<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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 Section240.14a-11(c) or
Section240.14a-12
AEHR TEST SYSTEMS
- - --------------------------------------------------------------------------------
(Name of Registrants 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.
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(2) or Item 22(a)(2) of
Schedule 14A.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
N/A
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
N/A
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
N/A
-----------------------------------------------------------------------
(5) Total fee paid:
N/A
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
N/A
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
N/A
-----------------------------------------------------------------------
(3) Filing Party:
N/A
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(4) Date Filed:
N/A
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<PAGE>
[LOGO]
AEHR TEST SYSTEMS
1667 PLYMOUTH STREET
MOUNTAIN VIEW, CALIFORNIA 94043
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 28, 1998
------------------------
TO THE SHAREHOLDERS OF
AEHR TEST SYSTEMS:
You are cordially invited to attend the Annual Meeting of Shareholders (the
"Annual Meeting") of Aehr Test Systems, a California corporation (the "Company")
to be held on October 28, 1998, at 4:30 p.m., at 1667 Plymouth Street, Mountain
View, California 94043, for the following purposes:
1. To elect four directors.
2. To ratify the selection of PricewaterhouseCoopers LLP as the Company's
independent auditors for the fiscal year ending May 31, 1999.
3. To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
Only holders of record of the Common Stock at the close of business on
September 3, 1998 will be entitled to notice of and to vote at the Annual
Meeting. Please sign, date and mail the enclosed proxy so that your shares may
be represented at the Annual Meeting if you are unable to attend and vote in
person.
By Order of the Board of Directors,
[SIGNATURE]
RHEA J. POSEDEL
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
CHAIRMAN OF THE BOARD OF DIRECTORS
<PAGE>
AEHR TEST SYSTEMS
1667 PLYMOUTH STREET
MOUNTAIN VIEW, CALIFORNIA 94043
------------------------
PROXY STATEMENT
---------------------
ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement is being furnished to the Shareholders (the
"Shareholders") of Aehr Test Systems, a California corporation (the "Company"),
in connection with the solicitation of proxies by the Board of Directors for use
at the Annual Meeting of Shareholders (the "Annual Meeting") of the Company to
be held on October 28, 1998 and at any adjournments thereof.
At the Annual Meeting, the Shareholders will be asked:
1. To elect four directors.
2. To ratify the selection of PricewaterhouseCoopers LLP as the Company's
independent auditors for the fiscal year ended May 31, 1999.
3. To transact such other business as may properly come before the Annual
Meeting or any adjournments of the Annual Meeting.
The Board of Directors has fixed the close of business on September 3, 1998
as the record date for the determination of the holders of Common Stock entitled
to notice of and to vote at the Annual Meeting. Each such Shareholder will be
entitled to one vote for each share of Common Stock ("Common Share") held on all
matters to come before the Annual Meeting and may vote in person or by proxy
authorized in writing.
This Proxy Statement and the accompanying form of proxy are first being sent
to holders of the Common Shares on or about September 25, 1998.
THE ANNUAL MEETING
DATE, TIME AND PLACE
The Annual Meeting will be held on October 28, 1998 at 4:30 p.m., local
time, at 1667 Plymouth Street, Mountain View, California 94043.
GENERAL
The Company's principal office is located at 1667 Plymouth Street, Mountain
View, California 94043 and its telephone number is (650) 691-9400.
RECORD DATE AND SHARES ENTITLED TO VOTE
Shareholders of record at the close of business on September 3, 1998 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. As
of the Record Date, there were 6,924,418 Common Shares outstanding and entitled
to vote.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company a written
notice of revocation or a duly executed proxy bearing a later date or by
attending the meeting and voting in person.
VOTING AND PROXY SOLICITATION
Each shareholder voting for the election of directors may cumulate his or
her votes, giving one candidate a number of votes equal to the number of
directors to be elected multiplied by the number of shares that the shareholder
is entitled to vote, or distributing the shareholder's votes on the same
principle
<PAGE>
among as many candidates as the shareholder chooses. No shareholder shall be
entitled to cumulate votes for any candidate unless the candidate's name has
been properly placed in nomination prior to the voting and the shareholder, or
any other shareholder, has given notice at the meeting prior to the voting of
the intention to cumulate votes. On all other matters, each share has one vote.
Proxies are being solicited by the Company. The cost of this solicitation
will be borne by the Company. The Company may reimburse brokerage firms and
other persons representing beneficial owners of shares for their expenses in
forwarding solicitation material to such beneficial owners. Proxies may also be
solicited by certain of the Company's directors, officers, and regular
employees, without additional compensation, personally or by telephone or
telegram.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting is
a majority of the shares of Common Stock issued and outstanding on the Record
Date. Shares that are voted "FOR," "AGAINST" or "WITHHELD FROM" a matter are
treated as being present at the meeting for purposes of establishing a quorum
and are also treated as shares "represented and voting" (the "Votes Cast") at
the Annual Meeting with respect to such matter.
While there is no definitive statutory or case law authority in California
as to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining both (i) the presence or absence
of a quorum for the transaction of business and (ii) the total number of Votes
Cast with respect to a proposal (other than the election of directors). In the
absence of controlling precedent to the contrary, the Company intends to treat
abstentions in this manner. Accordingly, abstentions will have the same effect
as a vote against the proposal.
Broker non-votes may be counted for purposes of determining the presence or
absence of a quorum for the transaction of business, but will not be counted for
purposes of determining the number of Votes Cast with respect to the proposal on
which the broker has expressly not voted. Thus, a broker non-vote will not
affect the outcome of the voting on a proposal.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Shareholders are entitled to present proposals for action at a forthcoming
meeting if they comply with the requirements of the proxy rules promulgated by
the Securities and Exchange Commission ("SEC"). Proposals of shareholders of the
Company intended to be presented for consideration at the Company's 1999 Annual
Meeting of Shareholders must be received by the Company no later than May 28,
1999, in order that they may be included in the proxy statement and form of
proxy related to that meeting.
The attached proxy card grants the proxy holders discretionary authority to
vote on any matter raised at the Annual Meeting. If a shareholder intends to
submit a proposal at the Company's Annual Meeting in 1999, which is not eligible
for inclusion in the proxy statement relating to that meeting, the shareholder
must give notice to the Company in accordance with the requirements set forth in
rules promulgated under the Securities Act of 1934, as amended, no later than
August 11, 1999. If such a shareholder fails to comply with the foregoing notice
provision, the proxy holders will be allowed to use their discretionary voting
authority when and if the proposal is raised at the Company's Annual Meeting in
1999.
SHAREHOLDER INFORMATION
IN COMPLIANCE WITH RULE 14A-3 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT
OF 1934, THE COMPANY HEREBY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH PERSON
UPON WRITTEN REQUEST, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K,
INCLUDING THE FINANCIAL STATEMENTS AND FINANCIAL SCHEDULES THERETO. REQUESTS FOR
SUCH COPIES SHOULD BE DIRECTED TO AEHR TEST SYSTEMS, 1667 PLYMOUTH STREET,
MOUNTAIN VIEW, CA 94043, ATTENTION: INVESTOR RELATIONS.
2
<PAGE>
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, 1998, or some other
practical date in cases of the principal shareholders, by: (i) each person (or
group of affiliated persons) known to the Company to be the beneficial owner of
more than 5% of the Company's Common Stock, (ii) each director of the Company,
(iii) each of the Company's executive officers named in the Summary Compensation
Table appearing herein, and (iv) all directors and executive officers of the
Company as a group:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
-------------------------
BENEFICIAL OWNER NUMBER PERCENT(2)
- - --------------------------------------------------------------------- ---------- -------------
<S> <C> <C>
NAMED EXECUTIVE OFFICERS AND DIRECTORS:
Rhea J. Posedel (3).................................................. 956,908 13.7%
William W. R. Elder (4).............................................. 84,895 1.2%
Mario M. Rosati (5).................................................. 214,340 3.1%
David Torresdal (6).................................................. 269,883 3.9%
Gary L. Larson (7)................................................... 59,113 *
William D. Barraclough (8)........................................... 35,776 *
Carl N. Buck (9)..................................................... 53,934 *
Richard F. Sette (10)................................................ 42,186 *
All Directors and Executive Officers as a group
(10 persons) (11).................................................. 1,744,983 23.9%
PRINCIPAL SHAREHOLDERS:
Private Capital Management (12) ..................................... 907,300 13.1%
3003 Tamiami Trail North, Naples, FL 33940
Franklin Resources, Inc. (13) ....................................... 683,400 9.9%
777 Mariners Island Blvd., San Mateo, CA 94403-7777
Wellington Management Company, LLP (14) ............................. 676,000 9.8%
75 State Street, Boston, MA 02109
State of Wisconsin Investment Board (15) ............................ 663,500 9.6%
P.O. Box 7842, Madison, WI 53707
</TABLE>
- - ------------------------
* Represents less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. 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, 1667
Plymouth Street, Mountain View, California 94043.
(2) Shares of Common Stock subject to options that are currently exercisable or
exercisable within 60 days of August 31, 1998 are deemed to be outstanding
and to be beneficially owned by the person holding such options or warrants
for the purpose of computing the percentage ownership of such person but are
not treated as outstanding for the purpose of computing the percentage
ownership of any other person.
(3) Includes 20,000 shares held by Vivian Owen, Mr. Posedel's wife, and 60,727
shares issuable upon the exercise of stock options exercisable within 60
days of August 31, 1998.
3
<PAGE>
(4) Includes 2,500 shares held jointly with Gloria Elder, and 82,395 shares
issuable upon the exercise of stock options exercisable within 60 days of
August 31, 1998.
(5) Includes 3,040 shares held of record by WS Investment Company 87A. Mr.
Rosati is a general partner of WS Investment Company 87A and disclaims
beneficial ownership of the shares held by WS Investment Company 87A except
to the extent of his proportionate partnership interest therein. Also
includes 27,000 shares held by Mario M. Rosati and Douglas Laurice, trustees
for the benefit of Mario M. Rosati, 151,016 shares held by Mario M. Rosati,
Trustee of the Mario M. Rosati Trust,
U/D/T dated 1/9/90, 20,000 shares held by Douglas M. Laurice and Mario M.
Rosati TTEE FBO Sally Rosati Banks and 12,083 shares issuable upon the
exercise of stock options exercisable within 60 days of August 31, 1998.
(6) Includes 248,800 shares held jointly with Betty Torresdal, 1,800 shares
held by Barbara Long, trustee for the benefit of Brock Frank Torresdal,
1,800 shares held by Barbara Long, trustee for the benefit of Candice Ann
Torresdal, 1,800 shares held by Barbara Long, trustee for the benefit of
Eric Nels Torresdal, 1,800 shares held by Barbara Long, trustee for the
benefit of Kyler David Torresdal, 1,800 shares held by Barbara Long, trustee
for the benefit of Kevin Allen Torresdal, and 12,083 shares issuable upon
the exercise of stock options exercisable within 60 days of August 31, 1998.
(7) Includes 58,613 shares issuable upon the exercise of stock options within
60 days of August 31, 1998.
(8) Includes 35,624 shares issuable upon the exercise of stock options within
60 days of August 31, 1998.
(9) Includes 46,416 shares issuable upon the exercise of stock options within
60 days of August 31, 1998.
(10) Includes 42,186 shares issuable upon the exercise of stock options within
60 days of August 31, 1998.
(11) Includes 3,471 shares held in the name of Raul V. Tan and 374,604 shares
issuable upon the exercise of stock options within 60 days of August 31,
1998.
(12) Based on information provided in a questionnaire by Private Capital
Management, Inc. to the Company. Voting and investment power is shared with
respect to the shares.
(13) Based on information provided in a letter from Franklin Resources, Inc.
("FRI") to the Company. The reported 683,400 shares are held by the mutual
funds in the Franklin/Templeton Group of Funds (the "F/T Group") (a
tradename for U.S. based separate, unaffiliated investment companies whose
investment advisors are direct or indirect wholly owned subsidiaries of FRI)
and other managed accounts advised by direct or indirect wholly owned
subsidiaries of FRI. FRI disclaims any economic interest in or beneficial
ownership of the shares. Voting and investment power to the shares owned by
the F/T Group resides with the respective investment advisor of each fund,
subject to guidelines set forth by each fund's Board of Trustees or
Directors. Voting power of the shares held by the managed accounts may or
may not reside with the respective investment advisor of the managed
account, subject to guidelines set forth by the managed account. Based on
the statement filed with the Securities and Exchange Commission pursuant to
Section 13(f) of the Securities Act of 1934 by FRI for the period ending
June 30, 1998, the funds of the F/T Group and the managed accounts together
have shared investment power with respect to all 683,400 shares, sole voting
power with respect to 337,600 shares, and no voting authority with respect
to the remaining 345,800 shares.
(14) Based on information provided in a letter from Wellington Management
Company, LLP ("WMC") to the Company. The shares consist of 676,000 shares
owned of record by investment advisory clients of WMC. WMC, in its capacity
as investment adviser, may be deemed to have beneficial ownership of the
676,000 shares. WMC is not the owner of record of such shares and disclaims
any pecuniary interest in such shares. WMC has shared voting power with
respect to 426,000 shares, shared investment power with respect to 676,000
shares, and no voting or investment power with respect to the remaining
shares.
(15) Number of shares held by the State of Wisconsin Investment Board ("SWIB")
provided in a letter from SWIB to the Company. Based on the statement filed
with the Securities and Exchange Commission pursuant to Section 13(g) of the
Securities Act of 1934 by SWIB on January 26, 1998, SWIB has sole voting and
sole investment power with respect to the shares.
4
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, four directors are to be elected to serve until the
next Annual Meeting or until their successors are elected and qualified. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the election of the four nominees named below, all of whom are presently
directors of the Company. Each nominee has consented to be named a nominee in
this Proxy Statement and to continue to serve as a director if elected. Should
any nominee become unable or decline to serve as a director or should additional
persons be nominated at the meeting, the proxy holders intend to vote all
proxies received by them in such a manner as will assure the election of as many
nominees listed below as possible (or, if new nominees have been designated by
the Board of Directors, in such a manner as to elect such nominees) and the
specific nominees to be voted for will be determined by the proxy holders. The
Company is not aware of any reason that any nominee will be unable or will
decline to serve as a director. There are no arrangements or understandings
between any director or executive officer and any other person pursuant to which
he is or was to be selected as a director or officer of the Company.
The names of the nominees and certain information about them are set forth
below:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE POSITION SINCE
- - ------------------------------------- --- ---------------------------------------------------------- -----------
<S> <C> <C> <C>
Rhea J. Posedel...................... 56 Chairman of the Board, President and Chief Executive 1977
Officer
William W. R. Elder (1)(2)........... 59 Director 1989
Mario M. Rosati (2).................. 52 Director and Secretary 1977
David Torresdal (1).................. 60 Director 1977
</TABLE>
- - ------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
The principal occupation of each of the Board members during the past five
years is set forth below. There is no family relationship between any director
or executive officer of the Company.
RHEA J. POSEDEL is a founder of the Company and has served as President,
Chief Executive Officer and Chairman of the Board of Directors since its
inception in 1977. Prior to founding the company, Mr. Posedel held various
project engineering and engineering managerial positions at Lockheed Martin
Corporation (formerly "Lockheed Missile & Space Corporation"), Ampex
Corporation, and Cohu, Inc. He received a B.S. in Electrical Engineering from
the University of California, Berkeley, an M.S. in Electrical Engineering from
San Jose State University and an M.B.A. from Golden Gate University.
WILLIAM W. R. ELDER has been a director of the Company since 1989. Dr. Elder
was the Chief Executive Officer of Genus, Inc. ("Genus"), a semiconductor
company, from his founding of Genus in 1981 to September 1996, and has been
serving in that same position again since April 1998. Dr. Elder has been a
director of Genus since its inception. Dr. Elder holds a B.S.I.E. and an
honorary Doctorate Degree from the University of Paisley in Scotland.
MARIO M. ROSATI has served as Secretary and a director of the Company since
1977. He is a member of the law firm of Wilson Sonsini Goodrich & Rosati, which
he joined in 1971. Mr. Rosati is a graduate of Boalt Hall, University of
California at Berkeley. Mr. Rosati is a director of C*ATS Software, Inc., a
software development company, Genus, Inc., a semiconductor company, Meridian
Data, Inc., a software development company, Ross Systems, a client/server
application software company, LECG, Inc., a law and economics consulting
company, and Sanmina Corporation, a customized, integrated electronics
manufacturing services company, as well as several private companies.
5
<PAGE>
DAVID TORRESDAL has been a director of the Company since 1977. He has been
President of Davtron, Inc., a manufacturer of aircraft electronic equipment,
since 1970. Mr. Torresdal received an A.A.S. in Engineering from Oregon
Technical Institute.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held a total of five (5) meetings and acted four (4)
times by unanimous written consent during the fiscal year ended May 31, 1998. No
director during his period of service in such fiscal year attended fewer than
75% of the aggregate of all meetings of the Board of Directors and the
committees of the Board upon which such director served. The Board of Directors
has two committees, the Audit Committee and the Compensation Committee.
The Audit Committee of the Board of Directors currently consists of Messrs.
Torresdal and Elder. The Audit Committee is responsible for reviewing the
results and scope the audit and other services provided by the Company's
independent auditors. The responsibilities of the Audit Committee were executed
by the Board of Directors during fiscal year 1998. During each meeting of the
Board of Directors in fiscal year 1998, the Board of Directors reviewed and
discussed financial presentations and related matters. The Board of Directors
also consulted with the Company's independent auditors regarding the audit for
fiscal year 1998. The Audit Committee did not hold any meetings during fiscal
year 1998.
The Compensation Committee of the Board of Directors currently consists of
Messrs. Rosati and Elder. The Compensation Committee held one (1) meeting during
fiscal year 1998. The Compensation Committee reviews and advises the Board of
Directors regarding all forms of compensation to be provided to the officers,
employees, directors and consultants of the Company.
The Board of Directors has no nominating committee or any committee
performing such function.
DIRECTOR COMPENSATION
Directors of the Company do not receive any cash compensation for their
services as members of the Board of Directors, although they are reimbursed for
certain expenses incurred in attending Board and committee meetings. Directors
are eligible to participate in the Company's option plans. In fiscal 1996, the
Company granted options to purchase 55,000 shares to William Elder at $4.00 per
share, 20,000 shares to Mario Rosati at $4.00 per share, and 20,000 shares to
David Torresdal at $4.00 per share. Directors were granted no options in fiscal
1997 and 1998.
VOTE REQUIRED
The four nominees receiving the highest number of affirmative votes of the
shares entitled to be voted for them shall be elected as directors. Votes
withheld from any director are counted for purposes of determining the presence
or absence of a quorum for the transaction of business, but have no other legal
effect in the election of directors under California law. See "QUORUM;
ABSTENTIONS; BROKER NON-VOTES."
MANAGEMENT RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE NOMINEES LISTED ABOVE
6
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows, as to the Chief Executive Officer and each of the
four other most highly compensated executive officers who earned in excess of
$100,000 in annual salary or bonus, information concerning compensation awarded
to, earned by or paid for services to the Company in all capacities during the
fiscal years ended May 31, 1998, 1997 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
ANNUAL COMPENSATION SECURITIES
----------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY ($) BONUS ($) OPTIONS ($) COMPENSATION ($)
- - ----------------------------------------------- ----------- ---------- ----------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Rhea J. Posedel................................ 1998 $ 192,125 $ 37,800 $ 4,194 $ 2,512(1)
President, Chief Executive Officer 1997 $ 185,040 $ 70,500 $ 5,388 $ 2,497(2)
and Chairman of the Board of 1996 $ 173,246 -- $ 1,686 $ 2,319(3)
Directors
Gary L. Larson................................. 1998 $ 144,408 $ 21,375 $ 4,164 $ 3,248(1)
Vice President of Finance and Chief 1997 $ 133,449 $ 33,700 $ 5,258 $ 3,313(2)
Financial Officer 1996 $ 133,540 $ 6,450 $ 1,574 $ 3,364(3)
William D. Barraclough......................... 1998 $ 124,615 $ 15,600 $ 3,711 $ 2,254(1)
Vice President of Test Systems 1997 $ 123,996 $ 40,584 $ 5,388 $ 2,227(2)
Engineering 1996 $ 106,700 $ 30,789 $ 1,385 $ 1,840(3)
Carl N. Buck................................... 1998 $ 127,787 $ 23,780 $ 3,797 $ 1,305(1)
Vice President of Research and 1997 $ 121,742 $ 24,142 $ 4,717 $ 1,312(2)
Development Engineering 1996 $ 121,060 $ 7,600 $ 1,437 $ 1,234(3)
Richard F. Sette............................... 1998 $ 128,639 $ 18,750 $ 3,657 $ 2,270(1)
Vice President of Operations 1997 $ 121,827 $ 26,500 $ 4,465 $ 11,848(4)
1996 $ 46,152 -- -- $ 5,246(5)
</TABLE>
- - ------------------------
(1) Consists of health and life insurance premiums paid by the Company during
the year ended May 31, 1998.
(2) Consists of health and life insurance premiums paid by the Company during
the year ended May 31, 1997.
(3) Consists of health and life insurance premiums paid by the Company during
the year ended May 31, 1996.
(4) Consists of $9,595 paid by the Company for relocation costs and $2,253 in
health and life insurance premiums paid by the Company during the year ended
May 31, 1997.
(5) Consists of $4,512 paid by the Company for relocation costs and $734 in
health and life insurance premiums paid by the Company during the year ended
May 31, 1996.
7
<PAGE>
STOCK OPTION GRANTS AND EXERCISES
The following table sets forth the number and terms of options granted to
the persons named in the Summary Compensation Table during the fiscal year ended
May 31, 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
- - ---------------------------------------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES % OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OPTION TERM (4)
OPTIONS TO EMPLOYEES IN PRICE ($/ EXPIRATION --------------------
NAME GRANTED (1) FISCAL YEAR (2) SHARE) (3) DATE 5% ($) 10% ($)
- - ---------------------------------- ----------- ----------------- ------------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Rhea J. Posedel................... 5,000 3.3% $ 8.25 6/19/02 $ 11,397 $ 25,184
Gary L. Larson.................... 5,000 3.3% $ 7.50 6/19/02 $ 10,361 $ 22,894
William D. Barraclough............ -- -- -- -- -- --
Carl N. Buck...................... 2,500 1.7% $ 7.50 6/19/02 $ 5,180 $ 11,447
Richard F. Sette.................. 10,000 6.6% $ 7.50 6/19/02 $ 20,721 $ 45,788
</TABLE>
- - ------------------------
(1) Options granted under the 1996 Stock Option Plan and vest over four years
from June 19, 1997.
(2) Based on an aggregate of 150,500 options granted by the Company in the year
ended May 31, 1998 to employees and consultants to the Company, including
the named executive officers.
(3) The exercise price per share of each option was equal to the fair market
value of the Common Stock on the date of grant as determined by the Board of
Directors, except the exercise price of the options granted to Mr. Posedel
was equal to 110% of the fair market value of the Common Stock on the date
of the grant.
(4) This column sets forth hypothetical gains or "option spreads" for the
options at the end of their respective five-year terms, as calculated in
accordance with the rules of the Securities and Exchange Commission. Each
gain is based on an arbitrarily assumed annualized rate of compound
appreciation of the market price at the date of grant of 5% and 10% from the
date the option was granted to the end of the option term. The 5% and 10%
rates of appreciation are specified by the rules of the Securities and
Exchange Commission and do not represent the Company's estimate or
projection of future Common Stock prices. The Company does not necessarily
agree that this method properly values an option. Actual gains, if any, on
option exercises are dependent on the future performance of the Company's
Common Stock and overall market conditions and the timing of option
exercises, if any.
8
<PAGE>
The following table provides information concerning option exercises by the
persons named in the Summary Compensation Table during the fiscal year ended May
31, 1998 and the value of unexercised options at such date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES FISCAL YEAR-END (#)(1) AT FISCAL YEAR-END ($)(2)
ACQUIRED ON VALUE -------------------------- --------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ---------------------------------- ------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Rhea J. Posedel................... -- -- 53,853 21,147 $ 87,653 $ 28,757
Gary L. Larson.................... 7,781 $ 25,464(3) 55,905 9,314 $ 118,384 $ 11,262
William D. Barraclough............ -- -- 31,874 13,126 $ 73,099 $ 27,236
Carl N. Buck...................... 5,000 $ 17,500(4) 48,655 8,845 $ 106,695 $ 14,270
Richard F. Sette.................. -- -- 37,457 12,543 $ 72,547 $ 9,973
</TABLE>
- - ------------------------
(1) The Company has not granted any stock appreciation rights and its stock
plans do not provide for the granting of such rights.
(2) Calculated by determining the difference between the fair market value of
the securities underlying the options at year-end ($6.063 per share as of
May 29, 1998) and the exercise price of the options.
(3) Total includes various exercises of options. The total is based on the fair
market value of the Company's Common Stock on June 24, 1997 ($7.50) as
determined by the Board of Directors, April 7, 1998 ($6.063) as reported by
the Nasdaq National Market System and April 9, 1998 ($6.125) as reported by
Nasdaq National Market System.
(4) Based on the fair market value of the Company's Common Stock on the date of
exercise ($7.50) as determined by the Board of Directors.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
GENERAL
In its ordinary course of business, the Company enters into transactions
with certain of its directors and officers. The Company believes that each such
transaction has been on terms no less favorable for the Company than could have
been obtained in a transaction with an independent third party.
LEGAL COUNSEL
During fiscal 1998, Mario M. Rosati, a member of the Board of Directors of
the Company, was also a member of the law firm of Wilson Sonsini Goodrich &
Rosati ("WSGR"). The Company retained WSGR as its legal counsel during the
fiscal year. The Company plans to retain WSGR as its legal counsel again during
fiscal 1999.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Rosati and Elder. No
interlocking relationship exists between the Company's Board of Directors and
Compensation Committee and the board of directors or compensation committee of
any other company.
9
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Exchange Act of 1933, as amended, or the
Securities Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the following report and
the Performance Graph shall not be incorporated by reference into any such
filings.
GENERAL
The objectives of the overall executive compensation program are to attract,
retain, motivate and reward Company executives while aligning their compensation
with the achievements of key business objectives, maximization of shareholder
value and optimal satisfaction of customers.
The Compensation Committee is responsible for:
1. Determining the specific executive compensation methods to be used by
the Company and the participants in each of those specific programs;
2. Determining the evaluation criteria and timeliness to be used in those
programs;
3. Determining the processes that will be followed in the ongoing
administration of the programs; and
4. Determining their role in the administration of the programs.
All of the actions take the form of recommendations to the full Board of
Directors where final approval, rejection or redirection will occur. The
Compensation Committee is responsible for administering the compensation
programs for all Company officers. The Compensation Committee has delegated the
responsibility of administering the compensation programs for all other Company
employees to the Company's officers.
COMPENSATION VEHICLES
Currently, the Company uses the following executive compensation vehicles:
- Cash-based programs: Base salary, Annual Incentive Bonus Plan, Annual
Profit Sharing Plan, and a Sales Incentive Commission Plan; and
- Equity-based programs: 1996 Incentive Stock Option Plan, the 1997 Employee
Stock Purchase Plan and the Employee Stock Bonus Plan.
These programs apply to the Chief Executive Officer and all executive level
positions, except for the Sales Incentive Commission Plan, which only includes
executives directly responsible for sales activities. Periodically, but at least
once near the close of each fiscal year, the Compensation Committee reviews the
existing plans and recommends those that should be used for the subsequent year.
The criteria for determining the appropriate salary level, bonus and stock
option grants for the Chief Executive Officer and each of the executive officers
include (a) Company performance as a whole, (b) business unit performance (where
appropriate) and (c) individual performance objectives. Company performance and
business unit performance are measured against both strategic and financial
goals. Examples of these goals are to obtain: operating profit, revenue growth,
timely new product introduction, and shareholder value (usually measured by the
Company stock price). Individual performance is measured to specific objectives
relevant to the individual's position and a specific time frame.
These criteria are usually related to a fiscal year time period, but may, in
some cases, be measured over a shorter or longer time frame.
10
<PAGE>
The processes used by the Compensation Committee include the following
steps:
1. The Compensation Committee periodically receives information comparing
the Company's pay levels to other companies in similar industries, other
leading companies (regardless of industry) and competitors. Primarily
national and regional compensation surveys are used.
2. At or near the start of each evaluation cycle, the Compensation
Committee meets with the Chief Executive Officer to review, revise as
needed, and agree on the performance objectives set for the other
executives reporting to the Chief Executive Officer. The Chief Executive
Officer and Compensation Committee jointly set the Company objectives to
be used. The business unit and individual objectives are formulated
jointly by the Chief Executive Officer and the specific individual. The
Compensation Committee also, with the Chief Executive Officer, jointly
establishes and agrees on their respective performance objectives.
3. Throughout the performance cycle review, feedback is provided by the
Chief Executive Officer, the Compensation Committee and full Board, as
appropriate.
4. At the end of the performance cycle, the Chief Executive Officer
evaluates each executive's relative success in meeting the performance
goals. The Chief Executive Officer makes recommendations on salary, bonus
and stock options, utilizing the comparative results as a factor. Also
included in the decision criteria are subjective factors such as
teamwork, leadership contributions and ongoing changes in the business
climate. The Chief Executive Officer reviews the recommendations and
obtains Compensation Committee approval. The Compensation Committee also
determines the level of salary and bonus and the terms of stock option
grants for the Chief Executive Officer.
5. The final evaluations and compensation decisions are discussed with each
executive by the Chief Executive Officer or Compensation Committee, as
appropriate.
POLICY ON DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code")
limits the tax deduction to $1 million for compensation paid to its five most
highly compensated executive officers, unless certain requirements are met. One
requirement is that the Compensation Committee consist entirely of outside
directors as defined in the Code, and the Company's Compensation Committee meets
this requirement. Another requirement is that compensation over $1 million must
be based upon Company attainment of pre-established, objective performance
goals. The Company believes that all compensation paid to its five most highly
compensated executive officers in fiscal 1998 is fully deductible. The
Committee's present intention is to comply with the requirements of Section
162(m) unless and until the Committee determines that compliance would not be in
the best interest of the Company and its shareholders.
The Compensation Committee feels that the compensation vehicles used by the
company, generally administered through the process as outlined above, provide a
fair and balanced executive compensation program related to the proper business
issues. In addition, it should be noted that compensation vehicles will be
reviewed and, as appropriate, revised in order to attract and retain new
executives in addition to rewarding performance on the job.
COMPENSATION COMMITTEE
Mario M. Rosati
William W.R. Elder
11
<PAGE>
COMPANY PERFORMANCE
The following graph shows a comparison of total shareholder return for
holders of the Company's Common Stock from August 15, 1997, the date of the
Company's initial public offering, through May 31, 1998 compared with The Nasdaq
Stock Market (U.S.) Index and the Hambrecht & Quist Semiconductor Index. The
graph assumes that $100 was invested in the Company's Common Stock, in the
Nasdaq Stock Market (U.S.) Index and the Hambrecht & Quist Semiconductor Index
on August 15, 1997, and that all dividends were reinvested. The Company believes
that while total shareholder return can be an important indicator of corporate
performance, the stock prices of semiconductor equipment companies like Aehr
Test Systems are subject to a number of market-related factors other than
company performance, such as competitive announcements, mergers and acquisitions
in the industry, the general state of the economy, and the performance of other
semiconductor equipment company stocks.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AEHR TEST SYSTEMS NASDAQ STOCK MARKET (U.S.) HAMBRECHT & QUIST SEMICONDUCTOR
<S> <C> <C> <C>
8/15/97 $100.00 $100.00 $100.00
5/31/98 $50.52 $113.73 $68.70
</TABLE>
12
<PAGE>
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company has selected PricewaterhouseCoopers
LLP, as the Company's independent auditors, to audit the financial statements of
the Company for the current fiscal year ending May 31, 1999, and recommends that
Shareholders vote for ratification of such appointment. Representatives of
PricewaterhouseCoopers LLP are expected to be present at the meeting with the
opportunity to make a statement if they desire to do so, and are expected to be
available to respond to appropriate questions.
MANAGEMENT RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires that directors, certain officers
of the Company and ten percent Shareholders file reports of ownership and
changes in ownership with the SEC as to the Company's securities beneficially
owned by them. Such persons are also required by SEC rules to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on its review of copies of Forms 3 and 4 and amendments thereto
furnished to the Company pursuant to Rule 16a-3(e) and Forms 5 and amendments
thereto furnished to the Company with respect to its most recent fiscal year,
and any written representations referred to in Item 405(b)(2)(i) of Regulation
S-K stating that no Forms 5 were required, the Company believes that, during
fiscal year 1998, all Section 16(a) filing requirements applicable to the
Company's officers, directors and ten percent shareholders were filed on a
timely basis except for amendments to a Form 3 and Form 4 by director Mario M.
Rosati in order to clarify his holdings which were previously reported on a
timely filed Form 3 and Form 4.
FINANCIAL STATEMENTS
The Company's Annual Report to Shareholders for the last fiscal year is
being mailed with this proxy statement to Shareholders entitled to notice of the
meeting. The Annual Report includes the consolidated financial statements,
unaudited selected financial data and management's discussion and analysis of
financial condition and results of operations.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed Proxy to vote the shares they represent as the
Board of Directors may recommend.
By Order of the Board of Directors,
[SIGNATURE]
RHEA J. POSEDEL
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
CHAIRMAN OF THE BOARD OF DIRECTORS
Dated: September 25, 1998
13
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
AEHR TEST SYSTEMS
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 28, 1998
The undersigned Shareholder of Aehr Test Systems, a California corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders and
Proxy Statement and hereby appoints Rhea J. Posedel and Gary L. Larson, or
either of them, proxies and attorneys-in-fact, with full power to each of
substitution, on behalf and in the name of the undersigned, to represent the
undersigned at the Annual Meeting of Shareholders of Aehr Test Systems to be
held on October 28, 1998, at 4:30 p.m., local time, at 1667 Plymouth Street,
Mountain View, California 94043, and at any adjournments thereof and to vote all
shares of Common Stock which the undersigned would be entitled to vote if then
and there personally present, on the matters set forth below:
1. ELECTION OF DIRECTORS: FOR all nominees listed WITHHOLD authority
below(EXCEPT AS INDICATED) / / TO VOTE FOR ALL
NOMINEES LISTED
BELOW / /
IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE(S), STRIKE
A LINE THROUGH THAT NOMINEES NAME IN THE LIST BELOW:
Rhea J. Posedel David Torresdal William W. R. Elder Mario M. Rosati
2. PROPOSAL TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT AUDITORS:
/ / FOR / / AGAINST / / ABSTAIN
3. IN THEIR DISCRETION, UPON SUCH OTHER MATTER OR MATTERS WHICH MAY PROPERLY
COME BEFORE THE MEETING AND ANY ADJOURNMENT(S) THEREOF.
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR RATIFICATION OF THE
APPOINTMENT OF THE COMPANY'S INDEPENDENT AUDITORS, AND AS SAID PROXIES DEEM
ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING AND ANY
ADJOURNMENT(S) THEREOF.
Dated: _____________________, 1998
__________________________________
Signature
__________________________________
[Signature]
(This Proxy should be marked,
dated, signed by the
Shareholder(s) exactly as his or
her name appears hereon, and
returned promptly in the enclosed
envelope. Persons signing in a
fiduciary capacity should so
indicate. If shares are held by
joint tenants or as community
property, both should sign.)
