SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. __)
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
----------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
AEHR TEST SYSTEMS
----------------------------------------------------------
(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)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
(2) Aggregate number of securities to which transactions 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:
(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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
<PAGE>
[GRAPHIC OMITTED]
AEHR TEST SYSTEMS
1667 Plymouth Street
Mountain View, California 94043
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 20, 1999
----------------
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 20, 1999, at 4:00 p.m., at 1667 Plymouth
Street, Mountain View, California 94043, for the following purposes:
1. To elect five directors.
2. To approve an amendment of the 1996 Stock Option Plan to increase the
number of shares issuable thereunder by 300,000 shares.
3. To ratify the selection of PricewaterhouseCoopers LLP as the Company's
independent auditors for the fiscal year ending May 31, 2000.
4. 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 14, 1999 will be entitled to notice of and to vote at the Annual
Meeting. Please sign, date and mail the enclosed proxy so that your shares may
be represented at the Annual Meeting if you are unable to attend and vote in
person.
By Order of the Board of Directors,
/s/ RHEA J. POSEDEL
RHEA J. POSEDEL
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 20, 1999 and at any adjournments thereof.
At the Annual Meeting, the Shareholders will be asked:
1. To elect five directors.
2. To approve an amendment of the 1996 Stock Option Plan to increase the
number of shares issuable thereunder by 300,000 shares.
3. To ratify the selection of PricewaterhouseCoopers LLP as the Company's
independent auditors for the fiscal year ended May 31, 2000.
4. 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 14,
1999 as the record date for the determination of the holders of Common Stock
entitled to notice of and to vote at the Annual Meeting. Each such Shareholder
will be entitled to one vote for each share of Common Stock ("Common Share")
held on all matters to come before the Annual Meeting and may vote in person or
by proxy authorized in writing.
This Proxy Statement and the accompanying form of proxy are first being
sent to holders of the Common Shares on or about September 27, 1999.
THE ANNUAL MEETING
Date, Time and Place
The Annual Meeting will be held on October 20, 1999 at 4:00 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 14, 1999 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. As
of the Record Date, there were 6,779,368 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.
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<PAGE>
Voting and Proxy Solicitation
Each shareholder voting for the election of directors may cumulate his or
her votes, giving one candidate a number of votes equal to the number of
directors to be elected multiplied by the number of shares that the shareholder
is entitled to vote, or distributing the shareholder's votes on the same
principle among as many candidates as the shareholder chooses. No shareholder
shall be entitled to cumulate votes for any candidate unless the candidate's
name has been properly placed in nomination prior to the voting and the
shareholder, or any other shareholder, has given notice at the meeting prior to
the voting of the intention to cumulate votes. On all other matters, each share
has one vote.
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 2000 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 2000
Annual Meeting of Shareholders must be received by the Company no later than
May 31, 2000, 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 2000, 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, 2000. 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 2000.
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
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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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
DIRECTORS AND MANAGEMENT
<TABLE>
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of August 31, 1999, 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:
<CAPTION>
Shares Beneficially
Owned (1)
---------------------------
Beneficial Owner Number Percent (2)
- ---------------- ----------- -------------
<S> <C> <C>
Named Executive Officers and Directors:
Rhea J. Posedel(3) ................................................... 984,929 14.4%
William W. R. Elder(4) ............................................... 62,083 *
Mario M. Rosati(5) ................................................... 224,340 3.3%
David Torresdal(6) ................................................... 264,783 3.9%
Mukesh Patel(7) ...................................................... 5,000 *
Gary L. Larson(8) .................................................... 57,665 *
Carl N. Buck(9) ...................................................... 60,402 *
Richard F. Sette(10) ................................................. 50,519 *
Raul V. Tan(11) ...................................................... 40,932 *
All Directors and Executive Officers as a group (12 persons)(12) ..... 1,819,624 25.2%
Principal Shareholders:
Private Capital Management(13) ....................................... 1,291,800 19.1%
3003 Tamiami Trail North, Naples, FL 33940
State of Wisconsin Investment Board(14) .............................. 861,000 12.7%
121 East Wilson Street, Madison, WI 53707
Wellington Management Company, LLP(15) ............................... 676,000 10.0%
75 State Street, Boston, MA 02109
Franklin Resources, Inc.(16) ......................................... 586,000 8.6%
777 Mariners Island Blvd., San Mateo, CA 94404
<FN>
- ------------
* Represents less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
SEC. Unless otherwise indicated in the footnotes to this table, the
persons and entities named in the table have represented to the Company
that they have sole voting and sole investment power with respect to all
shares beneficially owned, subject to community property laws where
applicable. Unless otherwise indicated, the address of each of the
individuals listed in the table is c/o Aehr Test Systems, 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, 1999 are deemed to be
outstanding and to be beneficially owned by the person holding such
options for the purpose of computing the percentage ownership of such
person but are not treated as outstanding for the purpose of computing the
percentage ownership of any other person.
(3) Includes 20,000 shares held by Vivian Owen, Mr. Posedel's wife, 5,000
shares held by Rhea J. Posedel, trustee for Natalie Diane Posedel, Mr.
Posedel's daughter, and 78,748 shares issuable upon the exercise of stock
options exercisable within 60 days of August 31, 1999.
3
<PAGE>
(4) Includes 2,500 shares held jointly with Gloria Elder, and 57,083 shares
issuable upon the exercise of stock options exercisable within 60 days of
August 31, 1999.
(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, 152,217 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 22,083 shares issuable upon the exercise of stock
options exercisable within 60 days of August 31, 1999.
(6) Includes 233,700 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 22,083 shares
issuable upon the exercise of stock options exercisable within 60 days of
August 31, 1999.
(7) Includes 5,000 shares issuable upon the exercise of stock options within 60
days of August 31, 1999.
(8) Includes 56,165 shares issuable upon the exercise of stock options within
60 days of August 31, 1999.
(9) Includes 49,041 shares issuable upon the exercise of stock options within
60 days of August 31, 1999.
(10) Includes 50,519 shares issuable upon the exercise of stock options within
60 days of August 31, 1999.
(11) Includes 35,103 shares issuable upon the exercise of stock options within
60 days of August 31, 1999.
(12) Includes 3,558 shares held in the name of William D. Barraclough and
441,238 shares issuable upon the exercise of stock options within 60 days
of August 31, 1999.
(13) Based solely on Form 13F Holdings Report filed with the SEC by Private
Capital Management, Inc. ("PCM") for the period ended June 30, 1999. PCM
has sole investment power and no voting power with respect to the shares.
(14) Based solely on Form 13F Holdings Report filed with the SEC by the State
of Wisconsin Investment Board ("SWIB") for the period ended June 30, 1999.
SWIB has sole investment and sole voting power with respect to the shares.
(15) Based solely on Form 13F Holdings Report filed with the SEC by Wellington
Management Company, LLP ("WMC") for the period ended June 30, 1999. WMC,
in its capacity as investment advisor, may be deemed to have beneficial
ownership of the 676,000 shares which are held of record by investment
advisory clients of WMC. WMC has sole investment power and no voting power
with respect to 320,000 shares, and shared investment and shared voting
power with respect to the remaining shares.
(16) Based solely on Form 13F Holdings Report filed with the SEC by Franklin
Resources, Inc. ("FRI") for the period ended June 30, 1999. The reported
586,000 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. 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. FRI has shared investment
power with respect to 586,000 shares, sole voting power with respect to
297,200 shares and no voting power with respect to the remaining shares.
</FN>
</TABLE>
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<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, five directors are to be elected to serve until the
next Annual Meeting or until their successors are elected and qualified. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the election of the five nominees named below, all of whom are presently
directors of the Company. Each nominee has consented to be named a nominee in
this Proxy Statement and to continue to serve as a director if elected. Should
any nominee become unable or decline to serve as a director or should
additional persons be nominated at the meeting, the proxy holders intend to
vote all proxies received by them in such a manner as will assure the election
of as many nominees listed below as possible (or, if new nominees have been
designated by the Board of Directors, in such a manner as to elect such
nominees) and the specific nominees to be voted for will be determined by the
proxy holders. The Company is not aware of any reason that any nominee will be
unable or will decline to serve as a director. There are no arrangements or
understandings between any director or executive officer and any other person
pursuant to which he is or was to be selected as a director or officer of the
Company.
<TABLE>
The names of the nominees and certain information about them are set forth below:
<CAPTION>
Director
Name of Nominee Age Position Since
- --------------- --- -------- --------
<S> <C> <C> <C>
Rhea J. Posedel .................. 57 Chairman of the Board, President and 1977
Chief Executive Officer
William W. R. Elder (1)(2) ....... 60 Director 1989
Mario M. Rosati (2) .............. 53 Director and Secretary 1977
David Torresdal (1) .............. 61 Director 1977
Mukesh Patel ..................... 41 Director 1999
<FN>
- ------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
</FN>
</TABLE>
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. He is
also a director of Unitrode, Inc. and Align-Rite International, Inc.
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.
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.
5
<PAGE>
MUKESH PATEL was appointed to the Company's Board of Directors in June
1999. Mr. Patel co-founded SMART Modular Technologies, Inc., where he has
served on its Board of Directors since its inception; he acted in various
executive capacities from 1989 to 1998, and in 1999 assumed his current
position of Vice President, Memory Division. Mr. Patel holds a B.S. degree in
Engineering with emphasis on digital electronics from Bombay University, India.
Mr. Patel also serves on the Boards of Directors of Krypton Isolation, Inc. and
Jedi Technologies, Inc.
Board Meetings and Committees
The Board of Directors held a total of three (3) meetings and acted three
(3) times by unanimous written consent during the fiscal year ended May 31,
1999. No incumbent director during his period of service in such fiscal year
attended fewer than 75% of the aggregate of all meetings of the Board of
Directors and the committees of the Board upon which such director served. The
Board of Directors has two committees, the Audit Committee and the Compensation
Committee.
The Audit Committee of the Board of Directors currently consists of
Messrs. Torresdal and Elder. The Audit Committee held one (1) meeting during
fiscal year 1999. The Audit Committee is responsible for reviewing the results
and scope of the audit and other services provided by the Company's independent
auditors.
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 1999. 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
Rhea J. Posedel, the only inside director of the Company, does not receive
any cash compensation for his services as a member of the Board of Directors.
Each outside director receives (1) an annual retainer of $5,000, (2) $1,000 for
each regular board meeting he attends, and (3) $500 for each committee meeting
he attends if not held in conjunction with a regular board meeting, in addition
to being reimbursed for certain expenses incurred in attending Board and
committee meetings. An inside director is a director who is a regular employee
of the Company, whereas an outside director is not an employee of the Company.
Directors are eligible to participate in the Company's stock option plans.
Outside directors were granted no options in fiscal 1997 and 1998. William
Elder, Mario Rosati and David Torresdal were each granted options to purchase
5,000 shares at $4.25 per share in fiscal 1999.
Vote Required
The five nominees receiving the highest number of affirmative votes of the
shares entitled to be voted for them shall be elected as directors. Votes
withheld from any director are counted for purposes of determining the presence
or absence of a quorum for the transaction of business, but have no other legal
effect in the election of directors under California law. See "Quorum;
Abstentions; Broker Non-Votes."
MANAGEMENT RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
NOMINEES LISTED ABOVE
6
<PAGE>
PROPOSAL 2
AMENDMENT TO 1996 STOCK OPTION PLAN
Proposal
Management is proposing that the 1996 Stock Option Plan (the "Stock Plan")
be amended to increase the number of shares authorized thereunder to provide
for the issuance of up to an aggregate of 950,000 shares of Common Stock of the
Company to employees, directors and consultants of the Company. This would
require the reservation of an additional 300,000 shares of Common Stock for
issuance upon exercise of the options granted pursuant to the Stock Plan, in
addition to the 650,000 shares previously reserved under the Stock Plan.
Management is proposing this amendment in order to allow for sufficient
stock options to cover the Company's needs for at least the next fiscal year.
Summary of Stock Plan
Purpose. The purposes of the Stock Plan are to attract and retain the best
available personnel, to provide additional incentive to employees, directors
and consultants of the Company and to promote the success of the Company's
business.
Status of Shares. As of September 1, 1999, options to purchase a total of
629,000 (net of cancelled or expired options) shares were outstanding under the
Stock Plan. In addition, options to purchase 20,532 (plus any shares that might
in the future be returned to the plan as a result of cancellations or
expiration of options) shares remained available for future grant thereunder.
Eligibility; Administration. Under the Stock Plan, employees may be
granted "incentive stock options" intended to qualify within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") and
employees, directors and consultants may be granted "non-statutory stock
options" not intended to qualify under such statute. The Stock Plan is
administered by the Board of Directors of the Company, or by a committee
appointed by the Board of Directors and consisting of at least two members of
the Board, which determine the terms of options granted, including the exercise
price, the number of shares subject of the option and the options'
exercisability. The Board or its committee has sole discretion to interpret any
provision of the Stock Plan.
Exercise Price. The exercise price of options granted under the Stock Plan
is determined by the Board of Directors or its committee. The exercise price of
incentive stock options may not be less than 100% of the fair market value of
the Common Stock on the date the option is granted. However, the exercise price
of options granted to an optionee who owns more than 10% of the voting power or
value of all classes of stock of the Company must not be less than 110% of the
fair market value on the date of grant. The Common Stock is currently traded on
The Nasdaq Stock Market. While the Company's stock is traded on The Nasdaq
Stock Market, the fair market value is the reported closing price on the date
of grant.
Exercisability. Options granted to new optionees under the Stock Plan
generally become exercisable starting one month after the date of grant with
1|M/48th of the shares covered thereby becoming exercisable at that time and
with an additional 1|M/48th 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. The term of an option may not exceed ten
years. No option may be transferred by the optionee other than by will or the
laws of descent or distribution. Each option may be exercised, during the
lifetime of the optionee, only by such optionee.
Stock Purchase Rights. The Stock Plan permits the Company to grant rights
to purchase Common Stock. After the Board or Committee determines that it will
offer stock purchase rights under the Stock Plan, it shall advise the offeree
in writing or electronically of the terms, conditions and restrictions related
to the offer, including the number of shares that the offeree shall be entitled
to purchase, and the time within which the offeree must accept such offer. The
offer shall be accepted by execution of a stock purchase agreement or a stock
bonus agreement in the form determined by the Board or Committee.
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<PAGE>
Unless the Board or Committee determines otherwise, the stock purchase
agreement or a stock bonus agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's employment with the Company for any reason. The purchase price for
shares repurchased pursuant to the stock purchase agreement or a stock bonus
agreement shall be the original price paid by the purchaser and may be paid by
cancellation of any indebtedness of the purchaser to the Company. The
repurchase option shall lapse at such rate as the Board or Committee may
determine.
Amendment and Termination. The Board may at any time amend or terminate
the Stock Plan without approval of the shareholders; provided, however, that
the Company will obtain shareholder approval of any amendment to the Stock Plan
to the extent necessary to comply with Rule 16b-3 under the Securities Exchange
Act of 1934 (the "Exchange Act"), with Section 422 of the Code, or with any
other applicable law or regulation, including requirements of the NASD or any
established stock exchange. Any amendment or termination of the Stock Plan is
subject to the rights of optionees under agreements entered into prior to such
amendment or termination.
Certain Federal Tax Information
An optionee who is granted an incentive stock option will not recognize
taxable income either at the time the option is granted or at the time it is
exercised, although exercise of the option may subject the optionee to the
alternative minimum tax. The Company will not be allowed a deduction for
federal income tax purposes as a result of the exercise of an incentive stock
option regardless of the applicability of the alternative minimum tax. Upon the
sale or exchange of the shares at least two years after grant of the option and
one year after exercise of the option, any gain will be treated as long-term
capital gain. If these holding periods are not satisfied at the time of sale,
the optionee will recognize ordinary income equal to the difference between the
exercise price and the lower of (i) the fair market value of the stock at the
date of the option exercise or (ii) the sale price of the stock, and the
Company will be entitled to a deduction in the same amount. (Different rules
may apply upon a premature disposition by an optionee who is an officer,
director or 10 % shareholder of the Company.) Any additional gain or loss
recognized on such a premature disposition of the shares will be characterized
as capital gain or loss. If the Company grants an incentive stock option and as
a result of the grant the optionee has the right in any calendar year to
exercise for the first time one or more incentive stock options for shares
having an aggregate fair market value (under all plans of the Company and
determined for each share as of the date the option to purchase the share was
granted) in excess of $100,000, then the excess shares must be treated as
non-statutory options.
An optionee who is granted a non-statutory stock option will also not
recognize any taxable income upon the grant of the option. However, upon
exercise of a non-statutory stock option, the optionee will recognize ordinary
income for tax purposes measured by the excess of the then fair market value of
the shares over the exercise price. Any taxable income recognized by an
optionee who is an employee of the Company will be subject to tax withholding
by the Company. Upon resale of the shares by the optionee, any difference
between the sales price and the fair market value at the time of exercise, to
the extent not recognized as ordinary income as described above, will be
treated as capital gain or loss. The Company will be allowed a deduction for
federal income tax purposes equal to the amount of ordinary income recognized
by the optionee.
Vote Required
Approval of the amendment to the Stock Plan requires the affirmative vote
of the Votes Cast. The effect of an abstention is the same as that of a vote
against the proposal.
MANAGEMENT RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE AMENDMENT TO 1996 STOCK OPTION PLAN
8
<PAGE>
PROPOSAL 3
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, 2000, and recommends
that Shareholders vote for ratification of such appointment. Representatives of
PricewaterhouseCoopers LLP are expected to be present at the meeting with the
opportunity to make a statement if they desire to do so, and are expected to be
available to respond to appropriate questions.
MANAGEMENT RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE RATIFICATION
OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP
COMPENSATION OF EXECUTIVE OFFICERS
<TABLE>
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, 1999, 1998 and 1997 by the Chief Executive Officer
and each of the four other most highly compensated executive officers with
annual compensation in excess of $100,000 for the fiscal year ended May 31,
1999.
Summary Compensation Table
<CAPTION>
Long-term
Compensation
-------------
Annual Compensation Securities
Fiscal -------------------------- Underlying All Other
Name and Principal Position Year Salary ($) Bonus ($) Options ($) Compensation ($)
- ------------------------------- -------- ------------ ----------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Rhea J. Posedel ............ 1999 $174,464 -- $1,813 $2,647(1)
President, Chief Executive 1998 $192,125 $37,800 $4,194 $2,512(2)
Officer and Chairman of 1997 $185,040 $70,500 $5,388 $2,497(3)
the Board of Directors
Gary L. Larson ............... 1999 $131,404 -- $1,732 $3,125(1)
Vice President of Finance and 1998 $144,408 $21,375 $4,164 $3,248(2)
Chief Financial Officer 1997 $133,449 $33,700 $5,258 $3,313(3)
Carl N. Buck ............... 1999 $117,867 -- $1,475 $1,596(1)
Vice President of Marketing 1998 $127,787 $23,780 $3,797 $1,305(2)
1997 $121,742 $24,142 $4,717 $1,312(3)
Richard F. Sette ............ 1999 $116,131 -- $1,529 $1,961(1)
Vice President of Operations 1998 $128,639 $18,750 $3,657 $2,270(2)
1997 $121,827 $26,500 $4,465 $1,848(4)
Raul V. Tan .................. 1999 $109,822 $ 9,100 $1,518 $2,379(1)
Vice President of Research and 1998 $117,685 $15,000 $3,682 $1,570(2)
Development Engineering 1997 $ 26,097 $ 4,500 -- --
<FN>
- ------------
(1) Consists of health and life insurance premiums paid by the Company during
the year ended May 31, 1999.
(2) Consists of health and life insurance premiums paid by the Company during
the year ended May 31, 1998.
(3) Consists of health and life insurance premiums paid by the Company during
the year ended May 31, 1997.
(4) Consists of $9,595 paid by the Company for relocation costs and $2,253 in
health and life insurance premiums paid by the Company during the year
ended May 31, 1997.
</FN>
</TABLE>
9
<PAGE>
Stock Option Grants and Exercises
<TABLE>
The following table sets forth the number and terms of options granted to
the persons named in the Summary Compensation Table during the fiscal year
ended May 31, 1999.
Option Grants in Last Fiscal Year
<CAPTION>
Individual Grants
- -------------------------------------------------------------------------------------------- Potential Realizable
Value at Assumed
Annual Rates of
Number of % of Total Stock Price
Securities Options Appreciation for
Underlying Granted to Exercise Option Term (4)
Options Employees in Price Expiration ---------------------
Name Granted (1) Fiscal Year (2) ($/Share) (3) Date 5% ($) 10% ($)
- ------------------------- ------------- ----------------- --------------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Rhea J. Posedel ........ 20,000 8.2% $6.7375 6/10/03 $21,594 $62,537
Gary L. Larson ......... 10,000 4.1% $6.1250 6/10/03 $16,922 $37,394
Carl N. Buck ........... 7,500 3.1% $6.1250 6/10/03 $12,692 $28,045
Richard F. Sette ....... 10,000 4.1% $6.1250 6/10/03 $16,922 $37,394
Raul V. Tan ............ 10,000 4.1% $6.1250 6/10/03 $16,922 $37,394
<FN>
- ------------
(1) Options granted under the 1996 Stock Option Plan and vest over four years
from June 10, 1998.
(2) Based on an aggregate of 242,500 options granted by the Company in the year
ended May 31, 1999 to employees and consultants to the Company, including
the named executive officers.
(3) The exercise price per share of each option was equal to the fair market
value of the Common Stock on the date of grant as determined by the Board
of Directors, except the exercise price of the options granted to Mr.
Posedel was equal to 110% of the fair market value of the Common Stock on
the date of the grant.
(4) This column sets forth hypothetical gains or "option spreads" for the
options at the end of their respective five-year terms, as calculated in
accordance with the rules of the SEC. Each gain is based on an arbitrarily
assumed annualized rate of compound appreciation of the market price at
the date of grant of 5% and 10% from the date the option was granted to
the end of the option term. The 5% and 10% rates of appreciation are
specified by the rules of the SEC and do not represent the Company's
estimate or projection of future Common Stock prices. The Company does not
necessarily agree that this method properly values an option. Actual
gains, if any, on option exercises are dependent on the future performance
of the Company's Common Stock and overall market conditions and the timing
of option exercises, if any.
</FN>
</TABLE>
<TABLE>
The following table provides information concerning option exercises by
the persons named in the Summary Compensation Table during the fiscal year
ended May 31, 1999 and the value of unexercised options at such date.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options
Shares Fiscal Year-End (#)(1) at Fiscal Year-End($)(2)
Acquired on Value ------------------------------- -------------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- -------------- -------------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Rhea J. Posedel ........ -- -- 70,936 24,064 -- --
Gary L. Larson ......... 11,219 $11,238(3) 51,477 12,523 -- --
Carl N. Buck ........... 10,000 $11,875(4) 45,498 9,502 -- --
Richard F. Sette ....... -- -- 45,832 14,168 -- --
Raul V. Tan ............ -- -- 26,509 35,991 -- --
<FN>
- ------------
(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 ($4.00 per share as of
May 28, 1999) and the exercise price of the options.
10
<PAGE>
(3) Total includes two exercises of options. The total is based on the fair
market value of the Company's Common Stock on October 12, 1998 ($3.56) and
January 8, 1999 ($6.75) as reported by the Nasdaq National Market System.
(4) Total includes two exercises of options. The total is based on the fair
market value of the Company's Common Stock on July 10, 1998 ($5.375) and
October 13, 1998 ($3.50) as reported by the Nasdaq National Market System.
</FN>
</TABLE>
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 1999, 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 2000.
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.
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.
11
<PAGE>
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.
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 consists entirely
of outside directors as defined in the Code, and the Company's Compensation
Committee meets this requirement. Another requirement is that compensation over
$1 million must be based upon Company attainment of pre-established, objective
performance goals. The Company believes that all compensation paid to its five
most highly compensated executive officers in fiscal 1998 is fully deductible.
The
12
<PAGE>
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
13
<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, 1999 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.
[GRAPHIC OMITTED]
[The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T]
Cumulative Total Return
-----------------------------
8/15/97 5/31/98 5/31/99
AEHR TEST SYSTEMS 100.00 50.52 33.33
NASDAQ STOCK MARKET (U.S.) 100.00 113.56 159.56
HAMBRECHT & QUIST SEMICONDUCTOR 100.00 68.70 112.24
14
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires that directors, certain
officers of the Company and ten percent Shareholders file reports of ownership
and changes in ownership with the SEC as to the Company's securities
beneficially owned by them. Such persons are also required by SEC rules to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of copies of Forms 3 and 4 and amendments
thereto furnished to the Company pursuant to Rule 16a-3(e) and Forms 5 and
amendments thereto furnished to the Company with respect to its most recent
fiscal year, and any written representations referred to in Item 405(b)(2)(i)
of Regulation S-K stating that no Forms 5 were required, the Company believes
that, during the fiscal year 1999, 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 5 by director
Mario M. Rosati in order to clarify his holdings which were previously reported
on a timely filed Form 5; a Form 3 which was not timely filed by director
Mukesh Patel; and Forms 5 which were not timely filed by Rhea J. Posedel,
William W. R. Elder, David Torresdal, Gary L. Larson, William D. Barraclough,
Carl N. Buck, Carl J. Meurell, Richard F. Sette, Raul V. Tan and Yasushi
Naitoh.
FINANCIAL STATEMENTS
The Company's Annual Report to Shareholders for the last fiscal year is
being mailed with this proxy statement to Shareholders entitled to notice of
the meeting. The Annual Report includes the consolidated financial statements,
unaudited selected financial data and management's discussion and analysis of
financial condition and results of operations.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed Proxy to vote the shares they represent as the
Board of Directors may recommend.
By Order of the Board of Directors,
/s/ RHEA J. POSEDEL
RHEA J. POSEDEL
President, Chief Executive Officer and
Chairman of the Board of Directors
Dated: September 27, 1999
15
<PAGE>
APPENDIX A
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
AEHR TEST SYSTEMS
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 20, 1999
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 20, 1999, at 4:00 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 below (except as indicated).
[ ] WITHHOLD authority 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 NOMINEE'S NAME IN THE LIST BELOW:
Rhea J.Posedel William W.R. Elder Mario M. Rosati
David Torresdal Mukesh Patel
2. PROPOSAL TO AMEND THE 1996 STOCK OPTION PLAN TO INCREASE BY 300,000 SHARES
THE NUMBER OF SHARES AUTHORIZED THEREUNDER TO PROVIDE FOR THE ISSUANCE OF
UP TO AN AGGREGATE OF 950,000 SHARES OF COMMON STOCK OF THE COMPANY TO
EMPLOYEES, DIRECTORS AND CONSULTANTS OF THE COMPANY.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT AUDITORS:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed on reverse side)
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
(Continued from other side)
4. IN THEIR DISCRETION, UPON SUCH OTHER MATTER OR MATTERS WHICH MAY PROPERLY
COME BEFORE THE MEETING AND ANY ADJOURNMENT(S) THEREOF.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR AMENDMENT OF
THE 1996 STOCK OPTION PLAN TO INCREASE THE NUMBER OF SHARES ISSUABLE
THEREUNDER BY 300,000 SHARES, 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:________________ , 1999
_____________________________________
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.)
- --------------------------------------------------------------------------------
