<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 LOGO]
5755 Kearny Villa Road
San Diego, California 92123-1111
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 16, 2000
TO OUR STOCKHOLDERS:
The Annual Meeting of Stockholders of Cohu, Inc. ("Cohu") will be held at
the offices of Cohu, 5755 Kearny Villa Road, San Diego, California 92123-1111 on
Tuesday, May 16, 2000, at 2:00 p.m. Pacific Standard Time, for the following
purposes:
1. To elect three directors, each for a term of three years.
2. To approve an amendment to the Cohu 1998 Stock Option Plan
increasing the shares of stock subject to the Plan by 950,000.
3. To approve an amendment to the Cohu Amended and Restated
Certificate of Incorporation to increase the number of authorized
shares of Common Stock from 40,000,000 to 60,000,000.
4. To act upon such other matters as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record of Cohu at the close of business on March
20, 2000 will be entitled to vote at the meeting.
Since the holders of a majority of the outstanding shares of voting stock of
Cohu 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. Alternatively, certain stockholders may vote by telephone or
electronically via the internet. Please refer to the instructions included with
the Proxy for additional details. 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 Cohu, 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 6, 2000
- --------------------------------------------------------------------------------
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 92123-1111
--------------------
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 ("Cohu"), of your Proxy
for use at the Annual Meeting of Stockholders to be held on Tuesday, May 16,
2000, at 2:00 p.m. Pacific Standard Time at 5755 Kearny Villa Road, San Diego,
California 92123-1111 (the "Meeting"). This Proxy Statement and the accompanying
Proxy are being mailed to all stockholders on or about April 6, 2000. 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 Cohu's Secretary or by
voting in person at the Meeting.
On March 20, 2000, the record date fixed by the Board of Directors (the
"Record Date"), Cohu had outstanding 20,168,881 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 being present or
represented by proxy at the Meeting. If a quorum is present, a plurality vote
(i.e. an excess of votes over those cast for an opposing candidate) of the
shares present, in person or by proxy, at the Meeting and entitled to vote is
required for the election of directors. The affirmative vote of a MAJORITY OF
SHARES PRESENT IN PERSON OR REPRESENTED BY PROXY is required for approval of the
amendment to the Cohu 1998 Stock Option Plan. The affirmative vote of a MAJORITY
OF SHARES OUTSTANDING is required for the approval of the amendment to Cohu's
Amended and Restated Certificate of Incorporation. 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,
FOR the approval of the amendment to the Cohu 1998 Stock Option Plan and FOR the
approval of the amendment to the Cohu Amended and Restated Certificate of
Incorporation.
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 Cohu's offices, 5755 Kearny Villa Road, San Diego,
California 92123-1111, 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 Cohu. 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. Cohu
has retained Georgeson Shareholder Communications Inc. to aid in the
solicitation of proxies at an anticipated cost of $6,500 plus expenses. Cohu
will bear the entire cost of the solicitation. Votes will be tabulated by Cohu's
Transfer Agent, ChaseMellon Shareholder Services, L.L.C.
1
<PAGE> 4
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Cohu Amended and Restated Certificate of Incorporation divides the
directors 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 three directors are to be elected for a term expiring in
2003. 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 three 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 OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE
THREE NOMINEES NAMED BELOW.
NOMINEES FOR TERMS EXPIRING IN 2003 - CLASS 3
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
--------------- --- -------------------- --------
<S> <C> <C> <C>
Harry L. Casari.......... 63 Retired Partner, Ernst & Young LLP; 1995
Mr. Casari is also a director of Meade Instruments
Frank W. Davis........... 85 Retired President of Convair Aerospace, 1976
Division of General Dynamics
Harold Harrigian......... 65 Retired Partner and Director of Corporate Finance, 1998
Crowell, Weedon & Co.;
Mr. Harrigian is also a director of First Mortgage
Corporation
</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.......... 70 Retired President & Chief Executive Officer 1983
of Cohu from 1983 to March 1996
James A. Donahue......... 51 President & Chief Operating Officer of Cohu since 1999
October 1999; President of Cohu Semiconductor
Equipment Group from May 1998 to October 1999;
President of Delta Design, Inc., a wholly owned subsidiary
of Cohu, since May 1983
</TABLE>
DIRECTORS WHOSE TERMS EXPIRE IN 2002 - CLASS 2
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
--------------- --- -------------------- --------
<S> <C> <C> <C>
Gene E. Leary............ 79 Retired executive at Honeywell, Inc. and Control Data 1976
Corporation
Charles A. Schwan........ 60 Chairman & Chief Executive Officer of Cohu since July 1990
1999; President & Chief Executive Officer of Cohu since
March 1996; Executive Vice President & Chief Operating
Officer of Cohu from September 1995 to March
1996; Vice President, Finance of Cohu from
1983 until September 1995 and Secretary of
Cohu from 1988 until September 1995
</TABLE>
2
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of Cohu's Common Stock as of February 15, 2000 by (i) each person
known by Cohu, based on information provided by such person, to own more than 5%
of Cohu's Common Stock; (ii) each director of Cohu; (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......................... 1,433,638 (3) 7.13%
One Monarch Drive
Littleton, MA 01460
Franklin Advisory Services, LLC............. 1,204,200 (4) 5.99%
One Parker Plaza, Sixteenth Floor
Fort Lee, NJ 07024
John H. Allen............................... 77,500 *
James W. Barnes............................ 407,666 2.03%
Harry L. Casari............................. 6,600 *
Frank W. Davis.............................. 50,400 *
James A. Donahue............................ 203,600 1.01%
Harold Harrigian............................ 1,600 *
Gene E. Leary............................... 30,000 *
Charles A. Schwan........................... 332,992 1.65%
All directors and executive officers
as a group (8 persons).................... 1,110,358 5.45%
</TABLE>
- -----------------
* Less than 1%
(1) Includes 62,500, 5,000, 10,000, 73,092, 5,000, 110,500 and 266,092 shares
issuable upon exercise of stock options held by Mr. Allen, Mr. Casari, Mr.
Davis, Mr. Donahue, Mr. Leary and Mr. Schwan and all directors and
executive officers as a group, respectively, that were exercisable on, or
exercisable within 60 days of, February 15, 2000.
(2) Computed on the basis of 20,103,019 shares of common stock outstanding as
of February 15, 2000, plus, with respect to those persons holding options
to purchase common stock exercisable within 60 days of February 15, 2000,
the number of shares of common stock issuable upon exercise thereof.
(3) According to Schedule 13G filed with the Securities and Exchange Commission
on February 2, 2000.
(4) According to Schedule 13G filed with the Securities and Exchange Commission
on January 19, 2000.
3
<PAGE> 6
BOARD OF DIRECTORS AND COMMITTEES
ORGANIZATION OF THE BOARD OF DIRECTORS
The Board of Directors held a total of nine meetings during 2000.
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 Cohu's independent auditors and monitors audit and internal accounting
control procedures. The Audit Committee held three meetings during 1999. 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 Cohu and each subsidiary. In addition, the Compensation Committee
has the responsibility for administration of Cohu's stock option, stock purchase
and incentive compensation plans. The Compensation Committee held three meetings
in 1999.
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 1996 Outside
Directors Stock Option Plan provides that each Outside Director will receive an
automatic grant of an option to purchase 20,000 shares of Cohu's Common Stock
upon their appointment to the Board. Cohu pays the cost of health care insurance
premiums for certain directors and their spouses. For services as Chairman of
the Board through July 13, 1999, Mr. William S. Ivans received compensation
totaling approximately $10,000 from Cohu in 1999. Pursuant to an employment
agreement with Cohu, 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 Cohu's Chief Executive
Officer and the other executive officers whose aggregate cash compensation
exceeded $100,000 (the "Named Executive Officers") during the last three years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
--------------
ANNUAL SECURITIES
COMPENSATION UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(1) OPTIONS (#)(2) COMPENSATION ($)(3)
--------------------------- ---- ---------- ------------ -------------- -------------------
<S> <C> <C> <C> <C> <C>
Charles A. Schwan 1999 322,186 291,060 50,000 24,530
Chairman of the Board & 1998 298,308 225,680 50,000 21,427
Chief Executive Officer 1997 285,000 263,610 30,000 21,944
James A. Donahue (4) 1999 271,019 274,800 60,000 21,833
President & 1998 227,341 202,950 30,000 18,118
Chief Operating Officer
John H. Allen 1999 191,008 158,760 50,000 13,991
Vice President, Finance & Chief 1998 169,847 114,005 20,000 11,520
Financial Officer, Secretary 1997 158,667 132,532 20,000 11,648
</TABLE>
- -------------------
(1) The amounts shown in this column reflect payments under Cohu's Incentive
Bonus Plan for key executives.
(2) All option and share amounts included throughout this Proxy Statement have
been adjusted for a two-for-one stock split effective September 1999.
(3) The amounts shown in this column reflect Cohu's contributions to the
Employees' Retirement 401(k) Plan and the Key Executive Long Term Incentive
Plan.
(4) Mr. Donahue was promoted to President, Cohu Semiconductor Equipment Group
and became a Named Executive Officer in May 1998. All amounts shown for
1998 are for the full year.
4
<PAGE> 7
INCENTIVE BONUS PLAN. Cohu has an incentive bonus plan for key executives in
effect through 1999. 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 Cohu's management.
RETIREMENT PLAN. The Cohu Employees' Retirement 401(k) Plan was implemented
on January 1, 1978. The majority of Cohu'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 subject to maximum annual contribution
limitations. Cohu matches participant contributions up to 4% of annual employee
compensation not to exceed $160,000. The amounts contributed by Cohu 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 1999 was $10,000.
KEY EXECUTIVE LONG TERM INCENTIVE PLAN. Cohu 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. Cohu 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 Cohu to purchase a specifically
designed life insurance policy on the executive's life. Cohu 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 Cohu for the present value of the deferred tax deduction. Upon the
executive's termination of employment Cohu reserves in any policy for that
executive an amount which is actuarially sufficient to provide a death benefit
equal to the present value of Cohu's deferred tax deduction. The remaining cash
value of the policy is available for borrowing by Cohu for payment to the
executive in accordance with a schedule determined in the sole discretion of
Cohu. Upon the executive's death, any policy proceeds will be paid to Cohu. Then
the executive's beneficiaries will receive from Cohu the amount of the net
proceeds (after repayment of all borrowings by Cohu), reduced by the present
value of any tax deduction deferred by Cohu and increased by the value of Cohu's
tax deduction available as a result of the payment of the net proceeds.
TERMINATION AGREEMENTS. Cohu 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 Cohu. For this purpose, a
change of control of Cohu means a merger or consolidation of Cohu (except with a
wholly owned subsidiary), a sale by Cohu of all or substantially all of its
assets, the acquisition of beneficial ownership of a majority of the outstanding
voting stock of Cohu by any person, entity or affiliated group or a change in
the identities of a majority of the directors of Cohu 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 Cohu, 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 2000 following a
change of control, the amounts payable to Mr. Schwan, Mr. Donahue and Mr. Allen
would be approximately $1,553,000, $1,358,000 and $869,000, respectively.
EMPLOYMENT AGREEMENT. James W. Barnes resigned as President & Chief
Executive Officer of Cohu effective March 1, 1996. Cohu 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 to this agreement,
Mr. Barnes agreed to provide Cohu with employment services under the direction
and control of Cohu on a part-time basis. For such services Mr. Barnes was paid
an annual salary of $30,000. Mr. Barnes has continued to serve as a member of
Cohu's Board of Directors, subject to reelection by the stockholders at the
conclusion of his term in office.
5
<PAGE> 8
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on grants of options to purchase
Cohu's Common Stock made to the Named Executive Officers during the year ended
December 31, 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------
NUMBER OF
SECURITIES PERCENT OF POTENTIAL REALIZABLE VALUE
UNDERLYING TOTAL OPTIONS AT ASSUMED ANNUAL RATES OF
OPTIONS GRANTED EXERCISE OR STOCK PRICE APPRECIATION
GRANTED TO EMPLOYEES BASE PRICE EXPIRATION FOR OPTION TERM (2)
NAME (#) (1) IN FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Charles A. Schwan 50,000 6.13% 12.07 3/10/09 379,500 962,000
James A. Donahue 60,000 7.35% 12.07 3/10/09 455,400 1,154,400
John H. Allen 50,000 6.13% 12.07 3/10/09 379,500 962,000
</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 Cohu's 1996 and 1998 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 Cohu's estimate of the possible future
appreciation in Cohu'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 1999 by the
Named Executive Officers and the value of such officers' unexercised options at
December 31, 1999.
<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 24,500 325,335 96,500 115,000 2,091,545 1,837,125
James A. Donahue - - 50,592 97,500 1,098,841 1,718,500
John H. Allen - - 45,000 90,000 896,250 1,597,750
</TABLE>
- ----------------------
(1) Calculated on the basis of the fair market value of Cohu's Common Stock on
the exercise date or at December 31, 1999, minus the aggregate exercise
price. The closing price of Cohu's Common Stock on December 31, 1999 as
reported on the Nasdaq Stock Market was $31.00.
6
<PAGE> 9
COMPENSATION COMMITTEE REPORT
Notwithstanding any statement to the contrary in any of Cohu'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 Cohu'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 Cohu 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 Cohu by closely aligning their financial interests with
those of the stockholders. To attain these goals, the Committee has designed
Cohu'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 Cohu'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 1999 is summarized
below.
In April 1999, Cohu's Chief Executive Officer developed executive
compensation data from a nationally recognized survey for a group of similarly
sized high technology companies. Cohu'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 1999, 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 1999. Cohu's performance was compared to
objectives for the last fiscal year and performance targets for fiscal 1999 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, 1999, 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, 1999, 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 Cohu'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 2000, the Committee reviewed and approved incentive awards for
1999 for all eligible participants in Cohu's Incentive Plan. The bonuses were
based upon Cohu's 1999 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 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 Cohu 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 Cohu, potential future contributions to Cohu 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 Cohu'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 COHU'S BOARD OF DIRECTORS:
Frank W. Davis Harry L. Casari Harold Harrigian Gene E. Leary
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1999, 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 Cohu 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 Cohu's Common Stock, Peer Group Index and
Nasdaq Market Index on December 31, 1994 and reinvestment of all dividends). The
Peer Group Index set forth on the Performance Graph is the index for Media
General Financial Services, Inc. Industry Group 834, "Semiconductor
Equipment/Material". Industry Group 834 is comprised of approximately 50
publicly-held semiconductor equipment companies. Historical stock price
performance is not necessarily indicative of future stock price performance.
Notwithstanding any statement to the contrary in any of Cohu'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>
<S> <C> <C> <C> <C> <C>
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1995 1996 1997 1998 1999
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Cohu 228 210 279 203 577
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Peer Group 158 147 187 210 577
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Nasdaq 130 161 197 278 490
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</TABLE>
8
<PAGE> 11
PROPOSAL NO. 2
AMENDMENT TO THE COHU 1998 STOCK OPTION PLAN
The Cohu Board of Directors has approved and recommended for adoption an
amendment to the Cohu 1998 Stock Option Plan (the "1998 Plan"). The amendment,
if approved by Cohu's stockholders, would increase the shares of stock available
for issuance under the 1998 Plan by 950,000 to 1,850,000. The 1998 Plan is
otherwise unchanged since Cohu stockholders approved the 1998 Plan at the 1998
Annual Meeting of Stockholders. We believe strongly that approval of the
amendment to the 1998 Plan is essential to our continued success. Our employees
are our most valuable assets. Stock options are vital to our ability to attract
and retain outstanding and highly skilled individuals in the extremely
competitive labor markets in which we must compete. Options are also crucial to
our ability to motivate employees to achieve Cohu's long-term goals. The
affirmative vote of the holders of a majority of shares voting in person or by
proxy at the Meeting (provided a quorum is present) will be required to approve
the amendment to the 1998 Plan. Any discrepancy between the language of the 1998
Plan and the summary provided herein shall be resolved in favor of the plan
language.
PURPOSE
The 1998 Plan is intended to make available shares of stock to enable
selected officers, directors and employees to purchase Common Stock of Cohu.
This will assist Cohu in retaining the services of employees holding key
positions with Cohu and attracting new employees capable of filling key
positions, providing an incentive for such employees and encouraging stock
ownership by participants thereby aligning their interests with those of Cohu's
stockholders. At March 20, 2000 Cohu had approximately 180,000 shares available
for grant under all existing employee stock option plans.
ADMINISTRATION
The 1998 Plan is administered by the Cohu Compensation Committee (the
"Committee"). The members of the Committee must qualify as "non-employee
directors" under Rule 16b-3 of the Securities Exchange Act of 1934 and as
"outside directors" under Section 162(m) of the Internal Revenue Code. The
Committee will have final power to construe and interpret the 1998 Plan and to
grant options thereunder and to determine all questions that may arise in the
administration of the 1998 Plan. The Committee has been authorized by the Board
to determine the persons to whom and the dates on which options will be granted,
the number of shares to be subject thereto, the time or times during the term of
each option within which all or a portion of such option may be exercised and
all other terms of the options. The Committee shall have the right to adopt,
amend and repeal rules and regulations concerning the administration of the 1998
Plan. The Board may also appoint an "Employee Option Committee" consisting of
one or more directors which is authorized to grant options to employees (other
than executive officers) subject to such limitations as may be established by
the Board.
TERM, AMENDMENT AND TERMINATION
The Board or the Committee may suspend or terminate the 1998 Plan at any
time. Unless sooner terminated by the Committee, the term of the 1998 Plan shall
be for ten (10) years from the commencement date. Termination of the 1998 Plan
shall not affect any rights previously granted thereunder. The Committee may
terminate, modify or amend the 1998 Plan from time to time, provided that
stockholder approval would be required with respect to any amendment which would
(i) increase the number of shares of Common Stock reserved for issuance upon
exercise of options pursuant to the 1998 Plan or (ii) modify the requirements as
to eligibility to receive incentive stock options under the 1998 Plan.
ELIGIBILITY
Stock options may be granted only to employees (including officers and
directors who are also employees) and non-employee directors of Cohu or its
parent or subsidiaries or to individuals who are rendering services as
consultants, advisors, or other independent contractors to Cohu or its parent or
subsidiaries.
No incentive stock option may be granted to a person who, at the time of the
grant, owns, directly or indirectly, stock constituting more than ten percent
(10%) of the total combined voting power of all classes of stock of Cohu
entitled to vote or of any parent or subsidiary thereof, unless the exercise
price of the stock subject to the option is at least one hundred and ten percent
(110%) of the fair market value of such stock on the date the option is granted
and the term of the option does not exceed five (5) years from the date of
grant.
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<PAGE> 12
SHARES RESERVED FOR ISSUANCE
If approved by Cohu's stockholders, a total of 1,850,000 shares of the $1.00
par value Common Stock of Cohu shall be reserved for issuance pursuant to the
1998 Plan, subject to adjustment in the event of stock dividends, splits,
subdivisions or combinations. At March 20, 2000 Cohu had approximately 1,750,000
options outstanding under all existing employee stock option plans and
approximately 180,000 shares available for grant under such plans.
TERMS OF OPTIONS
Set forth below is a description of terms of options granted pursuant to the
1998 Plan, provided, however, that individual option grants in any particular
case may be more restrictive as to any or all of the terms described below. The
Committee may grant nonqualified stock options, incentive stock options or a
combination thereof. During any calendar year no participant may be granted
options for more than 200,000 shares.
a. PRICE. The purchase price per share deliverable upon the exercise of an
incentive stock option shall not be less than the fair market value of a share
on the date of grant. The purchase price per share deliverable upon the exercise
of an incentive stock option granted to a person, who at the time of grant, owns
directly or indirectly, stock constituting more than ten percent (10%) of the
total combined voting power of all classes of stock of Cohu entitled to vote (or
a parent or subsidiary thereof), must be at least one hundred and ten percent
(110%) of the fair market value of such stock on the date the option was
granted. The purchase price per share deliverable upon exercise of a
nonqualified stock option shall be not less than the fair market value of a
share on the date of grant of the nonqualified stock option except that the
purchase price for no more than 5% of the shares under the plan can be
determined by the Committee in its sole discretion. The exercise price of
options granted under the 1998 Plan may be paid either (i) in cash at the time
the option is exercised, or (ii) at the discretion of the Committee, by delivery
to Cohu of other Common Stock of Cohu owned by the optionee.
b. OPTION EXERCISE. A stock option may be exercisable, in part or in full,
at any time and from time to time twelve months after the date of grant and
during an exercise period and may be subject to such performance criteria and
conditions as shall be determined by the Committee on a case-by-case basis and
such exercise period and restrictions shall be described in the agreement
evidencing the stock option. The exercise period applicable to any incentive
stock option shall not exceed ten (10) years from the date of grant and in
certain circumstances may not exceed five (5) years. The Committee may
accelerate the times at which a stock option may be exercised.
c. NONASSIGNABILITY. No incentive stock option may be transferred by an
optionee other than by will or by the laws of descent and distribution. During
the lifetime of an optionee, an option may be exercised only by the optionee.
d. EXPIRATION FOLLOWING TERMINATION OF EMPLOYMENT. Under the 1998 Plan, an
option will terminate immediately upon the optionee ceasing to be employed by
Cohu or a parent or subsidiary thereof, unless the option by its terms
specifically provides otherwise. If termination is due to disability of the
optionee, the optionee or his or her legal representative will have no more than
three (3) months from the date of disability to exercise the option, to the
extent the option was exercisable on the date of termination. If termination is
due to the death of the optionee, his or her legal representatives will have no
more than one (1) year from the date of death to exercise the option, to the
extent such option was exercisable on the date of death.
ADJUSTMENT PROVISIONS
If there is a change in the Common Stock subject to the 1998 Plan through
recapitalization, stock dividend, stock split, combination or otherwise,
appropriate adjustments shall be made to the maximum number of shares subject to
the 1998 Plan, the annual limit on stock options that may be granted to an
individual and to the number and exercise price of any outstanding options
thereunder.
REORGANIZATION
A "Reorganization" shall be deemed to have occurred when Cohu and/or its
stockholders enter into an agreement to dispose of all or substantially all the
assets of Cohu or an amount of the outstanding stock of Cohu sufficient to
constitute effective control of Cohu by means of a sale, merger, reorganization,
separation, liquidation or any other transaction. In the event of a
Reorganization, the "Acquiring Corporation" may assume Cohu's rights and
obligations under outstanding stock options or substitute options for the
Acquiring Corporation's stock for such outstanding stock options. In the event
the Acquiring Corporation elects not to assume or substitute for such
outstanding stock options in connection with the Reorganization, any
unexercisable and/or unvested portion of the outstanding stock options shall be
immediately exercisable and vested as of the date thirty (30) days prior to the
date of the Reorganization. Any stock options which are neither assumed or
substituted for by the Acquiring Corporation in connection with the
Reorganization nor exercised as of the date of the Reorganization shall
terminate and cease to be outstanding effective as of the date of the
Reorganization.
10
<PAGE> 13
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following summary of the U.S. federal income tax consequences to
participants and Cohu of the acquisition and disposition of shares under the
1998 Plan does not purport to be complete and participants in the 1998 Plan
should refer to the applicable provisions of the Internal Revenue Code ("the
Code"), or consult their own tax advisor. The summary does not address other
taxes that may affect an individual such as state and local income taxes,
federal and state estate, inheritance and gift taxes and foreign taxes.
Furthermore, the tax consequences described below are complex and subject to
change and a taxpayer's personal situation may be such that some variation of
the described rules applies.
Cohu may deduct from amounts otherwise due an optionee under a stock option
or from any wages or other compensation payable to such optionee any sums
required by federal, state or local tax to be withheld with respect to the
exercise or disposition of any option or other right, or require the optionee to
pay such sums as a condition of the issuance of shares. The 1998 Plan is not
qualified under Code Section 401(a) and is not subject to the provisions of the
Employee Retirement Income Security Act of 1974.
The grant of a nonqualified stock option generally will not result in
taxable income to the optionee at the time of grant and ordinary income will be
realized by an optionee at the time of exercise of a nonqualified option in the
amount by which the fair market value of the Common Stock on the date of
exercise exceeds the exercise price. Cohu will be entitled to a deduction from
income for federal income tax purposes in an amount equal to the ordinary income
recognized by the optionee in such case. Any subsequent disposition of the
shares acquired pursuant to a nonqualified option will result in gain or loss to
the optionee in an amount equal to the difference between the sale price and the
market price at date of exercise.
With respect to incentive stock options, the excess of the fair market value
of stock received upon exercise over the exercise price is taken into account
for purposes of the alternative minimum tax described under Section 55 of the
Code. Otherwise, there are generally no tax consequences to either Cohu or an
optionee connected with the grant or the exercise of an incentive stock option.
If the stock acquired under an incentive stock option is not disposed of within
two years from the date of grant nor within one year from the date of exercise,
any gain on the sale thereof will generally be treated as capital gain to the
optionee, with no tax consequences to Cohu. If the stock is sold prior to such
time, the optionee will recognize at the time of sale ordinary income equal to
the lesser of the gain on the sale or the difference between the option price
and the fair market value of the stock on the date of exercise and any
additional gain will be treated as capital gain. Cohu may have a tax deduction
equal to the ordinary income recognized by the optionee.
BOARD RECOMMENDS APPROVAL
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS APPROVE THE
AMENDMENT TO THE 1998 PLAN. THE AFFIRMATIVE VOTE OF A MAJORITY OF SHARES
PRESENT, IN PERSON OR BY PROXY, AT THE MEETING (PROVIDED A QUORUM IS PRESENT) IS
REQUIRED TO APPROVE THE AMENDMENT TO THE 1998 PLAN.
PROPOSAL NO. 3
AMENDMENT TO THE COHU AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE AUTHORIZED COMMON SHARES
The Board of Directors is requesting stockholder approval of an amendment to
Cohu's Amended and Restated Certificate of Incorporation to increase the number
of shares of Common Stock authorized for issuance from 40,000,000 to 60,000,000.
The Board of Directors consider it advisable to have the additional shares
available for possible future stock dividends or stock splits, acquisitions,
issuance under Cohu's stock option and purchase plans and for other corporate
purposes, although Cohu has no present commitments which would result in the
issuance of new shares of Common Stock, except through Cohu's stock option and
employee stock purchase plans.
If this amendment is adopted, the additional shares of Common Stock may be
issued by direction of the Board of Directors at such times, in such amounts and
upon such terms as the Board of Directors may determine, without further
approval of the stockholders unless, in any instance, such approval is expressly
required by regulatory agencies or otherwise. Stockholders of Cohu have no
preemptive rights to purchase additional shares. The adoption of the amendment
will not of itself cause any change in the capital accounts of Cohu. However,
the issuance of additional shares of Common Stock could dilute the existing
stockholders' equity interest in Cohu.
11
<PAGE> 14
BOARD RECOMMENDS APPROVAL
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS APPROVE THE
AMENDMENT TO THE COHU AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO
INCREASE COHU'S AUTHORIZED COMMON SHARES. THE AFFIRMATIVE VOTE OF THE HOLDERS OF
A MAJORITY OF COHU'S OUTSTANDING COMMON STOCK VOTING IN PERSON OR BY PROXY AT
THE MEETING IS REQUIRED TO APPROVE SUCH AMENDMENT.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Nicholas J. Cedrone was paid a salary of approximately $121,000 in 1999
for his services as an employee of Cohu. Mr. Cedrone retired from Cohu effective
December 31, 1999.
INDEPENDENT AUDITORS
Ernst & Young LLP has served as Cohu's independent auditors continuously
since 1957 and the Board of Directors 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 Cohu's
executive officers and directors and persons who own more than 10% of a
registered class of Cohu'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 ("SEC"). Such officers, directors and 10% stockholders
are also required by SEC rules to furnish Cohu 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, Cohu believes that during the year ended December 31,
1999 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 - 2001 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 Cohu's Bylaws. Any proposals intended to be presented at the 2001 Annual
Meeting of Stockholders of Cohu must be received at Cohu's offices on or before
December 7, 2000 in order to be considered for inclusion in Cohu's proxy
statement and form of proxy relating to such meeting.
If a stockholder intends to submit a proposal at the 2001 Annual Meeting of
Stockholders of Cohu, which proposal is not intended to be included in Cohu's
proxy statement and form of proxy relating to such meeting, the stockholder
should provide Cohu with appropriate notice no later than December 7, 2000. If
Cohu fails to receive notice of the proposal by such date, any such proposal
will be considered untimely and Cohu 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 2001
Annual Meeting of Stockholders of Cohu.
By Order of the Board of Directors
/s/ John H. Allen
John H. Allen
Secretary
San Diego, California
April 6, 2000
12
<PAGE> 15
PROXY
COHU, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF COHU, INC.
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 16, 2000
The undersigned hereby (i) acknowledge(s) receipt of the Notice and
Proxy Statement dated April 6, 2000 relating to the Annual Meeting of
Stockholders of Cohu, Inc. ("Cohu") to be held May 16, 2000 and (ii) appoint(s)
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
Cohu standing in the name of the undersigned at said meeting or any adjournment
thereof upon the matters specified below and upon such other matters as may be
properly brought before the meeting, or any adjournment thereof, 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 PROPOSALS 1, 2 and 3.
(PLEASE SIGN AND DATE ON THE REVERSE SIDE)
FOLD AND DETACH HERE
<PAGE> 16
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<S> <C> <C> <C> <C>
FOR WITHHOLD Please mark your
all nominees listed below AUTHORITY votes as indicated [X]
(except as marked to to vote for all in this example.
the contrary below) nominees listed
1. ELECTION OF DIRECTORS
HARRY L. CASARI [ ] [ ] 2. TO APPROVE AN AMENDMENT TO THE COHU 1998 STOCK OPTION
FRANK W. DAVIS PLAN
HAROLD HARRIGIAN [ ] FOR [ ] AGAINST [ ] ABSTAIN
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY 3. TO APPROVE AN AMENDMENT TO THE COHU AMENDED AND
INDIVIDUAL NOMINEE, WRITE THAT NOMINEE'S NAME ON THE RESTATED CERTIFICATE OF INCORPORATION TO INCREASE
SPACE PROVIDED BELOW.) THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
FROM 40,000,000 TO 60,000,000
- ------------------------------------------------------ [ ] FOR [ ] AGAINST [ ] ABSTAIN
4. 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.
</TABLE>
Signature(s): Dated: 2000
------------------------------------ ----------------
IMPORTANT: Please date this Proxy and sign exactly as your name(s) appears
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
