings during
the fiscal year ended May 31, 2020. 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 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
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 should
include the candidate’s name and qualifications for Board
membership and should be addressed to:
Aehr
Test Systems
400
Kato Terrace
Fremont,
CA 94539
Attn:
Secretary
Director Qualifications
Members
of the Board should have the highest professional and personal
ethics and values, consistent with the Company’s Code of
Conduct and Ethics adopted by the Board. They should have broad
experience at the policy-making level in business. Members should
be committed to enhancing shareholder value and should be able to
devote sufficient time and resources to carry out their duties and
to provide insight and practical wisdom based on experience. Their
service on other public company boards should be limited to a
number that permits them, given their individual circumstances, to
responsibly perform all of their duties as a director of the
Company. Each director must represent the interests of all
shareholders.
Identifying and Evaluating Nominees for Directors
The
Board utilizes a variety of methods for identifying and evaluating
nominees for director. The Board 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
considers various potential candidates for director. Candidates may
come to the attention of the Board through current Board members,
professional search firms, shareholders or other persons. These
candidates are evaluated at regular or special meetings of the
Board, and may be considered at any point during the year. As
described above, the Board 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 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. The Board may also review materials
provided by professional search firms or
10
other
parties in connection with a candidate who is not recommended by a
shareholder. In evaluating such recommendations, the Board 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. A goal of the nomination
process is for the Board 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 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.
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 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 maintains a structure that currently separates the positions
of Chairman of the Board and Chief Executive Officer with Rhea J.
Posedel currently serving in the position of Chairman of the Board
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 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 with information regarding the Company’s risks. The
Board, 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. 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, as
appropriate, depending on the facts and circumstances outlined in
the communication received.
11
PROPOSAL 2
AMENDMENT TO THE AMENDED AND RESTATED
2006 EMPLOYEE STOCK PURCHASE PLAN
The
Board is proposing that the ESPP be amended to increase the number
of shares authorized thereunder by an additional 350,000 shares of
Common Stock (the “Shares”). The Company previously
reserved 1,850,000 Shares for issuance under the ESPP. If this
proposal is approved by the Company’s shareholders, a total
of 2,200,000 Shares will be reserved for issuance under the
ESPP.
If the
amendment is approved, the ESPP will continue to be a significant
part of our overall equity compensation strategy, especially with
respect to our non-executive employees. The ESPP allows our
employees to buy Shares at a discount through payroll deductions.
In the highly competitive technology industry in which we compete
for talent, we believe that offering an employee stock purchase
program is critical to our ability to remain competitive. If the
amendment of the ESPP is not approved by the Company’s
shareholders, we may be restricted in our ability to offer
competitive compensation to existing employees and qualified
candidates, and our business and ability to increase long-term
shareholders value could be adversely affected.
Description of the ESPP
The
following paragraphs provide a summary of the principal features of
the ESPP and its operation. However, this summary is not a complete
description of all of the provisions of the ESPP and is qualified
in its entirety by the specific language of the ESPP.
Additional Information Regarding the ESPP
●
The actual number
of Shares that will be purchased under the ESPP cannot be
determined because such number will depend on a number of
indeterminable factors (including the number of participants, the
rates at which participants make contributions to the ESPP, and our
stock price). However, in fiscal years 2018, 2019 and 2020, the
numbers of Shares purchased under the ESPP were 236,808 Shares,
125,261 Shares, and 136,303 Shares, respectively.
●
53 employees
participated in the most recently completed offering period under
the ESPP, purchasing 65,674 Shares (with a value of $75,007 on the
date of purchase) at an average purchase price of $1.142 per
Share.
●
As of August 31,
2020, there were 56 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 in
October
2006 and approved by our shareholders on October
26, 2006. Our Board subsequently approved the amendment and
restatement of the ESPP in September 2016, which was approved by
our shareholders on October 18, 2016. The purpose of the ESPP is to
provide eligible employees with an opportunity to purchase shares
of our common stock through contributions, generally through
payroll deductions. The ESPP permits the administrator to grant
purchase rights that qualify for preferential tax treatment under
Section 423 of the Internal Revenue Code of 1986, as amended
(the “Code”) and purchase rights that do not qualify
under Code Section 423 pursuant to rules, procedures or
sub-plans adopted by our Board or other committee (including the
Compensation Committee) administering the ESPP that are designed to
achieve desired tax or other objectives.
12
Shares Available for Issuance
As
of August 31, 2020 a total of 233,061 Shares were available for
sale under the ESPP. If our shareholders approve this proposal, a
total of 583,061 Shares will be available for issuance under the
ESPP.
Administration
Our
Compensation Committee administers the ESPP. All questions of
interpretation or application of the ESPP are determined by the
administrator and its decisions are final and binding upon all
participants. The administrator has full and exclusive
discretionary authority to construe, interpret, and apply the terms
of the ESPP, to designate separate offerings under the ESPP, to
adjudicate disputed claims under the ESPP, and to establish such
procedures that it deems necessary for the administration of the
ESPP. The administrator is further authorized to adopt rules and
procedures regarding eligibility to participate, the definition of
“compensation,” handling of contributions, and making
of contributions to the ESPP, among other
responsibilities.
Eligibility
Each
employee of the Company is eligible to participate in the ESPP,
except that no employee will be eligible to participate in the ESPP
to the extent that (i) immediately after the grant, such
employee would own 5% or more of the combined voting power of all
classes of capital stock of Aehr Test Systems or its parents or
subsidiaries, or (ii) his or her rights to purchase stock
under all of Aehr Test Systems’ employee stock purchase plans
accrues at a rate that exceeds $25,000 worth of stock (determined
as of the fair market value of the shares on the beginning of the
offering period) for each calendar year. In addition, the
administrator, in its sole discretion and prior to an offering
date, may determine that an individual will not be eligible to
participate if he or she: (i) has not completed at least 2
years of service since his or her last hire date (or such lesser
period of time as may be determined by the administrator in its
discretion), (ii) customarily works not more than 20 hours per
week (or such lesser period of time as may be determined by the
administrator in its discretion), (iii) customarily works not
more than 5 months per calendar year (or such lesser period of time
as may be determined by the administrator in its discretion),
(iv) is an executive, officer or other manager, or (v) is
a highly compensated employee under Section 414(q) of the
Code.
Offering Period
Unless otherwise determined by the administrator,
each offering period under the ESPP will have a duration of
approximately 24 months, commencing on the first trading day on or
after April 1 of each year and terminating on the first trading day
on or after April 1, approximately 24 months later, and commencing
on the first trading day on or after October 1 of each year and
terminating on the first trading day on or after October 1,
approximately 24 months later. The administrator, in its
discretion, may modify the terms of offering periods before they
begin, provided that no offering period may last more than 27
months.
Each offering period will contain purchase periods
during which Shares may be purchased. Unless the administrator
provides otherwise, purchase periods will commence on the first
trading day on or after April 1 and October 1 and terminate on the
first trading day on or after October 1 of the same year and April
1 of the following year, respectively.
Participation
The ESPP permits participants to purchase Shares
through payroll deductions of up to 10% of their eligible
compensation, which includes
base straight time gross
earnings and commissions (to the extent such commissions are an
integral, recurring part of compensation), but exclusive of
payments for incentive compensation, bonuses, payments for overtime
and shift premium, equity compensation income and other similar
compensation
. Once an employee becomes
a participant in the ESPP, the employee automatically will
participate in each successive offering period until the employee
withdraws from the ESPP or the employee’s employment with the
Company terminates. On the first day of each offering period, each
participant automatically is granted a right to purchase shares of
our common stock
at the end of each purchase period
occurring during such offering period
.
This purchase right expires at the end of the
offering
13
period
or upon termination of employment, whichever is earlier, but is
exercised on the last day of each applicable purchase period to the
extent of the contributions made during such purchase
period.
Purchase Price
Unless
and until the administrator determines otherwise, the purchase
price will be 85% of the lesser of the fair market value of our
common stock on (i) the first day of the offering period, or
(ii) the last day of the applicable purchase period, subject
to compliance with the Code and the terms of the ESPP. The fair
market value of our common stock on any relevant date will be the
closing price of our stock as reported on the Nasdaq Capital
Market.
Payroll Deductions; Payment for Shares
Contributions
are accumulated throughout each purchase period, generally through
payroll deductions. The number of whole shares that a participant
may purchase in each purchase period will be determined by dividing
the total amount of a participant’s contributions during that
purchase period by the purchase price; provided, however, that a
participant may not purchase more than 3,000 shares each purchase
period. During an offering period, a participant may discontinue
his or her participation in the ESPP and generally may change the
rate of payroll deductions in an offering period, including to
cease deductions (change contribution rate to 0%) but remain
eligible to purchase shares on the next purchase date with funds
previously contributed. No fractional shares will be purchased
under the ESPP and any contributions accumulated in a
participant’s account that are not sufficient to purchase a
full share will be retained in participant’s account or
refunded as soon as administratively possible after the end of the
applicable purchase period.
All
participant contributions are credited to the participant’s
account, are generally only withheld in whole percentages and are
included with Aehr Test Systems’ general funds where
permissible. Funds received by Aehr Test Systems pursuant to
purchases under the ESPP will be added to the company’s
general funds but will not be segregated unless required by
applicable law. A participant generally may not make additional
contributions into his or her account outside the regularly
established process.
Withdrawal
Generally,
a participant may withdraw all of his or her contributions from a
purchase period at any time by written or electronic notice without
affecting his or her eligibility to participate in future offering
periods. Once a participant withdraws from a particular offering
period, however, that participant may not participate again in the
same offering period. To participate in a subsequent offering
period, the participant must deliver a new subscription agreement
to Aehr Test Systems.
Termination of Employment
Upon
termination of a participant’s employment for any reason,
including disability or death, he or she will be deemed to have
elected to withdraw from the ESPP and the contributions credited to
the participant’s account (to the extent not used to make a
purchase of our common stock) will be returned to him or her or, in
the case of death, to the person or persons entitled thereto as
provided in the ESPP, and such participant’s right to
purchase shares under the ESPP will automatically be
terminated.
Adjustments upon Changes in Capitalization, Dissolution,
Liquidation, Merger or Change of Control
Changes in Capitalization
In
the event that any dividend or other distribution (whether in the
form of cash, common stock, other securities, or other property),
recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase,
or exchange of common stock or other securities of Aehr Test
Systems, or other change in the corporate structure of Aehr Test
Systems affecting our common stock such that an adjustment is
appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under
the ESPP, then the administrator will adjust the number and class
of common stock that may be delivered under the ESPP, the purchase
price per share, the number of shares of common stock covered by
each right to purchase shares under the ESPP that
14
has not
yet been exercised, and the maximum number of shares a participant
can purchase during an offering period.
Dissolution or Liquidation
In
the event of Aehr Test Systems’ proposed dissolution or
liquidation, the administrator will shorten any offering period
then in progress by setting a new purchase date and any offering
periods will end on the new purchase date. The new purchase date
will be prior to the dissolution or liquidation. If the
administrator shortens any offering periods then in progress, the
administrator will notify each participant in writing, at least ten
business days prior to the new purchase date, that the purchase
date has been changed to the new purchase date and that the right
to purchase shares under the ESPP will be exercised automatically
on the new purchase date, unless the participant has already
withdrawn from the offering period.
Change in Control
In
the event of a merger or “change in control,” as
defined in the ESPP, each right to purchase shares under the ESPP
will be assumed or an equivalent right to purchase shares will be
substituted by the successor corporation or a parent or subsidiary
of such successor corporation. In the event the successor
corporation refuses to assume or substitute for the ESPP purchase
rights, the administrator will shorten the offering period with
respect to which such ESPP purchase right relates by setting a new
purchase date on which such offering period will end. The new
purchase date will be prior to the merger or change in control. If
the administrator shortens any offering periods then in progress,
the administrator will notify each participant in writing, prior to
the new purchase date, that the purchase date has been changed to
the new purchase date and that the right to purchase shares under
the ESPP will be exercised automatically on the new purchase date,
unless the participant has already withdrawn from the offering
period.
Amendment and Termination of the ESPP
The
administrator may at any time amend, suspend, or terminate the
ESPP, including the term of any offering period then outstanding.
Generally, no such termination can adversely affect previously
granted rights to purchase shares under the ESPP. The ESPP will
continue until terminated by our Board in accordance with the terms
of the ESPP.
Plan Benefits
Participation in the ESPP is voluntary and is
dependent on each eligible employee’s election to participate
and his or her determination as to the level of payroll deductions.
Accordingly, future purchases under the ESPP are not determinable.
Non-employee directors are not eligible to participate in the
ESPP.
For illustrative purposes, the following table sets
forth (i) the number of shares of our common stock that were
purchased during the last fiscal year under the ESPP, (ii) the
average price per share paid for such shares, and (iii) the
fair market value at the date of purchase
.
|
Name of
Individual or Group
|
Number of Shares
Purchased
|
Weighted Average
Per Share Purchased ($)
|
Weighted Average
Fair Market Value at Date of Purchased ($)
|
|
Gayn Erickson,
President and Chief Executive
Officer
|
6,000
|
$
1.139
|
$
10,020
|
|
Kenneth B. Spink,
VP of Finance and Chief Financial
Officer
|
6,000
|
$
1.139
|
$
10,020
|
|
Vernon Rogers,
Executive VP of Sales and
Marketing
|
--
|
$
--
|
$
--
|
|
All executive
officers, as a group
|
18,000
|
$
1.139
|
$
30,060
|
| All employees who are not executive officers, as a group |
118,303
|
$
1.139
|
$
197,962
|
15
Certain Federal Income Tax Information
The
following brief summary of the effect of the U.S. federal income
taxation upon the participant and the Company with respect to the
shares purchased under the ESPP does not purport to be complete and
does not discuss the tax consequences of a participant’s
death or the income tax laws of any state or foreign country in
which the participant may reside.
The
ESPP, and the right of 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. The Company
generally is not entitled to a deduction for amounts taxed as
ordinary income or capital gain to a participant except to the
extent of ordinary income recognized by participants upon a sale or
disposition of shares prior to the expiration of the holding
periods described above.
THE
FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF 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 Recommendation of the Board
The amendment of the ESPP
requires the
affirmative vote of the
majority of
the
shares represented at the Annual Meeting and entitled to
vote. If a stockholder abstains from voting,
that
abstention will have the same effect
as if the stockholder voted “AGAINST” this proposal.
Broker non-votes, if any, will have no impact on
the
outcome
of
this proposal
.
THE
BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
“FOR” THE AMENDMENT TO
THE
AMENDED AND RESTATED 2006 EMPLOYEE STOCK PURCHASE PLAN
16
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC
ACCOUNTING FIRM
The
Audit Committee of the Board of the Company has selected BPM LLP,
as the Company’s independent registered public accounting
firm, to audit the consolidated financial statements of the Company
for the fiscal year ending May 31, 2021, and the Board recommends
that shareholders vote for ratification of such appointment. In the
event of a negative vote on such ratification, the Audit Committee
will reconsider its selection. Even if the selection is ratified,
the Audit Committee in its 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 and will have the
opportunity to make a statement if they desire to do so, and are
expected to be available to respond to appropriate
questions.
Independent Registered Public Accounting Firm’s
Fees
The
following table sets forth the aggregate fees billed or to be
billed by BPM LLP for the fiscal years ended May 31, 2020 and
2019:
DESCRIPTION OF SERVICES
|
|
2020
|
2019
|
|
Audit
Fees
|
$
175,426
|
$
171,626
|
|
All
Other Fees
|
4,990
|
4,740
|
|
Total
Fees
|
$
180,416
|
$
176,366
|
Audit Fees
. Aggregate fees billed or to
be billed for professional services rendered for the audit of the
Company’s fiscal 2020 and fiscal 2019 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.
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 2020, all audit and
non-audit services were pre-approved in accordance with the
Company’s policy.
Vote Required and Recommendation of the Board
The
ratification of the appointment of BPM LLP as the Company’s
independent registered public accounting firm for the fiscal year
ending May 31, 2021 requires the affirmative vote of the majority
of the shares represented at the Annual Meeting and entitled to
vote. If a stockholder abstains from voting, that abstention will
have the same effect as if the stockholder voted
“AGAINST” this proposal. Broker non-votes, if any, will
have no impact on the outcome of this proposal
.
the Board unanimously recommends that shareholders vote
“for” the ratification of
the appointment of bpm llp as the company’s independent
registered public accounting
firm for fiscal 2021.
17
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.
This vote is not intended to address
any specific item of compensation or any specific named executive
officer, but rather the overall compensation of all of our named
executive officers and the philosophy, policies and practices
described in this Proxy Statement.
As
described in the Compensation Discussion and Analysis section of
this Proxy Statement, the Company believes that its 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 section of this Proxy
Statement captioned “Compensation Discussion and
Analysis”, 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. Although this
resolution is non-binding, the Compensation Committee and the Board
value the opinions that shareholders express in their vote and will
review and consider the outcome of the vote when making future
executive compensation decisions.
The
Board 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 2020
Annual Meeting of Shareholders.”
Vote Required and Recommendation of the Board
The advisory vote on executive compensation will
be considered approved
, on a non-binding, advisory basis, if
it receives the affirmative vote of the majority of the shares
represented at the Annual Meeting and entitled to vote. If a
stockholder abstains from voting, that abstention will have the
same effect as if the stockholder voted “AGAINST” this
proposal. Broker non-votes, if any, will have no impact on the
outcome of this proposal.
the Board unanimously recommends that shareholders vote
“for” the approval of the
compensation of the company’s named executive
officers.
18
EXECUTIVE OFFICERS
The
names of the executive officers of the Company, ages as of May 31,
2020, and certain information about them as of the mailing date of
this Proxy Statement are set forth below:
|
Name
|
|
Age
|
|
Position
|
|
Gayn
Erickson
|
|
55
|
|
President
and Chief Executive Officer
|
|
Kenneth
B. Spink
|
|
59
|
|
Vice
President of Finance and Chief Financial Officer
|
|
Donald
P. Richmond II
|
|
64
|
|
Vice
President of Engineering
|
|
David
S. Hendrickson
|
|
63
|
|
Chief
Technology Officer
|
|
Michael
Brannan (1)
|
|
52
|
|
Vice
President of Operations
|
|
Vernon
Rogers
|
|
53
|
|
Executive
Vice President of Sales and Marketing
|
-------------------------------------
(1)
Mr. Michael Brannan
was elected Vice President of Operations on March 16,
2020.
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
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.
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, member of the Board, 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.
MICHAEL
BRANNAN
joined the Company as Vice President of
Manufacturing and Operations in March 2020. He is a hands-on
executive manager with extensive operations, sales, and marketing
experience in test systems, probers, handlers, and probe cards.
Prior to joining Aehr, Mr. Brannan was President and CEO of Harbor
Electronics, a leading design & printed circuit board
fabrication company delivering test tooling solutions to the
semiconductor test industry, from 2015 to 2018. From 2006 to 2015,
he has also held senior manager roles at Xcerra (formerly LTX and
ECT) and at Kulicke & Soffa Interconnect which involved
critical new platform qualifications from all the major ATE
suppliers. Mr.
19
Brannan
is an alumnus of Santa Clara University where he was a combined
science major in PsychoBiology.
VERNON
ROGERS
joined the Company as Executive Vice President of
Sales and Marketing in October 2018. Prior to joining Aehr, Mr.
Rogers served as head of sales and marketing at GES preceding its
acquisition by Kimball Electronics. Mr. Rogers, over the past 22
years, has held numerous senior executive sales, marketing and
operations management positions, successfully building
multi-channel sales distribution and support organizations at both
public and start-up technology companies in the semiconductor and
system level test space. His career has focused on nanoscale
inspection, manufacturing, and test technologies with such leaders
as LitePoint (acquired by Teradyne), Credence Systems Corporation
(acquired by Xcerra), NPTest (acquired by Credence Systems) and
Schlumberger Automated Test Equipment. He also oversaw sales for
FlexStar Technology, a Bay Area leader in hard disk drives (HDD)
and solid-state disk drives (SSD) test and burn-in. Mr. Rogers
received a B.S. in Electrical Engineering from North Dakota State
University.
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.
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.
Overall Compensation
The
criteria for determining the appropriate salary level, bonus and
equity awards for each of the executive officers include: (a)
Company performance as a whole; (b) business unit performance
(where appropriate); and (c) individual performance. Company
performance and business unit performance are
20
measured
against both strategic and financial goals. Examples of these goals
are to obtain operating profit, revenue growth, and timely new
product introduction. Individual performance is measured to
specific objectives relevant to the executive officer’s
position and a specific time frame.
These
criteria are usually related to a given fiscal year, but may, in
some cases, be measured over a shorter or longer time
frame.
The
processes used by the Compensation Committee include the following
steps:
1.
The
Compensation Committee periodically reviews information comparing
the Company’s compensation levels to other companies in
similar industries, other leading companies (regardless of
industry) and competitors. 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, as
appropriate.
4.
At the
end of the performance cycle, the Chief Executive Officer evaluates
each other executive officers’ relative success in meeting
the performance goals. The Chief Executive Officer makes
recommendations on salary, bonus and equity awards, utilizing the
comparative results as a factor. Also included in the decision
criteria are subjective factors such as teamwork, leadership
contributions and ongoing changes in the business climate. The
Chief Executive Officer reviews the recommendations and obtains
Compensation Committee approval.
5.
The
final evaluations and compensation decisions are discussed with
each executive officer by the Chief Executive Officer or
Compensation Committee, as appropriate.
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 regarding all forms of
compensation to be provided to the executive officers of the
Company. The Compensation Committee is appointed by the Board, and
currently consists of directors Oliphant and Slayen, each of whom
is a “non-employee director” for purposes of Rule 16b-3
under the Exchange Act.
The
Company’s Compensation Committee has primary responsibility
for ensuring that the Company’s executive officer
compensation and benefit program is consistent with the
Company’s compensation philosophy and corporate governance
guidelines and for determining the executive compensation packages
offered to the Company’s executive officers.
The
Compensation Committee is responsible for:
1.
reviewing and
approving the annual base salary for the Company’s executive
officers, as well as any other benefits, compensation or
employment-related arrangements, including (i) annual or special
incentive bonuses, including the specific goals and amounts, (ii)
equity compensation, and/or (iii) employment agreements, severance
arrangements, and change in control agreements;
2.
making
recommendations to the Board with respect to incentive compensation
plans, including reservation of shares for issuance under employee
benefit plans;
3.
reviewing the
performance of the Company’s Chief Executive
Officer;
4.
making
recommendations to the Board on the Company’s executive
compensation practices and policies, including the evaluation of
performance by the Company’s executive officers and issues of
management succession.
21
Many of
the actions take the form of recommendations to the full Board
where final approval, rejection or redirection may occur. The
Compensation Committee is responsible for administering the
compensation programs for all Company executive officers. The
Compensation Committee has delegated the responsibility of
administering the compensation programs for all other Company
employees to the Company's officers.
Elements of Compensation
In
structuring the Company’s compensation program, the
Compensation Committee seeks to select the types and levels of
compensation that will further its goals of rewarding performance,
linking executive officer compensation to the creation of
shareholder value, attracting and retaining highly qualified
executive officers and maximizing long-term shareholder
returns.
The
Company designs base salary to provide the essential reward for an
executive officer’s work. Once base salary levels are
initially determined, increases in base salary are provided to
recognize an executive officer’s specific performance
achievements.
The
Company utilizes equity-based compensation, including stock options
and restricted stock units, or RSUs, to ensure that the Company has
the ability to retain executive officers over a longer period of
time, and to provide executive officers with a form of reward that
aligns their interests with those of the Company’s
shareholders. Executive officers whose skills and results the
Company deems to be critical to the Company’s long-term
success are eligible to receive higher levels of equity-based
compensation.
The
Company also utilizes various forms of performance-based
compensation, including cash bonuses, commissions, and RSUs that
allow the Company to remain competitive with other companies while
providing additional compensation for an executive officer’s
outstanding results and for the achievement of corporate
objectives.
Core
benefits, such as the Company’s basic health benefits, 401(k)
program, 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 booking 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
commission plan, which only applies to Gayn Erickson, the Chief
Executive Officer, and Vernon Rogers, the Executive Vice President
of Sales and Marketing. Periodically, but at least once near the
close of each fiscal year, the Compensation Committee reviews the
existing plans and recommends those that should be used for the
subsequent year.
Consistent with the
Company’s compensation philosophy, the Company has structured
each element of the Company’s executive officer compensation
program as described below.
Base Salary
The
Company creates a set of base salary structures that are both
affordable and competitive in relation to the market. The Company
determines the Company’s executive officer salaries based on
job responsibilities and individual experiences. The Company
monitors base salary levels within the market and makes adjustments
to the Company’s structures as needed after considering the
recommendations of management. The Company’s Compensation
Committee reviews the salaries of the Company’s executive
officers annually, and the Company’s Compensation Committee
grants increases in salaries based on individual performance during
the prior calendar year, provided that any increases are within the
guidelines determined by the Compensation Committee for each
position.
Annual Bonus
The
Company’s executive annual bonus plan provides for cash bonus
awards, dependent upon attaining stated corporate objectives and
personal performance goals. The Company’s executive officers
are eligible to receive cash bonuses based upon the Company’s
achievement of certain financial and performance goals set by the
Compensation Committee. The Compensation Committee approves the
performance criteria on an annual basis and these financial and
performance goals typically have a
22
quarterly
or one-year time horizon. The Compensation Committee believes that
the practice of awarding incentive bonuses based on the achievement
of performance goals furthers the Company’s goal of
strengthening the connection between the interests of management
and the Company’s shareholders.
In
fiscal 2020, the Company’s Compensation Committee determined
the maximum eligible cash bonus levels based upon the
Company’s achievement of certain financial goal for Gayn
Erickson and Kenneth B. Spink were up to 95% and 58% of their base
salaries, respectively. Vernon Rogers was not eligible for the
Company’s financial goal cash bonus in fiscal 2020. Based on
the Company performance for the year, the Compensation Committee
did not award any cash bonuses to the Company’s executive
officers. Additionally, in fiscal 2020, the Compensation Committee
approved a personal performance cash bonus for Gayn Erickson and
Vernon Rogers without maximum amounts and Kenneth B. Spink at the
maximum of $31,000. Based upon personal performance against
milestone for fiscal 2020, the Compensation Committee awarded
$20,000, $4,000 and $22,500 to Gayn Erickson, Kenneth B. Spink and
Vernon Rogers, respectively. The annual incentive bonus plan is
discretionary, and the Compensation Committee may modify, suspend,
eliminate or adjust the plan, the goals and the total or individual
payouts at any time.
Booking Commission
During
fiscal 2020, Gayn Erickson, the Company’s Chief Executive
Officer, was eligible to receive a booking commission at the rate
of 0.64% of bookings over $32 million, payable quarterly. The
commission would be payable upon the Company’s quarterly
achievement of a GAAP profit, before bonus, of $50,000 or more.
Under this plan, no booking commissions were earned by Mr. Erickson
in fiscal 2020.
During
fiscal 2020, Vernon Rogers, the Executive Vice President of Sales
and Marketing, was eligible to receive booking commission based on
achievement of booking objectives or quotas. Vernon Rogers receives
a standard commission rate of 0.41% for bookings up to 100% of
quota and accelerated commissions rate of 0.82% on bookings above
quota. Commissions are considered earned at the time of booking and
are paid after the close of the month of revenue
recognition.
Under
this plan, Vernon Rogers, the Executive Vice President of Sales and
Marketing, earned $70,639 in fiscal 2020 which is included in the
annual non-equity incentive plan compensation column in the Summary
Compensation Table on page 26.
Revenue Commission
During
fiscal 2020, Gayn Erickson was eligible to receive a revenue
commission at 0.427% of quarterly revenue with the yearly maximum
of $128,000. The commission would be payable upon the
Company’s quarterly achievement of a GAAP profit, before
bonus, of $50,000 or more. Under this plan, the Compensation
Committee awarded to Gayn Erickson $29,352 in cash, included in the
annual non-equity incentive plan compensation column in the Summary
Compensation Table on page 26, and 15,911 share restricted stock
units, which is equivalent to a $26,094 cash bonus, in fiscal
2020.
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 Board 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 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
23
respect
to newly hired executive officers, the Company’s standard
practice is to make stock option grants effective on or shortly
after the executive officer’s hire date.
In
fiscal 2020, the Company granted a total of 745,401 RSUs and
options to purchase shares of the Company’s common stock of
which RSUs and options covering a total of 390,911 shares were
granted to the Company’s executive officers, representing
52.4% of all RSUs and options granted in fiscal 2020. 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 makes payments for a
supplemental insurance to cover the uninsured out-of-pocket amounts
related to healthcare for the executive officers. Other than these
payments, there were no other special benefits or perquisites
provided to any executive officer in fiscal 2020, except that
Vernon Rogers received auto allowance payments. During fiscal 2020,
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
2020. During fiscal 2020, the Company contributed $60,000 to the
Company’s ESOP.
The
Company entered into Change of Control Severance Agreements on
January 3, 2012 with Mr. Gayn Erickson; on September 9, 2015 with
Mr. Kenneth B. Spink; and on October 12, 2018 with Mr. Vernon
Rogers; pursuant to which those executives would be entitled to a
payment in the event of a termination of employment for specified
reasons following a change of control of the Company. For this
purpose, a change of control of the Company means a merger or
consolidation of the Company, a sale by the Company of all or
substantially all of its assets, the acquisition of beneficial
ownership of a majority of the outstanding voting securities of the
Company by any person or a change in the composition of the Board
as a result of which fewer than a majority of the directors are
incumbent directors. Termination of employment for purposes of
these agreements means a discharge of the executive by the Company,
other than for specified causes including dishonesty, conviction of
a felony, misconduct or wrongful acts. Termination also includes
resignation following the occurrence of an adverse change in the
executive’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. Erickson, Spink and Rogers based on their base
salaries at May 31, 2020, would be approximately $466,309, $171,404
and $143,311, 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 29,
2020 (the last business day of the last fiscal year) of $1.65 and
the exercise price of the stock options for Messrs. Erickson, Spink
and Rogers would be $1,544, $594 and $475, 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 29, 2020 of $1.65 for Messrs.
Erickson, Spink and Rogers would be $7,339, $3,094 and $0,
respectively.
Compensation of the Chief Executive Officer
The
Compensation Committee used the same compensation policy described
above for all executive officers to determine the compensation for
Mr. Gayn Erickson, the Company’s Chief Executive Officer, in
fiscal year 2020. 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
2020, Mr. Erickson received stock options under the
24
Company’s
2016 Equity Incentive Plan to purchase 130,000 shares, which vest
over four year, and 15,911 restricted stock units, which vested
immediately as part of his revenue commission arrangement, as
described above under the section titled “Revenue
Commission.” The Compensation Committee believes Mr.
Erickson’s fiscal year 2020 compensation was fair relative to
the Company’s performance and Mr. Erickson’s individual
performance and leadership, and that it rewards him for this
performance and will serve to retain him as a key
employee.
Tax and Accounting Considerations
The
Compensation Committee takes the applicable tax and accounting
requirements into consideration in designing and overseeing our
executive compensation program.
Deductibility of Executive Compensation
Section
162(m) of the Internal Revenue Code generally limits the amount we
may deduct from our federal income taxes for compensation paid to
our Chief Executive Officer and certain other current and former
executive officers that are “covered employees” within
the meaning of Section 162(m) to $1 million per individual per
year, subject to certain exceptions. Although the Compensation
Committee may consider the tax implications as one factor in making
compensation decisions for our covered employees, the Compensation
Committee also considers other factors in making such decisions,
including ensuring that our executive compensation program supports
our business strategy. Consequently, the Compensation Committee
retains the discretion and flexibility to compensate our named
executive officers in a manner consistent with the objectives of
our executive compensation program and the best interests of the
Company and our shareholders, which may include providing for
compensation that is not deductible by the Company due to the
deduction limit of Section 162(m).
Accounting for Stock-Based Compensation
The
Compensation Committee takes accounting considerations into account
in designing compensation plans and arrangements for our executive
officers and other employees. Chief among these is Financial
Accounting Standards Board Accounting Standards Codification Topic
718 (“ASC Topic 718”), the standard which governs the
accounting treatment of certain stock-based compensation. Among
other things, ASC Topic 718 requires us to record a compensation
expense in our income statement for all equity awards granted to
our executive officers and other employees. This compensation
expense is based on the grant date “fair value” of the
equity award and, in most cases, will be recognized ratably over
the award’s requisite service period (which, generally, will
correspond to the award’s vesting schedule). This
compensation expense is also reported in the compensation tables
below, even though recipients may never realize any value from
their equity awards.
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, 2020, 2019 and 2018 by the
Company’s Chief Executive Officer, and each of the two other
most highly compensated executive officers for the fiscal year
ended May 31, 2020. We refer to these executive officers as our
named executive officers.
25
Summary Compensation Table
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
Name
and
|
Fiscal
|
|
Stock
|
Option
|
Incentive
Plan
|
All
Other
|
|
|
|
Principal
Position
|
Year
|
Salary
|
Bonus
|
Awards
(1)
|
Awards
(1)
|
Compensation
(2)
|
Compensation
(3)
|
Total
|
|
Gayn
Erickson
|
2020
|
$
288,766
|
$
20,000
|
$
26,094
(4)
|
$
133,093
|
$
29,352
|
$
35,948
(5)
|
$
533,253
|
|
President and
Chief
|
2019
|
$
288,766
|
--
|
--
|
$
157,017
|
--
|
$
35,146
|
$
480,929
|
|
Executive
Officer
|
2018
|
$
288,343
|
$
3,988
|
$
44,802
|
$
84,592
|
--
|
$
30,248
|
$
451,973
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth B.
Spink
|
2020
|
$
218,504
|
$
4,000
|
--
|
$
53,205
|
--
|
$
17,063
(6)
|
$
292,772
|
|
Vice President of
Finance
|
2019
|
$
218,504
|
--
|
--
|
$
64,987
|
--
|
$
17,752
|
$
301,243
|
|
and Chief Financial
Officer
|
2018
|
$
217,627
|
$
1,811
|
$
18,864
|
$
62,311
|
--
|
$
14,945
|
$
315,558
|
|
|
|
|
|
|
|
|
|
|
|
Vernon
Rogers
|
2020
|
$
250,016
|
$
22,500
|
--
|
$
38,748
|
$
70,639
|
$
51,393
(7)
|
$
433,295
|
|
Executive Vice
President of Sales and Marketing
|
2019
|
$
150,010
|
--
|
--
|
$
343,600
|
$
55,319
|
$
27,839
|
$
576,768
|
(1)
The amounts
reported represent the aggregate grant date fair value of equity
awards granted in the respective fiscal years, as determined
pursuant to ASC 718 (but excluding the effect of estimated
forfeitures for performance-based awards). The assumptions used to
calculate the value of awards are set forth in Note 11 of the Notes
to the Consolidated Financial Statements included in Aehr
Test’s Annual report on Form 10-K for fiscal filed with the
SEC on August 28, 2020.
(2)
Revenue and booking
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)
Restricted stock
units were issued in lieu of cash for revenue commissions
earned.
(5)
Includes health and
life insurance premiums and medical costs paid by the Company in
the amount of $33,160.
(6)
Includes health and
life insurance premiums and medical costs paid by the Company in
the amount of $15,053.
(7)
Includes health and
life insurance premiums and medical costs in the amount of $36,605,
and auto allowance in the amount of $12,000 paid by the
Company.
Grants of Plan Based Awards in Fiscal 2020
The
following table provides information with regard to each grant of
an award made to the named executive officers during the fiscal
year ended May 31, 2020.
|
|
|
|
All
Other
|
All
Other
|
|
|
|
|
|
|
|
Stock
|
Option
|
|
|
|
|
|
|
|
Awards:
|
Awards:
|
|
|
|
|
|
Estimated Future
Payouts
|
|
Number
of
|
Number
of
|
Exercise
|
Grant
Date
|
|
|
|
Under
Non-Equity
|
|
Shares
of
|
Securities
|
Price
of
|
Fair Value
of
|
|
|
|
Incentive
Plan Awards (1)
|
Grant
|
Stock
or
|
Underlying
|
Option
|
Stock
Option
|
|
|
Name
|
Target
($)
|
Maximum
($)
|
Date
|
Units
(2)
|
Option #
(3)
|
Awards ($)
(4)
|
Awards
($)
|
|
Gayn Erickson
(5)
|
$
137,743
|
$
275,486
|
7/16/19
|
|
130,000
|
$
1.635
|
$
125,931
|
|
|
|
|
4/21/20
|
15,911
|
--
|
--
|
$
26,094
|
|
Kenneth B. Spink
(6)
|
$
62,929
|
$
125,858
|
7/16/19
|
|
50,000
|
$
1.635
|
$
48,435
|
|
|
|
|
|
|
|
|
|
| Vernon Rogers (7) |
$
--
|
$
--
|
7/16/19
|
|
40,000
|
$
1.635
|
$
38,748
|
26
(1)
Reflects the target
and maximum values of cash bonus award based upon the
Company’s achievement of certain financial goals, excluding
commission, to the named executive officers in fiscal 2020. Based
on the Company performance for the year, the named executive
officers did not earn any Company’s financial goal
bonus.
(2)
Mr.
Erickson received RSUs which vest 100 percent on the date of grant
in lieu of cash for revenue commissions earned.
(3)
The
stock options granted in fiscal 2020 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, 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)
Besides cash bonus
on the Company’s financial goal, Mr. Erickson is eligible to
receive cash bonus based on personal performance goal without
target and maximum amounts. These cash bonus award amounts actually
earned by Mr. Erickson in fiscal 2020 are shown in the Summary
Compensation Table for fiscal 2020 under the heading
“Bonus.” Additionally, Mr. Erickson is eligible to
receive revenue and booking commission only when the
Company’s quarterly GAAP profit, before bonus, is equal
$50,000 or more. Revenue commission is calculated at 0.427% of
quarterly revenue with the yearly maximum of $128,000. Booking
commission is calculated at 0.64% only on the booking amounts that
are over $32 million thereafter without maximum amounts. The
commission amounts actually earned by Mr. Erickson in fiscal 2020
are shown in the Summary Compensation Table for fiscal 2020 under
the heading “Non-Equity Incentive Plan Compensation”
and “Stock Awards.”
(6)
Besides
cash bonus on the Company’s financial goal, Mr. Spink is
eligible to receive cash bonus based on personal performance
milestones with the maximum of $31,000. These cash bonus award
amounts actually earned by Mr. Spink in fiscal 2020 are shown in
the Summary Compensation Table for fiscal 2020 under the heading
“Bonus.”
(7)
Mr. Rogers is eligible to receive a cash
bonus based on personal performance milestones without target and
maximum amounts instead of the Company’s financial goal
bonus. These cash bonus award amounts actually earned by Mr. Rogers
in fiscal 2020 are shown in the Summary Compensation Table for
fiscal 2020 under the heading “Bonus.” Besides, Mr.
Rogers is eligible to receive booking commission in addition to a
cash bonus award. Mr. Rogers is eligible to receive $131,250 at the
target worldwide consolidated bookings, plus 0.82% of worldwide
consolidated bookings above target worldwide consolidated bookings.
The commission amounts actually earned by Mr. Rogers in fiscal 2020
are shown in the Summary Compensation Table for fiscal 2020 under
the heading “Non-Equity Incentive Plan
Compensation.”
27
Outstanding Equity Awards at Fiscal 2020 Year-End
The
following table presents certain information concerning the
outstanding equity awards held as of May 31, 2020 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
|
4,448
|
$
7,339
|
95,000
|
--
|
$
1.280
|
6/25/2020
|
|
|
|
|
100,000
|
--
|
$
2.710
|
8/20/2021
|
|
|
|
|
57,000
|
--
|
$
2.100
|
4/21/2022
|
|
|
|
|
40,968
|
1,782
|
$
1.680
|
7/25/2023
|
|
|
|
|
24,224
|
9,976
|
$
3.930
|
7/11/2024
|
|
|
|
|
43,748
|
56,252
|
$
2.400
|
8/17/2025
|
|
|
|
|
27,082
|
102,918
|
$
1.635
|
7/16/2026
|
|
|
|
|
|
|
|
|
|
Kenneth
B. Spink
|
1,875
|
$
3,094
|
12,000
|
--
|
$
2.710
|
8/20/2021
|
|
|
|
|
9,500
|
--
|
$
2.100
|
4/21/2022
|
|
|
|
|
29,000
|
--
|
$
2.300
|
9/9/2022
|
|
|
|
|
17,250
|
750
|
$
1.680
|
7/25/2023
|
|
|
|
|
17,283
|
7,117
|
$
3.930
|
7/11/2024
|
|
|
|
|
18,593
|
23,907
|
$
2.400
|
8/17/2025
|
|
|
|
|
10,416
|
39,584
|
$
1.635
|
7/16/2026
|
|
|
|
|
|
|
|
|
|
Vernon
Rogers
|
--
|
$
--
|
79,165
|
120,835
|
$
2.030
|
10/23/2025
|
|
|
|
|
45,833
|
4,167
|
$
1.710
|
12/12/2025
|
|
|
|
|
8,332
|
31,668
|
$
1.635
|
7/16/2026
|
|
|
|
|
|
|
|
|
(1)
RSUs generally vest
starting three months 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, 2020 of $1.65.
(3)
Stock
options outstanding are generally exercisable starting one month
after the date of grant, and with an additional 1/48
th
of the total number
of option shares becoming exercisable each month thereafter, with
full vesting occurring on the fourth anniversary of the date of
grant.
28
Stock Awards Vested and Option Exercises in Fiscal
2020
The
following table provides information concerning option exercises
and RSUs vested by the named executive officers during the fiscal
year ended May 31, 2020.
|
|
Stock Awards
|
Option Awards
|
||
|
|
Number of Shares
|
Value
|
Number of Shares
|
Value
|
|
|
Acquired on
|
Realized on
|
Acquired on
|
Realized on
|
|
Name
|
Vesting (#)
|
Vesting ($) (1)
|
Exercise (#)
|
Exercise ($) (2)
|
|
Gayn
Erickson
|
22,326
|
$
37,231
|
--
|
$
--
|
|
Kenneth
B. Spink
|
2,700
|
4,688
|
3,438
|
1,066
|
|
Vernon
Rogers
|
--
|
--
|
--
|
--
|
(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.
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,
2020 pursuant to each officer’s Change of Control and
Severance Agreement, as disclosed in more detail in the section
titled “
Elements of
Compensation - Other Benefits,
” above.
|
|
Involuntary
|
|
|
Terminaiton
not for
|
|
Named
Executive Benefits and Payments
|
Cause
Following a
|
|
Upon
Termination:
|
Change
of Control (1)
|
|
Gayn
Erickson
|
|
|
Base
salary
|
$
433,149
|
|
Medical
continuation
|
33,160
|
|
Value
of accelerated stock options (2)
|
1,544
|
|
Value
of accelerated RSUs (3)
|
7,339
|
|
|
|
|
Kenneth B.
Spink
|
|
|
Base
salary
|
$
163,878
|
|
Medical
continuation
|
7,526
|
|
Value
of accelerated stock options (2)
|
594
|
|
Value
of accelerated RSUs (3)
|
3,094
|
|
|
|
|
Vernon
Rogers
|
|
|
Base
salary
|
$
125,008
|
|
Medical
continuation
|
18,303
|
|
Value
of accelerated stock options (2)
|
475
|
|
Value
of accelerated RSUs (3)
|
--
|
________________________________
29
(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,
2020 of $1.65 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, 2020 of $1.65.
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
a portion of fiscal 2020, Mr. Mario M. Rosati, a member of the
Board, was also a member of the law firm of Wilson Sonsini Goodrich
& Rosati, Professional Corporation (“WSGR”). Mr.
Mario Rosati retired from WSGR on January 31, 2020. The Company
retained WSGR as its legal counsel during the fiscal
year.
Compensation Committee Interlocks and Insider
Participation
The
Compensation Committee currently consists of directors Oliphant and
Slayen. No interlocking relationship exists between the Board and
Compensation Committee and the Board or compensation committee of
any other company.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD
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
Laura
Oliphant
Howard
T. Slayen
30
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
DIRECTORS
AND MANAGEMENT
The
following table sets forth certain information regarding the
beneficial ownership of the Company’s Common Stock as of
August 31, 2020, 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)
|
1,079,456
|
4.6
%
|
|
Gayn Erickson
(4)
|
846,238
|
3.6
%
|
|
Laura Oliphant
(5)
|
33,143
|
*
|
|
Mario M. Rosati
(6)
|
368,590
|
1.6
%
|
|
John M. Schneider
(7)
|
680,742
|
2.9
%
|
|
Geoffrey Scott
(8)
|
658,368
|
2.8
%
|
|
Howard T. Slayen
(9)
|
383,562
|
1.6
%
|
|
Kenneth B. Spink
(10)
|
175,998
|
*
|
|
Vernon Rogers
(11)
|
163,757
|
*
|
|
All Directors and
Executive Officers as a group (13 persons) (12)
|
4,847,836
|
19.5
%
|
|
Principal
Shareholders:
|
|
|
|
AWM Investment
Company, Inc. (13)
527
Madison Avenue, Suite 2600, New York, NY 10022
|
1,898,524
|
8.2
%
|
|
Royce &
Associates, LP (14)
745
Fifth Avenue, New York, NY 10151
|
1,241,700
|
5.3
%
|
*
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 23,291,346 shares of Common Stock outstanding
on August 31, 2020. Shares of Common Stock subject to options that
are currently exercisable or exercisable within 60 days of August
31, 2020 and shares of Common Stock subject to RSUs that are
subject to vest within 60 days of August 31, 2020 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 911,831
shares held by the Rhea J. Posedel Family Trust, and 118,831 shares
issuable upon the exercise of stock options exercisable within 60
days of August 31, 2020.
(4)
Includes 322,326
shares issuable upon the exercise of stock options exercisable and
5,565 RSUs vesting within 60 days of August 31, 2020.
(5)
Includes 14,687
shares issuable upon the exercise of stock options exercisable
within 60 days of August 31, 2020.
31
(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, 31,533 shares held by Mario M.
Rosati and Danelle Storm Rosati, Trustees of the Rosati Family
Trust U/D/T dated May 23, 1997, and 132,840 shares issuable upon
the exercise of stock options exercisable within 60 days of August
31, 2020.
(7)
Includes 331,800
shares held in a Schwab IRA for which Mr. Schneider is the owner,
205,676 shares held by Dharma Group Investment LLC for which Mr.
Schneider is the owner, and 103,624 shares issuable upon the
exercise of stock options exercisable within 60 days of August 31,
2020. Mr. Schneider resigned from the Board on September 2,
2020.
(8)
Includes 50,000
shares held by Geoffrey Scott Living Trust and 270,000 shares held
by Caroline Scott Living Trust. Mr. Scott joined the Board on
September 2, 2020.
(9)
Includes 160,091
shares issuable upon the exercise of stock options exercisable
within 60 days of August 31, 2020.
(10)
Includes 126,970
shares issuable upon the exercise of stock options exercisable and
2,503 RSUs vesting within 60 days of August 31, 2020.
(11)
Includes 162,497
shares issuable upon the exercise of stock options exercisable and
1,260 RSUs vesting within 60 days of August 31, 2020.
(12)
Includes 1,524,625
shares issuable upon the exercise of stock options exercisable and
11,366 RSUs vesting within 60 days of August 31, 2020.
(13)
Based on
information reported by AWM Investment Company, Inc. on Schedule
13G/A filed with the SEC on February 13, 2019.
(14)
Based on
information reported by Royce & Associates, LP on Schedule 13G
filed with the SEC on January 21, 2020.
32
REPORT OF THE AUDIT COMMITTEE
The
Audit Committee of the Board serves as the representative of the
Board for general oversight of the Company’s financial
accounting and reporting system of internal control, audit process
and process for monitoring compliance with laws and regulations.
The Audit Committee evaluates the scope of the annual audit,
reviews audit results, consults with management and the Company's
independent registered public accounting firm prior to the
presentation of financial statements to shareholders and, as
appropriate, initiates inquiries into aspects of the Company's
financial affairs.
The
Company’s management has primary responsibility for preparing
the Company’s consolidated financial statements and for the
Company’s financial reporting process. The Company’s
independent registered public accounting firm, BPM LLP, is
responsible for expressing an opinion on the conformity of the
Company’s audited consolidated financial statements to
accounting principles generally accepted in the United States of
America. The Audit Committee has reviewed and discussed with
management the audited consolidated financial statements contained
in the Company’s Annual Report on Form 10-K for fiscal year
2020. BPM LLP, the Company’s independent registered public
accounting firm for fiscal year 2020, issued their unqualified
report dated August 28, 2020 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 that the Company's audited
consolidated financial statements for the fiscal year ended May 31,
2020 be included in the Company’s Annual Report on Form
10-K.
AUDIT
COMMITTEE
Laura
Oliphant
Geoffrey
Scott
Howard
T. Slayen
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, 2020.
33
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 may recommend.
By
Order of the Board of Directors,
GAYN
ERICKSON
President and Chief Executive Officer
Dated:
September 24, 2020
34
TABLE OF CONTENTS