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. __)
Filed
by the Registrant [ x ]
Filed
by a Party other than the Registrant [ ]
Check
the appropriate box:
[
]
Preliminary Proxy Statement
[
]
Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ x
]
Definitive Proxy Statement
[
]
Definitive Additional Materials
[
]
Soliciting Material Pursuant to §240.14a-12
_________________________
Aehr
Test Systems
___________________________
(Name
of Registrant as Specified in its Charter)
____________________________________________________________________
(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment
of Filing Fee (Check the appropriate box):
[ x ]
No fee required.
[
]
Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class
of securities to which transaction applies:
___________________________________________________
(2) Aggregate number of
securities to which transaction applies:
___________________________________________________
(3) Per unit price or other
underlying value of transaction computed pursuant to Exchange Act
Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
___________________________________________________
(4) Proposed maximum
aggregate value of transaction:
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(5) Total fee
paid:
___________________________________________________
[
]
Fee paid previously with preliminary materials.
[ ]
Check box if any part
of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
(1) Amount Previously
Paid:
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(2) Form, Schedule
or Registration Statement No.:
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(3) Filing
Party:
___________________________________________________
(4) Date
Filed:
___________________________________________________
AEHR TEST SYSTEMS
400 Kato Terrace
Fremont, California 94539
_____________________________
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD ON OCTOBER 19, 2021
_____________________________
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 19, 2021, 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 prior to, and as of, the
Annual Meeting date. 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 seven directors of the Company to hold office until the
next annual meeting or the election of their
successors.
2. To approve an amendment to the Company’s Bylaws to change
the authorized number of directors and permit certain amendments to
the Bylaws by unanimous consent of the Board of Directors of the
Company.
3. To approve an amendment to the Company's 2016 Equity Incentive
Plan to increase the number of shares of Common Stock reserved for
issuance thereunder by an additional 1,000,000 shares of Common
Stock (“Common Stock”).
4. To ratify the selection of BPM LLP as the Company’s
independent registered public accounting firm for the fiscal year
ending May 31, 2022.
5. To approve, on an advisory (non-binding) basis, the compensation
of the Company’s named executive officers.
6. 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, 2021 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 2021 ANNUAL
MEETING OF SHAREHOLDERS. THE PROXY STATEMENT AND THE RELATED PROXY
FORM ARE BEING DISTRIBUTED ON OR ABOUT SEPTEMBER 23, 2021. YOU CAN
VOTE YOUR SHARES USING ONE OF THE FOLLOWING METHODS:
● COMPLETE AND RETURN A WRITTEN PROXY
CARD; OR
● ATTEND THE COMPANY’S 2021 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 19,
2021:
The Company’s Proxy Statement, form of proxy card and 2021
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
_______________
2021 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 19, 2021 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 seven directors of the Company to hold office until the
next annual meeting or the election of their
successors.
2. To approve an amendment to the Company's Bylaws to change the
authorized number of directors and permit certain amendments to the
Bylaws by unanimous consent of the Board of Directors of the
Company.
3. To approve an amendment to the Company’s 2016 Equity
Incentive Plan to increase the number of shares reserved for
issuance thereunder by an additional 1,000,000 shares of common
stock of the Company (“Common Stock”).
4. To ratify the selection of BPM LLP as the Company’s
independent registered public accounting firm for the fiscal year
ending May 31, 2022.
5. To approve, on an advisory (non-binding) basis, the compensation
of the Company’s named executive officers.
6. 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, 2021 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,
2021, 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 23, 2021.
THE ANNUAL MEETING
Date, Time and Place
The Annual Meeting will be held on October 19,
2021 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
1
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.
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
24,482,796 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.
2
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.
If you provide specific
instructions with regard to certain items, the Company will vote
your shares as you instruct on such items. If no instructions are
indicated, the proxy holders will vote the shares as recommended by
the Board.
Voting Requirements to Approve Proposals
A plurality of the votes cast
is required for the election of the directors, which means that the
nominees for director receiving the highest number of affirmative
votes will be elected as directors.
The affirmative
“FOR” vote of a majority of the votes cast on the
proposal is required to (i) approve an amendment to the
Company’s Bylaws (ii) approve an amendment to the
Company’s Equity Incentive Plan, (iii) ratify the appointment
of BPM LLP as our independent registered public accounting firm,
and (iv) 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 2022 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 2022
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 26, 2022. 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:
3
Investor
Relations or by calling investor relations at (510) 623-9400, and
the Company will promptly deliver a separate copy. If you share an
address with another shareholder and you are receiving multiple
copies of annual reports or proxy statements, you may write us at
the address above to request delivery of a single copy of these
materials in the future.
How to Obtain Directions to Location of Annual Meeting
The Annual Meeting is being
held at the time and place set forth above. You can obtain
directions to attend the Annual Meeting and vote your shares in
person by calling the Company at (510) 623-9400, or by visiting the
Company’s website www.aehr.com under the heading
“Contact Us” and the subheading “Offices,”
and selecting the legend of “Headquarters” on the
map.
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 2021 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 1-800-962-4284 (US, Canada, Puerto Rico),
1-781-575-3100 (non-US) or via email at
web.queries@computershare.com, shareholder website is www.computershare.com/investor.
Additional Matters Presented at Annual Meeting
Other than the items of
business we describe in this proxy statement, we are not aware of
any other business to be acted upon at the Annual Meeting. If you
grant a proxy, the persons named as proxy holders, Gayn Erickson
and Kenneth B. Spink, our President and Chief Executive Officer and
Vice President of Finance and Chief Financial Officer,
respectively, or either of them or their substitutes, will have the
discretion to vote
your shares on any additional matters properly presented for a vote
at the meeting. If for any reason any of the nominees is not
available as a candidate for director, the persons named as proxy
holders will vote your proxy for such other candidate or candidates
as the Board may nominate.
4
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, seven
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 seven 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 or she is or was
to be selected as a director or officer of the
Company.
The names of the nominees,
ages as of May 31, 2021, and certain information about them as of
the Record Date are set forth below:
|
Name
of Nominee
|
Age
|
Position
|
Director
Since
|
|
Rhea J.
Posedel
|
78
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Chairman
|
1977
|
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Gayn
Erickson
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56
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President and Chief
Executive Officer
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2012
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Fariba Danesh
(2)
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63
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Director
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2021
(4)
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Laura Oliphant
(1)(2)(3)
|
58
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Director
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2019
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Mario M. Rosati
(3)
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75
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Director
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1977
(5)
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|
Geoffrey G. Scott
(1)(3)
|
72
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Director
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2020
(6)
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Howard T. Slayen
(1)(2)
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74
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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) Ms. Danesh
joined the Board in May 2021.
(5) Mr. Rosati was
a member of the Board from 1977 to September 2008 and then rejoined
the Board in February 2009.
(6) Mr. Scott
joined the Board in September 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 a member of the Board since January
2012. Prior to joining the Company, Mr. Erickson served as
corporate officer, Senior Vice
5
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 33 years of
executive and general management, operations, marketing, sales and
R&D program management experience, dating back to the late
1980s when he began his career in semiconductor test with
Hewlett-Packard's Automated Test Group. Mr. Erickson received a
B.S. in Electrical Engineering from Arizona State
University.
Mr. Erickson brings to the
Board senior leadership experience, semiconductor test industry and
technical expertise, and strategic business development
experience.
FARIBA DANESH
has been a director of
the Company since May 2021. Ms. Danesh is currently Chief
Operating Officer at PsiQuantum, a quantum computing startup based
in Palo Alto, California that is using silicon photonics to build
the world’s first useful quantum computer, applying existing
semiconductor and photonics manufacturing processes. Prior to
joining PsiQuantum in January 2021, Ms. Danesh served for nine
years as Chief Executive Officer of Glo AB, a venture-funded
photonics/compound semiconductor company that designs and develops
microLEDs chips and panels suitable for high brightness display
applications. Prior to that, she was SVP, General Manager Fiber
Optics Products Division of Avago Technologies (now Broadcom) for
three years, where she had complete P&L responsibility for a
$400 million annual revenue photonics business. Ms. Danesh received
a BS in Biochemistry from Santa Clara University, and an
Executive MBA from Stanford University.
As a technology industry
veteran, with 30 years of executive-level technology and operating
leadership in multiple enterprise and consumer hardware markets,
with special emphasis on semiconductor, photonics,
telecommunications, and data storage, Ms. Danesh brings to the
Board extensive knowledge, experience, and contacts in the compound
semiconductor and optical semiconductor spaces.
6
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 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 seven 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 2021, 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. The Board and its committees may elect to waive Board
fees, or receive Restricted Stock Units, or 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 14, 2020, Laura
Oliphant, Rhea Posedel, Mario Rosati and John Schneider (who
resigned from the Board on September 2, 2020) were granted
restricted stock units of 7,661, 9,409, 6,721 and 6,721 shares,
respectively, in lieu of cash Board fees for the first quarter of
fiscal 2021. On July 14, 2020, Howard Slayen was granted options to
purchase 12,448 shares at a price of $1.86 per share and vested 100
percent of the shares on the date of grant
in lieu of cash Board fees for the
first quarter of fiscal 2021. On October 20, 2020, Laura Oliphant,
Rhea Posedel, Mario Rosati, Geoffrey Scott and Howard Slayen were
granted restricted stock units of 11,381, 13,060, 10,261, 10,448
and 11,754 shares, respectively, in lieu of cash Board fees for the
second quarter of fiscal 2021. On January 19, 2021, Laura Oliphant,
Rhea Posedel, Mario Rosati, Geoffrey Scott and Howard Slayen were
granted restricted stock units of 6,889, 7,778, 6,111, 6,778 and
7,000 shares, respectively, in lieu of cash Board fees for the
third quarter of fiscal 2021. On April 20, 2021, Laura Oliphant,
Rhea Posedel, Mario Rosati, Geoffrey Scott and Howard Slayen were
granted restricted stock units of 6,731, 8,413, 6,010, 6,731 and
6,971 shares, respectively, in lieu of cash Board fees for the
fourth quarter of fiscal 2021. On September 2, 2020, an option to
purchase 15,000 shares at a price of $1.84 was granted to Geoffrey
Scott upon his appointment to the Board. On May 10, 2021, an option
to purchase 15,000 shares at a price of $2.25 was granted to Fariba
Danesh upon her appointment to the Board.
Directors are also eligible
to participate in the Company’s Equity Incentive Plans. On
October 20, 2020, outside directors Laura Oliphant, Mario Rosati,
Geoffrey Scott and Howard Slayen were each granted options to
purchase 10,000 shares at $1.34 per share, and Rhea Posedel was
granted options to purchase 18,000 shares at $1.34 per
share.
The following table sets
forth the compensation paid by the Company during the fiscal year
ended May 31, 2021 to the Company’s directors other than Mr.
Erickson:
8
Director
Compensation
|
|
|
Fees Earned
|
Option
|
Stock
|
Non-equity
|
All Other
|
Total
|
|
|
|
or Paid in
|
Awards
|
Awards
|
Incentive Plan
|
Compensation
|
Compensation
|
|
Name
|
Year
|
Cash ($)
|
($) (1)
|
($)
|
Compensation ($)
|
($)
|
($)
|
|
|
|
|
|
|
|
|
|
|
Fariba
Danesh (2)
|
2021
|
--
|
$
22,103
|
$
--
|
--
|
--
|
$
22,103
|
|
Laura
Oliphant
|
2021
|
--
|
8,487
|
59,000
|
--
|
--
|
67,487
|
|
Rhea
J. Posedel
|
2021
|
--
|
15,277
|
70,000
|
--
|
$
22,807
(3)
|
108,084
|
|
Mario
M. Rosati
|
2021
|
--
|
8,487
|
52,500
|
--
|
--
|
60,987
|
|
John
M. Schneider (4)
|
2021
|
--
|
--
|
12,500
|
--
|
--
|
12,500
|
|
Geoffrey
G. Scott (5)
|
2021
|
--
|
25,815
|
43,250
|
--
|
--
|
69,065
|
|
Howard
T. Slayen
|
2021
|
--
|
23,002
|
46,000
|
--
|
--
|
69,002
|
(1) The amounts reported
represent the aggregate grant date fair value of equity awards
granted in the fiscal year, as determined pursuant to ASC 718. The
assumptions used to calculate the value of awards are set forth in
Note 11 of the Notes to the Consolidated Financial Statements
included in Aehr Test’s Annual Report on Form 10-K for fiscal
2021 filed with the SEC on August 27, 2021. At the end of fiscal
2021, the aggregate number of option awards outstanding for each
director was as follows: 15,000 held by Fariba Danesh; 35,000 held
by Laura Oliphant; 148,456 held by Rhea Posedel; 113,505 held by
Mario Rosati; 101,957 held by John Schneider; 25,000 held by
Geoffrey Scott and 136,337 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) Fariba Danesh joined the
Board on May 10, 2021.
(3) Includes health and life
insurance premiums and medical costs paid by the Company in the
amount of $22,807.
(4) John Schneider resigned
from the Board on September 2, 2020.
(5) Geoffrey Scott joined the
Board on September 2, 2020.
Board Matters and Corporate Governance
Board Meetings and Committees
The Board held a total of six
meetings during the fiscal year ended May 31, 2021. 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. Thirdly, Mario Rosati was appointed to the Corporate
Governance and Nominating Committee on September 2, 2020, replacing
Howard Slayen in this position. Fourthly, Laura Oliphant was
appointed to the Corporate Governance and Nominating Committee on
September 2, 2020, adding an additional member to the committee.
Lastly, Fariba Danesh was appointed to the Board of Directors on
May 10, 2021. Ms. Danesh was appointed to the Compensation
Committee, but was not a
member for fiscal
year 2021, notwithstanding her signature on the report of the
Compensation Committee contained herein.
9
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 2021. 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 Danesh, 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 two meetings during fiscal year 2021.
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 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, 2021. 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
10
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
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
11
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.
12
PROPOSAL 2
AMENDMENT
TO THE BYLAWS
Pursuant to the
Company’s current amended and restated Bylaws (the
“Bylaws”), the number of directors of the Company shall
be not less than four (4) nor more than seven (7), with the exact
number of directors fixed from time to time by a resolution duly
adopted by the Board (currently set at seven (7)). The Board is
proposing to amend the Bylaws in order to:
(1) change the number of
directors of the Company from not less than four (4) nor more than
seven (7) to a new range of not less than five (5) nor more than
eight (8), with the exact number of directors to be set initially
at seven (7) effective upon approval of this amendment of the
Bylaws; and
The purpose of the proposed
amendment is to enable expansion of the Board and to expedite and
facilitate further changes to the size of the Board without
requiring future votes of the shareholders of the Company. The
relevant provisions of the Bylaws that are proposed to be amended
are Section 3.2 of Article III and Section 9.2 of Article IX, and
each shall be as stated below, which, if approved, will be
incorporated into an amended and restated form of Bylaws, which are
currently included in Exhibit 3.2 to the Company’s Annual
Report and are incorporated by reference to this Proxy
Statement.
The number of directors of
the corporation shall be not less than five (5) nor more than eight
(8). The exact number of directors shall be fixed from time to
time, within the limits specified above, by a resolution duly
adopted by the board of directors. The indefinite number of
directors may be changed, or a definite number fixed without
provision for an indefinite number, by a duly adopted amendment to
this by-law duly adopted by the vote or written consent of holders
of a majority of the outstanding shares entitled to vote; provided,
however, that an amendment reducing the number of the minimum
number of directors to a number less than five (5) cannot be
adopted if the votes cast against its adoption at a meeting of the
shareholders, or the shares not consenting in the case of action by
written consent, are equal to more than sixteen and two-thirds
percent (16 2/3%) of the outstanding shares entitled to vote
thereon. No amendment may change the stated maximum number of
authorized directors to a number greater than two (2) times the
stated minimum number of directors minus one (1).
Subject to the rights of the
shareholders as provided in Section 9.1 of these by-laws, by-laws,
other than a by-law or an amendment of a by-law changing the
authorized number of directors which shall require the unanimous
consent of the board of directors, may be adopted, amended, or
repealed by the board of directors.
Vote Required and Board of Directors’
Recommendation
Approval of the amendment to
the Bylaws requires the affirmative vote of
a majority of the outstanding shares of common
stock present in person or represented by proxy and entitled to
vote on this proposal.
RECOMMENDATION
THE
BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
“FOR”
AMENDMENT TO THE
BYLAWS
13
PROPOSAL 3
AMENDMENT TO THE 2016 EQUITY INCENTIVE PLAN
The Board of Directors is
proposing that the 2016 Equity Incentive Plan (the “2016
Plan”) be amended to increase the number of shares authorized
thereunder by an additional 1,000,000 Shares of Common Stock
(“Shares”). The Company previously reserved 3,434,579
shares of Common Stock for issuance under the 2016 Equity Incentive
Plan.
The Board of Directors is
proposing this amendment in order to allow for sufficient stock
options to cover the Company's needs for at least the next two
fiscal years. In determining the number of additional Shares to
reserve, the Board of Directors considered the Shares available for
issuance, historical annual grant rate, and estimated future annual
grants.
As of August 31, 2021, a total of
739,782 Shares were available for
grant under the 2016 Plan. If our shareholders approve this
proposal, a total of 1,739,782 Shares will be reserved for issuance
under the 2016 Plan, representing approximately 7% of our
outstanding Shares as of that date. As described below, certain
Shares subject to outstanding equity awards granted under our 2016
Plan may return to the 2016 Plan under certain
conditions.
The Board of Directors
considered the number of equity awards that were historically
granted in determining the additional shares to reserve. The
Company granted stock options covering a total of 804,000, 738,000,
and 297,000 Shares in fiscal years 2019, 2020, and 2021,
respectively. The Company granted Restricted Stock Units covering a
total of 25,000 and 340,000 Shares in fiscal years 2020 and 2021,
respectively.
At August 31, 2021 a total of
2,325,175 stock options were outstanding at an average exercise
price of $2.16 per Share with expiration dates ranging from October
21, 2021 through July 13, 2028. The exercise prices of the
outstanding options range from $1.22 per Share to $3.93 per Share.
At August 31, 2021 at total of 239,829 Restricted Stock Units were
outstanding and unvested.
The Board of Directors
believes that approval of the amended 2016 Plan will enable us to
continue to use the 2016 Plan to achieve employee performance,
recruiting, retention and incentive goals. In particular, our Board
of Directors believes that our employees are our most valuable
assets and that equity awards granted under the 2016 Plan are vital
to our ability to attract and retain outstanding and highly skilled
individuals in the extremely competitive labor markets in which we
compete.
Other than to increase the
number of Shares reserved for issuance under the 2016 Plan, our
2016 Plan has not been amended in any material way since our
shareholders approved the 2016 Plan at our 2016 annual meeting of
shareholders. Our Board of Directors approved the amendment to the
2016 Plan on September 7, 2021, subject to the approval of our
shareholders at the Annual Meeting. If the proposed amendment to
the 2016 Plan is not approved by our shareholders, the 2016 Plan
will remain in effect without the amendment and awards will
continue to be made under the 2016 Plan to the extent that shares
remain available. However, in those circumstances, we may not be
able to continue our equity incentive program in the future. This
could preclude us from successfully attracting and retaining
employees who are vital to our future success.
14
Summary of the 2016 Plan
The following paragraphs
provide a summary of the principal features of the 2016 Plan and
its operation. However, this summary is not a complete description
of all of the provisions of the 2016 Plan and is qualified in its
entirety by the specific language of the 2016 Plan.
Purposes of the 2016 Plan
The purposes of the 2016 Plan
are to attract and retain the best available personnel; to provide
additional incentive to employees, directors, and consultants; and
to promote the success of our business. These incentives are
provided through the grant of stock options, stock appreciation
rights, restricted stock, restricted stock units, performance
units, and performance shares as the plan administrator (as defined
below) may determine.
Shares Available for Issuance
Subject to the adjustment
provisions contained in the 2016 Plan, at August 31, 2021 the
maximum number of Shares available for issuance under the 2016 Plan
is equal to the sum of 739,782 Shares, and any Shares granted under
the 2016 Plan which expire or become unexercisable.
The Shares may be authorized, but unissued, or
reacquired common stock.
As of August 31, 2021, the closing
price of a share of our common stock on The
Nasdaq Capital Market
was
$7.46.
If any award granted under
the 2016 Plan expires or becomes unexercisable without having been
exercised in full or, with respect to restricted stock, restricted
stock units, performance units, or performance shares, is forfeited
to or repurchased by us due to failure to vest, then the
unpurchased Shares (or for full value awards the forfeited or
repurchased Shares) subject to such award will become available for
future grant or sale under the 2016 Plan, unless it has terminated.
With respect to the exercise of stock appreciation rights, the
gross number of Shares actually issued pursuant to a stock
appreciation right and Shares that represent payment of the
exercise price and any applicable tax withholdings will cease to be
available under the 2016 Plan. Except with respect to stock
appreciation rights, Shares used to pay the exercise price of an
award or to satisfy the tax withholding obligations related to an
award will not become available for future grant or sale under the
2016 Plan. If an award is paid out in cash rather than Shares, such
payment will not reduce the number of Shares available for issuance
under the 2016 Plan.
For purposes of determining
the number of Shares that remain available for issuance under the
2016 Plan and the number of Shares returned to the 2016
Plan’s share reserve, each Share subject to an award other
than an option, a stock appreciation right, or any other award that
is based solely on an increase in value of the Shares following the
grant date will count as 2.00 shares.
Limitation and Adjustments
The 2016 Plan contains annual
grant limits that were intended to qualify as performance-based
compensation under Section 162(m) of the Internal Revenue Code of
1986, as amended (the “Code”) as in effect prior to
effectiveness of the Tax Cuts and Jobs Act of 2017
(“TCJA”) on January 1, 2018. However, as a result of
the TCJA, compensation payable to “covered employees”
within the meaning of Section 162(m) of the Code, for taxable years
beginning on or after January 1, 2018, will not be eligible to
qualify as performance-based compensation under Section 162(m) of
the Code, except in limited circumstances with respect to certain
grandfathered arrangements that were in effect on or before
November 2, 2017. In particular, any restricted stock, restricted
stock units, performance shares and performance units that were or
may be granted under the 2016 Plan after the effectiveness of TCJA,
including any awards to be granted under the 2016 Plan in the
future, will not be eligible to qualify as performance-based
compensation under Section 162(m) of the Code.
15
The maximum number of Shares
covered by or the maximum initial value of awards that can be
issued to any particular employee or consultant under the 2016 Plan
in any fiscal year is set forth below:
|
Award Type
|
Annual Number of Shares or Dollar Value
|
|
Stock
Options
|
Maximum
of 200,000 Shares (increasing to 400,000 Shares in the fiscal year
the participant’s service as an employee begins)
|
|
Stock
Appreciation Rights
|
Maximum
of 200,000 Shares (increasing to 400,000 Shares in the fiscal year
the participant’s service as an employee begins)
|
|
Restricted
Stock
|
Maximum
of 75,000 Shares (increasing to 150,000 Shares in the fiscal year
the participant’s service as an employee begins)
|
|
Restricted
Stock Units
|
Maximum
of 75,000 Shares (increasing to 150,000 Shares in the fiscal year
the participant’s service as an employee begins)
|
|
Performance
Shares
|
Maximum
of 75,000 Shares (increasing to 150,000 Shares in the fiscal year
the participant’s service as an employee begins)
|
|
Performance
Units
|
Maximum
of 75,000 Shares with a maximum initial value of $250,000
(increasing to 150,000 Shares and $500,000 in the fiscal year the
participant’s service as an employee begins)
|
The 2016 Plan also provides
that in any fiscal year, a non-employee board member may not be
granted awards with a grant date fair value (determined in
accordance with GAAP) exceeding $150,000 (increased to $300,000 in
the fiscal year his or her service as an non-employee director
begins). Any award granted to a participant while he or she was an
employee or a consultant (other than a non-employee director) will
not count for purposes of this limitation.
In the event of any dividend
or other distribution (whether in the form of cash, Shares, other
securities, or other property), recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase or exchange of Shares
or other securities or other change in the corporate structure
affecting our common stock, the 2016 Plan administrator, in order
to prevent diminution or enlargement of the benefits or potential
benefits intended to be made available under the 2016 Plan, will
adjust the number and class of shares that may be delivered under
the 2016 Plan, and/or the number, class and price of shares of
stock subject to outstanding awards, and the award grant
limitations discussed above.
Administration
For purposes of this summary
of the 2016 Plan, the term “administrator” will refer
to our Board of Directors or any committee designated by our Board
of Directors to administer the 2016 Plan. Our Board of Directors
has delegated administration of the 2016 Plan to the Compensation
Committee. Our Board of Directors and the Compensation Committee
may further delegate administration of the 2016 Plan to any
committee of our Board of Directors, or a committee of individuals
satisfying applicable laws appointed by our Board of Directors in
accordance with the terms of the 2016 Plan. To make grants to
certain officers and key employees, the members of the committee
must qualify as “non-employee directors” under
Rule 16b-3 of the Securities Exchange Act of 1934, as amended.
In the case of awards intended to qualify for the performance-based
compensation exemption under Section 162(m) of the Code,
administration must be by a committee comprised solely of two or
more “outside directors” within the meaning of
Section 162(m) of the Code. However, as a result of the TCJA,
compensation payable to “covered employees” within the
meaning of Section 162(m) of the Code, for taxable years beginning
on or after January 1, 2018, will not be eligible to qualify as
performance-based compensation under Section 162(m) of the Code,
except in limited circumstances with respect to certain
grandfathered arrangements that were in effect on or before
November 2, 2017.
16
Subject to the terms of the
2016 Plan, the administrator has the sole discretion to select the
service providers who will receive awards; to determine the terms
and conditions of awards; and to approve forms of award agreements
for use with the 2016 Plan; to modify or amend each award (subject
to the repricing restrictions of the 2016 Plan, including the
exchange program prohibition), including to accelerate vesting or
waive forfeiture restrictions, and to interpret the provisions of
the 2016 Plan and outstanding awards. The administrator may allow a
participant to defer the receipt of payment of cash or delivery of
Shares that otherwise would be due to such participant. The
administrator may make rules and regulations relating to sub-plans
established for the purpose of satisfying applicable foreign laws
and may make all other determinations deemed necessary or advisable
for administering the 2016 Plan. The administrator will issue all
awards pursuant to the terms and conditions of the 2016
Plan.
The Administrator may not
implement a program allowing for the cancellation of awards in
exchange for different awards and/or cash, the transfer of an
outstanding award to a financial institution or other person or
entitled selected by the administrator, or the increase or
reduction of the exercise price of any outstanding
award.
Eligibility
All types of awards, other
than incentive stock options, may be granted to our employees,
non-employee directors and consultants and to the employees and
consultants of any of our parent, subsidiary, or affiliate
corporations. Incentive stock options may be granted only to
employees of Aehr or any parent or subsidiary corporation of Aehr.
As of August 31, 2021, we had approximately 80 employees (including
1 employee director and 5 non-director executive officers), and 6
non-employee directors.
Stock Options
An option gives a participant
the right to purchase a specified number of Shares for a fixed
exercise price during a specified period of time. Each option
granted under the 2016 Plan will be evidenced by an award agreement
specifying the number of Shares subject to the option and the other
terms and conditions of the option, consistent with the
requirements of the 2016 Plan.
The exercise price per share
of each option generally may not be less than the fair market value
of a share of our common stock on the date of grant. However, any
incentive stock option granted to a person who at the time of grant
owns stock possessing more than 10% of the total combined voting
power of all classes of our stock or any parent or subsidiary
corporation of ours (a “ten percent shareholder”) must
have an exercise price per share equal to at least 110% of the fair
market value of a share on the date of grant. The aggregate fair
market value of the shares (determined on the grant date) covered
by incentive stock options which first become exercisable by any
participant during any calendar year also may not exceed $100,000.
The fair market value of the common stock is generally the closing
sales price of our stock as reported on the Nasdaq Capital
Market.
Options will be exercisable at such times or
under such conditions as determined by the administrator and set
forth in the award agreement
.
Upon the termination of a
participant’s service, the unvested portion of the
participant’s option generally expires. The vested portion of
the option will remain exercisable for the period following the
participant’s termination of service that was determined by
the administrator and specified in the participant’s award
agreement, and if no such period was determined by the
administrator, the vested portion of the option will remain
exercisable for: (i) three months following a termination of
the participant’s service for reasons other than death or
disability (and if the participant dies within the three- month
period, the period will be extended to one year from the date of
the participant’s death) or (ii) 12 months following a
termination of the participant’s service due to death or
disability. However, if the exercise of an option is prevented by
applicable law, the exercise period may be extended under
certain
17
circumstances
described in the 2016 Plan. In no event will the option be
exercisable after the end of the option’s term.
The term of an option will be
specified in the award agreement but may not be more than ten years
(or five years for an incentive stock option granted to a ten
percent shareholder).
The 2016 Plan provides that
the administrator will determine the acceptable form(s) of
consideration for exercising an option. An option will be deemed
exercised when we receive the notice of exercise and full payment
for the Shares to be exercised, together with applicable tax
withholdings.
Stock Appreciation Rights
A stock appreciation right
gives a participant the right to receive the appreciation in the
fair market value of our common stock between the date an award is
granted and the date it is exercised. Upon exercise of a stock
appreciation right, the holder of the award will be entitled to
receive an amount determined by multiplying: (i) the
difference between the fair market value of a share on the date of
exercise and the exercise price by (ii) the number of
exercised stock appreciation rights. We may pay the appreciation in
cash, in Shares, or a combination of both. Each stock appreciation
right granted under the 2016 Plan will be evidenced by an award
agreement specifying the exercise price and the other terms and
conditions of the award.
The exercise price per share
of each stock appreciation right may not be less than the fair
market value of a share of our common stock on the date of
grant.
Stock appreciation rights
will be exercisable at such times or under such conditions as
determined by the administrator and set forth in the award
agreement.
The term of a stock
appreciation right may not be more than ten years. The terms and
conditions relating to the period of exercise of stock appreciation
rights following the termination of a participant’s service
are similar to those for options described above.
Restricted Stock Awards
Awards of restricted stock
are rights to acquire or purchase Shares that vest in accordance
with the terms and conditions established by the administrator in
its sole discretion. Unless otherwise provided by the
administrator, a participant will forfeit any Shares of restricted
stock that have not vested by the termination of the
participant’s service. Each restricted stock award granted
will be evidenced by an award agreement specifying the number of
Shares subject to the award and the other terms and conditions of
the award. The administrator will determine the vesting conditions
that apply to an award of restricted stock, but if an award of
restricted stock was intended to qualify as performance-based
compensation under Section 162(m) of the Code, the vesting
conditions were based on a specified list of performance goals and
certain other requirements, as further discussed
below.
Unless the administrator
provides otherwise, participants holding Shares of restricted stock
will have voting rights and rights to dividends and other
distributions with respect to such Shares without regard to
vesting. However, such dividends or other distributions will be
subject to the same restrictions and forfeitability provisions that
apply to the Shares of restricted stock with respect to which they
were paid. The administrator has the discretion to reduce or waive
any restrictions and to accelerate the time at which any
restrictions will lapse or be removed.
18
Restricted Stock Units
Restricted stock units
represent rights to receive cash or a share of our common stock if
the performance goals or other vesting criteria set by the
administrator are achieved or the restricted stock unit otherwise
vests. Each award of restricted stock units granted under the 2016
Plan will be evidenced by an award agreement specifying the number
of Shares subject to the award and other terms and conditions of
the award.
The administrator may set
vesting conditions based upon the achievement of company-wide,
divisional, business unit or individual goals (including, but not
limited to, continued employment or service), applicable federal or
state securities laws, or any other basis determined by the
administrator, in its discretion. However, if an award of
restricted stock units was, prior to the effectiveness of the TCJA,
intended to qualify as performance-based compensation under
Section 162(m) of the Code, the vesting conditions were based
on a specified list of performance goals and certain other
requirements, as further discussed below.
After an award of restricted
stock units has been granted, the administrator has the discretion
to reduce or waive any restrictions or vesting criteria that must
be met to receive a payout or to accelerate the time at which any
restrictions will lapse or be removed. A participant will forfeit
any unearned restricted stock units upon termination of his or her
service. The administrator in its sole discretion may pay earned
restricted stock units in cash, Shares, or a combination of
both.
Performance Units and Performance Shares
Performance units and
performance shares are awards that will result in a payment to a
participant only if performance goals established by the
administrator are achieved or the awards otherwise vest.
Performance units will have an initial value established by the
administrator on or before the date of grant. Each performance
share will have an initial value equal to the fair market value of
a share on the grant date. Performance units and performance shares
will result in a payment to a participant only if the performance
goals or other vesting criteria set by the administrator are
achieved or the awards otherwise vest.
Each award of performance
units or performance shares granted under the 2016 Plan will be
evidenced by an award agreement specifying the performance period
and other terms and conditions of the award. The administrator may
set vesting criteria based upon the achievement of company-wide,
divisional, business unit or individual goals (including, but not
limited to, continued employment or service), applicable federal or
state securities laws, or any other basis determined by the
administrator, in its discretion. However, if an award of
performance shares or performance units was, prior to the
effectiveness of the TCJA, intended to qualify as performance-based
compensation under Section 162(m) of the Code, the vesting
conditions were based on a specified list of performance goals and
certain other requirements, as further discussed
below.
After an award of performance
units or performance shares has been granted, the administrator has
the discretion to accelerate, reduce or waive any performance
objectives or other vesting provisions for such performance units
or performance shares, but may not increase the amount payable at a
given level of performance.
The administrator has the
discretion to pay earned performance units or performance shares in
the form of cash, Shares (which will have an aggregate fair market
value equal to the earned performance units or performance shares
at the close of the applicable performance period), or a
combination of both.
A participant will forfeit
any performance units or performance shares that have not been
earned or have not vested as of the termination of his or her
service with us.
19
Performance Goals
The granting and/or vesting
of awards under the 2016 Plan may be made subject to the attainment
of performance goals applicable to an award recipient with respect
to any discretionary award granted, including but not limited to
one or more of the performance goals listed below. If the
administrator desired (prior to the effectiveness of the TCJA) that
an award of restricted stock, restricted stock units, performance
shares and performance units, and other incentives under the 2016
Plan qualify as performance-based compensation under Section
162(m), then the award could be made subject to the attainment of
performance goals relating to one or more business criteria within
the meaning of Section 162(m) of the Code and may provide for
a targeted level or levels of achievement, including: stock price,
revenue, profit, bookings, cash flow, customer retention, customer
satisfaction, net bookings, net income, net profit, operating cash
flow, operating expenses, total earnings; earnings per share,
diluted or basic; earnings per share from continuing operations,
diluted or basic; earnings before interest and taxes; earnings
before interest, taxes, depreciation, and amortization; pre-tax
profit; net asset turnover; inventory turnover; capital
expenditures; net earnings; operating earnings; gross or operating
margin; profit margin, debt; working capital; return on equity;
return on net assets; return on total assets; return on capital;
return on investment; return on sales; net or gross sales; market
share; economic value added; cost of capital; change in assets;
expense reduction levels; debt reduction; productivity; new product
introductions; delivery performance; individual objectives; and
total shareholder return. Any performance goals may be used to
measure the performance of our company as a whole or, except with
respect to shareholder return metrics, to a region, business unit,
affiliate or business segment, and performance goals may be
measured either on an absolute basis, a per share basis or relative
to a pre-established target, to a previous period’s results
or to a designated comparison group, and, with respect to financial
metrics, which may be determined in accordance with United States
Generally Accepted Accounting Principles (“GAAP”), in
accordance with accounting principles established by the
International Accounting Standards Board (“IASB”) or
which may be adjusted when established to either exclude any items
otherwise includable under GAAP or under IASB principles or include
any items otherwise excludable under GAAP or under IASB principles.
In all other respects, performance goals will be calculated in
accordance with Aehr Test Systems’ financial statements,
generally accepted accounting principles, or under a methodology
established by the administrator prior to or at the time of the
issuance of an award and which is consistently applied with respect
to a performance goal in the relevant performance period. In
addition, the administrator will adjust any performance criteria,
performance goal, or other feature of an award that relates to or
is wholly or partially based on the number of, or the value of, any
stock of Aehr Test Systems, to reflect any stock dividend or split,
repurchase, recapitalization, combination, or exchange of shares or
other similar changes in such stock. The performance goals may
differ from participant to participant and from award to
award.
To the extent necessary to
comply with the performance-based compensation provisions of
Section 162(m) of the Code, with respect to any award granted
subject to performance goals, and within the first 25% of the
performance period and no more than 90 days following the
commencement of the performance period (or such other time required
or permitted by Section 162(m) of the Code), the administrator
will, in writing: (i) designate one or more participants to
whom an award will be made; (ii) select the performance goals
applicable to the performance period; (iii) establish the
performance goals, and amounts or methods of computation of the
awards which may be earned for the performance period; and
(iv) specify the relationship between performance goals and
the amounts or methods of computation of such awards, as
applicable, to be earned by each participant for such performance
period. Following the completion of each performance period, the
administrator will certify in writing whether the applicable
performance goals have been achieved for such performance period.
In determining the amounts earned by a participant, the
administrator may reduce or eliminate (but not increase) the amount
payable at a given level of performance to take into account
additional factors that the administrator may deem relevant to the
assessment of individual or corporate performance for the
performance period. A participant will be eligible to receive
payment pursuant to an award for a performance period only if the
performance goals for such period are achieved.
20
Transferability of Awards
Awards generally are not
transferable other than by will or by the laws of descent or
distribution. However, the administrator may permit an award other
than an incentive stock option to be assigned or transferred during
a participant’s lifetime (i) under a domestic relations
order, official marital settlement agreement, or other divorce or
separation agreement, (ii) to a “family member”
(within the meaning of Form S-8 under the Securities Act of 1933,
as amended) in connection with the participant’s estate plan,
or (iii) or as required by law.
Dissolution or Liquidation
In the event of a proposed
dissolution or liquidation of our company, the administrator will
notify each participant as soon as practicable prior to the
effective date of such proposed transaction. An award will
terminate immediately prior to consummation of such proposed action
to the extent the award has not been previously
exercised.
Change in Control
The 2016 Plan provides that,
in the event of a merger or Change in Control, as defined in the
2016 Plan, each award will be treated as the administrator
determines, including that each award be assumed or substantially
equivalent awards substituted by the acquiring or succeeding
corporation or its affiliate. The administrator will not be
required to treat all outstanding awards the same in the
transaction.
If the successor corporation
does not assume or substitute for the award, the participant will
fully vest in and have the right to exercise all of his or her
outstanding options and stock appreciation rights, all restrictions
on restricted stock and restricted stock units will lapse. With
respect to awards with performance-based vesting that are not
assumed or substituted for, all performance goals or other vesting
criteria will be deemed achieved at one hundred percent (100%) and
all other terms and conditions will be deemed met. In addition, if
an option or stock appreciation right is not assumed or substituted
for, the administrator will notify the participant in writing or
electronically that the option or stock appreciation right will be
exercisable for a period of time determined by the administrator,
in its sole discretion, and the option or stock appreciation right
will terminate upon the expiration of such period.
For awards granted to our
non-employee directors, in the event of a Change in Control,
(i) the non-employee director will fully vest in and have the
right to exercise all of his or her outstanding options and stock
appreciation rights, (ii) all restrictions on the non-employee
director’s restricted stock and restricted stock units will
lapse, and (iii) with respect to the non-employee
director’s awards with performance-based vesting, all
performance goals or other vesting criteria will be deemed achieved
at one hundred percent (100%) and all other terms and conditions
will be deemed met.
Forfeiture Events
Each award under the 2016
Plan will be subject to any clawback policy of ours, and the
administrator also may specify in an award agreement that the
participant’s rights, payments, and benefits with respect to
an award will be subject to reduction, cancellation, forfeiture, or
recoupment upon the occurrence of certain specified events. The
administrator may require a participant to forfeit, return, or
reimburse us all or a portion of the award and any amounts paid
under the award in order to comply with such clawback policy or
applicable laws.
Termination or Amendment
The 2016 Plan will
automatically terminate ten years from the date of its adoption by
our Board of Directors, unless terminated at an earlier time by our
Board of Directors. The administrator may amend,
21
alter,
suspend, or terminate the 2016 Plan at any time, provided that no
amendment may be made without shareholder approval to the extent
approval is necessary or desirable to comply with any applicable
laws. No amendment, alteration, suspension, or termination may
materially impair the rights of any participant unless mutually
agreed otherwise between the participant and the
administrator.
Summary of U.S. Federal Income Tax Consequences
The following summary is
intended only as a general guide to the U.S. federal income tax
consequences of participation in the 2016 Plan. The summary is
based on existing U.S. laws and regulations as of the Record Date,
and there can be no assurance that those laws and regulations will
not change in the future. The summary does not purport to be
complete and does not discuss the tax consequences upon 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. As a result, tax consequences for any
particular participant may vary based on individual
circumstances.
Incentive Stock Options
A participant recognizes no
taxable income for regular income tax purposes as a result of the
grant or exercise of an option that qualifies as incentive stock
option under Section 422 of the Code. If a participant
exercises the option and then later sells or otherwise disposes of
the Shares acquired through the exercise after both the two-year
anniversary of the date the option was granted and the one-year
anniversary of the exercise, the participant will recognize a
capital gain or loss equal to the difference between the sale price
of the Shares and the exercise price, and we will not be entitled
to any deduction for federal income tax purposes.
However, if the participant
disposes of such Shares either on or before the two-year
anniversary of the date of grant or on or before the one-year
anniversary of the date of exercise (a “disqualifying
disposition”), any gain up to the excess of the fair market
value of the Shares on the date of exercise over the exercise price
generally will be taxed as ordinary income, unless the Shares are
disposed of in a transaction in which the participant would not
recognize a loss (such as a gift). Any gain in excess of that
amount will be a capital gain. If a loss is recognized, there will
be no ordinary income, and such loss will be a capital loss. Any
ordinary income recognized by the participant upon the
disqualifying disposition of the Shares generally should be
deductible by us for federal income tax purposes, except to the
extent such deduction is limited by applicable provisions of the
Code.
For purposes of the
alternative minimum tax, the difference between the option exercise
price and the fair market value of the Shares on the exercise date
is treated as an adjustment item in computing the
participant’s alternative minimum taxable income in the year
of exercise. In addition, special alternative minimum tax rules may
apply to certain subsequent disqualifying dispositions of the
Shares or provide certain basis adjustments or tax credits for
certain purposes.
Nonstatutory Stock Options
A participant generally
recognizes no taxable income as the result of the grant of such an
option. However, upon exercising the option, the participant
normally recognizes ordinary income equal to the amount that the
fair market value of the Shares on such date exceeds the exercise
price. If the participant is an employee, such ordinary income
generally is subject to withholding of income and employment taxes.
Upon the sale of the Shares acquired by the exercise of a
nonstatutory stock option, any gain or loss (based on the
difference between the sale price and the fair market value on the
exercise date) will be taxed as capital gain or loss. No tax
deduction is available to us with respect to the grant of a
nonstatutory stock option or the sale of the Shares acquired
through the exercise of the nonstatutory stock option.
22
Stock Appreciation Rights
In general, no taxable income
is reportable when a stock appreciation right is granted to a
participant. Upon exercise, the participant generally will
recognize ordinary income in an amount equal to the fair market
value of any Shares received. Any additional gain or loss
recognized upon any later disposition of the Shares would be
capital gain or loss.
Restricted Stock Awards
A participant acquiring
Shares of restricted stock generally will recognize ordinary income
equal to the fair market value of the Shares on the vesting date.
If the participant is an employee, such ordinary income generally
is subject to withholding of income and employment taxes. The
participant may elect, pursuant to Section 83(b) of the Code
to accelerate the ordinary income tax event to the date of
acquisition by filing an election with the Internal Revenue Service
no later than thirty days after the date the Shares are acquired.
Upon the sale of Shares acquired pursuant to a restricted stock
award, any gain or loss, based on the difference between the sale
price and the fair market value on the date the ordinary income tax
event occurs, will be taxed as capital gain or loss.
Restricted Stock Unit Awards
There are no immediate tax
consequences of receiving an award of restricted stock units. A
participant who is awarded restricted stock units generally will be
required to recognize ordinary income in an amount equal to the
fair market value of Shares issued to such participant at the end
of the applicable vesting period or, if later, the settlement date
elected by the administrator or a participant. Any additional gain
or loss recognized upon any later disposition of any Shares
received would be capital gain or loss.
Performance Shares and Performance Unit Awards
A participant generally will
recognize no income upon the grant of a performance share or a
performance unit award. Upon the settlement of such awards,
participants normally will recognize ordinary income in the year of
receipt in an amount equal to the cash received and the fair market
value of any cash or unrestricted Shares received. If the
participant is an employee, such ordinary income generally is
subject to withholding of income and employment taxes. Upon the
sale of any Shares received, any gain or loss, based on the
difference between the sale price and the fair market value on the
date the ordinary income tax event occurs, will be taxed as capital
gain or loss.
Section 409A
Section 409A provides
certain requirements for non-qualified deferred compensation
arrangements with respect to an individual’s deferral and
distribution elections and permissible distribution events. Awards
granted under the 2016 Plan with a deferral feature will be subject
to the requirements of Section 409A. If an award is subject to
and fails to satisfy the requirements of Section 409A, the
recipient of that award may recognize ordinary income on the
amounts deferred under the award, to the extent vested, which may
be prior to when the compensation is actually or constructively
received. Also, if an award that is subject to Section 409A
fails to comply with Section 409A’s provisions,
Section 409A imposes an additional 20% federal income tax on
compensation recognized as ordinary income, as well as interest on
such deferred compensation.
Medicare Surtax
A participant’s annual
“net investment income,” as defined in Section 1411 of
the Code may be subject to a 3.8% federal surtax (generally
referred to as the “Medicare Surtax”). Net investment
income may include capital gain and/or loss arising from the
disposition of shares subject to a participant’s
awards
23
under
the 2016 Plan. Whether a participant’s net investment
income will be subject to the Medicare Surtax will depend on the
participant’s level of annual income and other
factors.
Tax Effect for Aehr Test Systems
We generally will be entitled
to a tax deduction in connection with an award under the 2016 Plan
in an amount equal to the ordinary income realized by a participant
and at the time the participant recognizes such income (for
example, the exercise of a nonstatutory stock option) except to the
extent such deduction is limited by applicable provisions of the
Code. Special rules limit the deductibility of compensation paid to
our chief executive officer and other “covered
employees” as determined under Section 162(m) of the
Code and applicable guidance. Under Section 162(m) of the
Code, the annual compensation paid to any of these specified
executives will be deductible only to the extent that it does not
exceed $1,000,000. However, we can preserve the deductibility of
certain compensation in excess of $1,000,000 if the conditions of
Section 162(m) of the Code are met.
THE FOREGOING IS ONLY A
SUMMARY OF THE EFFECT OF U.S. FEDERAL INCOME TAXATION UPON
PARTICIPANTS AND AEHR TEST SYSTEMS WITH RESPECT TO AWARDS UNDER THE
2016 PLAN. IT DOES NOT PURPORT TO BE COMPLETE AND DOES NOT DISCUSS
THE IMPACT OF EMPLOYMENT OR OTHER TAX REQUIREMENTS, 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.
Number of Awards Granted to Employees, Consultants and
Directors
The number of awards that an
employee, director, or consultant may receive under the 2016 Plan
is in the discretion of the administrator and therefore cannot be
determined in advance. The following table sets forth: (i) the
aggregate number of shares of common stock subject to options
granted under the 2016 Plan during the fiscal year 2021 to each of
our named executive officers; executive officers, as a group;
directors who are not executive officers, as a group; and all
employees who are not executive officers, as a group; (ii) the
average per share exercise price of such options.
|
Name of Individual or Group |
Number
of Shares Subject to Stock Option and Stock Award
Granted
|
Average
Per Share Exercise Price of Stock Option and Stock Award
Grants
|
|
Gayn Erickson,
President and Chief Executive
Officer
|
105,081
|
$
2.02
|
|
Kenneth B. Spink,
VP of Finance and Chief Financial
Officer
|
51,988
|
$
2.05
|
|
Vernon Rogers,
Executive VP of Sales and
Marketing
|
40,604
|
$
2.16
|
|
All executive
officers, as a group
|
265,187
|
$
2.09
|
|
All directors who
are not executive officers, as a group
|
257,276
|
$
1.73
|
|
All employees who
are not executive officers, as a group
|
198,463
|
$
1.88
|
24
Vote Required and Board of Directors’
Recommendation
Approval of the amendment to
the 2016 Equity Incentive Plan requires the affirmative vote of
a majority of the outstanding shares
of common stock present in person or represented by proxy and
entitled to vote on this proposal.
RECOMMENDATION
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
“FOR” AMENDMENT TO THE
2016
EQUITY INCENTIVE PLAN
25
PROPOSAL 4
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, 2022, 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, 2021 and 2020:
DESCRIPTION OF SERVICES
|
|
2021
|
2020
|
|
Audit
Fees
|
$
181,929
|
$
175,426
|
|
All
Other Fees
|
4,991
|
4,990
|
|
Total
Fees
|
$
186,920
|
$
180,416
|
Audit Fees
. Aggregate fees billed or to
be billed for professional services rendered for the audit of the
Company’s fiscal 2021 and fiscal 2020 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 2021, 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, 2022 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 2022.
26
PROPOSAL 5
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:
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.
27
EXECUTIVE OFFICERS
The names of the executive
officers of the Company, ages as of May 31, 2021, and certain
information about them as of the mailing date of this Proxy
Statement are set forth below:
|
Name
|
|
Age
|
|
Position
|
|
Gayn
Erickson
|
|
56
|
|
President
and Chief Executive Officer
|
|
Kenneth
B. Spink
|
|
60
|
|
Vice
President of Finance and Chief Financial Officer
|
|
Donald
P. Richmond II
|
|
65
|
|
Vice
President of Engineering
|
|
David
S. Hendrickson
|
|
64
|
|
Chief
Technology Officer
|
|
Michael
Brannan
|
|
53
|
|
Vice
President of Operations
|
|
Vernon
Rogers
|
|
54
|
|
Executive
Vice President of Sales and Marketing
|
-------------------------------------
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. Brannan is an alumnus of Santa Clara University
where he was a combined science major in
PsychoBiology.
28
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 measured against both strategic and financial
goals. Examples of these goals are to obtain operating
profit,
29
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 Danesh, 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.
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
30
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 commission plans;
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 plans, 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 quarterly or one-year time horizon. The
Compensation Committee believes that the practice of
awarding
31
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 2021, the
Company’s Compensation Committee determined the maximum
eligible cash bonus levels based upon the Company’s
achievement of certain financial goals for Gayn Erickson and
Kenneth B. Spink were up to 90% and 50% of their base salaries,
respectively. Vernon Rogers was not eligible for the
Company’s financial goal cash bonus in fiscal 2021. Based on
the Company performance for the year, the Compensation Committee
did not award any cash bonuses to the Company’s executive
officers. In addition, the Compensation Committee approved
profit-sharing bonus payable semi-annually based on Company net
profit for Gayn Erickson, Kenneth B. Spink and Vernon Rogers, each
at 5% of their base salaries. Based on the Company performance for
the year, the Compensation Committee did not award any
profit-sharing bonuses to the Company’s executive officers.
Additionally, in fiscal 2021, the Compensation Committee approved a
personal performance cash bonus for Gayn Erickson, Kenneth B. Spink
and Vernon Rogers at a target of $88,877, $31,500 and $95,000,
respectively. Based upon personal performance against milestones
for fiscal 2021, the Compensation Committee awarded 3,440, 3,635
and 5,440 share restricted stock units, which are equivalent to a
$7,500, $8,500 and $12,500 cash bonus in fiscal 2021 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
Under this plan, Mr. Rogers
earned $63,078 in fiscal 2021 which is included in the annual
non-equity incentive plan compensation column in the Summary
Compensation Table on page 34.
Revenue Commission
During
fiscal 2021, Gayn Erickson, the Company’s Chief Executive
Officer, was eligible to receive a revenue commission rate of
0.219% for revenue up to 100% of target and an accelerated
commission rate of 0.438% on revenue above target. The commission
would be payable upon the Company’s quarterly achievement of
a GAAP profit, before bonus, of $50,000 or more. Under this plan,
the Compensation Committee awarded to Gayn Erickson 6,690 share
restricted stock units, which is equivalent to a $16,724 cash
bonus, in fiscal 2021.
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 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.
32
In fiscal 2021, the Company
granted a total of 720,926 RSUs and options to purchase shares of
the Company’s common stock of which RSUs and options covering
a total of 265,187 shares were granted to the Company’s
executive officers, representing 36.8% of all RSUs and options
granted in fiscal 2021. 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 2021, except that
Vernon Rogers received auto allowance payments. During fiscal 2021,
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
2021. During fiscal 2021, 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,
2021, would be $466,774, $173,007 and $143,942, 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 28, 2021 (the last business day
of the last fiscal year) of $2.25 and the exercise price of the
stock options for Messrs. Erickson, Spink and Rogers would be
$43,308, $16,657 and $28,910, 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 28, 2021 of $2.25 for Messrs.
Erickson, Spink and Rogers would be $143,492, $65,102 and $36,862,
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 2021. 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 2021, Mr.
Erickson received 6,690 share restricted stock units, which vested
immediately as part of his revenue commission arrangement, as
described above under the section titled “Revenue
Commission,” and 3,440 share restricted stock units, which
vested immediately as his personal performance bonus. The
Compensation Committee believes Mr. Erickson’s
33
fiscal
year 2021 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, 2021, 2020 and 2019 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,
2021. We refer to these executive officers as our named executive
officers.
Summary Compensation Table
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
Stock
|
Option
|
Incentive
Plan
|
All
Other
|
|
|
|
Name and
Principal Position
|
|
Fiscal
Year
|
Salary
|
Bonus
|
Awards
(1)
|
Awards
(1)
|
Compensation
(2)
|
Compensation
(3)
|
Total
|
|
Gayn Erickson
|
|
2021
|
$
225,460
|
$
--
|
$
211,922
(4)
|
$
4,315
|
$
--
|
$
42,996
(5)
|
$
484,693
|
|
President and
Chief
|
|
2020
|
$
288,766
|
$
20,000
|
$
26,094
|
$
133,093
|
$
29,352
|
$
35,948
|
$
533,253
|
|
Executive
Officer
|
|
2019
|
$
288,766
|
--
|
--
|
$
157,017
|
--
|
$
35,146
|
$
480,929
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth B.
Spink
|
|
2021
|
$
166,399
|
$
--
|
$
106,828
(6)
|
$
4,523
|
$
--
|
$
19,998
(7)
|
$
297,748
|
|
Vice President of
Finance
|
|
2020
|
$
218,504
|
$
4,000
|
--
|
$
53,205
|
$
--
|
$
17,063
|
$
292,772
|
|
and
Chief Financial Officer
|
|
2019
|
$
218,504
|
--
|
--
|
$
64,987
|
$
--
|
$
17,752
|
$
301,243
|
|
|
|
|
|
|
|
|
|
|
|
|
Vernon Rogers
|
|
2021
|
$
186,550
|
$
--
|
$
87,506
(8)
|
$
--
|
$
63,078
|
$
52,661
(9)
|
$
389,795
|
|
Executive Vice
President of
|
|
2020
|
$
250,016
|
$
22,500
|
--
|
$
38,748
|
$
70,639
|
$
51,393
|
$
433,296
|
|
Sales
and Marketing
|
|
2019
|
$
150,010
|
--
|
--
|
$
343,600
|
$
55,319
|
$
27,839
|
$
576,768
|
__________________
34
(1) The
amounts reported represent the aggregate grant date fair value of
equity awards granted in the respective fiscal years, as determined
pursuant to ASC 718 (but excluding the effect of estimated
forfeitures for performance-based awards). The assumptions used to
calculate the value of awards are set forth in Note 11 of the Notes
to the Consolidated Financial Statements included in Aehr’s
Annual report on Form 10-K for fiscal 2021 filed with the SEC on
August 27, 2021.
(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) Includes
restricted stock units issued in lieu of cash for revenue
commissions earned, personal performance bonus earned and the
repayment of 30% salary deduction in the second half of fiscal 2021
in the amounts of $16,724, $7,500 and $43,315,
respectively.
(5) Includes health
and life insurance premiums and medical costs paid by the Company
in the amount of $33,625.
(6) Includes
restricted stock units issued in lieu of cash for personal
performance bonus earned and the repayment of 30% salary deduction
in the second half of fiscal 2021 in the amounts of $8,500 and
$32,776, respectively.
(7) Includes health
and life insurance premiums and medical costs paid by the Company
in the amount of $18,258.
(8) Includes
restricted stock units issued in lieu of cash for personal
performance bonus earned and the repayment of 30% salary deduction
in the second half of fiscal 2021 in the amounts of $12,500 and
$37,502, respectively.
(9) Includes health
and life insurance premiums and medical costs in the amount of
$37,867, and auto allowance in the amount of $12,000 paid by the
Company.
Grants of Plan Based Awards in Fiscal 2021
The following table provides
information with regard to each grant of an award made to the named
executive officers during the fiscal year ended May 31,
2021.
|
|
|
|
All
Other
|
All
Other
|
|
|
|
|
|
|
|
Stock
|
Option
|
|
|
|
|
|
|
|
Awards:
|
Awards:
|
|
|
|
|
|
Estimated
Future Payouts
|
|
Number
of
|
Number
of
|
Exercise
|
Grant
Date
|
|
|
|
Under
Non-Equity
|
|
Shares
of
|
Securities
|
Price
of
|
Fair
Value of
|
|
|
|
Incentive
Plan Awards (1)
|
Grant
|
Stock
or
|
Underlying
|
Option
|
Stock
Option
|
|
|
Name
|
Target
($)
|
Maximum
($)
|
Date
|
Units
(2)
|
Option
# (3)
|
Awards
($)
|
Awards
($)
|
|
Gayn Erickson
(4)
|
$
144,383
|
$
274,328
|
07/14/20
|
77,625
|
--
|
--
|
$
144,383
|
|
|
|
|
04/16/21
|
3,440
|
--
|
--
|
$
7,500
|
|
|
|
|
07/06/21
|
6,690
|
--
|
--
|
$
16,725
|
|
|
|
|
07/06/21
|
17,326
|
--
|
--
|
$
43,315
|
|
Kenneth B. Spink
(5)
|
$
65,551
|
$
120,177
|
07/14/20
|
35,243
|
--
|
--
|
$
65,552
|
|
|
|
|
04/16/21
|
1,835
|
--
|
--
|
$
4,000
|
|
|
|
|
07/06/21
|
1,800
|
--
|
--
|
$
4,500
|
|
|
|
|
07/06/21
|
13,110
|
--
|
--
|
$
32,776
|
|
Vernon Rogers
(6)
|
$
12,500
|
$
12,500
|
07/14/20
|
20,163
|
--
|
--
|
$
37,503
|
|
|
|
|
04/16/21
|
3,440
|
--
|
--
|
$
7,500
|
|
|
|
|
07/06/21
|
2,000
|
--
|
--
|
$
5,000
|
|
|
|
|
07/06/21
|
15,001
|
--
|
--
|
$
37,502
|
__________________
35
(1)
Reflects the target and maximum values of cash bonus awards based
upon the Company’s achievement of certain financial goals,
excluding commissions, to the named executive officers in fiscal
2021. Based on the Company performance for the year, the named
executive officers did not earn any financial goal
bonus.
(2)
Officers received RSUs under the Company’s 2016 Equity
Incentive Plan which vest over four years on July 14, 2020.
Officers received RSUs for personal performance bonus in lieu of
cash on April 16, 2021 and July 6, 2021. Officers received RSUs in
lieu of cash for the repayment of a 30% salary reduction in the
second half of fiscal 2021 on July 6, 2021.
(3) There
were no options granted to officers during fiscal
2021.
(4)
Besides bonus on the Company’s financial goals, Mr. Erickson
is eligible to receive a bonus based on personal performance
milestones with a target of $88,877. These bonus award amounts
actually earned by Mr. Erickson in fiscal 2021 are shown in
footnote (4) of Summary Compensation Table for fiscal 2021.
Additionally, Mr. Erickson is eligible to receive revenue
commission only when the Company’s quarterly GAAP profit,
before bonus, is equal $50,000 or more. Revenue commission is
calculated at 0.219% for revenue up to 100% of target and
accelerated commission rate of 0.438% on revenue above target. The
commission amounts actually earned by Mr. Erickson in fiscal 2021
are shown in footnote (4) of Summary Compensation Table for fiscal
2021.
(5) In
addition to a bonus based on the Company’s financial goals,
Mr. Spink is eligible to receive a bonus based on personal
performance milestones with a maximum of $31,500. These bonus award
amounts actually earned by Mr. Spink in fiscal 2021 are shown in
footnote (6) the Summary Compensation Table for fiscal
2021.
(6)
Mr. Rogers is eligible to receive a
bonus based on personal performance milestones with a target of
$95,000. These bonus award amounts actually earned by Mr. Rogers in
fiscal 2021 are shown in footnote (8) of the Summary Compensation
Table for fiscal 2021. Additionally, Mr. Rogers is eligible to
receive a booking commission without maximum amounts. Booking
commission is calculated at 0.399% for revenue up to 100% of target
and an accelerated commission rate of 0.798% on revenue above
target. The commission amounts actually earned by Mr. Rogers in
fiscal 2021 are shown in the Summary Compensation Table for fiscal
2021 under the heading “Non-Equity Incentive Plan
Compensation.”
36
Outstanding Equity Awards at Fiscal 2021 Year-End
The following table presents
certain information concerning the outstanding equity awards held
as of May 31, 2021 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
|
63,774
|
$
143,492
|
100,000
|
--
|
$
2.710
|
8/20/2021
|
|
|
|
|
57,000
|
--
|
$
2.100
|
4/21/2022
|
|
|
|
|
42,750
|
--
|
$
1.680
|
7/25/2023
|
|
|
|
|
32,774
|
1,426
|
$
3.930
|
7/11/2024
|
|
|
|
|
68,749
|
31,251
|
$
2.400
|
8/17/2025
|
|
|
|
|
59,581
|
70,419
|
$
1.635
|
7/16/2026
|
|
|
|
|
|
|
|
|
|
Kenneth
B. Spink
|
28,934
|
$
65,102
|
12,000
|
--
|
$
2.710
|
8/20/2021
|
|
|
|
|
9,500
|
--
|
$
2.100
|
4/21/2022
|
|
|
|
|
29,000
|
--
|
$
2.300
|
9/9/2022
|
|
|
|
|
18,000
|
--
|
$
1.680
|
7/25/2023
|
|
|
|
|
23,383
|
1,017
|
$
3.930
|
7/11/2024
|
|
|
|
|
29,218
|
13,282
|
$
2.400
|
8/17/2025
|
|
|
|
|
22,916
|
27,084
|
$
1.635
|
7/16/2026
|
|
|
|
|
|
|
|
|
|
Vernon
Rogers
|
16,383
|
$
36,862
|
129,165
|
70,835
|
$
2.030
|
10/23/2025
|
|
|
|
|
50,000
|
--
|
$
1.710
|
12/12/2025
|
|
|
|
|
18,332
|
21,668
|
$
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, 2021 of $2.25.
(3) Stock options
outstanding are generally exercisable starting one month after the
date of grant, with an additional 1/48
th
of the total number
of option shares becoming exercisable each month thereafter, with
full vesting occurring on the fourth anniversary of the date of
grant.
37
Stock Awards Vested and Option Exercises in Fiscal
2021
The following table provides
information concerning option exercises and RSUs vested by the
named executive officers during the fiscal year ended May 31,
2021.
|
|
Stock Awards
|
Option Awards
|
||
|
|
Number of Shares
|
Value
|
Number of Shares
|
Value
|
|
|
Acquired on
|
Realized on
|
Acquired on
|
Realized on
|
|
Name
|
Vesting (#)
|
Vesting ($) (1)
|
Exercise (#)
|
Exercise ($) (2)
|
|
Gayn
Erickson
|
45,755
|
$
103,342
|
95,000
|
$
61,750
|
|
Kenneth
B. Spink
|
24,929
|
57,285
|
--
|
--
|
|
Vernon
Rogers
|
24,221
|
57,373
|
--
|
--
|
(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, 2021 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
|
|
|
Termination
not for
|
|
|
Cause
Following a
|
|
Named Executive Officer Benefits and Payments
Upon
Termination:
|
Change
of Control (1)
|
|
Gayn
Erickson
|
|
|
Base
salary
|
$
433,149
|
|
Medical
continuation
|
33,625
|
|
Value
of accelerated stock options (2)
|
43,308
|
|
Value
of accelerated RSUs (3)
|
143,492
|
|
Kenneth B.
Spink
|
|
|
Base
salary
|
$
163,878
|
|
Medical
continuation
|
9,129
|
|
Value
of accelerated stock options (2)
|
16,657
|
|
Value
of accelerated RSUs (3)
|
65,102
|
|
Vernon
Rogers
|
|
|
Base
salary
|
$
125,008
|
|
Medical
continuation
|
18,934
|
|
Value
of accelerated stock options (2)
|
28,910
|
|
Value
of accelerated RSUs (3)
|
36,862
|
38
(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,
2021 of $2.25 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, 2021 of
$2.25.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Review, Approval or Ratification of Transactions with Related
Persons
In its ordinary course of
business, the Company may enter into transactions with certain of
its directors and officers. The Company believes that each such
transaction has been on terms no less favorable for the Company
than could have been obtained in a transaction with an independent
third party. The Company’s policy is to require that any
transaction with a related party that is required to be reported
under applicable SEC rules, be reviewed and approved according to
an established procedure. Such a transaction is reviewed and
approved by the Company’s Audit Committee as required by the
Audit Committee’s charter. We have not adopted specific
standards for approval of these transactions, but instead we review
each such transaction on a case by case basis.
Legal Counsel
The Company retained WSGR as
its legal counsel during a portion of the fiscal 2021. The Company
retained Latham & Watkins LLP as its legal counsel in February
2021.
Compensation Committee Interlocks and Insider
Participation
The Compensation Committee
currently consists of directors Danesh, 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
Fariba
Danesh
Laura
Oliphant
Howard
T. Slayen
39
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, 2021, 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)
|
1,040,555
|
4.2
%
|
|
Gayn Erickson
(4)
|
935,779
|
3.8
%
|
|
Fariba Danesh
(5)
|
6,255
|
*
|
|
Laura Oliphant
(6)
|
33,813
|
*
|
|
Mario M. Rosati
(7)
|
353,403
|
1.4
%
|
|
Geoffrey G. Scott
(8)
|
658,165
|
2.7
%
|
|
Howard T. Slayen
(9)
|
390,908
|
1.6
%
|
|
Kenneth B. Spink
(10)
|
222,473
|
*
|
|
Vernon Rogers
(11)
|
243,053
|
1.0
%
|
|
All Directors and
Executive Officers as a group (12 persons) (12)
|
4,296,448
|
16.7
%
|
|
|
|
|
|
Principal
Shareholders:
|
|
|
|
AWM Investment
Company, Inc. (13)
527
Madison Avenue, Suite 2600, New York, NY 10022
|
1,898,524
|
7.8
%
|
|
Royce &
Associates, LP (14)
745
Fifth Avenue, New York, NY 10151
|
1,047,900
|
4.3
%
|
__________________
* 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 24,482,796 shares of Common Stock outstanding
on August 31, 2021. Shares of Common Stock subject to options that
are currently exercisable or exercisable within 60 days of August
31, 2021 and shares of Common Stock subject to RSUs that are
subject to vest within 60 days of August 31, 2021 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 869,555
shares held by the Rhea J. Posedel Family Trust, and 122,206 shares
issuable upon the exercise of stock options exercisable within 60
days of August 31, 2021.
(4)
Includes 286,239
shares issuable upon the exercise of stock options exercisable and
8,086 RSUs vesting within 60 days of August 31, 2021.
(5)
Includes 4,693
shares held by the Fariba Danesh Revocable Trust U/A DTD
06/28/2001, and 1,562 shares issuable upon the exercise of stock
options exercisable within 60 days of August 31, 2021.
40
(6)
Includes 30,376
shares held by Laura A Oliphant TTEE Oliphant Family Living Trust
U/A DTD 05/11/1999, and 3,437 shares issuable upon the exercise of
stock options exercisable within 60 days of August 31,
2021.
(7)
Includes 27,000
shares held by Mario M. Rosati and Douglas Laurice, trustees for
the benefit of Mario M. Rosati, 151,016 shares held by Mario M.
Rosati, Trustee of the Mario M. Rosati Trust, U/D/T dated 1/5/90,
58,181 shares held by Mario M. Rosati and Danelle Storm Rosati,
Trustees of the Rosati Family Trust U/D/T dated May 23, 1997, and
113,505 shares issuable upon the exercise of stock options
exercisable within 60 days of August 31, 2021.
(8)
Includes 61,509 shares held by Geoffrey
Scott Living Trust and 250,000 shares held by Caroline Scott Living
Trust, and 14,062 shares issuable upon the exercise of stock
options exercisable within 60 days of August 31, 2021.
(9)
Includes 136,337
shares issuable upon the exercise of stock options exercisable
within 60 days of August 31, 2021.
(10)
Includes 142,670
shares issuable upon the exercise of stock options exercisable and
3,671 RSUs vesting within 60 days of August 31, 2021.
(11)
Includes 222,497
shares issuable upon the exercise of stock options exercisable and
2,100 RSUs vesting within 60 days of August 31, 2021.
(12)
Includes 1,246,159
shares issuable upon the exercise of stock options exercisable and
17,504 RSUs vesting within 60 days of August 31, 2021.
(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 29, 2021.
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
2021. BPM LLP, the Company’s independent registered public
accounting firm for fiscal year 2021, issued their unqualified
report dated August 27, 2021 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.
41
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, 2021 be included in
the Company’s Annual Report on Form 10-K.
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AUDIT
COMMITTEE
Laura
Oliphant
Geoffrey G.
Scott
Howard T.
Slayen
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COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange
Act requires that directors, certain officers of the Company and
10% shareholders file reports of ownership and changes in ownership
with the SEC as to the Company’s securities beneficially
owned by them. Such persons are also required by SEC rules to
furnish the Company with copies of all Section 16(a) forms
they file.
Based solely on its review of
copies of such forms received by the Company, or on written
representations from certain reporting persons, the Company
believes that all Section 16(a) filing requirements applicable to
its officers, directors and greater than ten percent beneficial
owners were complied with during the fiscal year ended May 31,
2021, except that the Form 4 of Gayn Erickson reporting shares
withheld for taxes on quarterly RSUs vested on January 14, 2021 was
inadvertently filed late.
FINANCIAL STATEMENTS
The Company’s Annual
Report to Shareholders for the last fiscal year is being mailed
with this Proxy Statement to shareholders entitled to notice of the
meeting. The Annual Report includes the consolidated financial
statements, unaudited selected consolidated financial data and
management’s discussion and analysis of financial condition
and results of operations.
OTHER MATTERS
The Company knows of no other
matters to be submitted to the meeting. If any other matters
properly come before the meeting, it is the intention of the
persons named in the enclosed Proxy to vote the shares they
represent as the Board may recommend.
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By Order of the
Board of Directors,
GAYN
ERICKSON
President and Chief Executive Officer
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Dated:
September 23, 2021
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