<PAGE> 1
SCHEDULE 14A INFORMATION
(Rule 14a-101)
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
COHU, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[COHU, INC. LOGO]
5755 Kearny Villa Road
San Diego, California 92123
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 11, 1999
TO OUR STOCKHOLDERS:
The Annual Meeting of Stockholders of Cohu, Inc. (the "Company") will be
held at the offices of the Company, 5755 Kearny Villa Road, San Diego,
California 92123 on Tuesday, May 11, 1999, at 2:00 p.m. Pacific Time, for the
following purposes:
1. To elect two directors, each for a term of three years; and
2. To act upon such other matters as may properly come before the meeting
or any adjournment thereof.
Only stockholders of record of the Company at the close of business on March
17, 1999 will be entitled to vote at the meeting.
Since the holders of a majority of the outstanding shares of voting stock of
the Company entitled to vote at the meeting must be represented to constitute a
quorum, all stockholders are urged either to attend the meeting in person or to
vote by proxy.
Please sign, date and return the enclosed proxy in the envelope enclosed for
your convenience. If you attend the meeting you may revoke your proxy and vote
in person. You may also revoke your proxy by delivering a written notice to the
Secretary of the Company, or by submitting another duly signed proxy bearing a
later date.
By Order of the Board of Directors,
/s/ JOHN H. ALLEN
--------------------------------------------
John H. Allen
Secretary
San Diego, California
April 1, 1999
YOUR VOTE IS IMPORTANT
IN ORDER TO INSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE
REQUESTED TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE
AND RETURN IT IN THE ENCLOSED POSTAGE PREPAID ENVELOPE.
<PAGE> 3
COHU, INC.
5755 Kearny Villa Road
San Diego, California 92123
-------------------
PROXY STATEMENT
-------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Cohu, Inc., a Delaware corporation (the "Company"), of
your Proxy for use at the Annual Meeting of Stockholders to be held on Tuesday,
May 11, 1999, at 2:00 p.m. Pacific Time at 5755 Kearny Villa Road, San Diego,
California 92123 (the "Meeting"). This Proxy Statement and the accompanying
Proxy are being mailed to all stockholders on or about April 1, 1999. Any
stockholder may revoke a proxy at any time prior to its exercise by filing a
later dated proxy or written notice of revocation with the Company's Secretary
or by voting in person at the Meeting.
On March 17, 1999, the record date fixed by the Board of Directors (the
"Record Date"), the Company had outstanding 9,827,733 shares of Common Stock.
Stockholders have one vote for each share on all items to be considered at the
Meeting. In the election of directors stockholders may, under certain
circumstances, cumulate their votes, giving one candidate a number of votes
equal to the number of directors to be elected multiplied by the number of votes
to which the stockholder's shares are normally entitled, or distribute the
stockholder's votes on the same principle among as many candidates as the
stockholder thinks fit.
To conduct any business at the Meeting, a quorum must be present. A quorum
generally consists of a majority of the shares entitled to vote and present or
represented by proxy at the Meeting. If a quorum is present, a plurality vote of
the shares present, in person or by proxy, at the Meeting and entitled to vote
is required for the election of directors. Abstentions will not be considered to
be a vote "for" or "against" a proposal, but will be included in determining
whether a quorum is present. If a broker indicates on the enclosed proxy or its
substitute that it does not have discretionary authority as to certain shares to
vote on a particular matter ("broker non-votes"), those shares will be included
in determining whether a quorum is present but will not be considered as present
with respect to that matter. Any proxy that is returned not marked as to a
particular item will be voted FOR the election of directors.
A complete list of the stockholders of record entitled to vote at the
Meeting, arranged in alphabetical order and showing the address of each
stockholder, and the number of shares registered in the name of each
stockholder, will be kept open at the Company's offices, 5755 Kearny Villa Road,
San Diego, California 92123, for the examination of any stockholder during
normal business hours for a period of ten days immediately prior to the Meeting.
This solicitation is made by the Board of Directors of the Company. Proxies
will be solicited by mail and may be solicited in person or by mail, telephone
and facsimile transmission. Directors and officers may engage in such
solicitation but will not be entitled to any additional compensation for such
efforts. The Company will bear the entire cost of the solicitation. Votes will
be tabulated by the Company's Transfer Agent, ChaseMellon Shareholder Services.
1
<PAGE> 4
PROPOSAL 1- ELECTION OF DIRECTORS
The Certificate of Incorporation divides the directors of the Company into
three classes whose terms expire at successive annual meetings over a period of
three years. One class of directors is elected for a term of three years at each
annual meeting with the remaining directors continuing in office. At the Meeting
two directors are to be elected for a term expiring in 2002. It is intended that
the shares represented by proxies in the accompanying form will be voted by the
proxy holders for the election of the two nominees named below. In the event the
election of directors is to be by cumulative voting, the proxy holders will vote
the shares represented by proxies in such proportions as the proxy holders see
fit. Should any nominee decline or become unable to accept nomination or
election, which is not anticipated, the proxies will be voted for such
substitute nominee as may be designated by a majority of the Board of Directors.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF THE TWO NOMINEES NAMED BELOW.
NOMINEES FOR TERMS EXPIRING IN 2002 - CLASS 2
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
- --------------------------- --- -------------------------------------------------- --------
<S> <C> <C> <C>
Charles A. Schwan ......... 59 President & Chief Executive Officer of the Company 1990
since March 1996, Executive Vice President &
Chief Operating Officer from September 1995
to March 1996, Vice President, Finance from
1983 until September 1995 and Secretary from
1988 until September 1995
Gene E. Leary 78 Retired executive at Honeywell and Control Data 1976
</TABLE>
INFORMATION CONCERNING OTHER DIRECTORS
DIRECTORS WHOSE TERMS EXPIRE IN 2001 - CLASS 1
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
- --------------------------- --- -------------------------------------------------- --------
<S> <C> <C> <C>
James W. Barnes ........... 69 Retired President & Chief Executive Officer 1983
of the Company (1983-1996)
William S. Ivans .......... 78 Chairman of the Board of the Company 1960
since February 1983
DIRECTORS WHOSE TERMS EXPIRE IN 2000 - CLASS 3
</TABLE>
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
- --------------------------- --- -------------------------------------------------- --------
<S> <C> <C> <C>
Frank W. Davis ............ 84 Retired President of Convair Aerospace 1976
Division of General Dynamics
Harry L. Casari ........... 62 Retired partner, Ernst & Young LLP 1995
Mr. Casari is also a director of Meade Instruments
Harold Harrigian .......... 64 Retired partner and Director of Corporate Finance, 1998
Crowell, Weedon & Co.
Mr. Harrigian is also a director of First Mortgage
Corporation
</TABLE>
2
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of February 15, 1999 by (i) each
person known by the Company, based on information provided by such person, to
own more than 5% of the Company's Common Stock; (ii) each director of the
Company; (iii) each named executive officer included in the "Summary
Compensation Table"; and (iv) all directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT & NATURE OF PERCENT
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) OF CLASS (2)
- ---------------------------- ------------------------- ------------
<S> <C> <C>
Nicholas J. Cedrone ................... 719,819 7.35%
One Monarch Drive
Littleton, MA 01460
Franklin Advisory Services, Inc. ...... 668,200 (3) 6.82%
One Parker Plaza, Sixteenth Floor
Fort Lee, NJ 07024
John H. Allen ......................... 20,000 *
James W. Barnes ....................... 245,136 2.49%
Harry L. Casari ....................... 5,800 *
Frank W. Davis ........................ 23,100 *
James A. Donahue ...................... 85,550 *
Harold Harrigian ...................... 300 *
William S. Ivans ...................... 76,152 *
Gene E. Leary ......................... 15,000 *
Charles A. Schwan ..................... 173,996 1.77%
All current directors and
executive officers
as a group (9 persons) ........... 645,034 6.50%
</TABLE>
- ---------------
* Less than 1%
(1) Includes 12,500, 31,335, 5,000, 2,500, 31,250, 2,500, 50,500 and 135,585
shares issuable upon exercise of stock options held by Mr. Allen, Mr.
Barnes, Mr. Casari, Mr. Davis, Mr. Donahue, Mr. Leary and Mr. Schwan and
all current directors and executive officers as a group, respectively,
that were exercisable on, or exercisable within 60 days of, February 15,
1999.
(2) Computed on the basis of 9,795,648 shares of common stock outstanding as
of February 15, 1999, plus, with respect to those persons holding
options to purchase common stock exercisable within 60 days of February
15, 1999, the number of shares of common stock issuable upon exercise
thereof.
(3) According to Schedule 13G dated January 22, 1999.
3
<PAGE> 6
BOARD OF DIRECTORS AND COMMITTEES
ORGANIZATION OF THE BOARD OF DIRECTORS
The Board held a total of seven meetings during 1998.
The Board of Directors has established two standing committees: the Audit
Committee and the Compensation Committee. The Audit Committee, composed of
Messrs. Leary, Casari, Davis and Harrigian, is the principal link between the
Board and the Company's independent auditors and monitors audit and internal
accounting control procedures. The Audit Committee held one meeting during 1998.
The Compensation Committee, also consisting of Messrs. Davis, Casari, Harrigian
and Leary, recommends to the Board of Directors the compensation structure for
the officers of the Company and each subsidiary. In addition, this Committee has
the responsibility for administration of the Company's stock option, stock
purchase and incentive compensation plans. The Compensation Committee held four
meetings in 1998.
DIRECTORS' COMPENSATION
Outside Directors receive (i) an annual retainer of $8,500; (ii) $500 per
meeting attended in person to a maximum of $2,500 annually; and (iii) $1,000
annually for membership on one or more active committees. The Cohu, Inc. 1996
Outside Directors Stock Option Plan provides that each Outside Director will
receive an automatic grant of an option to purchase 10,000 shares of the
Company's Common Stock upon their appointment to the Board. The Company pays the
cost of health care insurance premiums for certain directors and their spouses.
For services as Chairman of the Board, Mr. Ivans received compensation totaling
approximately $35,000 from the Company in 1998. Pursuant to an employment
agreement with the Company, Mr. Barnes was paid an annual salary of $30,000
through February 1999.
COMPENSATION OF EXECUTIVE OFFICERS AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table discloses compensation paid to the Company's Chief
Executive Officer and the other executive officers whose aggregate cash
compensation exceeded $100,000 (the "Named Executive Officers") during the last
three years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION SECURITIES
---------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) (1) OPTIONS (#) COMPENSATION ($) (2)
- ---------------------------------------- ------- ------------ ------------- ------------ -------------------
<S> <C> <C> <C> <C> <C>
Charles A. Schwan ...................... 1998 298,308 225,680 25,000 21,427
President & 1997 285,000 263,610 15,000 21,944
Chief Executive Officer 1996 263,333 246,950 50,000 (3) 20,878
James A. Donahue (4) ................... 1998 227,341 202,950 15,000 18,118
President, Cohu Semiconductor
Equipment Group
John H. Allen .......................... 1998 169,847 114,005 10,000 11,520
Vice President, Finance & Chief 1997 158,667 132,532 10,000 11,648
Financial Officer, Secretary 1996 143,000 122,846 40,000 (3) 10,994
</TABLE>
- --------------
(1) The amounts shown in this column reflect payments under the Company's
Incentive Bonus Plan for key executives.
(2) The amounts shown in this column reflect Company contributions to the
Employees' Retirement 401(k) Plan and the Key Executive Long Term
Incentive Plan.
(3) Includes 25,000 and 30,000 stock options for Mr. Schwan and Mr. Allen,
respectively, that were repriced on November 13, 1996 to $17.00 per
share.
(4) Mr. Donahue was promoted to President, Cohu Semiconductor Equipment
Group in May 1998. All amounts shown above are for the full year.
4
<PAGE> 7
INCENTIVE BONUS PLAN. The Company has an incentive bonus plan for key
executives originally adopted in 1978 and continuing in effect for the present
fiscal year upon recommendation of the Compensation Committee. Under this plan,
corporate officers may receive incentive compensation based on overall corporate
earnings performance and the principal executive of each division and subsidiary
may receive incentive compensation based upon the earnings performance of the
operations they manage. In each case, the incentive compensation is determined
with reference to a pre-tax earnings "target" fixed by the Compensation
Committee, or in the case of divisions and subsidiaries, by the corporate
management.
RETIREMENT PLAN. The Cohu, Inc. Employees' Retirement 401(k) Plan was
implemented on January 1, 1978. The majority of the Company's employees,
including the Named Executive Officers, who are at least 21 years of age and
complete six months of service are eligible to enroll in this Plan. The
participant may contribute up to 11% of his or her annual compensation. The
Company matches participant contributions up to 4% of annual employee
compensation not to exceed $160,000. The amounts contributed by the Company are
vested 10% after one year of participation, another 10% after two years and an
additional 20% each year thereafter to the full 100%. None of the contributions
nor accumulated earnings are taxable to the participant until withdrawn. The
maximum annual amount that a participant could contribute in 1998 was $10,000.
KEY EXECUTIVE LONG TERM INCENTIVE PLAN. The Company adopted the Key
Executive Long Term Incentive Plan in 1994. Under this plan, corporate officers
and the principal executives of each division and subsidiary may elect to defer
a portion of their current compensation. The Company will then match participant
contributions up to 4% of the executive's compensation in excess of $160,000 per
year. These combined funds may be used by the Company to purchase a specifically
designed life insurance policy on the executive's life. The Company is not
entitled to a corporate tax deduction until the year in which the executive
recognizes taxable income in connection with the plan. However, this plan is
designed to compensate the Company for the present value of the deferred tax
deduction. Upon the executive's termination of employment, the Company reserves
in any policy for that executive an amount which is actuarially sufficient to
provide a death benefit equal to the present value of the Company's deferred tax
deduction. The remaining cash value of the policy is available for borrowing by
the Company for payment to the executive in accordance with a schedule
determined in the sole discretion of the Company. Upon the executive's death,
any policy proceeds will be paid to the Company. Then the executive's
beneficiaries will receive from the Company the amount of the net proceeds
(after repayment of all borrowings by the Company), reduced by the present value
of any tax deduction deferred by the Company and increased by the value of the
Company's tax deduction available as a result of the payment of the net
proceeds.
TERMINATION AGREEMENTS. The Company has entered into Termination Agreements
with Mr. Schwan, Mr. Donahue and Mr. Allen 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 (except with a wholly owned subsidiary), 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 stock of the Company by any person,
entity or affiliated group or a change in the identities of a majority of the
directors of the Company within a period of thirty consecutive months resulting
in whole or in part from the election of persons who were not management
nominees. Termination of employment for purposes of these agreements means a
discharge of the executive by the Company, other than for specified causes
including death, disability, wrongful acts, habitual intoxication, habitual
neglect of duties or normal retirement. 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 1999 following a change of control, the amounts
payable to Mr. Schwan, Mr. Donahue and Mr. Allen would be approximately
$1,380,000, $1,210,000 and $820,000, respectively.
EMPLOYMENT AGREEMENT. James W. Barnes resigned as President & Chief
Executive Officer of the Company effective March 1, 1996. The Company and Mr.
Barnes entered into an employment agreement for a three-year period commencing
March 1, 1996. This employment agreement expired in February 1999. Pursuant
5
<PAGE> 8
to this agreement, Mr. Barnes agreed to provide the Company with employment
services under the direction and control of the Company on a part-time basis.
For such services Mr. Barnes was paid an annual salary of $30,000. Mr. Barnes
has continued to serve as a member of the Company's Board of Directors, subject
to reelection by the stockholders at the conclusion of his term in office.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on grants of options to purchase
the Company's Common Stock made to the Named Executive Officers during the year
ended December 31, 1998.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------
NUMBER OF POTENTIAL REALIZABLE VALUE
SECURITIES PERCENT OF AT ASSUMED ANNUAL RATES OF
UNDERLYING TOTAL OPTIONS STOCK PRICE APPRECIATION
OPTIONS GRANTED EXERCISE OR FOR OPTION TERM (2)
GRANTED TO EMPLOYEES BASE PRICE EXPIRATION --------------------------
NAME (#) (1) IN FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ------------------------ ---------- -------------- ----------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Charles A. Schwan ................. 25,000 6.2 43.50 1/29/08 684,000 1,733,250
James A. Donahue .................. 15,000 3.7 35.75 4/16/08 337,200 854,700
John H. Allen ..................... 10,000 2.5 43.50 1/29/08 273,600 693,300
</TABLE>
- ---------------
(1) Consists of stock options, which (i) were granted at an exercise price
of 100% of the market price of the underlying shares on the date of
grant, (ii) become exercisable over four years at the rate of one-fourth
each year and (iii) expire ten years from the date of grant. The options
were granted under the Company's 1992 and 1996 Employee Stock Option
Plans.
(2) The "potential realizable value" shown represents the potential gains
based on annual compound stock price appreciation of 5% and 10% from the
date of grant through the full 10-year option term, net of exercise
price, but before taxes associated with the exercise. The amounts
represent assumed rates of appreciation only based on the Securities and
Exchange Commission rules and do not represent the Company's estimate of
the possible future appreciation in the Company's Common Stock or gains,
if any, that may ultimately be realized by the above option holders.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information on option exercises in 1998 by the
Named Executive Officers and the value of such officers' unexercised options at
December 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED VALUE OPTIONS AT FISCAL YEAR-END (#) AT FISCAL YEAR-END ($) (1)
ON EXERCISE REALIZED ------------------------------- ------------------------------
NAME (#) ($) (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------- ----------- ---------- ------------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Charles A. Schwan ......... 20,000 438,680 44,250 48,751 452,820 62,505
James A. Donahue .......... 25,000 550,650 27,500 27,500 303,800 25,000
John H. Allen ............. 7,500 96,075 20,000 22,500 37,500 75,000
</TABLE>
- -------------
(1) Calculated on the basis of the fair market value of the Company's Common
Stock on the exercise date or at December 31, 1998, minus the aggregate
exercise price. The closing price of the Company's Common Stock on December
31, 1998 as reported on the Nasdaq Stock Market was $22.00.
6
<PAGE> 9
COMPENSATION COMMITTEE REPORT
Notwithstanding any statement to the contrary in any of the Company's
previous or future filings with the Securities and Exchange Commission, this
Report shall not be incorporated by reference into any such filings.
The Compensation Committee (the "Committee") of the Board of Directors,
comprised of the non-employee directors, determines and administers the
Company's executive compensation policies and programs.
COMPENSATION PHILOSOPHY
One of the Committee's primary objectives in establishing compensation
policies is to maintain competitive programs to attract, retain and motivate
high caliber executives and maximize the long-term success of the Company by
appropriately rewarding such individuals for their achievements. Another
objective is to provide an incentive to executives to focus their efforts on
long-term goals for the Company by closely aligning their financial interests
with those of the stockholders. To attain these goals, the Committee has
designed the Company's executive compensation program to include base salary,
annual cash bonus incentives and long-term incentives in the form of stock
options. The Committee believes that the Company's executive compensation
programs, as summarized below, have met these objectives.
BASE SALARY
The Committee generally determines base salary levels for executive level
positions prior to the annual stockholders' meeting in May. The process involved
in the determination of executive base salaries for fiscal 1998 is summarized
below.
In April 1998, the Company's chief executive officer developed executive
compensation data from a nationally recognized survey for a group of similarly
sized high technology companies. The Company's chief financial officer's
position as well as the principal executives of each division and subsidiary
were matched to comparable survey positions and competitive market compensation
levels were determined for base salary. This data was provided to the Committee,
along with performance evaluations and salary recommendations
In May 1998, the chief executive officer reviewed the competitive market
data with the Committee for each executive level position and the responsibility
level of each position, together with the individual's performance for the last
fiscal year and objectives for fiscal 1998. The Company's performance was
compared to objectives for the last fiscal year and performance targets for
fiscal 1998 were also reviewed. The Committee reviewed the recommendations,
performance evaluations and survey data outlined above. After discussion, the
Committee approved a base salary level to be effective May 1, 1998, for each
executive level position other than the chief executive officer.
The Committee reviewed the base salary of the chief executive officer and
compared it to those in peer positions in companies of similar size and
performance. As a result of this review, the Committee determined that effective
May 1, 1998, it was appropriate to increase the chief executive officer's base
salary to a level consistent with the base salaries of other chief executive
officers of similarly sized high technology companies. The group of companies
used for salary comparison purposes is not the same group of companies used to
compare stock performance included elsewhere herein.
ANNUAL INCENTIVES
Bonuses are designed to be a significant component of cash compensation.
Incentives for executive level positions are determined according to the
Company's Incentive Bonus Plan (the "Incentive Plan"), based upon Company
performance. In general, the Incentive Plan performance target objectives must
be achieved before any bonuses may be paid to participants.
In January 1999, the Committee reviewed and approved incentive awards for
1998 for all eligible participants in the Company's Incentive Plan. The bonuses
were based upon the Company's 1998 financial results compared to the targeted
results and followed the process and formula outlined in the Incentive Plan. In
each case, the incentive compensation is determined with reference to a pre-tax
earnings "target" fixed by the Compensation Committee, or in the case of
divisions and subsidiaries, by the corporate management.
7
<PAGE> 10
STOCK OPTIONS
The Committee grants stock options to focus the executive on the long-term
performance of the Company and on maximizing stockholder value. The grant of
stock options is tied to individual executive performance. The Committee grants
such stock options after a review of various factors, including the executive's
current equity ownership in the Company, potential future contributions to the
Company and job responsibilities. The Committee members weigh these subjective
factors individually and arrive at final determinations for option grants
through consensus. Stock options are granted with an exercise price equal to the
current fair market value of the Company's stock and utilize vesting periods to
encourage retention of executive officers. The Committee believes stock options
serve to align the interests of executive officers with those of other
stockholders.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE COMPANY'S BOARD OF DIRECTORS:
Frank W. Davis Harry L. Casari Harold Harrigian Gene E. Leary
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1998, Messrs. Davis, Casari, Harrigian and Leary served as members
of the Compensation Committee. None of the Compensation Committee members or
Named Executive Officers have any relationships which must be disclosed under
this caption.
COMPARATIVE STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on the
Common Stock of the Company for the last five fiscal years with the cumulative
total return on the Nasdaq Market Index and a Peer Group Index over the same
period (assuming the investment of $100 in the Company's Common Stock, Peer
Group Index and Nasdaq Market Index on December 31, 1993 and reinvestment of all
dividends). The Peer Group Index set forth on the Performance Graph is the index
for Media General Financial Services, Inc. ("Media General") Industry Group 834,
"Semiconductor Equipment/Material". The Peer Group Index included in the stock
performance graph in the Company's 1998 Proxy Statement was Media General
Industry Group 171, "Electronic Equipment Manufacturers". Industry Group 171 is
no longer provided by Media General. Industry Group 834 is comprised of more
than 50 publicly-held semiconductor equipment companies and, in the opinion of
the Company, is a more relevant peer group for Cohu, Inc. than the previously
used Group 171 which included a more diverse group of electronics related
companies. Historical stock price performance is not necessarily indicative of
future stock price performance. Notwithstanding any statement to the contrary in
any of the Company's previous or future filings with the Securities and Exchange
Commission, the graph and other information in this section shall not be
incorporated by reference into any such filings.
(Graph)
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Cohu, Inc. 119 272 250 332 242
Peer Group 130 205 192 243 273
Nasdaq 105 136 169 207 292
</TABLE>
8
<PAGE> 11
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Nicholas J. Cedrone was paid a salary of approximately $162,000 in 1998
for his services as an employee of Daymarc, Inc., a wholly-owned subsidiary of
the Company.
INDEPENDENT AUDITORS
Ernst & Young LLP has served as the Company's independent auditors
continuously since 1957 and the Board has selected this firm to serve as
independent auditors for the current year. Representatives of Ernst & Young LLP
will be present at the Meeting and be available to respond to appropriate
questions and may make a statement if they desire to do so.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's executive officers and directors, and persons who own more than 10% of
a registered class of the Company's equity securities, file an initial report of
ownership on Form 3 and changes in ownership on Form 4 or 5 with the Securities
and Exchange Commission (the "SEC"). Such officers, directors and 10%
stockholders 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 the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for such persons, the Company believes that during the year ended
December 31, 1998 its executive officers, directors and 10% stockholders
complied with all Section 16(a) filing requirements applicable to them.
OTHER MATTERS
The Board of Directors is unaware of any other business to be presented for
consideration at the Meeting. If, however, such other business should properly
come before the Meeting, the proxies will be voted in accordance with the best
judgment of the proxy holders. The shares represented by proxies received in
time for the Meeting will be voted and if any choice has been specified the vote
will be in accordance with such specification.
STOCKHOLDER PROPOSALS - 2000 ANNUAL MEETING
Stockholders are entitled to present proposals for action at a forthcoming
stockholders' meeting if they comply with the requirements of the proxy rules
and the Company's Bylaws. Any proposals intended to be presented at the 2000
Annual Meeting of Stockholders of the Company must be received at the Company's
offices on or before December 1, 1999 in order to be considered for inclusion in
the Company's proxy statement and form of proxy relating to such meeting.
If a stockholder intends to submit a proposal at the 2000 Annual Meeting of
Stockholders of the Company, which proposal is not intended to be included in
the Company's proxy statement and form of proxy relating to such meeting, the
stockholder should provide the Company with appropriate notice no later than
December 1, 1999. If the Company fails to receive notice of the proposal by such
date, the Company will not be required to provide any information about the
nature of the proposal in its proxy statement and the proposal will not be
submitted to the stockholders for approval at the 2000 Annual Meeting of
Stockholders of the Company.
By Order of the Board of Directors
/s/ JOHN H. ALLEN
-----------------------------------
John H. Allen
Secretary
San Diego, California
April 1, 1999
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER
OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE
ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE PREPAID ENVELOPE.
9
<PAGE> 12
PROXY
COHU, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 11, 1999
The undersigned hereby (i) acknowledge(s) receipt of the Notice and Proxy
Statement dated April 1, 1999 relating to the Annual Meeting of Stockholders of
Cohu, Inc. (the "Company") to be held May 11, 1999 and (ii) appoint(s) WILLIAM
S. IVANS, CHARLES A. SCHWAN and JOHN H. ALLEN as proxies, with full power of
substitution, and authorizes them, or any of them, to vote all the shares of
common stock of the Company standing in the name of the undersigned at said
meeting or any adjournment thereof upon the matter specified below and upon
such other matters as may be properly brought before the meeting, conferring
discretionary authority upon such proxies as to such other matters.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSAL 1.
(PLEASE SIGN AND DATE ON THE REVERSE SIDE)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 13
PLEASE MARK
YOUR VOTE AS
INDICATED IN [X}
THIS EXAMPLE
<TABLE>
<CAPTION>
<S> <C> <C>
1. ELECTION OF DIRECTORS FOR WITHHOLD
Charles A. Schwan ALL NOMINEES LISTED AUTHORITY
Gene E. Leary BELOW (EXCEPT AS MARKED TO VOTE FOR ALL
(Instruction: To withhold authority to vote for TO THE CONTRARY BELOW) NOMINEES LISTED
any individual nominee, write that nominee's [ ] [ ]
name on the space provide below.)
- -----------------------------------------------
2. IN THEIR DISCRETION, UPON SUCH OTHER MATTERS AS MAY PROPERLY
COME BEFORE THE MEETING.
STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE IN PERSON EVEN
THOUGH THEY HAVE PREVIOUSLY MAILED THIS PROXY.
PLEASE DATE, SIGN AND MAIL THIS PROXY CARD IN THE
ENVELOPE. NO POSTAGE IS REQUIRED FOR MAILING IN
THE U.S.A.
Signature(s)_____________________________________________________________ Dated: ___________ 1999
IMPORTANT: Please date this Proxy and sign exactly as your name(s) appear hereon. When signing as
a fiduciary, please give your full title. If shares are held by joint tenants, both should sign.
- -------------------------------------------------------------------------------------------------
FOLD AND DETACH HERE
</TABLE>
