Edgar Filing: AEHR TEST SYSTEMS

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. __)

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:
[ X ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12

Aehr Test Systems
-----------------------------------------------
(Name of Registrant as Specified in its Charter)
-----------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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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 27, 2009
_____________________________

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 27, 2009, 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 six directors.

2. To approve an amendment to the Company's 2006 Equity Incentive Plan to
increase the number of shares reserved for issuance thereunder by an
additional 800,000 shares.

3. To approve an amendment to the Company's 2006 Employee Stock Purchase
Plan to increase the number of shares reserved for issuance thereunder
by an additional 250,000 shares.

4. To ratify the selection of Burr, Pilger & Mayer LLP as the Company's
independent registered public accounting firm for the fiscal year
ending May 31, 2010.

5. To approve an amendment to the Company's restated articles of
incorporation authorizing the Board of Directors, in its discretion,
to effect a reverse stock split of the Company's Common Stock pursuant
to which any whole number of outstanding shares between and including
Two (2) and Five (5) would be combined into one share of Common Stock
and to concurrently decrease the authorized number of shares of Common
Stock on a proportional basis.

6. To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.

Only holders of record of Common Stock at the close of business on
September 8, 2009 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,

-------------------------------------
RHEA J. POSEDEL
Chief Executive Officer and
Chairman of the Board of Directors

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD OCTOBER 27, 2009:

The Company's Proxy Statement, form of proxy card and Annual Report are
available at: www.aehr.com under the heading "Investors" and the subheading
"Proxy Materials".

AEHR TEST SYSTEMS
400 Kato Terrace
Fremont, California 94539
_______________

PROXY STATEMENT
_______________

2009 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 27, 2009 and at any adjournments thereof.

At the Annual Meeting, the Shareholders will be asked:
1. To elect six directors.
2. To approve an amendment to the Company's 2006 Equity Incentive Plan to
increase the number of shares reserved for issuance thereunder by an
additional 800,000 shares.
3. To approve an amendment to the Company's 2006 Employee Stock Purchase
Plan to increase the number of shares reserved for issuance thereunder
by an additional 250,000 shares.
4. To ratify the selection of Burr, Pilger & Mayer LLP as the Company's
independent registered public accounting firm for the fiscal year
ending May 31, 2010.
5. To approve an amendment to the Company's restated articles of
incorporation authorizing the Board of Directors, in its discretion,
to effect a reverse stock split of the Company's Common Stock pursuant
to which any whole number of outstanding shares between and including
Two (2) and Five (5) would be combined into one share of Common Stock
and to concurrently decrease the authorized number of shares of Common
Stock on a proportional basis.
6. 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 8,
2009 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 28, 2009.

THE ANNUAL MEETING
Date, Time and Place
The Annual Meeting will be held on October 27, 2009 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 8, 2009 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. As
of the Record Date, there were 8,495,692 shares of Common Stock outstanding and
entitled to vote.

Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Secretary of
the Company 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.
The Company is soliciting proxies for the Annual Meeting from its
shareholders. The cost of this solicitation will be borne by the Company. The
Company may reimburse brokerage firms and other persons representing beneficial
owners of shares for their expenses in forwarding solicitation material to such
beneficial owners. Proxies may also be solicited by certain of the Company's
directors, officers and regular employees, without additional compensation,
personally or by telephone, facsimile or special delivery letter.

Quorum; Abstentions; Broker Non-Votes
The required quorum for the transaction of business at the Annual Meeting
is a majority of the shares of Common Stock issued and outstanding on the
Record Date. Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the Inspector of Elections, 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 be
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 be counted for purposes of determining
whether a quorum exists 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 2010 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 2010 Annual Meeting of Shareholders must be received by the Company
no later than May 31, 2010, 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, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K, INCLUDING THE
CONSOLIDATED FINANCIAL STATEMENTS.

If you share an address with another shareholder, only one annual report
and proxy statement may be delivered to all shareholders sharing your address
unless the Company has contrary instructions from one or more shareholders.
Shareholders sharing an address may request a separate copy of the annual
report or proxy statement by writing to: Aehr Test Systems, 400 Kato Terrace,
Fremont, CA 94539, Attention: Investor Relations or by calling investor
relations at (510) 623-9400, and the Company will promptly deliver a separate
copy. If you share an address with another shareholder and you are receiving
multiple copies of annual reports or proxy statements, you may write us at the
address above to request delivery of a single copy of these materials in the
future.

How to Obtain Directions to Location of Annual Meeting
The Annual Meeting is being held at the time and place set forth above.
You can obtain directions to attend the Annual Meeting and vote your shares in
person by calling the Company at (510) 623-9400.

Internet Availability of Proxy Materials
This Proxy Statement, the form of proxy card and the Annual Report are
available on our website www.aehr.com under the heading "Investors" and the
subheading "Proxy Materials".

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, 2009, 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) 1,128,404 13.1%
Robert R. Anderson (4) 180,686 2.1%
William W. R. Elder (5) 60,150 *
Mukesh Patel (6) 43,179 *
Mario M. Rosati (7) 238,800 2.8%
Howard T. Slayen (8) 15,000 *
Gary L. Larson (9) 154,829 1.8%
Joel Bustos (10) 62,890 *
David S. Hendrickson (11) 103,702 1.2%
Gregory M. Perkins (12) 39,561 *
All Directors and Executive Officers
as a group (12 persons) (13) 2,156,421 23.5%

Principal Shareholders:
State of Wisconsin Investment Board (14)
121 East Wilson Street, Madison, WI 53702 821,143 9.7%
___________________

* 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, 2009 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 9,950 shares held by Rhea J. Posedel, trustee for Natalie Diane
Posedel, Mr. Posedel's daughter, and 148,473 shares issuable upon the
exercise of stock options exercisable within 60 days of August 31, 2009.

(4) Includes 63,186 shares issuable upon the exercise of stock options
exercisable within 60 days of August 31, 2009.

(5) Includes 6,000 shares held by William W.R. Elder, trustee for his sons
Derek S. Elder (3,000 shares) and Corwin W. Elder (3,000 shares) and
21,250 shares issuable upon the exercise of stock options exercisable
within 60 days of August 31, 2009.

(6) Includes 16,250 shares issuable upon the exercise of stock options
exercisable within 60 days of August 31, 2009.

(7) Includes 27,000 shares held by Mario M. Rosati and Douglas Laurice,
trustees for the benefit of Mario M. Rosati, 151,016 shares held by Mario
M. Rosati, Trustee of the Mario M. Rosati Trust, U/D/T dated 1/9/90,
22,500 shares held by WS Investment Company, LLC (2001A) of which
Mr. Rosati is a general partner and 34,583 shares issuable upon the
exercise of stock options exercisable within 60 days of August 31, 2009.

(8) Includes 5,000 shares issuable upon the exercise of stock options
exercisable within 60 days of August 31, 2009.

(9) Includes 91,290 shares issuable upon the exercise of stock options
exercisable within 60 days of August 31, 2009.

(10) Includes 62,122 shares issuable upon the exercise of stock options
exercisable within 60 days of August 31, 2009.

(11) Includes 101,789 shares issuable upon the exercise of stock options
exercisable within 60 days of August 31, 2009.

(12) Includes 39,561 shares issuable upon the exercise of stock options
exercisable within 60 days of August 31, 2009.

(13) Included 682,107 shares issuable upon the exercise of stock options
exercisable within 60 days of August 31, 2009.

(14) Based solely on Schedule 13G/A filed January 30, 2009 with the SEC by
the State of Wisconsin Investment Board ("SWIB"). SWIB has sole
investment and sole voting power with respect to the 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, 2009.

(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
security holders 1,672,674 (1) $5.28 580,385

Equity compensation
plans not approved
by security holders -- -- --

Total 1,672,674 $5.28 580,385

---------------------

(1) Issued pursuant to the Company's 1996 Stock Option Plan and the 1997
Employee Stock Purchase Plan ("Stock Option Plans") and the Company's 2006
Equity Incentive Plan and 2006 Employee Stock Purchase Plan, 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 26, 2006, the Company's shareholders approved the 2006 Equity
Incentive Plan (the "2006 Equity Incentive Plan"). Options granted under the
2006 Equity Incentive Plan are generally for periods not to exceed ten years
(five years if the option is an incentive stock option granted to a 10%
shareholder) and are granted at the fair market value of the stock at the date
of grant as determined by the Board of Directors.

The 2006 Equity Incentive Plan replaces the Amended and Restated 1996
Stock Option Plan (the "1996 Stock Option Plan") which would otherwise have
expired in 2006. The 1996 Stock Option Plan will continue to govern awards
previously granted under that plan. However, the shares represented by options
granted under the 1996 Stock Option Plan that terminate without being exercised
are added to the shares available for grant under the 2006 Equity Incentive
Plan. More information regarding the 2006 Equity Incentive Plan is set forth
in the section entitled "Amendment to the 2006 Equity Incentive Plan". As of
May 31, 2009, out of the 2,172,000 shares authorized for grant under the 1996
Stock Option Plan and 2006 Equity Incentive Plan, approximately 1,636,000
shares had been granted. Because Rhea J. Posedel owns more than 10% of the
Company's outstanding Common Stock, the exercise price of any incentive stock
option granted to him is set at a 10% premium above the market price on the
date of the grant. All other exercise prices are equal to the closing price of
the Company's Common Stock on the date of the grant as reported on the NASDAQ
Global Market.

On October 26, 2006, the Company's shareholders approved the 2006
Employee Stock Purchase Plan (the "2006 Employee Stock Purchase Plan"). A
total of 200,000 shares of the Company's Common Stock were reserved for
issuance under the 2006 Employee Stock Purchase Plan. The 2006 Employee Stock
Purchase Plan 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. The first exercise date under the 2006
Employee Stock Purchase Plan was April 1, 2007. All employees who work a
minimum of 20 hours per week and are customarily employed by the Company (or an
affiliate thereof) for at least five months per calendar year are eligible to
participate. Under this plan, 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 2006
Employee Stock Purchase Plan.

The 2006 Employee Stock Purchase Plan replaces the 1997 Employee Stock
Purchase Plan which would have otherwise expired in 2007. For the year ended
May 31, 2009, approximately 73,000 shares of Common Stock were issued under the
1997 Employee Stock Purchase Plan and the 2006 Employee Stock Purchase Plan.
As of May 31, 2009, 519,276 shares have been issued under 1997 Employee Stock
Purchase Plan and the 2006 Employee Stock Purchase Plan. Because Rhea J.
Posedel owns more than 10% of the Company's outstanding Common Stock, he is
precluded from participating in the 1997 Employee Stock Purchase Plan and the
2006 Employee Stock Purchase Plan.

PROPOSAL 1

ELECTION OF DIRECTORS

At the Annual Meeting, six 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 six nominees named below. Each nominee has
consented to be named a nominee in this Proxy Statement and to continue to
serve as a director if elected. Should any nominee become unable or decline to
serve as a director or should additional persons be nominated at the meeting,
the proxy holders intend to vote all proxies received by them in such a manner
as will assure the election of as many nominees listed below as possible (or,
if new nominees have been designated by the Board of Directors, in such a
manner as to elect such nominees) and the specific nominees to be voted for
will be determined by the proxy holders. The Company is not aware of any
reason that any nominee will be unable or will decline to serve as a director.
There are no arrangements or understandings between any director or executive
officer and any other person pursuant to which he is or was to be selected as a
director or officer of the Company.

The names of the nominees and certain information about them are set
forth below:

Name of Nominee Age Position Director
Since
--------------------- ---- ------------------------------------------------- --------

Rhea J. Posedel 67 Chairman of the Board and Chief Executive Officer 1977
Robert R. Anderson(1)(2) 71 Director 2000
William W.R. Elder(2)(3) 70 Director 1989
Mukesh Patel(1)(3) 51 Director 1999
Mario M. Rosati 63 Director 1977(4)
Howard T. Slayen(1) 62 Director 2008
-------------------

(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Nominating and Governance Committee
(4) Mr. Rosati was a member of the Board of Directors from 1977 to September
2008 and then rejoined the Board of Directors in February 2009.

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 the Company's
inception in 1977. From the Company's inception through May 2000, Mr. Posedel
also served as President of the Company. Prior to founding the Company, Mr.
Posedel held various project engineering and engineering managerial positions
at Lockheed Martin Corporation (formerly Lockheed Missile & Space Corporation),
Ampex Corporation, and Cohu, Inc. Mr. Posedel received a B.S. in Electrical
Engineering from the University of California, Berkeley, an

M.S. in Electrical Engineering from San Jose State University and an M.B.A.
from Golden Gate University.

ROBERT R. ANDERSON has been a director of the Company since October
2000. Mr. Anderson currently is a director of MKS Instruments, Inc., a
semiconductor components and equipment supplier. Mr. Anderson also serves
as a director for Energetiq Technology, Inc., a private company. Mr.
Anderson is a graduate of Bentley University and served as a trustee of
Bentley University from 1993 through 2004.

WILLIAM W. R. ELDER has been a director of the Company since 1989. From
1981 to 1996, Dr. Elder was the Chief Executive Officer of Genus, Inc., a
semiconductor equipment company, and then again from 1998 until the company was
acquired by AIXTRON AG ("AIXTRON") in 2005. Dr. Elder retired from AIXTRON in
December 2007. Dr. Elder is currently President and CEO of Maskless
Lithography Inc., a capital equipment start-up company based in San Jose,
California. Dr. Elder received a B.S.I.E. and an honorary Doctorate Degree
from the University of Paisley in Scotland.

MUKESH PATEL has been a director of the Company since June 1999. Mr.
Patel was President and Chief Executive Officer of Metta Technology, which he
co-founded in 2004, until November 2006, when LSI Logic Corporation acquired
it. He founded Sparkolor Corporation, acquired by Intel Corporation in late
2002, and co-founded SMART Modular Technologies, Inc. ("SMART Modular"), a high
value added memory products company, acquired by Solectron Corporation in late
1999. From February 1989 to July 1995, Mr. Patel served as Vice President and
General Manager Memory Product Division of SMART Modular from August 1995 to
August 1998 and as Vice President, Engineering. Mr. Patel also serves as a
director of SMART Modular and for several privately-held companies. Mr. Patel
received a B.S. degree in Engineering with an emphasis in digital electronics
from Bombay University, India.

MARIO M. ROSATI was a director of the Company from 1977 to 2008, and then
rejoined the Board of Directors in 2009. Mr. Rosati is a member of the law
firm Wilson Sonsini Goodrich & Rosati, Professional Corporation which he joined
in 1971. Mr. Rosati is a director of Sanmina-SCI Corporation, an electronics
manufacturing services company and a publicly-held company, as well as several
privately-held companies. Mr. Rosati received a B.A. from the University of
California, Los Angeles and a J.D. from the University of California, Berkeley
School of Law.

HOWARD T. SLAYEN has been a director of the Company since 2008. Since
June 2001, Mr. Slayen has been providing independent financial consulting
services to various organizations and clients. From October 1999 to May 2001,
Mr. Slayen served as Executive Vice President and Chief Financial Officer of
Quaartz Inc., a web-hosted communications business. From 1971 to September
1999, Mr. Slayen held various positions with PricewaterhouseCoopers/Coopers &
Lybrand, including his last position as a Corporate Finance Partner. Mr.
Slayen currently is a director of Lantronix, Inc., a provider of embedded
networking solutions. Mr. Slayen received a B.A. from Claremont McKenna
College and a J.D. from the University of California, Berkeley School of Law.

Board Matters and Corporate Governance

Board Meetings and Committees

The Board of Directors held a total of four (4) meetings during the
fiscal year ended May 31, 2009. 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 three committees: the Audit Committee, the
Compensation Committee and the Nominating and Governance Committee.

The Audit Committee of the Board of Directors is comprised entirely of
independent directors, as defined by the NASDAQ Stock Market LLC director
independence standards, as well as applicable SEC rules, as currently in
effect. More 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 section entitled "Report of the Audit Committee." The Audit
Committee is governed by a written charter approved by the

Board of Directors. The Company maintains a copy of the Audit Committee
charter on its website: www.aehr.com. The Audit Committee consists of
directors Messrs. Slayen, Anderson and Patel. The Board of Directors has
determined that Mr. Slayen 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. Anderson and Elder, each of whom is an independent member of the
Board of Directors, as defined by the NASDAQ Stock Market LLC director
independence standards, as well as applicable SEC rules, as currently in
effect. The Compensation Committee held one (1) meeting during fiscal year
2009. 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 Compensation Committee is
governed by a written charter approved by the Board of Directors. The Company
maintains a copy of the Compensation Committee charter on its website:
www.aehr.com. More information regarding the Compensation Committee's
processes and procedures can be found herein in the section entitled
"Compensation Discussion and Analysis."

The Nominating and Governance Committee of the Board of Directors
currently consists of Messrs. Elder and Patel, each of whom is an independent
member of the Board of Directors, as defined by the NASDAQ Stock Market LLC
director independence standards, as well as applicable SEC rules, as currently
in effect. The Nominating and Governance Committee held one (1) meeting during
fiscal year 2009. The Nominating and Governance Committee reviews and makes
recommendations to the Board of Directors regarding matters concerning
corporate governance; reviews the composition and evaluates the performance of
the Board of Directors; selects, or recommends for the selection of the Board
of Directors, director nominees; evaluates director compensation; reviews the
composition of committees of the Board of Directors and recommends persons to
be members of such committee; and reviews conflicts of interest of members of
the Board of Directors and corporate officers. The Nominating and Governance
Committee is governed by a written charter approved by the Board of Directors.
The Company maintains a copy of the Nominating and Governance Committee charter
on its website: www.aehr.com.

Shareholder 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 shareholder direct nomination of directors
are discussed under "Deadline for Receipt of Shareholder 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. 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
the Company's annual meeting. If any materials are provided by a shareholder in
connection with the recommendation of a director candidate, such materials are
forwarded to the Board 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 LLC director
independence standards, as well as applicable SEC rules, as currently in
effect.

Annual Meeting Attendance

Although the Company does not have a formal policy regarding attendance
by members of the Board at the Company's annual meetings of shareholders,
directors are encouraged to attend annual meetings of the Company's
shareholders. All five members of the Board of Directors attended the 2008
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 Code of Conduct and Ethics may be found on the Company's website
at www.aehr.com. 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

The Company does not have a formal policy regarding shareholder
communication with the Board of Directors. However, shareholders may
communicate with the Board by submitting a letter to the attention of the
Chairman of the Board, c/o Aehr Test Systems, 400 Kato Terrace, Fremont, CA
94539. Communication received in writing will be collected, organized and
processed by the Chairman of the Board who will distribute the communications
to the members of the Board of Directors, as appropriate, depending on the
facts and circumstances outlined in the communication received.

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,

consisting of Messrs. Slayen, Anderson and Patel, held five (5) meetings in
fiscal year 2009. Each member is an independent director in accordance with
the NASDAQ Global Market Audit Committee requirements as currently in effect.
The Audit Committee evaluates the scope of the annual audit, reviews audit
results, consults with management and the Company's independent registered
public accounting firm prior to the presentation of financial statements to
shareholders and, as appropriate, initiates inquiries into aspects of the
Company's financial affairs.

The Company's management has primary responsibility for preparing the
Company's consolidated financial statements and for the Company's financial
reporting process. The Company's independent registered public accounting
firm, Burr, Pilger & Mayer LLP ("BPM"), is responsible for expressing an
opinion on the conformity of the Company's audited consolidated financial
statements to accounting principles generally accepted in the United States of
America. The Audit Committee has reviewed and discussed with management the
audited consolidated financial statements for the year ended May 31, 2009.
BPM, the Company's independent registered public accounting firm for fiscal
year 2009, issued their unqualified report dated September 1, 2009 on the
Company's consolidated financial statements.

The Audit Committee has also discussed with BPM the matters required to
be discussed by Statement on Auditing Standards No. 61, "Communication with
Audit Committees", as amended, as adopted by the Public Company Accounting
Oversight Board in Rule 3200T. The Audit Committee has also received the
written disclosures and the letter from BPM required by the applicable Public
Company Accounting Oversight Board requirements for independent accountant
communications with audit committees concerning auditor independence, and has
conducted a discussion with BPM relative to its independence. The Audit
Committee has considered whether BPM's provision of non-audit services is
compatible with its independence. The Audit Committee has an Audit Committee
Charter.

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 consolidated financial statements for the fiscal year ended
May 31, 2009 be included in the Company's Annual Report on Form 10-K.

AUDIT COMMITTEE

Howard T. Slayen
Robert R. Anderson
Mukesh Patel

(1) The information regarding the Audit Committee is not "soliciting" material
and is not deemed "filed" with the SEC, and is not to be 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. 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. In
response to the current slowdown in the semiconductor manufacturing industry
and the related impact on the Company's net revenues, during fiscal 2009 the
Company implemented a temporary reduction in fees paid to the Board of
Directors. Under the current reduced fees each outside director receives (1)
an annual retainer of $25,000, (2) $1,250 for each regular board meeting he
attends, and (3) $625 for a special telephonic meeting he attends. In addition,
each outside Committee member receives the payment in the following amounts he
attends a committee meeting if the meeting is not held on the same day as a
regular meeting of the Board of Directors. If the committee meeting is held on
the same day as a regular meeting of the Board of Directors, then the committee
members shall be paid 50% of the following amounts: Audit

Committee Chairman - $1,000, Audit Committee Member - $ $750, Compensation
Committee Chairman - $875, and Other Committee Members - $625. Outside
directors are also reimbursed for certain expenses incurred in attending board
and committee meetings. Directors are eligible to participate in the Company's
stock option plans. In each of fiscal 2007 and 2008, outside directors Robert
Anderson, William Elder, Mukesh Patel, and Mario Rosati were each granted
options to purchase 5,000 shares at $7.28 per share and $6.07 per share,
respectively. In fiscal 2009, outside directors Robert Anderson, William Elder
and Mukesh Patel were each granted options to purchase 5,000 shares at $2.30
per share, an option to purchase 3,750 shares at $1.29 per share was granted to
outside director Mario M. Rosati and an option to purchase 15,000 shares at
$2.30 was granted to outside director Howard T. Slayen. All exercise prices
are equal to the closing price of the Company's Common Stock on the date of the
grant as reported on the NASDAQ Global Market. eligible to participate in the
Company's stock option plans. In each of fiscal 2007 and 2008, outside
directors Robert Anderson, William Elder, Mukesh Patel, and Mario Rosati were
each granted options to purchase 5,000 shares at $7.28 per share and $6.07 per
share, respectively. In fiscal 2009, outside directors Robert Anderson,
William Elder and Mukesh Patel were each granted options to purchase 5,000
shares at $2.30 per share, an option to purchase 3,750 shares at $1.29 per
share was granted to outside director Mario M. Rosati and an option to purchase
15,000 shares at $2.30 was granted to outside director Howard T. Slayen. All
exercise prices are equal to the closing price of the Company's Common Stock on
the date of the grant as reported on the NASDAQ Global Market.

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.

The following table sets forth the compensation paid by the Company
during the fiscal year ended May 31, 2009 to the Company's non-executive
officer directors:

Director Compensation

Fees Earned or Option Award Total
Name Year Paid in Cash (2) Compensation
------------------ ---- -------------- ------------ ------------

Rhea J. Posedel(1) 2009 -- -- --
Robert R. Anderson 2009 $39,625 $13,700 $53,325
William W.R. Elder 2009 $38,125 $13,700 $51,825
Mukesh Patel 2009 $37,750 $13,700 $51,450
Mario M. Rosati 2009 $26,250 $10,622 $36,872
Howard T. Slayen 2009 $29,125 $ 3,214 $32,339

------------------

(1) Rhea J. Posedel is an executive officer and does not receive any
additional compensation for services provided as a director.
(2) Reflects the dollar amount recognized for financial statement
reporting purposes for the fiscal year ended May 31, 2009 in
accordance with SFAS 123 (R), and thus includes amounts from awards
granted in and prior to fiscal 2009. See Note 1 of the consolidated
financial statements in the Company's Annual Report for the year ended
May 31, 2009 regarding the assumptions underlying valuation of equity
awards. The full grant date fair value of the awards granted to each
director in fiscal 2009, computed in accordance with SFAS 123 (R) were:
Robert R. Anderson: $7,281; William W.R. Elder: $7,281; Mukesh Patel:
$7,281; Mario M. Rosati: $3,032; and Howard T. Slayen: $21,843. At
fiscal year end, the aggregate number of option awards outstanding for
each director was as follows: Robert R. Anderson: 61,936; William W.R.
Elder: 20,000, Mukesh Patel: 15,000; Mario M. Rosati: 33,750, and
Howard T. Slayen: 15,000. Options granted vest as to one-twelfth
(1/12th) of the shares each month after the date of grant over a period
of one year, so long as the optionee remains a director of the Company.

Vote Required

The six 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 ISTED
ABOVE

PROPOSAL 2

AMENDMENT TO THE 2006 EQUITY INCENTIVE PLAN
Proposal

The Board of Directors is proposing that the 2006 Equity Incentive Plan
be amended to increase the number of shares authorized thereunder by an
additional 800,000 shares of Common Stock. The Company previously reserved
1,200,000 shares of Common Stock for issuance under the 2006 Equity Incentive
Plan, plus (i) 181,405 shares that were reserved but not issued under the 1996
Stock Option Plan, (ii) any shares subject to stock options or similar awards
granted under the 1996 Stock Option Plan that expire or otherwise terminate
without having been exercised in full and (iii) any shares issued pursuant to
awards granted under the 1996 Stock Option Plan that are forfeited to or
repurchased by the Company.

The Board of Directors is proposing this amendment in order to allow for
sufficient stock options to cover the Company's needs for at least the next
fiscal year.

Participation in the 2006 Equity Incentive Plan

The grant of options, stock purchase rights, stock bonus awards and long-
term performance awards under the 2006 Equity Incentive Plan to employees,
including the executive officers named in the Summary Compensation Table
herein, is subject to the discretion of the plan administrator. As of the date
of this proxy statement, there has been no determination by the plan
administrator with respect to future awards under the 2006 Equity Incentive
Plan. Accordingly, future awards are not determinable. No stock bonus awards
or long-term performance awards were granted during the last fiscal year. The
following table sets forth information with respect to the grant of options to
the executive officers named in the Summary Compensation Table, to all current
executive officers as a group, to all outside directors as a group and to all
other employees as a group during the last fiscal year:

Amended Plan Benefits

2006 Equity Incentive Plan

Weighted
Securities Average
ame of Individual Underlying Exercise Price
Or Options Share ($/share)
Identity of Group and Position Granted(#) ($/share)
----------------------------------------- ---------- --------------

Rhea J. Posedel 54,000 $7.01
Gary L. Larson 27,000 $6.52
Joel Bustos 27,000 $6.52
David S. Hendrickson 36,000 $6.52
Gregory M. Perkins 27,000 $6.52
All current Executive Officers as a group 207,000 $6.65
All outside Directors as a group 33,750 $2.19
All other employees (including all current
Officers who are not Executive Officers)
as a group 314,200 $6.00

Summary of Stock Plan

Purpose. The purposes of the 2006 Equity Incentive 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 August 31, 2009, options to purchase a total of
1,427,759 (net of cancelled or expired options) shares were outstanding under
the 2006 Equity Incentive Plan. In addition, options to

purchase 103,708 (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. As discussed above, shares represented
by options granted under the 1996 Stock Option Plan that terminate without
being exercised are added to the shares available for future grant under the
2006 Equity Incentive Plan.

Eligibility; Administration. Under the 2006 Equity Incentive 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 2006
Equity Incentive 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 2006 Equity Incentive Plan.

Exercise Price. The exercise price of options granted under the 2006
Equity Incentive 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 incentive stock 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 Global Market.
While the Company's stock is traded on the NASDAQ Global Market, the fair
market value is the reported closing price on the date of grant.

Exercisability. Options granted to new optionees under the 2006 Equity
Incentive Plan generally become exercisable starting one month after the date
of grant with 1/48th of the shares covered thereby becoming exercisable at that
time and with an additional 1/48th 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 2006 Equity Incentive 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 2006 Equity
Incentive 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.

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 2006 Equity Incentive Plan without approval of the shareholders; provided,
however, that the Company will obtain shareholder approval of any amendment to
the 2006 Equity Incentive 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 NASDAQ Stock Market LLC or any established stock exchange.
Any amendment or termination of the 2006 Equity

Incentive 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 2006 Equity Incentive Plan requires the
affirmative vote of the Votes Cast (which affirmative vote must constitute at
least a majority of the required quorum). The effect of an abstention is the
same as that of a vote against the proposal.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE AMENDMENT
TO THE 2006 EQUITY INCENTIVE PLAN

PROPOSAL 3

AMENDMENT TO THE 2006 EMPLOYEE STOCK PURCHASE PLAN

Proposal

The Board of Directors is proposing that the 2006 Employee Stock Purchase
Plan (the "ESPP") be amended to increase the number of shares authorized
thereunder by an additional 250,000 shares of Common Stock. The Company
previously reserved 600,000 shared of Common Stock for issuance under the ESPP.

The Board of Directors is proposing this amendment in order to enable the
Company to continue its policy of encouraging employee equity participation in
the Company by enabling employees to purchase the Company's Common Stock at a
discount from the market price through voluntary payroll deductions. The
Management also believes the continued opportunity for employees equity
participation will promote the attraction, retention and motivation of
employees.

Participation in the 2006 Employee Stock Purchase Plan

Participation in the ESPP is voluntary and is dependent on each eligible
employee's election to participate and his or her determination as to the level
of payroll deductions. Accordingly, future purchases under the ESPP are not
determinable. Outside directors are not eligible to participate in the ESPP.
No purchases have been made under the ESPP since its amendment by the Board.
However, purchases were made under the ESPP prior to such amendment. The
following table sets forth certain information regarding shares purchased under
the ESPP during the last fiscal year and the payroll deductions accumulated at
the end of the last fiscal year in accounts under the ESPP for each of the
executive officers named in the Summary Compensation Table, for all current
executive officers as a group and for all other employees who participated in
the ESPP as a group:

Amended Plan Benefits

2006 Employee Stock Purchase Plan

Payroll
Number of Dollar Deductions as
Name of Individual Shares Value of
or Identity of Group and Purchased (1) Fiscal Year
Position (#) ($) End
-------------------------------- --------- ------- -------------

Rhea J. Posedel -- -- --
Gary L. Larson 6,000 $ 2,237 $ 1
Joel Bustos 294 $ 160 --
David S. Hendrickson -- -- --
Gregory M. Perkins -- -- --
All current executive officers as a group 11,985 $ 4,464 $ 1
All other employees (including all
current officers who are not executive
officers) as a group 60,643 $19,314 $19,447

-------------------------------

(1) Market value of shares on date of purchase, minus the purchase price
under the ESPP.

Summary of Stock Plan

Purpose. The purpose of the ESPP is to provide employees of the Company
who participate in the ESPP with an opportunity to purchase shares of the
Company's Common Stock through payroll deductions.

Administration. The Board or a committee appointed by the Board
(referred to herein as the "Administrator") administers the ESPP. All
questions of interpretation or application of the ESPP are determined by the
Administrator and its decisions are final, conclusive and binding upon all
participants.

Eligibility. Each of the Company's employees or the employees of the
Company's designated subsidiaries who is a common law employee and whose
customary employment with the Company or one of the Company's designated
subsidiaries is at least twenty hours per week and more than five months in a
calendar year is eligible to participate in the ESPP; except that no employee
will be granted an option under the ESPP (i) to the extent that, immediately
after the grant, such employee would own 5% or more of the total combined
voting power of all classes of the Company's capital stock or the capital stock
of one of the Company's designated subsidiaries, or (ii) to the extent that his
or her rights to purchase stock under all of the Company's employee stock
purchase plans accrues at a rate which exceeds $25,000 worth of stock
(determined at the fair market value of the shares at the time such option is
granted) for each calendar year.

Offering Date. Each offering period under the ESPP will expire on the
earliest to occur of (i) the completion of the purchase of shares on the last
exercise date occurring within twenty-four months of the offering date of such
option, (ii) such shorter offering period as may be determined by the
Administrator, or (iii) the date on which an eligible employee ceases to be a
participant under the ESPP. Each offering period will generally consist of a
number of purchase periods after which shares will be purchased. Until the
Administrator determines otherwise, a purchase period will be approximately six
months and run from April 1 to October 1 and October 1 to April 1. To
participate in the ESPP, an eligible employee must authorize payroll deductions
pursuant to the ESPP. Such payroll deductions may not exceed 10% of a
participant's compensation during the offering period. Once an employee
becomes a participant in the ESPP, the employee automatically will participate
in each successive offering period until the employee withdraws from the ESPP
or the employee's employment with the Company or one of the Company's
designated subsidiaries terminates. At the beginning of each offering period,
each participant automatically is granted an option to purchase shares of the
Company's Common Stock. The option expires at the end of the offering period
or upon termination of employment, whichever is earlier, but is exercised at
the end of each purchase period to the extent of the payroll deductions
accumulated during such purchase period.

Purchase Price. Shares of the Company's Common Stock may be purchased
under the ESPP at a purchase price not less than 85% of the lesser of the fair
market value of the Company's Common Stock on (i) the first day of an offering
period, or (ii) the last day of the purchase period. The fair market value of
the Company's Common Stock on any relevant date will be the closing price per
share as reported on the NASDAQ Global Market, or the mean of the closing bid
and asked prices, if no sales were reported, as quoted on such exchange or
reported in The Wall Street Journal.

Payment of Purchase Price; Payroll Deductions. The purchase price of the
shares is accumulated by payroll deductions throughout each purchase period.
The number of shares of the Company's Common Stock that a participant may
purchase in each purchase period during an offering period will be determined
by dividing the total amount of payroll deductions withheld from the
participant's compensation during that purchase period by the purchase price;
provided, however, that a participant may not purchase more than 3,000 shares
each purchase period. During an offering period, a participant may discontinue
his or her participation in the ESPP, and may decrease or increase the rate of
payroll deductions in an offering period within limits set by the
Administrator.

All payroll deductions made for a participant are credited to the
participant's account under the ESPP, are withheld in whole percentages only
and are included with the Company's general funds. Funds received by the
Company pursuant to exercises under the ESPP are also used for general
corporate purposes. A participant may not make any additional payments into
his or her account.

Withdrawal. Generally, a participant may withdraw from an offering
period at any time by written or electronic notice without affecting his or her
eligibility to participate in future offering periods. Once a participant
withdraws from a particular offering period, however, that participant may not
participate again in the same offering period. To participate in a subsequent
offering period, the participant must deliver a new subscription agreement to
the Company.

Termination of Employment. Upon termination of a participant's
employment for any reason, including disability or death, he or she will be
deemed to have elected to withdraw from the plan and the payroll deductions
credited to the participant's account (to the extent not used to make a
purchase of the Company's Common Stock) will be returned to him or her or, in
the case of death, to the person or persons entitled thereto as provided in the
ESPP, and such participant's option will automatically be terminated.

Changes in Capitalization. In the event that any dividend or other
distribution (whether in the form of cash, Common Stock, other securities, or
other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Common Stock or other securities of the Company, or
other change in the corporate structure of the Company affecting the Common
Stock such that an adjustment is appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the ESPP, then the Administrator will adjust the number and class of
Common Stock which may be delivered under the ESPP, the purchase price per
share and the number of shares of Common Stock covered by each option under the
ESPP which has not yet been exercised, and the maximum number of shares a
participant can purchase during a purchase period.

Dissolution or Liquidation. In the event of the Company's proposed
dissolution or liquidation, the Administrator will shorten any purchase periods
and offering periods then in progress by setting a new exercise date and any
offering periods will end on the new exercise date. The new exercise date will
be prior to the dissolution or liquidation. If the Administrator shortens any
purchase periods and offering periods then in progress, the Administrator will
notify each participant in writing, at least ten business days prior to the new
exercise date, that the exercise date has been changed to the new exercise date
and that the option will be exercised automatically on the new exercise date,
unless the participant has already withdrawn from the offering period.

Change of Control. In the event of a merger or "change of control," as
defined in the ESPP, each option under the ESPP will be assumed or an
equivalent option will be substituted by such successor corporation or a parent
or subsidiary of such successor corporation. In the event the successor
corporation refuses to assume or substitute for the options, the Administrator
will shorten any purchase periods and offering periods then in progress by
setting a new exercise date and any offering periods will end on the new
exercise date. The new exercise date will be prior to the merger or change of
control. If the Administrator shortens any purchase periods and offering
periods then in progress, the Administrator will notify each participant in
writing, at least ten business days prior to the new exercise date, that the
exercise date has been changed to the new exercise date and that the option
will be exercised automatically on the new exercise date, unless the
participant has already withdrawn from the offering period.

Amendment and Termination of the Plan.

The Administrator may at any time terminate or amend the ESPP including
the term of any offering period then outstanding. Generally, no such
termination can adversely affect options previously granted.

New Plan Benefits

Certain Federal Income Tax Information

The following brief summary of the effect of federal income taxation upon
the participant and the Company with respect to the shares purchased under the
ESPP does not purport to be complete, and does not discuss the tax consequences
of a participant's death or the income tax laws of any state or foreign country
in which the participant may reside.

The ESPP, and the right of participants to make purchases thereunder, is
intended to qualify under the provisions of Sections 421 and 423 of the Code.
Under these provisions, no income will be taxable to a participant until the
shares purchased under the ESPP are sold or otherwise disposed of. Upon sale
or other disposition of the shares, the participant will generally be subject
to tax in an amount that depends upon the

holding period. If the shares are sold or otherwise disposed of more than two
years from the first day of the applicable offering period and one year from
the applicable date of purchase, the participant will recognize ordinary income
measured as the lesser of (a) the excess of the fair market value of the shares
at the time of such sale or disposition over the purchase price, or (b) an
amount equal to 15% of the fair market value of the shares as of the first day
of the applicable offering period. Any additional gain will be treated as
long-term capital gain. If the shares are sold or otherwise disposed of before
the expiration of these holding periods, the participant will recognize
ordinary income generally measured as the excess of the fair market value of
the shares on the date the shares are purchased over the purchase price. Any
additional gain or loss on such sale or disposition will be long-term or short-
term capital gain or loss, depending on how long the shares have been held from
the date of purchase. The Company generally is not entitled to a deduction for
amounts taxed as ordinary income or capital gain to a participant except to the
extent of ordinary income recognized by participants upon a sale or disposition
of shares prior to the expiration of the holding periods described above.

THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON PARTICIPANTS AND THE COMPANY UNDER THE ESPP. IT DOES NOT PURPORT TO BE
COMPLETE, AND DOES NOT DISCUSS THE TAX CONSEQUENCES OF A PARTICIPANT'S DEATH OR
THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN
COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE.

Vote Required

Approval of the amendment to the ESPP requires the affirmative vote of
the Votes Cast (which affirmative vote must constitute at least a majority of
the required quorum). The effect of an abstention is the same as that of a
vote against the proposal.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE AMENDMENT
TO THE 2006 EMPLOYEE STOCK PURCHASE PLAN

PROPOSAL 4

RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

The Board of Directors of the Company has selected Burr, Pilger & Mayer
LLP, as the Company's independent registered public accounting firm, to audit
the consolidated financial statements of the Company for the fiscal year ending
May 31, 2010, 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 a different independent
registered public accounting firm at any time during the year. Representatives
of Burr, Pilger & Mayer 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.

Principal Accounting Fees and Services

The following table sets forth the aggregate fees billed or to be billed
by Burr, Pilger & Mayer LLP for the following services for the fiscal years
ended May 31, 2009 and 2008:

DESCRIPTION OF SERVICES
2009 2008
-------- --------

Audit Fees $159,395 $186,895
-------- --------
TOTAL $159,395 $186,895
======== ========

Audit Fees. Aggregate fees billed or to be billed for professional
services rendered for the audit of the Company's fiscal 2009 and fiscal 2008
annual consolidated financial statements, for the review of the condensed
consolidated financial statements included in the Company's quarterly reports
during such periods and for the review of the Company's Registration Statement
on Form S-8.

The Audit Committee pre-approves all audit and other permitted non-audit
services provided by the Company' independent registered public accounting
firm. These services may include audit services, audit-related services, tax
services and other services. Pre-approval is generally provided for up to one
year, and any pre-approval is detailed as to the particular service or category
of services and is subject to a budget. The Audit Committee may also pre-
approve particular services on a case-by-case basis. The Audit Committee has
delegated the authority to grant pre-approvals to the committee chair, when the
full Audit Committee is unable to do so. These pre-approvals are reviewed by
the full Audit Committee at its next regular meeting. In fiscal 2009, all
audit and non-audit services were pre-approved in accordance with the Company's
policy.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE RATIFICATION
OF THE APPOINTMENT OF BURR, PILGER & MAYER LLP

PROPOSAL 5

APPROVAL OF AMENDMENT TO THE COMPANY'S RESTATED ARTICLES OF INCORPORATION
TO EFFECT A REVERSE STOCK SPLIT OF THE COMPANY'S COMMON STOCK

The Company is seeking shareholder approval of an amendment to the
Company's restated articles of incorporation to effect a reverse stock split of
the Company's Common Stock pursuant to which any whole number of outstanding
shares between and including two (2) to five (5) would be combined into one
share of Common Stock and to concurrently decrease the authorized number of
shares of Common Stock on a proportional basis and to authorize the Board of
Directors to select and file one such amendment at any time prior to the first
anniversary of the Annual Meeting; provided that, the Board of Directors is not
obligated to effect a stock split in that time period unless the Board of
Directors deems it to be in the best interests of the corporation and the
shareholders.

Overview

The Board of Directors recommends the shareholders approve an amendment
to the Company's restated articles of incorporation (the "Articles") to effect
a reverse stock split of all outstanding shares of the Company's Common Stock
at an exchange ratio ranging from one-for-two (1:2) to one-for-five (1:5) and
to concurrently decrease the authorized number of shares of Common Stock on a
proportional basis. You are now being asked to vote upon this amendment to the
Articles. Should we receive the required shareholder approval, the Board of
Directors will have the sole authority to elect, at any time prior to the first
anniversary of this Annual Meeting: (1) whether or not to effect a reverse
stock split, and (2) if so, the number of whole shares of Common Stock between
and including two (2) and five (5) which will be combined into one share of
Common Stock with a proportional reduction in the number of authorized shares
of Common Stock. The Board of Directors believes that providing the flexibility
for the Board of Directors to choose an exact split ratio based on then-current
market conditions is in the best interests of the Company and its shareholders.

By obtaining shareholder approval of a reverse stock split at the Annual
Meeting, the Board of Directors will be able to determine the most appropriate
time to effectuate the reverse stock split, based on factors such as prevailing
market conditions and trading price. If approved by the shareholders, and
following such approval, the Board of Directors determines that a reverse stock
split is in the best interests of the Company and its shareholders, the reverse
stock split will become effective upon filing an amendment with the Secretary
of State of the State of California in the form attached hereto as Appendix A.
The amendment will contain the number of shares selected by the Board of
Directors within the limits set forth in this proposal to be combined into one
share of Common Stock. Upon filing of the amendment, the number of authorized
and issued and outstanding shares of Common Stock would be reduced in
accordance with the split ratio determined by the Board of Directors.

Except for adjustments that may result from the treatment of fractional
shares as described below, each shareholder will hold the same percentage of
outstanding Common Stock immediately following the reverse stock split as such
shareholder held immediately prior to the reverse stock split.

Reasons for the Reverse Stock Split

The Board of Directors believes that a reverse stock split and
corresponding reduction in the total number of authorized shares of Common
Stock may be desirable and should be approved by shareholders for a number of
reasons, including:

Potential Increased Investor Interest. The Board of Directors believes
that the increased market price of the Common Stock expected as a result of
implementing a reverse stock split and corresponding

reduction in the total number of authorized shares of Common Stock will improve
the marketability and liquidity of the Common Stock and will encourage interest
and trading in the Common Stock. Many brokerage houses and institutional
investors have internal policies and practices that either prohibit them from
investing in low-priced stocks or tend to discourage individual brokers from
recommending low-priced stocks to their customers. In addition, some of those
policies and practices may function to make the processing of trades in low-
priced stocks economically unattractive to brokers. Moreover, because brokers'
commissions on low-priced stocks generally represent a higher percentage of the
stock price than commissions on higher-priced stocks, the current average price
per share of Common Stock can result in individual shareholders paying
transaction costs representing a higher percentage of their total share value
than would be the case if the share price were substantially higher. Although
it should be noted that the liquidity of the Common Stock may be harmed by the
proposed reverse split given the reduced number of shares that would be
outstanding after the reverse stock split, the Board of Directors is hopeful
that the anticipated higher market price will reduce, to some extent, the
negative effects on the liquidity and marketability of the Common Stock
inherent in some of the policies and practices of institutional investors and
brokerage houses described above.

Reduced Risk of NASDAQ Delisting. On September 15, 2009, the Company
received a letter from the Listing Qualifications Department of the NASDAQ
Stock Market LLC informing it that for the previous thirty consecutive trading
days, the bid price of the Company's Common Stock had closed below the minimum
$1.00 per share requirement for continued listing set forth in Marketplace Rule
4450(a)(1), and that, in accordance with Marketplace Rule 5810(c)(3)(A), the
Company was being provided 180 calendar days, or until March 15, 2010, to
regain compliance with the minimum $1.00 per share bid price requirement.
Compliance will be achieved if the bid price of the Common Stock closes at or
above $1.00 per share for a minimum of ten consecutive trading days prior to
March 15, 2010. Approval of this proposal would provide the Company with the
ability to increase the share price of the Common Stock above $1.00 per share
in the event that the Company is unable to comply with Marketplace Rule
4450(a)(1) prior to the annual meeting of shareholders in 2010.

Effects of the Reverse Stock Split

Reduction of Shares Held by Individual Shareholders. After the effective
date of the proposed reverse stock split, each shareholder will own fewer
shares of Common Stock. However, the proposed reverse stock split will affect
all of the shareholders uniformly and will not affect any shareholder's
percentage ownership interests, except to the extent that the reverse split
results in any of the shareholders owning a fractional share as described
below. Proportionate voting rights and other rights and preferences of the
holders of Common Stock will not be affected by the proposed reverse stock
split (other than as a result of the payment of cash in lieu of fractional
shares). For example, a holder of 2% of the voting power of the outstanding
shares of Common Stock immediately prior to reverse stock split would continue
to hold 2% of the voting power of the outstanding shares of Common Stock
immediately after the reverse stock split. The number of shareholders of record
will not be affected by the proposed reverse stock split (except to the extent
that any shareholder holds only a fractional share interest and receives cash
for such interest after the proposed reverse stock split). However, if the
proposed reverse stock split is implemented, it will increase the number of
shareholders of the Company who own "odd lots" of less than 100 shares of
Common Stock. Brokerage commissions and other costs of transactions in odd lots
may be higher than the costs of transactions of more than 100 shares of Common
Stock.

Reduction in Total Outstanding and Authorized Shares. The proposed
reverse split will reduce the total number of authorized and outstanding shares
of Common Stock by the split ratio determined by the Board of Directors within
the limits set forth in this proposal. The following table contains approximate
information relating to the Common Stock under certain of the possible split
ratios based on share information as of September 8, 2009 (in thousands):

Pre Reverse 1-for- 1-for- 1-for- 1-for-
Split Two Three Four Five
----------------------------- ----------- ------ ------ ------ ------

Authorized 75,000 37,500 25,000 18,750 15,000
Outstanding 8,496 4,248 2,832 2,124 1,699
Reserved for future issuance
pursuant to outstanding
equity grants 2,068 1,034 689 517 414
Reserved for future issuance
pursuant to stock option
plan 104 52 35 26 21
Reserved for future issuance
Pursuant to employee
purchase plan 81 40 27 20 16
Authorized and unreserved 64,251 32,126 21,417 16,063 12,850
====== ====== ====== ====== ======

Change in Number and Exercise Price of Employee and Director Equity
Awards. The proposed reverse stock split will reduce the number of shares of
Common Stock available for issuance under our employee and director equity
plans in proportion to the exchange ratio selected by the Board of Directors
within the limits set forth in this proposal. Under the terms of our
outstanding equity awards, the proposed reverse stock split will cause a
reduction in the number of shares of Common Stock issuable upon exercise or
vesting of such awards in proportion to the exchange ratio of the reverse stock
split and will cause a proportionate increase in the exercise price of such
awards to the extent they are stock options. The number of shares authorized
for future issuance under our equity plans will also be proportionately
reduced. The number of shares of Common Stock issuable upon exercise or vesting
of outstanding equity awards will be rounded to the nearest whole share and no
cash payment will be made in respect of such rounding.

Regulatory Effects. The Company's Common Stock is currently registered
under Section 12(b) of the Exchange Act, and the Company is subject to the
periodic reporting and other requirements of the Exchange Act. The proposed
reverse stock split will not affect the registration of the Common Stock under
the Exchange Act or our obligation to publicly file financial and other
information with the SEC. If the proposed reverse stock split is implemented,
the Common Stock will continue to trade on The NASDAQ Global Market under the
symbol "AEHR" (although NASDAQ would likely add the letter "D" to the end of
the trading symbol for a period of 20 trading days to indicate that the reverse
stock split has occurred).

No Going Private Transaction. Notwithstanding the decrease in the number
of outstanding shares following the proposed reverse stock split, the Board of
Directors does not intend for this transaction to be the first step in a series
of plans or proposals of a "going private transaction" within the meaning of
Rule 13e-3 of the Exchange Act.

Risks of Proposed Reverse Split

The proposed reverse stock split may not increase our stock price, which
would prevent the Company from realizing some of the anticipated benefits of
the reverse stock split.

The Board of Directors expects that the reverse split will increase the
price per share of our Common Stock, which in turn would, among other things,
broaden the class of investors who invest in our stock, help increase analyst
and broker interest in our stock and reduce the possibility that our stock
trades below $1.00 per share for an extended period of time, which could cause
our stock to be delisted from the NASDAQ Global Market. While the Board of
Directors expects that a reverse stock split of our Common Stock will increase
the market price of our Common Stock, the effect of a reverse split upon the
market

price of our Common Stock cannot be predicted with any certainty. The market
price of our Common Stock is primarily driven by other factors unrelated to the
number of shares outstanding, including our current and expected future
performance, conditions in the semiconductor industry and stock market
conditions generally. Therefore, it is possible that the per share price of our
Common Stock after the reverse split will not rise in proportion to the
reduction in the number of shares of our Common Stock outstanding resulting
from the reverse stock split, which could cause the Company to fail to realize
the anticipated benefits of the reverse stock split.

The proposed reverse stock split may decrease the liquidity of our stock.

The liquidity of our Common Stock may be harmed by the proposed reverse
split given the reduced number of shares that would be outstanding after the
reverse stock split, particularly if the stock price does not increase as a
result of the reverse stock split.

Board Discretion to Implement the Reverse Stock Split

If the reverse stock split is approved by the shareholders, it will be
effected, if at all, only upon a determination by the Board of Directors that a
reverse stock split is in the best interests of the Company and the
shareholders. Such determination shall be based upon certain factors, including
our then current stock price, the existing and expected marketability and
liquidity of our Common Stock, prevailing market conditions, the likely effect
on the market price of our Common Stock and desire to continue to meet the
listing requirements for the NASDAQ Global Market. Notwithstanding approval of
the reverse stock split by the shareholders, the Board of Directors may, in its
sole discretion, abandon the proposed amendment to the articles of
incorporation and determine not to effect the reverse stock split. If the Board
of Directors fails to implement the reverse stock split prior to the one year
anniversary of the Annual Meeting, shareholder approval again would be required
prior to implementing any reverse stock split.

Effective Date

The proposed reverse stock split would become effective on the date of
filing of a certificate of amendment to the Articles with the office of the
Secretary of State of the State of California. Except as explained below with
respect to fractional shares, on the effective date, shares of Common Stock
issued and outstanding immediately prior thereto will be combined and
converted, automatically and without any action on the part of the
shareholders, into new shares of Common Stock in accordance with the reverse
stock split ratio determined by the Board of Directors within the limits set
forth in this proposal and the authorized number of shares of Common Stock will
be reduced on a proportional basis to the exchange ratio implemented.

Payment for Fractional Shares

No fractional shares of Common Stock will be issued as a result of the
proposed reverse stock split. Instead, shareholders who otherwise would be
entitled to receive fractional shares, upon surrender to the exchange agent of
such certificates representing such fractional shares, will be entitled to
receive cash in an amount equal to the product obtained by multiplying (a) the
closing sales price of our Common Stock on the effective date as reported on
the NASDAQ Global Market by (b) the number of shares of our Common Stock held
by such shareholder that would otherwise have been exchanged for such
fractional share interest.

Exchange of Stock Certificates

As soon as practicable after the effective date, shareholders will be
notified that the reverse split has been effected. The Company's transfer agent
will act as exchange agent for purposes of implementing

the exchange of stock certificates for record holders (i.e. shareholders who
hold their shares directly in their own name and not through a broker). Record
holders of pre-reverse split shares who hold physical stock certificates will
be asked to surrender to the exchange agent certificates representing pre-
reverse split shares in exchange for a book entry with the transfer agent or
certificates representing post-reverse split shares in accordance with the
procedures to be set forth in a letter of transmittal to be sent by us. No new
certificates will be issued to a shareholder until such shareholder has
surrendered such shareholder's outstanding certificate(s) together with the
properly completed and executed letter of transmittal to the exchange agent.
RECORD SHAREHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT
SUBMIT ANY CERTIFICATE(S) UNTIL REQUESTED TO DO SO.

For beneficial holders of pre-reverse split shares (i.e., shareholders
who hold their shares through a broker), your broker will make the appropriate
adjustment to the number of shares held in your account following the effective
date of the reverse split.
Effect on Registered "Book-Entry" Holders of Common Stock (i.e. shareholders
that are registered on the transfer agent's books and records but do not hold
stock certificates)

Certain holders of common stock may hold some or all of their shares
electronically in book-entry form with the transfer agent. These shareholders
do not have stock certificates evidencing their ownership of the Common Stock.
They are, however, provided with a statement reflecting the number of shares
registered in their accounts.

If a shareholder holds registered shares in book-entry form with the
transfer agent, no action needs to be taken to receive post-reverse stock split
shares or cash payment in lieu of any fractional share interest, if applicable.
If a shareholder is entitled to post-reverse stock split shares, a transaction
statement will automatically be sent to the shareholder's address of record
indicating the number of shares of Common Stock held following the reverse
stock split.

If a shareholder is entitled to a payment in lieu of any fractional share
interest, a check will be mailed to the shareholder's registered address as
soon as practicable after the effective date. By signing and cashing the check,
shareholders will warrant that they owned the shares of Common Stock for which
they received a cash payment. The cash payment is subject to applicable federal
and state income tax and state abandoned property laws. In addition,
shareholders will not be entitled to receive interest for the period of time
between the effective date of the reverse stock split and the date payment is
received.

Accounting Consequences

The par value per share of our Common Stock will remain unchanged at
$0.01 per share after the reverse stock split. As a result, on the effective
date of the reverse split, the stated capital on our consolidated balance sheet
attributable to Common Stock will be reduced and the additional paid-in-capital
account will be increased by the amount by which the stated capital is reduced.
Per share net income or loss will be increased because there will be fewer
shares of our Common Stock outstanding. The Company does not anticipate that
any other accounting consequences, including changes to the amount of stock-
based compensation expense to be recognized in any period, will arise as a
result of the reverse stock split.

No Appraisal Rights

Our shareholders are not entitled to dissenter's or appraisal rights
under California corporate law with respect to the proposed amendment to the
Articles to effect the reverse split.

Material Federal U.S. Income Tax Consequences of the Reverse Stock Split

The following is a summary of important tax considerations of the
proposed reverse stock split. It addresses only shareholders who hold the pre-
reverse split shares and post-reverse split shares as capital assets. It does
not purport to be complete and does not address shareholders subject to special
rules, such as financial institutions, tax-exempt organizations, insurance
companies, dealers in securities, mutual funds, foreign shareholders,
shareholders who hold the pre-reverse split shares as part of a straddle,
hedge, or conversion transaction, shareholders who hold the pre-reverse split
shares as qualified small business stock within the meaning of Section 1202 of
the Internal Revenue Code of 1986, as amended (the "Code"), shareholders who
are subject to the alternative minimum tax provisions of the Code, and
shareholders who acquired their pre-reverse split shares pursuant to the
exercise of employee stock options or otherwise as compensation. This summary
is based upon current law, which may change, possibly even retroactively. It
does not address tax considerations under state, local, foreign, and other
laws. Furthermore, we have not obtained a ruling from the Internal Revenue
Service or an opinion of legal or tax counsel with respect to the consequences
of the reverse stock split. Each shareholder is advised to consult his or her
tax advisor as to his or her own situation.

The reverse stock split is intended to constitute a reorganization within
the meaning of Section 368 of the Code. Assuming the reverse split qualifies as
a reorganization, a shareholder generally will not recognize gain or loss on
the reverse stock split, except to the extent of cash, if any, received in lieu
of a fractional share interest in the post-reverse split shares. The aggregate
tax basis of the post-reverse split shares received will be equal to the
aggregate tax basis of the pre-reverse split shares exchanged therefor
(excluding any portion of the holder's basis allocated to fractional shares),
and the holding period of the post-reverse split shares received will include
the holding period of the pre-reverse split shares exchanged.

A holder of the pre-reverse split shares who receives cash will generally
recognize gain or loss equal to the difference between the portion of the tax
basis of the pre-reverse split shares allocated to the fractional share
interest and the cash received. Such gain or loss will be a capital gain or
loss and will be short term if the pre-reverse split shares were held for one
year or less and long term if held more than one year. No gain or loss will be
recognized by the Company as a result of the reverse stock split.

Vote Required

Approval of the amendment to the Articles requires the affirmative vote
of the Votes Cast (which affirmative vote must constitute at least a majority
of the required quorum). The effect of an abstention is the same as that of a
vote against the proposal.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE AMENDMENT TO
THE COMPANY'S RESTATED ARTICLES OF INCORATION TO EFFECT A REVERSE STOCK SPLIT
OF THE COMPANY'S COMMON STOCK

COMPENSATION OF EXECUTIVE OFFICERS

COMPENSATION DISCUSSION AND ANALYSIS

General Philosophy

The Company compensates the Company's executive officers through a
combination of base salary, cash bonus and equity compensation designed to be
competitive with comparable companies. The Company's primary objectives of the
overall executive compensation program are to attract, retain, motivate and
reward Company executive officers while aligning their compensation with the
achievements of key business objectives and maximization of shareholder value.

The Company's compensation programs are designed to:
1. reward executive officers for performance and link executive compensation
to the creation of shareholder value through the use of performance and
equity-based compensation;
2. attract, retain and motivate highly qualified executive officers by
compensating them at a level that is competitive with other companies in
similar industries;
3. share the risks and rewards of the Company's business with the Company's
executive officers; and
4. maximize long-term shareholder returns by utilizing compensation funds in
a cost-effective manner.

To achieve these objectives, the Company has implemented and maintains
compensation plans that tie a significant portion of executive officers'
overall compensation to the Company's financial performance and Common Stock
price. In determining the compensation for the Company's executive officers,
the Company considers a number of factors, including information regarding
comparably sized companies in the semiconductor equipment and materials
industries in the United States. The Company also considers the level of the
executive officer, the geographical region in which the executive officer
resides and the executive officer's overall performance and contribution to the
Company. The compensation packages provided by the Company to its executive
officers, including the named executive officers, include both cash-based and
equity-based compensation. A component of these compensation packages is linked
to the performance of individual executive officers as well as Company-wide
performance objectives. The Compensation Committee ensures that the total
compensation paid to the Company's executive officers is competitive and
consistent with the Company's compensation philosophy and corporate governance
guidelines. The Compensation Committee relies upon Company employees, personal
knowledge of semiconductor equipment industry compensation practices,
compensation data in SEC filings, and national and regional compensation
surveys to provide information and recommendations to establish specific
compensation packages for executive officers.

Role of Compensation Committee

The Company's executive officer compensation program is overseen and
administered by the Compensation Committee. The Compensation Committee reviews
and advises the Board of Directors regarding all forms of compensation to be
provided to the executive officers of the Company. The Compensation Committee
is appointed by the Company's Board of Directors, and consists of Messrs.
Anderson and Elder, each of whom is an "outside director" for purposes of
Section 162(m) of the Internal Revenue Code and a "non-employee director" for
purposes of Rule 16b-3 under the Exchange Act.

The Company's Compensation Committee has primary responsibility for
ensuring that the Company's executive officer compensation and benefit program
is consistent with the Company's compensation philosophy and corporate
governance guidelines and is responsible for determining the executive
compensation packages offered to the Company's executive officers.

The Compensation Committee is responsible for:

1. Determining the specific executive officer compensation methods to be
used by the Company and the participants in each of those specific
programs;
2. Determining the evaluation criteria and timelines 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.

Many of the actions take the form of recommendations to the full Board of
Directors where final approval, rejection or redirection may occur. The
Compensation Committee is responsible for administering the compensation
programs for all Company executive officers. The Compensation Committee has
delegated the responsibility of administering the compensation programs for all
other Company employees to the Company's officers.

Elements of Compensation

In structuring the Company's compensation program, the Compensation
Committee seeks to select the types and levels of compensation that will
further its goals of rewarding performance, linking executive officer
compensation to the creation of shareholder value, attracting and retaining
highly qualified executive officers and maximizing long-term shareholder
returns.

The Company designs base salary to provide the essential reward for an
executive officer's work. Once base salary levels are initially determined,
increases in base salary are provided to recognize an executive officer's
specific performance achievements.

The Company utilizes equity-based compensation, including stock options,
to ensure that the Company has the ability to retain executive officers over a
longer period of time, and to provide executive officers with a form of reward
that aligns their interests with those of the Company's shareholders.
Executive officers whose skills and results the Company deems to be critical to
the Company's long-term success are eligible to receive higher levels of
equity-based compensation.

The Company also utilizes various forms of performance-based
compensation, including cash bonuses and commissions that allow the Company to
remain competitive with other companies while providing additional compensation
for an executive officer's outstanding results and for the achievement of
corporate objectives.
Core benefits, such as the Company's basic health benefits, 401(k) program,
Employee Stock Ownership Plan ("ESOP") and life insurance, are designed to
provide support to executive officers and their families.

Currently, the Company uses the following executive officer compensation
vehicles:

Cash-based programs: base salary, annual bonus plan and a sales
commission plan; and

Equity-based programs: The 2006 Equity Incentive Plan, the 2006 Employee
Stock Purchase Plan and the ESOP.

These programs apply to all executive level positions, except for the
sales commission plan, which only applies to the Vice President of Worldwide
Sales and Service. Periodically, but at least once near the close of each
fiscal year, the Compensation Committee reviews the existing plans and
recommends those that should be used for the subsequent year.

Consistent with the Company's compensation philosophy, the Company has
structured each element of the Company's executive officer compensation program
as described below.

Base Salary

The Company creates a set of base salary structures that are both
affordable and competitive in relation to the market. The Company determines
the Company's executive officer salaries based on job responsibilities and
individual experiences. The Company monitors base salary levels within the
market and makes adjustments to the Company's structures as needed after
considering the recommendations of management. The Company's Compensation
Committee reviews the salaries of the Company's executive officers annually,
and the Company's Compensation Committee grants increases in salaries based on

individual performance during the prior calendar year, provided that any
increases are within the guidelines determined by the Compensation Committee
for each position.

Annual Bonus

The Company's executive annual bonus plan provides for cash bonus awards,
dependent upon attaining stated corporate objectives and personal performance
goals. The Company's executive officers are eligible to receive cash bonuses
based upon the Company's achievement of certain financial and performance goals
set by the Compensation Committee. The Compensation Committee approves the
performance criteria on an annual basis and these financial and performance
goals typically have a one-year time horizon. The Compensation Committee
believes that the practice of awarding incentive bonuses based on the
achievement of performance goals furthers the Company's goal of strengthening
the connection between the interests of management and the Company's
shareholders. In fiscal 2010, the Chief Executive Officer is eligible to
receive a maximum cash bonus of up to 30% of his base salary and the Company's
Chief Financial Officer is eligible to receive a maximum cash bonus of up to
30% of his base salary. Vice Presidents are eligible are eligible to receive
maximum cash bonuses of up to 30% of their base salaries depending on
individual and company performance.

In fiscal 2009, the Company's Compensation Committee determined the
maximum cash bonus levels for the Company's Chief Executive Officer, Chief
Financial Officer and Vice Presidents to be 90%, 80% and up to 80% of base
compensation, respectively. Based on the corporate financial performance for
the year, the Compensation Committee awarded no cash bonuses to the Company's
Chief Executive Officer, Chief Financial Officer and Vice Presidents. The
annual incentive bonus plan is discretionary, and the Compensation Committee
may modify, suspend, eliminate or adjust the plan, the goals and the total or
individual payouts at any time.

Sales Commission

The sales commission plan is a sales commission program and provides a
payout to the Vice President of Worldwide Sales and Service ("VP-WSS") based on
achievement of sales objectives, or quotas. The VP-WSS receives a standard
commission for sales up to 100% of quota and accelerated commissions based on
sales above quota. Commissions are "earned" at the time of booking, and
commissions are paid after the close of the quarter of booking. Under this
plan, the VP-WSS earned $24,853 in fiscal 2009. The VP-WSS was paid $34,451
during fiscal 2009. This $34,451 included $11,365 that was earned in fiscal
2008. The remaining $1,767 earned in fiscal 2009 was paid to the VP-WSS in
fiscal 2010. The $34,451 in commissions paid to the VP-WSS is included in the
annual compensation salary column in the Summary Compensation Table on page 26.

Equity Compensation

The Company awards equity compensation to the Company's executive
officers based on the performance of the executive officer and guidelines
related to each executive officer's position in the Company. The Company
determines the Company's option guidelines based on information derived from
the Company's experience with other companies and, with respect to the
Company's executive officers, informal surveys of companies in the Company's
industry. The Company typically bases awards to newly hired executive officers
on these guidelines and the Company bases the Company's award decisions for
continuing executive officers on these guidelines as well as an executive
officer's performance for the prior fiscal year. The Company evaluates each
executive officer's awards based on the factors described above and competitive
practices in the Company's industry. The Company believes that stock option
ownership is an important factor in aligning corporate and individual goals.
The Company utilizes equity-based compensation, including stock options, to
encourage long-term performance, with corporate performance and extended
executive officer tenure producing potentially significant value.

The Company's Compensation Committee generally grants stock options to
executive officers. Such grants are typically made coincident with the first
meeting of the Board of Directors held each fiscal year. The Company believes
annual awards at this time allow the Compensation Committee to consider a
number of factors related to the option award decisions, including corporate
performance for the prior fiscal year, executive officer performance for the
prior fiscal year and expectations for the upcoming fiscal year. With respect
to newly hired executive officers, the Company's practice is typically to make
stock option grants effective on or shortly after the executive officer's hire
date. The Company does not plan or time the

Company's stock option grants in coordination with the release of material non-
public information for the purpose of affecting the value of executive officer
compensation.

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. 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, and timely new product
introduction. Individual performance is measured to specific objectives
relevant to the executive officer's position and a specific time frame.
These criteria are usually related to a 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 reviews information
comparing the Company's pay levels to other companies in similar
industries, other leading companies (regardless of industry) and
competitors. Primarily, personal knowledge of semiconductor equipment
industry compensation practices, compensation data in SEC filings,
and national and regional compensation surveys are used.

2. At or near the start of each evaluation cycle, the Compensation
Committee meets with the Chief Executive Officer to review, revise
as needed, and agree on the performance objectives set for the other
executive officers. The Chief Executive Officer and Compensation
Committee jointly set the Company objectives to be used. The business
unit and individual objectives are formulated jointly by the Chief
Executive Officer and the specific individual. The Compensation
Committee also, with the Chief Executive Officer, jointly establishes
and agrees on respective performance objectives of each executive
officer.

3. Throughout the performance cycle review, feedback is provided by
the Chief Executive Officer, the Compensation Committee and full
Board, as appropriate.

4. At the end of the performance cycle, the Chief Executive Officer
evaluates each other executive officers relative success in meeting
the performance goals. The Chief Executive Officer makes
recommendations on salary, bonus and 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 officer by the Chief Executive Officer or Compensation
Committee, as appropriate.

In fiscal 2009, the Company granted a total of 554,950 option shares, of
which a total of 207,000 option shares were granted to the Company's executive
officers, representing 37.3% of all option shares granted in fiscal 2009. The
Company's Compensation Committee does not apply a formula for allocating stock
options to executive officers. Instead, the Company's Compensation Committee
considers the role and responsibilities of the executive officers, competitive
factors, the non-equity compensation received by the executive officers and the
total number of options to be granted in the fiscal year. The description for
the type of equity-based compensation program should be read in conjunction
with "Equity Compensation Plan Information" and "Stock Option Plans" in this
Proxy Statement and the related notes in the "Notes to Consolidated Financial
Statements" of the Company's Annual Report on Form 10-K for the fiscal year
ended May 31, 2009.

Other Benefits

Executive officers are eligible to participate in all of the Company's
employee benefit plans, such as medical, dental, group life, disability, and
accidental death and dismemberment insurance, the Company's 401(k) plan, the
Company's ESOP and ESPP. Because Rhea J. Posedel owns more than 10% of the
Company's outstanding Common Stock he is precluded from participating in the
ESPP. During fiscal 2009, the Company made payments for health and life
insurance premiums and medical costs as reflected in the Summary Compensation
Table below under the All Other Compensation column. Other than these
payments, the executive officers participate on the same basis as other
employees and there were no other special benefits or perquisites provided to
any executive officer in fiscal 2009. The Company does not

maintain any pension plan, retirement benefit or deferred compensation
arrangement other than the Company's 401(k) plan and ESOP. The Company is not
required to make, and did not make any contributions to the 401(k) plan during
fiscal 2009. During fiscal 2009, the Company contributed $60,000 to the
Company's ESOP.

The Company entered into Change of Control Severance Agreements on
January 24, 2001 with Mr. Carl N. Buck, Mr. David S. Hendrickson, Mr. Gary L.
Larson and Mr. Rhea J. Posedel, on September 13, 2006 with Mr. Gregory M.
Perkins and on July 9, 2007 with Mr. Joel Bustos, 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 2010 following a change of control, the amounts
payable to Messrs. Buck, Bustos, Hendrickson, Larson, Perkins and Posedel would
be approximately $90,000, $113,000, $119,000, $163,000, $99,000 and $261,000,
respectively. In addition to the amount payable to the executive officers
mentioned in the previous sentence, the aggregate values of the acceleration of
vesting of the executive officer's unvested stock options based on the spread
between the closing price of the Company's Common Stock on May 31, 2009 (the
last business day of the fiscal year) of $0.93 and the exercise price of the
stock options for Messrs. Buck, Bustos, Hendrickson, Larson, Perkins and
Posedel would be $0.

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 year 2009. 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 the Company's long-term goals. During
fiscal year 2009, he received two stock option grant under the Company's 2006
Stock Option Plan for 54,000 shares. This option vests over four years. The
Compensation Committee believes Mr. Posedel's fiscal year 2009 compensation was
fair relative to the Company's performance and Mr. Posedel's individual
performance and leadership, and that it rewards him for this performance and
will serve to retain him as a key employee.

Policy on Deductibility of Compensation

The Company is required to disclose the Company's 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
the Company's executive officers for fiscal 2009 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.

Compensation of Executive Officers

In response to the current slowdown in the semiconductor manufacturing
industry and the related impact on the Company's net revenues, during fiscal
2009 the Company implemented a temporary reduction in compensation paid to the
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 year ended May 31, 2009 and 2008 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, 2009 and 2008.

Summary Compensation Table

Long-term
Compensation
Securities
Name and Principal Fiscal Annual Compensation Option Underlying All Other
Position Year Salary(1) Bonus(2) Awards Options Compensation Total
------------------------- ---- --------- -------- ------- ----------- ------------ --------

(3) (4) (5)
Rhea J. Posedel 2009 $236,287 -- $101,443 $2,706 $24,465 $364,901
Chief Executive Officer 2008 $237,479 $58,794 $66,054 $5,777 $27,467 $395,571
and Chairman of the 2007 $217,911 $55,011 $56,642 $5,739 $33,790 $369,093
Board of Directors

Gary L. Larson 2009 $205,759 -- $70,283 $2,706 $8,103 $286,851
Vice President of 2008 $207,763 $45,823 $59,001 $5,777 $6,981 $325,345
Finance and Chief 2007 $189,343 $42,388 $52,390 $5,739 $10,982 $300,842
Financial Officer

Joel Bustos 2009 $196,668 -- $112,130 $2,665 $23,973 $335,436
Vice President of 2008 $183,500 $40,268 $81,415 $4,307 $25,828 $335,318
Operations 2007 -- -- -- -- -- --

David S. Hendrickson 2009 $208,234 -- $73,425 $2,706 $26,493 $310,858
Vice President of 2008 $202,186 $54,491 $49,991 $5,619 $26,679 $338,966
Engineering 2007 $195,283 $55,245 $40,179 $5,739 $28,023 $324,469

Gregory M. Perkins (6) 2009 $215,241 -- $52,526 $2,409 $15,651 $285,837
Vice President of 2008 $246,037 $10,386 $43,242 $5,777 $16,456 $321,898
Worldwide Sales and 2007 $230,406 $10,440 $48,656 $5,739 $17,815 $313,056
Service
----------------------------

(1) The amounts in this column include any salary contributed by the named
executive officer to the Company's 401 (k) plan.
(2) Bonus amounts paid or accrued in fiscal 2009, 2008 and 2007 were made
under the Company's executive bonus plan.
(3) The amounts in this column represent the dollar amount recognized for
financial statement reporting purposes computed in accordance with SFAS
123 (R) and thus includes awards granted in and prior to fiscal 2009, 2008
and 2007. See Note 1 to the consolidated financial statements of the
Company's Annual Report on Form 10-K for the fiscal year ended May 31,
2009, 2008 and 2007 for assumptions used to estimate the fair value of
options granted during fiscal year 2009, 2008 and 2007. The Company's
stock-based compensation expense recognized under SFAS 123 (R) reflects
an estimated forfeiture rate of 2%, 2% and 4% in fiscal 2009, 2008 and
2007, respectively. The values recognized in the "Option Awards" column
above do not reflect such expected forfeitures.
(4) Represents contributions made by the Company under its ESOP.
(5) Consists of health and life insurance premiums and medical costs paid by
the Company during the fiscal year ended May 31, 2009, 2008 and 2007.

(6) The amount shown in the Annual Compensation Salary column for fiscal 2009
includes $34,451 in commissions paid in fiscal 2009. Of this $34,451,
$11,365 had been earned in fiscal 2008. An additional $1,767 has been
earned but not paid in fiscal 2009 and is not included in these figures.
The $1,767 was paid in fiscal 2010. The amount shown in the Annual
Compensation Salary column for fiscal 2008 included $62,294 in
commissions paid in fiscal 2008. Of this $62,294, $20,245 had been
earned in fiscal 2007. An additional $11,365 has been earned but not
paid in fiscal 2008 and is not included in these figures. The $11,365
was paid in fiscal 2009. The amount shown in the Annual Compensation
Salary column for fiscal 2007 includes $57,031 in commissions paid in
fiscal 2007. Of this $57,031, $11,597 had been earned in fiscal 2006.
An additional $20,246 has been earned but not paid in fiscal 2007 and
is not included in these figures. The $20,246 was paid in fiscal 2008.

Stock Option Grants and Exercises

The following table provides information with regard to each grant of an
award made to the persons named in the Summary Compensation Table during the
fiscal year ended May 31, 2009.

Grants of Plan-Based Awards in Fiscal 2009

Estimated Possible Payouts Number of Exercise Grant Date
Option Under Non-Equity Securities Price of Fair Value of
Grant Incentive Plan Awards(1) Underlying Option Stock Option
Name Date Target Maximum Option (2) Awards(3) Awards
----- ---------- --------- --------- --------- --------- -------------

Rhea J. Posedel 6/24/2008 $106,234 $212,468 4,774 $9.94 $29,173
6/24/2008 25,226 $10.93 $149,224
11/13/2008 6,388 $2.48 $8,791
11/13/2008 17,612 $2.25 $24,970

Gary L. Larson 6/24/2008 $83,570 $167,140 15,000 $9.94 $91,662
11/13/2008 1,659 $2.25 $2,352
11/13/2008 10,341 $2.25 $14,661

Joel Bustos 6/24/2008 $80,730 $161,460 5,700 $9.94 $34,832
6/24/2008 9,300 $9.94 $56,830
11/13/2008 7,227 $2.25 $10,246
11/13/2008 4,773 $2.25 $6,767

David S. 6/24/2008 $84,418 $168,837 3,868 $9.94 $23,637
Hendrickson 6/24/2008 16,132 $9.94 $98,579
11/13/2008 7,990 $2.25 $11,328
11/13/2008 8,010 $2.25 $11,357

Gregory M. 6/24/2008 -- -- 371 $9.94 $2,267
Perkins 6/24/2008 14,629 $9.94 $89,395
11/13/2008 250 $2.25 $354
11/13/2008 11,750 $2.25 $16,659

---------------

(1) Reflects the target and maximum values of cash bonus award to the named
executive officers in fiscal 2009. The cash bonus award amounts actually
paid to the named executive officers in fiscal 2009 are shown in the
Summary Compensation Table for fiscal 2009 under the heading "Annual
Compensation, Bonus" refer to "Compensation Discussion and Analysis" above
for a description of the cash bonus compensation.
(2) The stock options granted in fiscal 2009 are generally exercisable
starting one month after the date of grant, with 1/48th of the shares
covered thereby becoming exercisable at that time and with an additional
1/48th 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. Each of these options expires 5 years from the date
of grant.

(3) Options are granted at an exercise price equal to the fair market value of
the Company's Common Stock, as determined by reference to the closing
price reported by the NASDAQ Global Market on the date of grant. Because
Rhea J. Posedel owns more than 10% of the Company's outstanding Common
Stock, the exercise prices of any incentive stock option granted to him is
set at a 10% premium above the market price on the date of the grant.
Non-qualified stock options may be granted to Mr. Posedel at the market
price on the date of grant.

The following table presents certain information concerning the
outstanding equity awards held as of May 31, 2009 by each named executive
officer.

Outstanding Equity Awards at Fiscal Year-End

Option Awards
Number of Securities Option Option
Underlying Unexercised Options(1) Exercise Expiration
Name Exercisable Unexercisable Price (2) Date (3)
----------------- ------------- ----------------- --------- ----------

Rhea J. Posedel 40,000 -- $4.466 7/22/2009
25,000 -- $3.170 6/26/2010
35,000 -- $3.993 6/30/2011
34,270 730 $3.091 6/23/2012
10,625 4,375 $9.295 7/18/2013
15,812 17,188 $6.556 6/26/2012
5,880 19,346 $10.934 6/24/2013
994 3,780 $9.940 6/24/2013
500 5,888 $2.475 11/13/2013
2,201 15,411 $2.250 11/13/2013

Gary L. Larson 23,000 -- $4.060 7/22/2009
15,000 -- $2.880 6/26/2010
20,000 -- $3.630 6/30/2011
24,479 521 $2.810 6/23/2012
7,083 2,917 $8.450 7/18/2013
9,583 10,417 $5.960 6/26/2012
3,437 11,563 $9.940 6/24/2013
691 968 $2.250 11/13/2013
808 9,533 $2.250 11/13/2013

Joel Bustos 29,929 35,371 $6.110 7/09/2012
11,320 13,380 $6.110 7/09/2012
3,402 5,898 $9.940 6/24/2013
35 5,665 $9.940 6/24/2013
1,497 5,730 $2.250 11/13/2013
2 4,771 $2.250 11/13/2013

David S. Hendrickson 20,000 -- $6.250 9/22/2010
20,000 -- $3.630 6/30/2011
24,479 521 $2.810 6/23/2012
7,083 2,917 $8.450 7/18/2013
11,979 13,021 $5.960 6/26/2012
1,704 14,428 $9.940 6/24/2013
2,878 990 $9.940 6/24/2013
3 7,987 $2.250 11/13/2013
1,996 6,014 $2.250 11/13/2013

Gregory M. Perkins 9,623 -- $4.350 6/03/2011
1,458 105 $2.810 6/23/2012
7,083 2,917 $8.450 7/18/2013
7,187 7,813 $5.960 6/26/2012
3,066 11,563 $9.940 6/24/2013
371 -- $9.940 6/24/2013
1,250 10,500 $2.250 11/13/2013
250 -- $2.250 11/13/2013

---------------------

(1) Stock options outstanding are generally exercisable starting one month
after the date of grant, and with an additional 1/48th 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.
(2) Options are granted at an exercise price equal to the fair market value
of the Company's Common Stock, as determined by reference to the closing
price reported by the NASDAQ Global Market on the date of grant.
Because Rhea J. Posedel owns more than 10% of the Company's outstanding
Common Stock, the exercise prices of any incentive stock option granted
to him is set at a 10% premium above the market price on the date of the
grant. Non-qualified stock options may be granted to Mr. Posedel at the
market price on the date of grant.
(3) These options generally expire five or seven years from the date of grant.

The following table provides information concerning option exercises by
the persons named in the Summary Compensation Table during the fiscal year
ended May 31, 2009 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
Shares Value Underlying Unexercised Value of Unexercised
Acquired Realized Options at In-the-Money Options at
on on Fiscal Year-End(#)(1) Fiscal Year-End($)(2)
Name Exercise(#)Exercise($) Exercisable Unexercisable Exercisable Unexercisable
------------------- ---------- ---------- ----------- ------------- ----------- -------------

Rhea J. Posedel 1,000 $0.00 170,282 66,718 $0.00 $0.00
Gary L. Larson 0 $0.00 104,081 35,919 $0.00 $0.00
Joel Bustos 0 $0.00 46,185 70,815 $0.00 $0.00
David S. Hendrickson 0 $0.00 90,122 45,878 $0.00 $0.00
Gregory M. Perkins 0 $0.00 30,288 32,898 $0.00 $0.00

---------------

(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 ($0.93 per share
as of May 31, 2009) and the exercise price of the options.

The following table shows the potential payments upon termination or
change of control for the persons named in the Summary Compensation Table
during the fiscal year ended May 31, 2009.

Potential Payments Upon Termination or Change of Control for each Named
Executive Officer

Involuntary
Termination not for
Named Executive Benefits and Payments Cause Following a
Upon Termination: Change of Control
---------------------------------------------- ---------------------

Rhea J. Posedel
Base salary $236,076
Medical continuation 24,465
Value of accelerated stock options (1) --

Gary L. Larson
Base salary $156,694
Medical continuation 6,078
Value of accelerated stock options (1) --

Joel Bustos
Base salary $100,913
Medical continuation 11,986
Value of accelerated stock options (1) --

David S. Hendrickson
Base salary $105,523
Medical continuation 13,247
Value of accelerated stock options (1) --

Gregory M. Perkins
Base salary $91,088
Medical continuation 7,825
Value of accelerated stock options (1) --

-----------------------

(1) Represents the aggregate value of the acceleration of vesting of the
executive officer's unvested stock options based on the spread between
the closing price of the Company's Common Stock on May 31, 2009 (the
last business day of the year) of $0.93 and the exercise price of the
stock options. Aggregate intrinsic value represents only the value for
those options in which the exercise price of the option is less than
the market value of the Company's stock on May 31, 2009.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Review, Approval or Ratification of Transactions with Related Persons

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. The
Company's policy is to require that any transaction with a related party that
is required to be reported under applicable SEC rules, be reviewed and approved
according to an established procedure. Such a transaction is reviewed and
approved by the Company's Audit Committee as required by the Audit Committee's
charter.

We have not adopted specific standards for approval of these transactions, but
instead we review each such transaction on a case by case basis.

Legal Counsel

During fiscal 2009, 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 2010.

Change of Control Severance Agreement

Compensation Committee Interlocks and Insider Participation

The Compensation Committee consists of Messrs. Anderson 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 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.

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.

The Compensation Committee has reviewed and discussed with management the
Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K
and, based on such review and

discussions, the Compensation Committee recommended to the Board that the
Compensation Discussion and Analysis be included in this proxy statement.

COMPENSATION COMMITTEE

Robert R. Anderson
William W.R. Elder

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, 2009.

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,

-------------------------------
RHEA J. POSEDEL
Chief Executive Officer and
Chairman of the Board of
Directors
Dated: September 28, 2009

APPENDIX A

CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF AEHR TEST SYSTEMS

The undersigned, Rhea J. Posedel and Gary L. Larson, hereby certify that:
1. They are the Chief Executive Officer and Secretary, respectively, of
Aehr Test Systems, a California Corporation (the "Company").
2. The first paragraph of Article III of the Amended and Restated
Articles of Incorporation of the Company is amended in its entirety to read as
follows:

This corporation is authorized to issue two classes of shares to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares that this corporation is authorized to issue is [______]
million ([_______]) shares. The number of shares of Common Stock authorized is
[______] million ([_______]) shares. The par value of each share of Common
Stock is one cent ($0.01). The number of shares of Preferred Stock authorized
is ten million (10,000,000) shares. The par value of each share of Preferred
Stock is one cent ($0.01). Upon filing of these amended and restated articles
of incorporation, each [two (2) to five (5)]* outstanding shares of Common
Stock shall automatically and without any action on the part of the respective
holders thereof, be combined and converted into one (1) share of Common Stock.
No fractional shares shall be issued and, in lieu thereof, any holder of less
than one (1) share of Common Stock shall be entitled to receive cash for such
holder's fractional share based upon the closing sales price of the
corporation's Common Stock as reported on the NASDAQ Global Market, as of the
date this Certificate of Amendment is filed with the Secretary of State of the
State of California.
The undersigned further declare under penalty of perjury under the laws
of the State of California that the matters set forth in this certificate are
true and correct of their own knowledge.

Dated: _________ __, 200_

By:
----------------------
Rhea J. Posedel
Chief Executive Officer

By:
----------------------
Gary L. Larson
Secretary

* These amendments approve the combination of any whole number of shares of
Common Stock between and including two (2) and five (5) into one (1) share of
Common Stock and a corresponding reduction in the total number of shares of
Common Stock that the corporation is authorized to issue. By these

amendments, the shareholders would approve each of the four amendments proposed
by the Board of Directors. The Certificate of Amendment filed with the
Secretary of State of the State of California will include only that amendment
determined by the Board of Directors to be in the best interests of the
corporation and its shareholders. The other three proposed amendments will be
abandoned. The Board of Directors may also elect not to do any reverse split
and corresponding reduction in the total number of shares of Common Stock that
corporation is authorized to issue, in which case all four proposed amendments
will be abandoned. In accordance with the resolutions to be adopted by the
shareholders, the Board of Directors will not implement any amendment providing
for a different split ratio.

Proxy - AEHR TEST SYSTEMS

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
AEHR TEST SYSTEMS

ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 27, 2009

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 27, 2009, 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 (1) FOR THE ELECTION OF THE NOMINATED DIRECTORS; (2) FOR THE
AMENDMENT TO THE 2006 EQUITY INCENTIVE PLAN, (3) FOR THE AMENDMENT TO THE 2006
EMPLOYEE STOCK PURCHASE PLAN, (4) FOR RATIFICATION OF THE APPOINTMENT OF THE
COMPANY'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, (5) FOR an amendment
to the Company's restated articles of incorporation to effect a reverse stock
split of the Company's Common Stock and to concurrently decrease the authorized
number of shares of Common Stock on a proportional basis and to authorize the
Board of Directors to select and file one such amendment, AND (6) 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

Important notice regarding the Internet availability of proxy materials for
the Annual Meeting of Shareholders

The Proxy Statement, Form of Proxy Card and Annual Report are available at:
www.aehr.com under the heading "Investors" and the subheading "Proxy
Materials".

Annual Meeting Proxy Card

A Proposals - The Board of Directors recommends a vote FOR all the nominees
listed, FOR Proposal 2,
FOR Proposal 3, FOR Proposal 4 and FOR Proposal 5.

1. Election of Directors:
01 - Rhea J. Posedel 02 - Robert R. Anderson
03 - William W. R. Elder
04 - Mukesh Patel 05 - Mario M. Rosati
06 - Howard T. Slayen

[ ] Mark here to vote [ ] Mark here to WITHHOLD [ ] For All EXCEPT -
To withhold authority to vote for any
FOR all nominees vote from all nominees nominee(s), write the
name(s) of such nominee(s) below.

______________________________________________

2. PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S 2006 EQUITY INCENTIVE
PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER BY
AN ADDITIONAL 800,000 SHARES.

[ ] For [ ] Against [ ] Abstain

3. PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S 2006 EMPLOYEE STOCK
PURCHASE PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE
THEREUNDER BY AN ADDITIONAL 250,000 SHARES.

[ ] For [ ] Against [ ] Abstain

4. PROPOSAL TO RATIFY THE APPOINTMENT OF BURR, PILGER & MAYER LLP AS THE
COMPANY'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.

[ ] For [ ] Against [ ] Abstain

5. PROPOSAL To approve an amendment to the Company's restated articles of
incorporation to effect a reverse stock split of the Company's Common
Stock pursuant to which any whole number of outstanding shares between
and including Two (2) and Five (5) would be combined into one share of
Common Stock and to concurrently decrease the authorized number of shares
of Common Stock on a proportional basis and to authorize the Board of
Directors to select and file one such amendment.

[ ] For [ ] Against [ ] Abstain

6. IN THEIR DISCRETION, UPON SUCH OTHER MATTER OR MATTERS WHICH MAY PROPERLY
COME BEFORE THE MEETING AND ANY ADJOURNMENT(S) THEREOF.

B Non-Voting Items
Change of Address - Please print new address below.

______________________________________________________________________________

C Authorized Signatures - This section must be completed for your vote to
be counted. - Date and Sign Below
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 postage-paid
envelope. Persons signing in a fiduciary capacity should so indicate. If
shares are held by joint tenants or as community property, both should sign.

Date (mm/dd/yyyy) - Please print date below.

____________/___________/_______________

Signature 1 - Please keep signature within the box.

____________________________________________
Signature 2 - Please keep signature within the box.