SCHEDULE 14A INFORMATION
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(Amendment No. __)
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AEHR TEST SYSTEMS
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[LOGO]AEHR TEST SYSTEMS
AEHR TEST SYSTEMS
400 Kato Terrace
Fremont, California 94539
-----------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 19, 2004
-----------------------------
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 19, 2004, at 4:00 p.m., at the Company's
corporate headquarters located at 400 Kato Terrace, Fremont, California 94539,
for the following purposes:
1. To elect five directors.
2. To ratify the selection of PricewaterhouseCoopers LLP as the Company's
independent registered public accounting firm for the fiscal year
ending May 31, 2005.
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 9, 2004 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. If you attend the Annual Meeting, you may vote in person even if you
return a proxy.
By Order of the Board of Directors,
/s/ Rhea J. Posedel
RHEA J. POSEDEL
Chief Executive Officer and
Chairman of the Board of Directors
AEHR TEST SYSTEMS
400 Kato Terrace
Fremont, California 94539
---------------
PROXY STATEMENT
---------------
2004 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 19, 2004 and at any adjournments thereof.
At the Annual Meeting, the Shareholders will be asked:
1. To elect five directors.
2. To ratify the selection of PricewaterhouseCoopers LLP as the Company's
independent registered public accounting firm for the fiscal year
ending May 31, 2005.
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 9,
2004 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, 2004.
THE ANNUAL MEETING
Date, Time and Place
The Annual Meeting will be held on October 19, 2004 at 4:00 p.m., local
time, at 400 Kato Terrace, Fremont, California 94539.
General
The Company's principal office is located at 400 Kato Terrace, Fremont,
California 94539 and its telephone number is (510) 623-9400.
Record Date and Shares Entitled to Vote
Shareholders of record at the close of business on September 9, 2004 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. As
of the Record Date, there were 7,393,719 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 Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a
later date or by attending the meeting and voting in person.
Voting and Proxy Solicitation
Each shareholder voting for the election of directors may cumulate his or
her votes, giving one candidate a number of votes equal to the number of
directors to be elected multiplied by the number of shares that the shareholder
is entitled to vote, or distributing the shareholder's votes on the same
principle among as many candidates as the shareholder chooses. No shareholder
shall be entitled to cumulate votes for any candidate unless the candidate's
name has been properly placed in nomination prior to the voting and the
shareholder, or any other shareholder, has given notice at the meeting prior to
the voting of the intention to cumulate votes. On all other matters, each share
has one vote.
1
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, telegram
or facsimile.
Quorum; Abstentions; Broker Non-Votes
The required quorum for the transaction of business at the Annual Meeting
is a majority of the shares of Common Stock issued and outstanding on the Record
Date. Votes cast by proxy or in person at the Annual Meeting will be tabulated
by the Inspector of Elections, appointed for the meeting, who will determine
whether or not a quorum is present. If the shares present, in person and by
proxy, do not constitute the required quorum, the meeting may by adjourned to a
subsequent date for the purposes of obtaining a quorum. Shares that are voted
"FOR," "AGAINST" or "WITHHELD FROM" a matter are treated as being present at
the meeting for purposes of establishing a quorum and shares that are voted
"FOR," "AGAINST" or "ABSTAIN" are also treated as shares entitled to vote (the
"Votes Cast") at the Annual Meeting with respect to such matter.
While there is no definitive statutory or case law authority in California
as to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining both (i) the presence or absence
of a quorum for the transaction of business and (ii) the total number of Votes
Cast with respect to a proposal (other than the election of directors). In the
absence of controlling precedent to the contrary, the Company intends to treat
abstentions in this manner. Accordingly, abstentions will have the same effect
as a vote against the proposal.
Broker non-votes (i.e. votes from shares of record by brokers as to which
the beneficial owners have no voting instructions) will be counted for purposes
of determining the presence or absence of a quorum for the transaction of
business, but will not be counted for purposes of determining the number of
Votes Cast with respect to the proposal on which the broker has expressly not
voted. Thus, a broker non-vote will make a quorum more readily but will not
otherwise affect the outcome of the voting on a proposal. With respect to a
proposal that requires a majority of the outstanding shares (such as an
amendment to the articles of incorporation), however, a broker non-vote has the
same affect as a vote against the proposal.
Deadline for Receipt of Shareholder Proposals for 2005 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 2005 Annual
Meeting of Shareholders must be received by the Company no later than May 22,
2005, in order that they may be included in the proxy statement and form of
proxy related to that meeting.
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 SCHEDULE THERETO. REQUESTS FOR
SUCH COPIES SHOULD BE DIRECTED TO AEHR TEST SYSTEMS, 400 KATO TERRACE, FREMONT,
CA 94539, ATTENTION: INVESTOR RELATIONS.
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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, 2004, 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:
Shares Beneficially
Owned(1)
-------------------------
Beneficial Owner Number Percent(2)
---------------- -------- ----------
Named Executive Officers and Directors:
Rhea J. Posedel (3) ................................................. 1,073,134 14.3%
Robert R. Anderson (4) .............................................. 111,999 1.5%
William W. R. Elder (5) ............................................. 67,083 *
Mukesh Patel (6) .................................................... 39,499 *
Mario M. Rosati (7) ................................................. 221,300 3.0%
Carl J. Meurell (8) ................................................. 93,167 1.2%
Gary L. Larson (9) .................................................. 106,130 1.4%
Carl N. Buck (10) ................................................... 89,856 1.2%
David S. Hendrickson (11) ........................................... 89,646 1.2%
All Directors and Executive Officers as a group (10 persons) (12) ... 1,925,000 24.2%
Principal Shareholders:
Private Capital Management, Inc. (13) ............................... 1,422,178 19.2%
8889 Pelican Bay Blvd., Suite 500, Naples, FL 34108
State of Wisconsin Investment Board (14) ............................ 1,184,400 16.0%
121 East Wilson Street, Madison, WI 53702
Wellington Management Company, LLP (15) ............................. 732,700 9.9%
75 State Street, Boston, MA 02109
--------------------------------
* Represents less than 1% of the Common Shares
(1) Beneficial ownership is determined in accordance with the rules of the
SEC. Unless otherwise indicated in the footnotes to this table, the
persons and entities named in the table have represented to the Company
that they have sole voting and sole investment power with respect to all
shares beneficially owned, subject to community property laws where
applicable. Unless otherwise indicated, the address of each of the
individuals listed in the table is c/o Aehr Test Systems, 400 Kato
Terrace, Fremont, California 94539.
(2) Shares of Common Stock subject to options that are currently exercisable
or exercisable within 60 days of August 31, 2004 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, 9,950
shares held by Rhea J. Posedel, trustee for Natalie Diane Posedel, Mr.
Posedel's daughter, and 105,103 shares issuable upon the exercise of
stock options exercisable within 60 days of August 31, 2004.
(4) Includes 39,499 shares issuable upon the exercise of stock options
exercisable within 60 days of August 31, 2004.
(5) Includes 42,083 shares issuable upon the exercise of stock options
exercisable within 60 days of August 31, 2004.
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(6) Includes 34,499 shares issuable upon the exercise of stock options
exercisable within 60 days of August 31, 2004.
(7) 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, 149,177 shares held by Mario
M. Rosati, Trustee of the Mario M. Rosati Trust, U/D/T dated 1/9/90
and 42,083 shares issuable upon the exercise of stock options exercisable
within 60 days of August 31, 2004.
(8) Includes 91,978 shares issuable upon the exercise of stock options
exercisable within 60 days of August 31, 2004. Mr. Carl J. Meurell ceased
to be an officer of the Company as of January 2004.
(9) Includes 55,478 shares issuable upon the exercise of stock options
exercisable within 60 days of August 31, 2004.
(10) Includes 38,624 shares issuable upon the exercise of stock options
exercisable within 60 days of August 31, 2004.
(11) Includes 85,936 shares issuable upon the exercise of stock options
exercisable within 60 days of August 31, 2004.
(12) Includes 568,469 shares issuable upon the exercise of stock options
exercisable within 60 days of August 31, 2004.
(13) Based solely on Form 13F Holdings Report filed with the SEC by Private
Capital Management ("PCM") for the period ended June 30, 2004. PCM has
shared investment power and shared 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,
2004. 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, 2004. WMC,
in its capacity as investment advisor, may be deemed to have beneficial
ownership of the 532,700 shares which are held of record by investment
advisory clients of WMC. WMC has sole investment and sole voting power
with respect to 200,000 shares and shared investment and shared voting
power with respect to the remaining shares.
Equity Compensation Plan Information
The following table gives information about the Company's common stock
that may be issued upon the exercise of options, warrants and rights under all
of the Company's existing equity compensation plans as of May 31, 2004.
(a) (b) (c)
Number of securities
remaining available for future
Number of securities to Weighted-average issuance under equity
be issued upon exercise exercise price of compensation plans
of outstanding options, outstanding options, (excluding securities reflected
Plan Category warrants and rights warrants and rights in column (a))
------------- ------------------- ------------------- --------------
Equity compensation
plans approved by 1,095,728 (1) $4.69 626,141
security holders
Equity compensation
plans not approved by -- -- --
security holders
---------------------
Total 1,095,728 $4.69 626,141
4
(1) Issued pursuant to the Company's 1996 Stock Option Plan and the 1997
Employee Stock Purchase Plan ("Stock Option Plans"), which require the approval
of and have been approved by the Company's shareholders. See description of the
Stock Option Plans below.
Stock Option Plans
On October 23, 1996, the Board of Directors approved the 1996 Stock Option
Plan (the "Stock Plan"). The Stock Plan provides for the granting of non-
qualified stock options or incentive stock options to employees and consultants
at the fair market value of the Company's common stock as of the date of grant.
Options granted under the Stock Plan generally vest at a rate of 1/48th per
month, however, the vesting schedule can change on a grant-by-grant basis. The
Stock Plan provides that vested options may be exercised for 3 months after
termination of employment and for 12 months after termination of employment as a
result of death or disability. The Company may select alternative periods of
time for exercise upon termination of service. The Stock Plan permits options
to be exercised with cash, check, certain other shares of the Company's common
stock or consideration received by the Company under a "cashless exercise"
program. In the event that the Company merges with or into another corporation,
or sell substantially all of the Company's assets, the Stock Plan provides that
each outstanding option will be assumed or substituted for by the successor
corporation. If such substitution or assumption does not occur, each option will
fully vest and become exercisable. As of May 31, 2004, there were 1,721,869
shares of Common Stock reserved under the Stock Plan and 626,141 shares
remaining for future issuance.
On June 9, 1997, the Board of Directors adopted the 1997 Employee Stock
Purchase Plan (the "ESPP"). The ESPP has consecutive, overlapping, twenty-four
month offering periods. Each twenty-four month offering period includes four
six month purchase periods. The offering periods generally begin on the first
trading day on or after April 1 and October 1 each year, except that the first
such offering period commenced with the effectiveness of the Company's initial
public offering and ended on the last trading day on or before March 31, 1999.
Shares are purchased through employee payroll deductions at exercise prices
equal to 85% of the lesser of the fair market value of the Company's Common
Stock at either the first day of an offering period or the last day of the
purchase period. If a participant's rights to purchase stock under all employee
stock purchase plans of the Company accrue at a rate which exceeds $25,000 worth
of stock for a calendar year, such participant may not be granted an option to
purchase stock under the ESPP. The maximum number of shares a participant may
purchase during a single purchase period is 3,000 shares. As of May 31, 2004,
there were 400,000 shares of Common Stock reserved under the ESPP and 117,834
shares remaining for future issuance.
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.
5
The names of the nominees and certain information about them are set
forth below:
Director
Name of Nominee Age Position Since
---------------------------- --- ------------------------------------------------- --------
Rhea J. Posedel 62 Chairman of the Board and Chief Executive Officer 1977
Robert R. Anderson (1) 66 Director 2000
William W.R. Elder (1)(2) 65 Director 1989
Mukesh Patel (1) 46 Director 1999
Mario M. Rosati (2) 58 Director and Secretary 1977
----------------------------
(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 Chief
Executive Officer and Chairman of the Board of Directors since its inception in
1977. From the Company's inception through May 2000, Mr. Posedel also served as
President. 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.
ROBERT R. ANDERSON was appointed to the Company's Board of Directors in
October 2000. Mr. Anderson is a private investor. From January 1994 to January
2001, he was Chairman of Silicon Valley Research, Inc., a semiconductor design
automation software company, and its Chief Executive Officer from December 1996
to August 1998, and from April 1994 to July 1995. He also served as Chairman of
Yield Dynamics, Inc., a private semiconductor process control software company,
from October 1998 to October 2000, and as Chief Executive Officer from October
1998 to April 2001. Mr. Anderson co-founded KLA Instruments Corporation, now
KLA-Tencor Corporation, a supplier of semiconductor process control systems, in
1975 and served in various capacities including Chief Operating Officer, Chief
Financial Officer, Vice Chairman and Chairman before he retired from that
company in 1994. Mr. Anderson is a director of MKS Instruments, Inc., Metron
Technology N.V. and Trikon Technologies, Inc. He also serves as a director for
two private development stage companies.
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 also serves as a Board Member
of Trikon Technologies in the United Kingdom. Dr. Elder holds a B.S.I.E. and an
honorary Doctorate Degree from the University of Paisley in Scotland.
MUKESH PATEL was appointed to the Company's Board of Directors in June
1999. Mr. Patel is a leading entrepreneur in the Silicon Valley who founded
Sparkolor Corporation, acquired by Intel Corporation in late 2002, and co-
founded SMART Modular Technologies, Inc., a billion dollar company, acquired by
Solectron Corporation in late 1999. Mr. Patel holds a B.S. degree in Engineering
with an emphasis in digital electronics from Bombay University, India. Mr. Patel
also serves as a Board member for SMART Modular Technologies, Inc., Nazomi
Communications Inc. and Parama Networks.
MARIO M. ROSATI has been a director of the Company since 1977. He is
a member of the law firm Wilson Sonsini Goodrich & Rosati, Professional
Corporation which he joined in 1971. Mr. Rosati is a graduate of Boalt Hall,
University of California at Berkeley. Mr. Rosati is a director of Genus, Inc.,
Sanmina Corporation, Symyx Technologies, Inc., Inc., and Vivus Inc., as well as
several privately-held companies.
6
Board Meetings and Corporate Governance
Board Meetings and Committees
The Board of Directors held a total of five (5) meetings and acted two
(2) times by unanimous written consent during the fiscal year ended May 31,
2004. 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 Company does not have a nominating committee or a
committee performing the functions of a nominating committee.
The Audit Committee of the Board of Directors is comprised entirely of
independent directors, as defined in the National Association of Securities
Dealers, Inc.'s listing standards, for which information regarding the functions
performed by the Committee, its membership, and the number of meetings held
during the fiscal year, is set forth in the "Report of the Audit Committee,"
included in this Proxy Statement. The Audit Committee is governed by a written
charter approved by the Board of Directors. A copy of this charter is included
in this Proxy Statement as Appendix A. The Audit Committee consists of
directors Messrs. Anderson, Elder and Patel. The Board of Directors has
determined that Mr. Anderson is an audit committee financial expert as defined
by Item 401(h) of Regulation S-K of the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
The Compensation Committee of the Board of Directors currently consists
of Messrs. Elder and Rosati. The Compensation Committee held one (1) meeting
during fiscal year 2004. 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.
Consideration of Director Nominees
All members of the Board of Directors participate in the consideration
of director nominees. The Company is also in the process of forming a nominating
committee for future consideration of director nominees.
Stockholder Recommendations
The policy of the Board of Directors is to consider properly submitted
shareholder recommendations for candidates for membership on the Board as
described below under "Identifying and Evaluating Nominees for Directors." In
evaluating such recommendations, the Board of Directors seeks to achieve a
balance of knowledge, experience and capability on the Board and to address the
membership criteria set forth under "Director Qualifications" below. Any
shareholder recommendations proposed for consideration by the Board of
Directors should include the candidate's name and qualifications for Board
membership and should be addressed to:
Aehr Test Systems
400 Kato Terrace
Fremont, CA 94539
Attn: Secretary
In addition, procedures for stockholder direct nomination of directors
are discussed under "Deadline for Receipt of Stockholder Proposals" above.
Director Qualifications
Members of the Board should have the highest professional and personal
ethics and values, consistent with the Company's Code of Conduct and Ethics
adopted by the Board in an action by written
7
consent dated September 24, 2004. They should have broad experience at the
policy-making level in business. They should be committed to enhancing
shareholder value and should have sufficient time to carry out their duties and
to provide insight and practical wisdom based on experience. Their service on
other boards of public companies should be limited to a number that permits
them, given their individual circumstances, to perform responsibly all director
duties. Each director must represent the interests of all shareholders.
Identifying and Evaluating Nominees for Directors
The Board of Directors utilizes a variety of methods for identifying and
evaluating nominees for director. The Board of Directors periodically assesses
the appropriate size of the Board, and whether any vacancies on the Board are
expected due to retirement or otherwise. In the event that vacancies are
anticipated, or otherwise arise, the Board of Directors considers various
potential candidates for director. Candidates may come to the attention of the
Board of Directors through current Board members, professional search firms,
shareholders or other persons. These candidates are evaluated at regular or
special meetings of the Board of Directors, and may be considered at any point
during the year. As described above, the Board of Directors considers properly
submitted shareholder recommendations for candidates for the Board. Following
verification of the shareholder status of persons proposing candidates, any
recommendations are aggregated and considered by the Board of Directors at a
regularly scheduled meeting prior to the issuance of the proxy statement for our
annual meeting. If any materials are provided by a shareholder in connection
with the recommendation of a director candidate, such materials are forwarded to
the Board of Directors. The Board of Directors may also review materials
provided by professional search firms or other parties in connection with a
candidate who is not recommended by a shareholder. In evaluating such
recommendations, the Board of Directors seeks to achieve a balance of knowledge,
experience and capability on the Board.
The Board of Directors has determined that each of its current
directors, except for Rhea J. Posedel, the Company's Chief Executive Officer, is
independent within the meaning of the Nasdaq Stock Market, Inc. director
independence standards, as currently in effect.
Annual Meeting Attendance
Although the Company does not have a formal policy regarding attendance
by members of the Board at the Company's annual meetings of shareholders,
directors are encouraged to attend annual meetings of the Company's
shareholders. All directors attended the 2003 annual meeting of shareholders.
Code of Conduct and Ethics
The Board of Directors has adopted a Code of Conduct and Ethics for all
directors, officers and employees of the Company, which includes the Chief
Executive Officer, Chief Financial Officer and any other principal accounting
officer. The Company will provide a copy of the Code of Conduct and Ethics upon
request made in writing to Aehr Test Systems, Attention: Investor Relations, 400
Kato Terrace, Fremont, CA 94539. The Company will disclose any amendment to the
Code of Conduct and Ethics or waiver of a provision of the Code of Conduct and
Ethics, including the name of the officer to whom the waiver was granted, on the
Company's website at www.aehr.com, on the Investors page.
Communications with the Board
Individuals may communicate with the Board by submitting a letter to the
attention of the Chairman of the Board, c/o Aehr Test Systems, 400 Kato Terrace,
Fremont, CA 94539.
REPORT OF THE AUDIT COMMITTEE(1)
The Audit Committee of the Board of Directors of the Company serves as
the representative of the Board for general oversight of the Company's financial
accounting and reporting system of internal control, audit process and process
for monitoring compliance with laws and regulations. The Audit Committee,
8
consisting of Messrs. Patel, Anderson and Elder, held five (5) meetings in
fiscal year 2004. Each member is an independent director in accordance with the
Nasdaq National Market Audit Committee requirements. The Audit Committee
evaluates the scope of the annual audit, reviews audit results, consults with
management and the Company's independent registered public accounting firm prior
to the presentation of financial statements to stockholders and, as appropriate,
initiates inquiries into aspects of the Company's financial affairs.
The Company's management has primary responsibility for preparing the
Company's financial statements and for the Company's financial reporting
process. The Company's independent registered public accounting firm,
PricewaterhouseCoopers LLP ("PwC"), is responsible for expressing an opinion on
the conformity of the Company's audited financial statements to generally
accepted accounting principles. The Audit Committee has reviewed and discussed
with management the audited financial statements for the year ended May 31,
2004. PwC, the Company's independent registered public accounting firm for
fiscal year 2004, issued their unqualified report dated August 30, 2004 on the
Company's consolidated financial statements.
The Audit Committee has also discussed with PwC the matters required to
be discussed by AICPA Statement on Auditing Standards No. 61, "Communication
with Audit Committees." The Audit Committee has also received the written
disclosures and the letter from PwC required by Independence Standards Board
Standard No. 1, "Independence Discussions with Audit Committees," and has
conducted a discussion with PwC relative to its independence. The Audit
Committee has considered whether PwC's provision of non-audit services is
compatible with its independence. The Audit Committee has an Audit Committee
Charter. A copy of the charter is attached in Appendix A.
Based on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors of Aehr Test Systems that the
Company's audited financial statements for the fiscal year ended May 31, 2004 be
included in the Annual Report on Form 10-K.
AUDIT COMMITTEE
Mukesh Patel
Robert R. Anderson
William W.R. Elder
(1) The information regarding the Audit Committee is not "soliciting" material
and is not deemed "filed" with the SEC, and is not incorporated by reference
into any filings of the Company under the Securities Act or the Exchange Act,
whether made before or after the date hereof and irrespective of any general
incorporation language contained in such filing.
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 $10,000, (2)
$1,250 for each regular board meeting he attends, and (3) $750 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. Prior to each annual meeting of
shareholders, each outside director may elect to receive an additional stock
option grant in lieu of any cash payments throughout the year. 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. In fiscal 2002, outside
directors Robert Anderson, William Elder, Mukesh Patel and Mario Rosati were
each granted options to purchase 5,000 shares at $3.85 per share. In fiscal
2003, outside directors Robert Anderson, William Elder, Mukesh Patel and Mario
Rosati were each granted options to purchase 5,000 shares at $2.70 per share. In
fiscal 2004, outside directors Robert Anderson, William Elder, Mukesh Patel and
Mario Rosati were each granted options to purchase 5,000 shares at $3.79 per
share.
9
Additionally, Robert Anderson and Mukesh Patel were each granted 9,499 shares at
$3.79 per share pursuant to an agreement to take these shares of stock in lieu
of cash payments throughout the fiscal year.
The Company has agreed to indemnify each director against certain claims
and expenses for which the director might be held liable in connection with past
or future service on the Board. In addition, the Company maintains an insurance
policy insuring its officers and directors against such liabilities.
Vote Required
The five nominees receiving the highest number of affirmative votes of
the shares present or represented and entitled to be voted for them shall be
elected as directors. Votes withheld from any director are counted for purposes
of determining the presence or absence of a quorum for the transaction of
business, but have no other legal effect in the election of directors under
California law. See "Quorum; Abstentions; Broker Non-Votes."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE NOMINEES
LISTED ABOVE
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The Board of Directors of the Company has selected PricewaterhouseCoopers
LLP, as the Company's independent registered public accounting firm, to audit
the financial statements of the Company for the current fiscal year ending May
31, 2005, and recommends that Shareholders vote for ratification of such
appointment. In the event of a negative vote on such ratification, the Audit
Committee and the Board of Directors will reconsider their selection. Even if
the selection is ratified, the Audit Committee and the Board of Directors in
their discretion may direct the appointment of different independent registered
public accounting firm at any time during the year. 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.
Audit Fees
The following table sets forth the aggregate fees billed or to be billed
by PricewaterhouseCoopers LLP for the following services for the years ended May
31, 2004 and 2003:
DESCRIPTION OF SERVICES
-----------------------
2004 2003
---- ----
Audit fees $106,200 $ 92,375
Audit Related Fees -- --
Fees for Tax Services 35,175 68,175
-------- --------
TOTAL $141,375 $160,550
======== ========
Audit fees. Aggregate fees billed or to be billed for professional
services rendered for the audit of the Company's fiscal 2004 annual financial
statements and for the review of the financial statements included in the
Company's quarterly reports during such period.
Audit related fees. Aggregate fees were for services related to income
tax provision procedures, internal control projects and revenue recognition.
10
Tax services. Aggregate fees were for services related to finalization
of income tax returns, sale and use tax filings, and other tax consulting
services.
The Audit Committee pre-approves all audit and non-audit services
provided to the Company by the independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows information concerning compensation awarded
to, earned by or paid for services to the Company in all capacities during the
fiscal years ended May 31, 2004, 2003 and 2002 by the Chief Executive Officer
and each of the four other most highly compensated executive officers with
annual compensation in excess of $100,000 for the fiscal year ended May 31,
2004.
Summary Compensation Table
Long-term
Compensation
------------
Annual Compensation Securities
Fiscal ----------------------- Underlying All Other
Name and Principal Position Year Salary ($) Bonus ($) Options ($) Compensation ($)
--------------------------- ---- ---------- --------- ------------ ----------------
Rhea J. Posedel ..................... 2004 $216,662 -- $2,360 $22,936(1)
Chief Executive Officer and 2003 $213,252 -- $2,252 $17,505(2)
Chairman of the Board of 2002 $200,199 -- $1,935 $ 5,795(3)
Directors
Carl J. Meurell (4).................. 2004 $213,253 $ 58,206 -- $22,710(1)
President and Chief Operating 2003 $195,850 $ 52,965 $2,294 $17,254(2)
Officer 2002 $197,397 $ 10,000 $1,935 $13,968(3)
Gary L. Larson ...................... 2004 $174,181 -- $2,071 $ 5,320(1)
Vice President of Finance and 2003 $169,855 -- $1,944 $ 4,061(2)
Chief Financial Officer 2002 $166,503 -- $1,935 $ 7,341(3)
Carl N. Buck ...........................2004 $153,144 $ 7,375 $1,739 $ 5,261(1)
Vice President of Contactor 2003 $151,205 $ 14,749 $1,580 $ 6,187(2)
Business Group 2002 $139,289 -- $1,746 $ 3,717(3)
David S. Hendrickson................. 2004 $182,015 -- $2,015 $16,458(1)
Vice President of Engineering 2003 $174,214 $ 26,906 $2,015 $13,013(2)
2002 $175,792 $ 14,280 $1,935 $ 5,491(3)
---------------------
(1) Consists of health and life insurance premiums and medical costs paid by
the Company during the year ended May 31, 2004.
(2) Consists of health and life insurance premiums and medical costs paid by
the Company during the year ended May 31, 2003.
(3) Consists of health and life insurance premiums and medical costs paid by
the Company during the year ended May 31, 2002.
(4) Mr. Carl J. Meurell ceased to be an officer of the Company as of January
2004.
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, 2004.
11
Option Grants in Last Fiscal Year
Potential Realizable
Individual Grants 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% ($)
---- ---------- -------------- ------------ ---------- -------- --------
Rhea J. Posedel 25,000 15.5% $3.17 6/26/2010 $22,061 $61,058
Carl J. Meurell 10,000 6.2% $2.88 6/26/2010 $11,724 $27,323
Gary L. Larson 15,000 9.3% $2.88 6/26/2010 $17,587 $40,985
Carl N. Buck 15,000 9.3% $2.88 6/26/2010 $17,587 $40,985
David S. Hendrickson 5,000 3.1% $2.88 6/26/2010 $ 5,862 $13,662
-----------------
(1) The options were granted under the 1996 Stock Option Plan and vested over
four years.
(2) Based on an aggregate of 161,750 options granted by the Company in the
year ended May 31, 2004 to employees and consultants to the Company,
including the named executive officers.
(3) The exercise price per share of each option was equal to the fair market
value of the Common Stock on the date of grant as determined by the Board
of Directors, except the exercise price of the options granted to Mr.
Posedel was equal to 110% of the fair market value of the Common Stock on
the date of the grant.
(4) This column sets forth hypothetical gains or "option spreads" for the
options at the end of their respective seven-year terms, as calculated in
accordance with the rules of the SEC. Each gain is based on an arbitrarily
assumed annualized rate of compound appreciation of the market price at
the date of grant of 5% and 10% annually from the date the option was
granted to the end of the option term. The 5% and 10% rates of
appreciation are specified by the rules of the SEC and do not represent
the Company's estimate or projection of future Common Stock prices. The
Company does not necessarily agree that this method properly values an
option. Actual gains, if any, on option exercises are dependent on the
future performance of the Company's Common Stock and overall market
conditions and the timing of option exercises, if any.
The following table provides information concerning option exercises by
the persons named in the Summary Compensation Table during the fiscal year ended
May 31, 2004 and the value of unexercised options at such date.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
Shares Fiscal Year-End(#)(1) Fiscal Year-End($)(2)
Acquired on Value --------------------------- --------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ------------ ----------- ------------- ----------- -------------
Rhea J. Posedel ............ 12,000 $23,193 103,312 54,688 $5,385 $18,115
Carl J. Meurell ............ 106,953 $67,018 79,478 -- -- --
Gary L. Larson ............. 25,000 $47,062 47,769 30,231 $5,460 $15,120
Carl N. Buck ............... 3,000 $ 3,395 44,998 21,002 $7,607 $14,603
David S. Hendrickson ....... -- -- 76,768 23,232 $1,523 $ 4,877
----------------------------
(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 ($4.11 per share as of
May 31, 2004) and the exercise price of the options.
12
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 2004, Mario M. Rosati, a member of the Board of Directors of
the Company, was also a member of the law firm of Wilson Sonsini Goodrich &
Rosati, Professional Corporation ("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 2005.
Change of Control Severance Agreement
On January 24, 2001, the Company entered into Change of Control Severance
Agreements with Mr. Carl N. Buck, Mr. David S. Hendrickson, Mr. Gary L. Larson
and Mr. Rhea J. Posedel pursuant to which those executives would be entitled to
a payment in the event of a termination of employment for specified reasons
following a change of control of the Company. For this purpose, a change of
control of the Company means a merger or consolidation of the Company, a sale by
the Company of all or substantially all of its assets, the acquisition of
beneficial ownership of a majority of the outstanding voting securities of the
Company by any person or a change in the composition of the Board as a result of
which fewer than a majority of the directors are incumbent directors.
Termination of employment for purposes of these agreements means a discharge of
the executive by the Company, other than for specified causes including
dishonesty, conviction of a felony, misconduct or wrongful acts. Termination
also includes resignation following the occurrence of an adverse change in the
executive's position, duties, compensation or work conditions. The amounts
payable under the agreements will change from year to year based on the
executive's compensation. In the event of a termination in fiscal 2005 following
a change of control, the amounts payable to Messrs. Buck, Hendrickson, Larson
and Posedel would be approximately $79,000, $101,000, $138,000 and $238,000,
respectively.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Messrs. Elder and Rosati. 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 and such information shall be entitled to the benefits provided in Item
306(c) and (d) of Regulation S-K and Item 7(d)(3)(v) of Schedule 14A.
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;
13
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:
o Cash-based programs: Base salary, Annual Incentive Bonus Plan, Annual
Profit Sharing Plan, and a Sales Incentive Commission Plan; and
o Equity-based programs: 1996 Incentive Stock Option Plan, the 1997
Employee Stock Purchase Plan and the Employee Stock Bonus Plan.
These programs apply to 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 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. 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 other 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.
5. The final evaluations and compensation decisions are discussed with
each executive by the Chief Executive Officer or Compensation
Committee, as appropriate.
Compensation of the Chief Executive Officer
The Compensation Committee used the same compensation policy described
above for all executive officers to determine the compensation for Rhea J.
Posedel, the Company's Chief Executive Officer, in fiscal
14
year 2004. In setting both the cash-based and the equity-based elements of Mr.
Posedel's compensation, the Compensation Committee considered the company's
performance, competitive forces taking into account Mr. Posedel's experience and
knowledge, and Mr. Posedel's leadership in achieving our long-term goals. During
fiscal year 2004, he received a stock option grant under our 1996 Stock Option
Plan for 25,000 shares. These options vest over four years. The Compensation
Committee believes Mr. Posedel's fiscal year 2004 compensation was fair,
relative to the Company's performance and Mr. Posedel's individual performance
and leadership, and it rewards him for this performance and will serve to retain
him as a key employee.
Policy on Deductibility of Compensation
We are required to disclose our policy regarding qualifying executive
compensation for deductibility under Section 162(m) of the Internal Revenue Code
of 1986, as amended, which provides that, for purposes of the regular income
tax, the otherwise allowable deduction for compensation paid or accrued with
respect to the executive officers of a publicly-held company, which is not
performance-based compensation is limited to no more than $1 million per year.
It is not expected that the compensation to be paid to our executive officers
for fiscal 2004 will exceed the $1 million limit per officer; however, to the
extent such compensation to be paid to such executive officers exceeds the $1
million limit per officer, such excess will be treated as performance-based
compensation.
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
William W. R. Elder
Mario M. Rosati
15
Company Performance
The following graph shows a comparison of total shareholder return for
holders of the Company's Common Stock for the last five fiscal years and ending
May 31, 2004, compared with The Nasdaq Stock Market (U.S.) Index and the
Philadelphia 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
Philadelphia Semiconductor Index on May 31, 1999, 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.
[The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T]
Cumulative Total Return
--------------------------------------------------------------
5/31/99 5/31/00 5/31/01 5/31/02 5/31/03 5/31/04
AEHR TEST SYSTEMS 100.00 143.75 100.01 148.71 71.75 102.74
NASDAQ STOCK MARKET (U.S.) 100.00 137.97 85.84 65.94 65.44 81.86
PHILADELPHIA SEMICONDUCTOR 100.00 257.27 154.27 122.71 98.50 125.95
16
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 such forms received by the
Company, or on written representations from certain reporting persons, the
Company believes that all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent beneficial owners were complied
with during the fiscal year ended May 31, 2004.
FINANCIAL STATEMENTS
The Company's Annual Report to Shareholders for the last fiscal year is
being mailed with this proxy statement to Shareholders entitled to notice of the
meeting. The Annual Report includes the consolidated financial statements,
unaudited selected consolidated financial data and management's discussion and
analysis of financial condition and results of operations.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed Proxy to vote the shares they represent as the
Board of Directors may recommend.
By Order of the Board of Directors,
/s/ Rhea J. Posedel
RHEA J. POSEDEL
Chief Executive Officer and
Chairman of the Board of Directors
Dated: September 27, 2004
17
APPENDIX A
AEHR TEST SYSTEMS
AUDIT COMMITTEE CHARTER
PURPOSE
The primary purpose of the Audit Committee (the "Committee") is to assist the
Board of Directors (the "Board") in fulfilling its responsibility to oversee
management's conduct of the Company's financial reporting process, including by
overviewing the financial reports and other financial information provided by
the Company to any governmental or regulatory body, the public or other users
thereof, the Company's systems of internal accounting and financial controls,
and the annual independent audit of the Company's financial statements.
In discharging its oversight role, the Committee is empowered to investigate any
matter brought to its attention with full access to all books, records,
facilities and personnel of the Company and the power to retain outside counsel,
auditors or other experts for this purpose. The Board and the Committee are in
place to represent the Company's shareholders; accordingly, the outside auditor
is ultimately accountable to the Board and the Committee.
The Committee shall review the adequacy of this Charter on an annual basis.
MEMBERSHIP
The Committee shall be comprised of members of the Board, and the Committee's
composition will meet the requirements of the Audit Committee Policy of the
NASD.
Accordingly, all of the members will be directors:
1. Who have no relationship to the Company that may interfere with the exercise
of their independence from management and the Company; and
2. Who are financially literate or who become financially literate within a
reasonable period of time after appointment to the Committee. In addition,
at least one member of the Committee will have accounting or related
financial management expertise.
KEY RESPONSIBILITIES
The Committee's job is one of oversight and it recognizes that the Company's
management is responsible for preparing the Company's financial statements and
that the outside auditors are responsible for auditing those financial
statements.
Additionally, the Committee recognizes that financial management, as well as the
outside auditors, have more time, knowledge and more detailed information on the
Company than do Committee members; consequently, in carrying out its oversight
responsibilities, the Committee is not providing any expert or special assurance
as to the Company's financial statements or any professional certification as to
the outside auditor's work.
The following functions shall be the common recurring activities of the
Committee in carrying out its oversight function. These functions are set forth
as a guide with the understanding that the Committee may diverge from this guide
as appropriate given the circumstances.
o The Committee shall review with management and the outside auditors the
audited financial
18
statements to be included in the Company's Annual Report
on Form 10-K (or the Annual Report to Shareholders if distributed prior to
the filing of Form 10-K) and review and consider with the outside auditors
the matters required to be discussed by Statement of Auditing Standards
("SAS") No. 61, as amended.
o As a whole, or through the Committee chair, the Committee shall review with
the outside auditors the Company's interim financial results to be included
in the Company's quarterly reports to be filed with Securities and Exchange
Commission and the matters required to be discussed by SAS No. 61; this
review will occur prior to the Company's filing of the Form 10-Q.
o The Committee shall:
o request from the outside auditors annually, a formal written statement
delineating all relationships between the auditor and the Company
consistent with Independence Standards Board Standard Number 1;
o discuss with the outside auditors any such disclosed relationships and
their impact on the outside auditor's independence; and
o recommend that the Board take appropriate action to oversee the
independence of the outside auditor.
o The Committee, subject to any action that may be taken by the full Board,
shall have the ultimate authority and responsibility to select (or nominate
for shareholder approval), evaluate and, where appropriate, replace the
outside auditor.
19
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
AEHR TEST SYSTEMS
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 19, 2004
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 19, 2004, at 4:00 p.m., local time, at 400 Kato Terrace,
Fremont, California 94539, 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 on the reverse side of
this card.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR (1) THE ELECTION OF THE NOMINATED DIRECTORS AND (2)
FOR RATIFICATION OF THE APPOINTMENT OF THE COMPANY'S INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS
AS MAY COME BEFORE THE MEETING AND ANY ADJOURNMENT(S) THEREOF.
PLEASE SIGN AND DATE ON REVERSE SIDE
--------------------------------------------------------------------------------
DETACH PROXY CARD HERE
--------------------------------------------------------------------------------
1. ELECTION OF DIRECTORS:
[ ] FOR all nominees listed [ ] WITHHOLD authority to [ ] EXCEPTIONS
below (except as vote for all nominees
indicated to the listed below
contrary 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 Robert R. Anderson William W. R. Elder
Mukesh Patel Mario M. Rosati
2. PROPOSAL TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
THE COMPANY'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM:
[ ] 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
I (WE) WILL [ ] WILL NOT [ ] ATTEND THE MEETING IN PERSON.
The undersigned hereby ratifies and
confirms all that the attorneys and
proxies, or any of them, or their
substitutes, shall lawfully do or
cause to be done by virtue hereof,
and hereby revokes any and all
proxies heretofore given by the
undersigned to vote at the meeting.
The undersigned acknowledges receipt
of the Notice of Annual Meeting and
the Proxy Statement accompanying
such notice.
Dated: _______________________, 2004
____________________________________
Signature
____________________________________
Signature
Please date this proxy card and sign
above exactly as your name appears
on this card. Joint owners should
each sign personally. Corporate
proxies should be signed by an
authorized officer. Executors,
administrators, trustee, etc.,
should give their full titles.
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