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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-4298
COHU, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 95-1934119
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
5755 KEARNY VILLA ROAD, SAN DIEGO, CALIFORNIA 92123
- --------------------------------------------------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 619-277-6700
-----------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
As of June 30, 1998, the Registrant had 9,735,842 shares of its $1.00 par value
common stock outstanding.
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COHU, INC.
INDEX
FORM 10-Q
JUNE 30, 1998
PART I FINANCIAL INFORMATION
Item 1. Condensed Consolidated Balance Sheets
June 30, 1998 (Unaudited) and December 31, 1997.............................. 3
Condensed Consolidated Statements of Income (Unaudited)
Three and Six Months Ended June 30, 1998 and 1997............................ 4
Condensed Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30, 1998 and 1997...................................... 5
Notes to Unaudited Condensed Consolidated Financial Statements............... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................................ 7
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.......................... 11
Item 6. Exhibits and Reports on Form 8-K............................................. 11
Signatures ............................................................................ 12
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COHU, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS JUNE 30, 1998 DECEMBER 31, 1997
-------------- -----------------
(Unaudited)
Current assets:
Cash and cash equivalents $ 48,862 $ 39,736
Short-term investments 8,684 13,814
Accounts receivable, less allowance for doubtful
accounts of $1,737 in 1998 and $1,787 in 1997 38,571 31,934
Inventories:
Raw materials and purchased parts 21,936 21,224
Work in process 11,211 15,657
Finished goods 10,601 8,018
-------------- --------------
43,748 44,899
Deferred income taxes 9,669 9,669
Prepaid expenses 1,414 1,478
-------------- --------------
Total current assets 150,948 141,530
Property, plant and equipment, at cost:
Land and land improvements 2,501 2,501
Buildings and building improvements 12,067 11,906
Machinery and equipment 18,672 17,524
-------------- --------------
33,240 31,931
Less accumulated depreciation and amortization 14,114 12,982
-------------- --------------
Net property, plant and equipment 19,126 18,949
Goodwill, net of accumulated amortization
of $893 in 1998 and $815 in 1997 2,234 2,312
Other assets 90 101
-------------- --------------
$ 172,398 $ 162,892
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,523 $ 16,166
Income taxes payable 4,844 3,421
Other accrued liabilities 15,577 15,742
-------------- --------------
Total current liabilities 30,944 35,329
Accrued retiree medical benefits 1,048 1,004
Deferred income taxes 348 348
Stockholders' equity:
Preferred stock -- --
Common stock 9,736 9,549
Paid in excess of par 10,363 8,677
Retained earnings 119,959 107,985
-------------- --------------
Total stockholders' equity 140,058 126,211
-------------- --------------
$ 172,398 $ 162,892
============== ==============
See accompanying notes.
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COHU, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per share amounts)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
---------- ---------- ---------- ----------
Net sales $ 55,202 $ 44,642 $ 111,893 $ 79,404
Cost and expenses:
Cost of sales 35,625 25,100 68,992 45,008
Research and development 5,905 4,264 11,306 7,525
Selling, general and administrative 6,239 5,169 12,415 9,986
---------- ---------- ---------- ----------
47,769 34,533 92,713 62,519
---------- ---------- ---------- ----------
Income from operations 7,433 10,109 19,180 16,885
Interest income 780 717 1,549 1,455
---------- ---------- ---------- ----------
Income before income taxes 8,213 10,826 20,729 18,340
Provision for income taxes 2,900 3,900 7,200 6,700
---------- ---------- ---------- ----------
Net income $ 5,313 $ 6,926 $ 13,529 $ 11,640
========== ========== ========== ==========
Earnings per share:
Basic $ .55 $ .74 $ 1.39 $ 1.24
========== ========== ========== ==========
Diluted $ .53 $ .70 $ 1.35 $ 1.18
========== ========== ========== ==========
Weighted average shares used in
computing earnings per share:
Basic 9,726 9,417 9,706 9,383
========== ========== ========== ==========
Diluted 10,012 9,888 10,040 9,845
========== ========== ========== ==========
See accompanying notes.
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COHU, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
SIX MONTHS ENDED
JUNE 30,
1998 1997
---------- ----------
Cash flows from operating activities:
Net income $ 13,529 $ 11,640
Adjustments to reconcile net income to net
cash provided from operating activities:
Depreciation and amortization 1,207 800
Purchase consideration to be paid with stock 361 262
Increase in accrued retiree medical benefits 44 44
Changes in assets and liabilities:
Accounts receivable (6,637) (8,070)
Inventories 1,151 (9,478)
Prepaid expenses 64 59
Accounts payable (5,643) 6,535
Income taxes payable 1,423 2,032
Other accrued liabilities (526) (656)
---------- ----------
Net cash provided from operating activities 4,973 3,168
Cash flows from investing activities:
Purchases of short-term investments (8,084) (18,834)
Maturities of short-term investments 13,214 10,610
Purchases of property, plant, equipment and other assets (1,295) (1,697)
---------- ----------
Net cash provided by (used for) investing activities 3,835 (9,921)
Cash flows from financing activities:
Issuance of stock, net 1,873 731
Cash dividends (1,555) (1,129)
---------- ----------
Net cash provided by (used for) financing activities 318 (398)
---------- ----------
Net increase (decrease) in cash and cash equivalents 9,126 (7,151)
Cash and cash equivalents at beginning of period 39,736 24,660
---------- ----------
Cash and cash equivalents at end of period $ 48,862 $ 17,509
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes $ 5,777 $ 4,682
See accompanying notes.
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COHU, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
1 - BASIS OF PRESENTATION
The accompanying interim financial statements are unaudited but include
all adjustments (consisting of normal recurring adjustments) which Cohu,
Inc. (the "Company") considers necessary for a fair statement of the
results for the period. The operating results for the three and six months
ended June 30, 1998 are not necessarily indicative of the operating
results for the entire year or any future period. These financial
statements should be read in conjunction with the consolidated financial
statements incorporated by reference in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997.
2 - EARNINGS PER SHARE
Earnings per share are computed in accordance with FASB Statement No. 128,
Earnings per Share. Basic earnings per share are computed using the
weighted average number of common shares outstanding during each period.
Diluted earnings per share include the dilutive effect of common shares
potentially issuable upon the exercise of stock options. Earnings per
share data for the three and six months ended June 30, 1997 have been
adjusted to conform to the provisions of FASB Statement No. 128. The
following table reconciles the denominators used in computing basic and
diluted earnings per share:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
---------- ---------- ---------- ----------
(in thousands) (in thousands)
Weighted average common shares outstanding 9,726 9,417 9,706 9,383
Effect of dilutive stock options 286 471 334 462
---------- ---------- ---------- ----------
10,012 9,888 10,040 9,845
========== ========== ========== ==========
3 - STOCKHOLDERS' EQUITY
On May 12, 1998 the stockholders of the Company approved (i) the adoption
of the Cohu, Inc. 1998 Stock Option Plan providing for the issuance of a
maximum of 450,000 shares of the Company's Common Stock and (ii) an
amendment to the Company's Amended and Restated Certificate of
Incorporation increasing the Company's authorized shares of Common Stock
to 40,000,000.
4 - NEW ACCOUNTING PRONOUNCEMENTS
Financial Accounting Standards Board ("FASB") Statement No. 130, Reporting
Comprehensive Income, requires the disclosure of "Comprehensive Income" in
financial statements. Comprehensive Income includes items such as
unrealized gains on available-for-sale securities that are not included in
net income. FASB No. 130 is effective in 1998 and had no material impact
on the Company's results of operations or related disclosures for the six
months ended June 30, 1998. FASB No. 131, Disclosures about Segments of an
Enterprise and Related Information, requires the disclosure of financial
information on operating segments on the basis used by management in
evaluating segment performance and deciding how to allocate resources.
FASB No. 131 will first be reflected in the Company's 1998 Annual Report.
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COHU, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
JUNE 30, 1998
This Form 10-Q contains certain forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended, and is subject
to the Safe Harbor provisions created by that statute. The words "anticipate",
"expect", "believe", and similar expressions are intended to identify such
statements. Such statements are subject to certain risks and uncertainties,
including but not limited to those discussed herein and, in particular, under
the caption "Business Risks and Uncertainties" that could cause actual results
to differ materially from those projected.
RESULTS OF OPERATIONS
SECOND QUARTER 1998 COMPARED TO SECOND QUARTER 1997
Net sales increased 24% to $55.2 million in 1998 compared to net sales of $44.6
million in 1997. Sales of semiconductor test handling equipment in 1998
increased 28% over the 1997 period and accounted for 83% of consolidated net
sales in 1998 versus 80% in 1997. Sales of television cameras and other
equipment decreased 7% while the combined sales of metal detection and microwave
equipment increased 31%. Export sales accounted for 44% of net sales in the
second quarter of 1998 compared to 52% for the year ended December 31, 1997.
Gross margin as a percentage of net sales declined to 35.5% in 1998 versus 43.8%
in 1997 as a result of lower margins in the semiconductor equipment business.
Within the semiconductor equipment segment, margins decreased in 1998 primarily
as a result of changes in product mix, sales price reductions and certain cost
increases. During the second quarter of 1998 the Company shipped a significant
number of its new Enterprise semiconductor test handlers. The gross margins
realized on these sales were lower than the Company's established semiconductor
handler products due to manufacturing inefficiencies incurred in the early
stages of producing new equipment and higher estimated warranty costs. Research
and development expense as a percentage of net sales was 10.7% in 1998, compared
to 9.6% in 1997, increasing in absolute dollars from $4.3 million to $5.9
million reflecting the Company's increased investment in new product
development, particularly in the semiconductor equipment business. Selling,
general and administrative expense as a percentage of net sales declined to
11.3% in 1998 from 11.6% in 1997 primarily as a result of the increase in
business volume. Interest income was $.8 million in 1998 and $.7 million in
1997. The provision for income taxes expressed as a percentage of pre-tax income
was 35.3% in the second quarter of 1998. As a result of the factors set forth
above, net income decreased from $6.9 million in 1997 to $5.3 million in 1998.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
Net sales increased 41% to $111.9 million in 1998 compared to net sales of $79.4
million in 1997. Net sales during the first half of 1997 were negatively
impacted by the semiconductor industry downturn that began in 1996. Sales of
semiconductor test handling equipment in 1998 increased 51% over the 1997 period
and accounted for 84% of consolidated net sales in 1998 versus 78% in 1997.
Sales of television cameras and other equipment decreased 5% while the combined
sales of metal detection and microwave equipment increased 27%. Export sales
accounted for 45% of net sales in the first six months of 1998 compared to 52%
for the year ended December 31, 1997.
Gross margin as a percentage of net sales declined to 38.3% in 1998 versus 43.3%
in 1997 as a result of lower margins in the semiconductor equipment business.
Within the semiconductor equipment segment, margins decreased in 1998 primarily
as a result of changes in product mix, sales price reductions and certain cost
increases. During the second quarter of 1998 the Company shipped a significant
number of its new Enterprise semiconductor test handlers. The gross margins
realized on these sales were lower than the Company's established semiconductor
handler products due to
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COHU, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
JUNE 30, 1998
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997(CONT.)
manufacturing inefficiencies incurred in the early stages of producing new
equipment and higher estimated warranty costs. Research and development expense
as a percentage of net sales was 10.1% in 1998, compared to 9.5% in 1997,
increasing in absolute dollars from $7.5 million to $11.3 million reflecting the
Company's increased investment in new product development, particularly in the
semiconductor equipment business. Selling, general and administrative expense as
a percentage of net sales declined to 11.1% in 1998 from 12.6% in 1997 primarily
as a result of the increase in business volume. Interest income was $1.5 million
in 1998 and 1997. The provision for income taxes expressed as a percentage of
pre-tax income was 34.7% in the first six months of 1998. As a result of the
factors set forth above, net income increased from $11.6 million in 1997 to
$13.5 million in 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's net cash flows generated from operating activities in the first
six months of 1998 totaled $5 million. The major components of cash flows from
operating activities were net income of $13.5 million an increase in income
taxes payable of $1.4 million and a decrease in inventories of $1.2 million
offset by an increase in accounts receivable of $6.6 million and decreases in
accounts payable and other accrued liabilities totaling $6.2 million. Net cash
provided by investing activities was $3.8 million resulting from maturities of
short-term investments, less purchases, offset by purchases of property, plant
and equipment and other assets of $1.3 million. Net cash provided by financing
activities was $.3 million. Cash provided by financing activities included $1.9
million received from the issuance of stock under stock option and purchase
plans offset by $1.6 million for the payment of dividends. The Company had $10
million available under its new bank line of credit and working capital of $120
million at June 30, 1998. It is anticipated that present working capital and
available borrowings under the line of credit will be sufficient to meet the
Company's operating requirements for the next twelve months and the remaining
anticipated capital expenditures for 1998 of approximately $3 million.
BUSINESS RISKS AND UNCERTAINTIES
The Company's operating results are substantially dependent on the semiconductor
test handling equipment business conducted through its Delta Design and Daymarc
subsidiaries. This capital equipment business is in turn highly dependent on the
overall strength of the semiconductor industry. Historically, the semiconductor
industry has been highly cyclical with recurring periods of oversupply, which
often have had a significant effect on the semiconductor industry's demand for
capital equipment, including equipment of the type manufactured and marketed by
the Company. The Company believes that the markets for newer generations of
semiconductors may also be subject to similar cycles and downturns such as that
experienced in 1996 and currently in 1998. Reductions in capital equipment
investment by semiconductor manufacturers will adversely affect the Company's
results of operations.
The Company's order backlog declined to $40.6 million at June 30, 1998 from
$53.4 million at March 31, 1998. This reduction in backlog is primarily related
to the Company's semiconductor equipment business. The decline in the Company's
backlog and recent announcements by certain semiconductor and semiconductor
equipment manufacturers indicate there has been a slowdown in demand for certain
semiconductors and related equipment. The projected length and severity of this
slowdown is unknown at this time. In addition, continued DRAM price declines
have negatively impacted the profitability of DRAM manufacturers which may
impact future capital equipment purchases. These and possible other factors are
expected to adversely affect the Company's operating results in the second half
of 1998.
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COHU, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
JUNE 30, 1998
BUSINESS RISKS AND UNCERTAINTIES (CONT.)
During this period of uncertainty in the semiconductor equipment industry the
Company will attempt to keep its production capacity, labor force and other
aspects of its cost structure in line with expected demand. The Company has
reduced the size of its work force and it is likely that the Company will have
further reductions. Cost reduction programs may have a temporary negative impact
on the Company's operations and operating results. Furthermore, no assurance can
be made that such cost reduction programs will be implemented successfully.
Semiconductor equipment and processes are subject to rapid technological change.
The Company believes that its future success will depend in part on its ability
to enhance existing products and develop new products with improved performance
capabilities. The Company expects to continue to invest heavily in research and
development and must manage product transitions successfully as introductions of
new products could adversely impact sales or margins of existing products. The
design, development, manufacture and commercial introduction of new
semiconductor test handling equipment is a complex process that involves a
number of risks and uncertainties. These risks include potential problems in
meeting customer performance requirements, integration of the test handler with
other suppliers' equipment and the customers' manufacturing processes and the
ability of the equipment to satisfy the semiconductor industry's constantly
evolving needs and achieve commercial acceptance at prices that produce
satisfactory profit margins. The Company has devoted significant resources to
the development, introduction and volume production of two new semiconductor
test handler products that were introduced in the second quarter of 1998. In the
past, the Company has experienced delays in the introduction of new
semiconductor test handlers and difficulties in the early stages of
manufacturing and volume production of such products. The Company has incurred
similar delays and difficulties with the two test handlers introduced in 1998.
In addition, after sale support and warranty costs are typically greater with
new test handlers than with established products. There can be no assurance that
future technologies, processes and product developments will not render the
Company's current or future product offerings obsolete or that the Company will
be able to develop and introduce new products or enhancements to its existing
products in a timely manner to satisfy customer needs or achieve market
acceptance. Furthermore, there is no assurance that the Company will be able to
convert new test handlers into production on a timely basis and realize
acceptable profit margins on such products.
The semiconductor equipment industry is intensely competitive and the Company
faces substantial competition from numerous companies throughout the world. Some
of these competitors have substantially greater financial, engineering,
manufacturing and customer support capabilities and more extensive product
offerings than the Company. In addition, there are smaller, emerging
semiconductor equipment companies that provide or may provide innovative
technology incorporated in products that may compete favorably against those of
the Company. The Company expects its competitors to continue to improve the
design and performance of their current products and to introduce new products
with improved performance capabilities. Failure to introduce new products in a
timely manner, the introduction by competitors of products with perceived or
actual advantages or disputes over rights of the Company or its competitors to
use certain intellectual property or technology could result in a loss of the
Company's competitive position and reduced sales of or margins on existing
products.
As is common in the semiconductor equipment industry, the Company relies on a
limited number of customers for a substantial percentage of its net sales. In
1997, three customers of the semiconductor equipment business accounted for 42%
of the Company's net sales. The loss of or a significant reduction in
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COHU, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
JUNE 30, 1998
BUSINESS RISKS AND UNCERTAINTIES (CONT.)
orders by these or other significant customers would adversely impact the
Company's results of operations. Furthermore, the concentration of the Company's
revenues in a limited number of large customers may cause significant
fluctuations in the Company's future annual and quarterly operating results.
In 1997, 52% of the Company's total net sales were exported to foreign
countries, including 60% of the sales in the semiconductor equipment segment.
The majority of the Company's export sales are made to destinations in Asia.
Currency fluctuations and instability in global financial markets, particularly
in Asia, may adversely impact the demand for capital equipment, including
equipment of the type manufactured and marketed by the Company. In addition,
changes in the amount or price of semiconductors produced in Asia could impact
the profitability or capital equipment spending programs of the Company's
customers.
Certain computer systems used by the Company may not properly recognize a date
using "00" as the year 2000 (Year 2000). This could result in system/program
failures or logic errors that would disrupt normal business activities. The
Company is in the process of identifying and modifying or replacing computer
systems that potentially subject the Company to risk. In addition, certain
software programs used to operate equipment manufactured and sold by the Company
may not be Year 2000 compliant. The Company is currently evaluating such
software programs to determine if they are Year 2000 ready, and is notifying
customers that plans are being developed to address this issue. The Company has
initiated communications with suppliers to raise their awareness of the Year
2000 issue and to determine the extent to which the Company is vulnerable to
their failure to correct their own Year 2000 issues. The Company cannot
reasonably predict the degree to which its suppliers will be successful in
limiting the potential negative effects of the Year 2000 date-recognition
problem. If computer systems used by the Company or its suppliers, or the
software applications used in equipment manufactured and sold by the Company,
fail or experience significant difficulties, the Company could become involved
in disputes and the Company's results of operations could be materially
affected. At this time, the Company cannot reasonably estimate the cost of its
Year 2000 compliance program.
Due to these and other factors, historical results may not be indicative of
results of operations for any future period. In addition, certain matters
discussed above are forward-looking statements that are subject to the risks and
uncertainties noted herein and the other risks and uncertainties listed from
time to time in the Company's filings with the Securities and Exchange
Commission, including but not limited to the 1997 Annual Report on Form 10-K,
that could cause actual results to differ materially from those projected or
forecasted. The Company undertakes no obligation to update the information,
including the forward-looking statements, in this Form 10-Q.
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PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders was held on May 12, 1998. At the
meeting the following directors were elected:
DIRECTOR Number of Common Shares Voted
-------- -------------------------------
For Withhold Authority
--------- ------------------
James W. Barnes 8,797,147 70,259
William S. Ivans 8,793,408 73,998
The directors continuing in office until 1999 or 2000 are Harry L.
Casari, Frank W. Davis, Gene E. Leary and Charles A. Schwan.
In addition, the stockholders approved the following proposals:
PROPOSAL
Number of Common Shares Voted
------------------------------------------
For Against Abstain
--------- --------- -------
To approve the Cohu, Inc. 1998
Stock Option Plan 6,768,430 1,969,180 129,796
To approve the amendment to the Cohu, Inc.
Amended and Restated Certificate of Incorporation
to increase authorized shares of Common Stock
to 40,000,000 8,464,830 343,433 59,143
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
3.1(a) - Provisions of the Amended and Restated
Certificate of Incorporation of Cohu, Inc.
10.1 - Credit Agreement dated June 15, 1998 between
Cohu, Inc. and Bank of America National Trust and
Savings Association
10.2 - Employment Agreement between Cohu, Inc. and
James A. Donahue
27.1 - Financial Data Schedule
(b) Reports on Form 8-K: The Company did not file any reports on
Form 8-K during the quarter ended June 30, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COHU, INC.
-----------------------------------------
(Registrant)
Date: July 24, 1998 /s/ Charles A. Schwan
---------------- -----------------------------------------
Charles A. Schwan
President & Chief Executive Officer
Date: July 24, 1998 /s/ John H. Allen
---------------- -----------------------------------------
John H. Allen
Vice President, Finance & Chief Financial
Officer
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1
Exhibit 3.1(a)
PROVISIONS OF AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION OF COHU, INC.
FIRST: The name of the corporation is COHU, INC.
SECOND: Its registered office in the State of Delaware is located at
No. 100 West Tenth Street, in the City of Wilmington, County of New Castle. The
name and address of its registered agent is The Corporation Trust Company, No.
100 West Tenth Street, Wilmington, Delaware, 19801.
THIRD: The nature of the business, or objects or purposes to be
transacted, promoted or carried on are:
To manufacture, sell and deal in electronic instruments and
devices.
To manufacture, purchase or otherwise acquire, invest in, own,
mortgage, pledge, sell, assign and transfer or otherwise dispose of,
trade, deal in and deal with goods, wares and merchandise and
personal property of every class and description.
To acquire, and pay for in cash, stock or bonds of this
corporation or otherwise, the good will, rights, assets and
property, and to undertake or assume the whole or any part of the
obligations or liabilities of any person, firm, association or
corporation.
To acquire, hold, use, sell, assign, lease, grant licenses in
respect of mortgage or otherwise dispose of letters patent of the
United States or any foreign country, patent rights, licenses and
privileges, inventions, improvements and processes, copyrights,
trademarks and trade names, relating to or useful in connection with
any business of this corporation.
To acquire by purchase, subscription or otherwise, and to
receive, hold, own guarantee, sell, assign, exchange, transfer,
mortgage, pledge or otherwise dispose of or deal in and with any of
the shares of the capital stock, or any voting trust certificates in
respect of the shares of capital stock, scrip, warrants, rights,
bonds, debentures, notes, trust receipts, and other securities,
obligations, choses in action and evidences of indebtedness or
interest issued or created by any corporations, joint stock
companies, syndicates, associations, firms, trusts or persons,
public or private, or by the government of the United States of
America, or by any foreign government, or by any state, territory,
province, municipality or other political subdivision or by any
governmental agency, and as owner thereof to possess and exercise
all the rights, powers and privileges of ownership, including the
right to execute consents and vote thereon, and to do any and all
acts and things necessary or advisable for the preservation,
protection, improvement and enhancement in value thereof.
- 1 -
2
Exhibit 3.1(a)
To enter into, make and perform contracts of every kind and
description with any person, firm, association, corporation,
municipality, county, state, body politic or government or colony or
dependency thereof.
To borrow or raise moneys for any of the purposes of the
corporation and, from time to time without limit as to amount, to
draw, make, accept, endorse, execute and issue promissory notes,
drafts, bills of exchange, warrants, bonds, debentures and other
negotiable or non-negotiable instruments and evidences of
indebtedness, and to secure the payment of any thereof and of the
interest thereon by mortgage upon or pledge, conveyance or
assignment in trust of the whole or any part of the property of the
corporation, whether at the time owned or thereafter acquired, and
to sell, pledge or otherwise dispose of such bonds or other
obligations of the corporation for its corporate purposes.
To loan to any person, firm or corporation any of its surplus
funds, either with or without security.
To purchase, hold, sell and transfer the shares of its own
capital stock; provided it shall not use its funds or property for
the purchase of its own shares of capital stock when such use would
cause any impairment of its capital except as otherwise permitted by
law, and provided further that shares of its own capital stock
belonging to it shall not be voted upon directly or indirectly.
To have one or more offices, to carry on all or any of its
operations and business and without restriction or limit as to
amount, to purchase or otherwise acquire, hold, own, mortgage, sell,
convey or otherwise dispose of, real and personal property of every
class and description in any of the states, districts, territories
or colonies of the United States, and in any and all foreign
countries, subject to the laws of such state, district, territory,
colony or country.
In general, to carry on any other business in connection with
the foregoing, and to have and exercise all the powers conferred by
the laws of Delaware upon corporations formed under the General
Corporation Law of the State of Delaware, and to do any or all of
the things hereinbefore set forth to the same extent as natural
persons might or could do.
The objects and purposes specified in the foregoing clauses
shall, except where otherwise expressed, be in no way limited or
restricted by reference to, or inference from the terms of any other
clause in this certificate of incorporation, but the objects and
purposes specified in each of the foregoing clauses of this article
shall be regarded as independent objects and purposes.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 41,000,000 shares, of which
1,000,000 shares
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Exhibit 3.1(a)
shall constitute Preferred Stock having a par value of $1.00 per share and
40,000,000 shares shall constitute Common Stock having a par value of $1.00 per
share.
1. Any of the shares of Preferred Stock may be issued from
time to time in one or more series. The Board of Directors, by
resolution or resolutions, is authorized to create or provide for
any such series, and to fix the designations, preferences and
relative, participating, optional or other special rights and
qualifications, limitations or restrictions thereof, including,
without limitation, the authority to fix or alter the dividend
rights, dividend rates, conversion rights, exchange rights, voting
rights, rights and terms of redemption (including sinking and
purchase fund provisions), the redemption price or prices, the
dissolution preferences, and the rights in respect to any
distribution of assets, of any wholly unissued series of Preferred
Stock and the number of shares constituting any such series, and the
designation thereof, or any of them and to increase or decrease the
number of shares of any series so created subsequent to the issue of
any such series but not below the number of shares of such series
then outstanding. In case the number of shares of any series shall
be so decreased, the shares constituting such decrease shall resume
the status which they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
2. Subject to all of the rights of the Preferred Stock,
dividends may be paid upon the Common Stock as and when declared by
the Board of Directors out of funds legally available for payment of
dividends.
3. In the event of any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, and after the
holders of the Preferred Stock shall have been paid in full amounts
to which they respectively shall be entitled, or an amount
sufficient to pay the aggregate amount to which such holders shall
be entitled shall have been deposited in trust with a bank or trust
company having its principal office in the Borough of Manhattan,
City, County and State of New York, or the City of Los Angeles,
State of California, having a capital, undivided profits and surplus
aggregating at least $5,000,000 for the benefit of the holders of
the Preferred Stock, the remaining net assets of the Corporation
shall be distributed pro rata to the holders of the Common Stock.
4. The entire voting power and all voting rights, except as
otherwise required by law, or fixed by resolution or resolutions of
the Board of Directors with respect to one or more series of
Preferred Stock, shall be vested exclusively in the Common Stock.
The amount of either the authorized Preferred Stock or Common Stock,
or the amount of both such classes of stock, may be increased or
decreased by the affirmative vote of the holders of a majority of
the stock of the Corporation entitled to vote.
FIFTH: The shareholders of this corporation shall have no
pre-emptive rights.
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Exhibit 3.1(a)
SIXTH: The minimum amount of capital with which the corporation will
commence business is ONE THOUSAND DOLLARS ($1,000).
SEVENTH: The names and places of residence of the incorporators are
as follows:
NAMES RESIDENCES
----- ----------
H. K. Webb Wilmington, Delaware
H. C. Broadt Wilmington, Delaware
A. D. Atwell Wilmington, Delaware
EIGHTH: The corporation is to have perpetual existence.
NINTH: The private property of the stockholders shall not be subject
to the payment of corporate debts to any extent whatever.
TENTH: In furtherance and not in limitation of the powers conferred
by statute, the board of directors is expressly authorized:
To make, alter or repeal the by-laws of the corporation.
To authorize and cause to be executed mortgages and liens upon
the real and personal property of the corporation.
To set apart out of any of the funds of the corporation
available for dividends a reserve or reserves for any proper purpose
and to abolish any such reserve in the manner in which it was
created.
By resolution passed by a majority of the whole board, to
designate one or more committees, each committee to consist of two
or more of the directors of the corporation, which, to the extent
provided in the resolution or in the by-laws of the corporation,
shall have and may exercise the powers of the board of directors in
the management of the business and affairs of the corporation, and
may authorize the seal of the corporation to be affixed to all
papers which may require it. Such committee or committees shall have
such name or names as may be stated in the by-laws of the
corporation or as may be determined from time to time by resolution
adopted by the board of directors.
When and as authorized by the affirmative vote of the holders
of a majority of the stock issued and outstanding having voting
power given at a stockholders' meeting duly called for that purpose,
or when authorized by the written consent of the holders of a
majority of the voting stock issued and outstanding, to sell, lease
or exchange all of the property and assets of the corporation,
including its good will and its corporate franchises, upon such
terms and conditions and for such consideration, which may be in
whole or in part shares of stock in, and/or other securities of any
other corporation or corporations, as its board of directors shall
deem expedient and for the best interests of the corporation.
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Exhibit 3.1(a)
ELEVENTH: Meetings of stockholders may be held outside the State of
Delaware, if the by-laws so provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
board of directors or in the by-laws of the corporation. Elections of directors
need not be by ballot unless the by-laws of the corporation shall so provide.
TWELFTH: The corporation reserves the right to amend, alter, change
or repeal any provision contained in this certificate of incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
THIRTEENTH: Every shareholder entitled to vote at any election of
directors of this company may cumulate his votes and give one candidate a number
of votes equal to the number of directors to be elected multiplied by the number
of votes to which his shares are entitled, or distribute his votes on the same
principle among as many candidates as he thinks fit. The candidates receiving
the highest number of votes up to the number of directors to be elected are
elected.
FOURTEENTH: The Board of Directors of this Corporation is divided
into three classes, Class 1, Class 2 and Class 3. The number of Directors in
each class shall be the whole number contained in the quotient arrived at by
dividing the authorized number of Directors by three, and if a fraction is also
contained in such quotient, then if such fraction is one-third, the extra
Director shall be a member of Class 3, and if the fraction is two-thirds, one of
the Directors shall be a member of Class 3 and the other shall be a member of
Class 2. Each Director shall serve for a term ending on the date of the third
annual meeting following that at which such Director is elected, and Directors
of only one class shall be elected at any annual meeting, except as hereinafter
provided. The Directors elected at the meeting of stockholders at which the
Amendment to the Certificate of Incorporation of this Corporation to include
this Article is approved shall determine which of them shall belong to Class 1,
which to Class 2, and which to Class 3 by resolution of the Board, which
resolution when adopted may not be amended or rescinded. Those so determined as
belonging to Class 1 shall serve for a term ending on the annual meeting date
next following, those so determined as belonging to Class 2 shall serve for a
term ending on the second annual meeting date next following, and those so
determined as belonging to Class 3 shall serve a full term as hereinabove
provided. The foregoing notwithstanding, each Director shall serve until a
successor shall have been duly elected and qualified unless he shall resign,
become disqualified, die or shall be removed as provided in this Certificate of
Incorporation.
No Director of the Corporation shall be removed from office as a
Director by vote or other action of stockholders or otherwise, unless the
Director to be removed has been convicted of a felony by a court of competent
jurisdiction and such conviction is no longer subject to direct appeal, or
unless the Director to be removed has been adjudged to be liable for negligence
or misconduct in the performance of his duty to the Corporation by a court of
competent jurisdiction and such adjudication is no longer subject to direct
appeal.
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Exhibit 3.1(a)
FIFTEENTH: In the event that it is proposed that this Corporation
enter into a "business combination" (as hereinafter defined) with any other
corporation and such corporation or its affiliates singly or in the aggregate
own or control directly or indirectly five (5%) percent or more of the
outstanding shares of the common stock of this Corporation (such corporation and
its affiliates being referred to herein as a "related party"), the affirmative
vote of the holders of not less than 80% of the total voting power of all
outstanding shares of stock of this Corporation shall be required for the
approval of such proposal; provided, however, that the foregoing shall not apply
to any business combination which was approved by resolution of the Board of
Directors of this Corporation prior to the acquisition of the ownership or
control of ten (10%) percent of the outstanding shares of this Corporation by
such related party, nor shall it apply to any business combination between this
Corporation and another Corporation, fifty (50%) percent or more of the voting
stock of which is owned by this Corporation, and none of which is owned or
controlled by a related party, provided that each stockholder of this
Corporation receives the same type of consideration in such transaction in
proportion to his stockholding. For the purposes hereof, an "affiliate" is any
person (including a corporation, partnership, trust, estate or individual) who
directly or indirectly, through one or more intermediaries, controls or is
controlled by or is under common control with the person specified, and
"control" means the possession directly or indirectly of the power to direct or
cause the direction of management and policies of a person, whether through the
ownership of voting securities, by contract, or otherwise.
For the purposes hereof, the term "business combination" shall mean
(a) any merger or consolidation of or with this Corporation, (b) any sale,
lease, exchange, transfer or other disposition, including without limitation a
mortgage or other security device, of all or any substantial part of the assets
of this Corporation or any subsidiary of this Corporation, (c) the acquisition
by this Corporation or subsidiary of this Corporation of any securities of a
related person, (d) the issuance of any shares of this Corporation or any
subsidiary to a related person, or (e) any agreement, contract or other
arrangement providing for any of the transactions described in this definition
of business combination.
SIXTEENTH: Action shall be taken by stockholders only at an annual
or special meeting of stockholders, and stockholders may not act by written
consent.
SEVENTEENTH: The by-laws of this Corporation may be adopted,
altered, amended or repealed at any time by affirmative vote of a majority of
the authorized number of Directors of this Corporation, and may also be altered,
amended or repealed at any annual meeting, or at any special meeting of
stockholders duly called for the purpose, by the affirmative vote of the holders
of not less than 80% of the issued and outstanding shares of the stock of this
Corporation, in any manner not prohibited by this Certificate of Incorporation
or by the Delaware Corporation Law as then in effect.
EIGHTEENTH: The provisions set forth in Articles Fourteenth,
Fifteenth, Sixteenth, and Seventeenth and in this Article Eighteenth may not be
repealed or amended in any respect unless such repeal or amendment is approved
by the affirmative vote of the holders of not less than 80% of the total voting
power of all outstanding shares of stock of this Corporation.
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Exhibit 10.1
[BANK OF AMERICA LOGO]
BANK OF AMERICA BUSINESS LOAN AGREEMENT
NATIONAL TRUST AND SAVINGS ASSOCIATION
- --------------------------------------------------------------------------------
This Agreement dated as of June 15, 1998, is between BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION (the "Bank") and COHU, INC. (the "Borrower").
1. LINE OF CREDIT AMOUNT AND TERMS
1.1 LINE OF CREDIT AMOUNT.
(a) During the availability period described below, the Bank will provide a
line of credit to the Borrower. The amount of the line of credit (the
"Commitment") is Ten Million Dollars ($10,000,000).
(b) This is a revolving line of credit providing for cash advances and
letters of credit. During the availability period, the Borrower may
repay principal amounts and reborrow them.
(c) The Borrower agrees not to permit the outstanding principal balance of
advances under the line of credit plus the outstanding amounts of any
letters of credit, including amounts drawn on letters of credit and not
yet reimbursed to exceed the Commitment.
1.2 AVAILABILITY PERIOD. The line of credit is available between the date of
this Agreement and May 1, 1999 (the "Expiration Date") unless the Borrower is in
default.
1.3 INTEREST RATE.
(a) The interest rate is the Bank's Reference Rate.
(b) The Reference Rate is the rate of interest publicly announced from time
to time by the Bank in San Francisco, California, as its Reference Rate.
The Reference Rate is set by the Bank based on various factors,
including the Bank's costs and desired return, general economic
conditions and other factors, and is used as a reference point for
pricing some loans. The Bank may price loans to its customers at, above,
or below the Reference Rate. Any change in the Reference Rate shall take
effect at the opening of business on the day specified in the public
announcement of a change in the Bank's Reference Rate.
1.4 REPAYMENT TERMS.
(a) The Borrower will pay interest on June 1, 1998, and then monthly
thereafter until payment in full of any principal outstanding under this
line of credit.
(b) The Borrower will repay in full all principal and any unpaid interest or
other charges outstanding under this line of credit no later than the
Expiration Date.
1.5 LETTERS OF CREDIT. This line of credit may be used for financing:
(i) commercial letters of credit with a maximum maturity of 365 days
but not to extend more than 180 days beyond the Expiration Date.
Each commercial letter of credit will require drafts payable at
sight.
(ii) standby letters of credit with a maximum maturity of 365 days
but not to extend more than 180 days beyond the Expiration Date.
(iii) The amount of letters of credit outstanding at any one time,
(including amounts drawn on letters of credit and not yet
reimbursed), may not exceed Two Hundred Fifty Thousand Dollars
($250,000).
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The Borrower agrees:
(a) any sum drawn under a letter of credit may, at the option of the Bank,
be added to the principal amount outstanding under this Agreement. The
amount will bear interest and be due as described elsewhere in this
Agreement.
(b) if there is a default under this Agreement, to immediately prepay and
make the Bank whole for any outstanding letters of credit.
(c) the issuance of any letter of credit and any amendment to a letter of
credit is subject to the Bank's written approval and must be in form and
content satisfactory to the Bank and in favor of a beneficiary
acceptable to the Bank.
(d) to sign the Bank's form Application and Agreement for Commercial Letter
of Credit or Application and Agreement for Standby Letter of Credit.
(e) to pay any issuance and/or other fees that the Bank notifies the
Borrower will be charged for issuing and processing letters of credit
for the Borrower.
(f) to allow the Bank to automatically charge its checking account for
applicable fees, discounts, and other charges.
2. EXPENSES
2.1 EXPENSES. The Borrower agrees to immediately repay the Bank for expenses
that include, but are not limited to, filing, recording and search fees,
appraisal fees, title report fees and documentation fees.
2.2 REIMBURSEMENT COSTS. The Borrower agrees to reimburse the Bank for any
expenses it incurs in the preparation of this Agreement and any agreement or
instrument required by this Agreement. Expenses include, but are not limited to,
reasonable attorneys' fees, including any allocated costs of the Bank's in-house
counsel.
3. DISBURSEMENTS, PAYMENTS AND COSTS
3.1 REQUESTS FOR CREDIT. Each request for an extension of credit will be
made in writing in a manner acceptable to the Bank, or by another means
acceptable to the Bank.
3.2 DISBURSEMENTS AND PAYMENTS. Each disbursement by the Bank and each
payment by the Borrower will be:
(a) made at the Bank's branch (or other location) selected by the Bank from
time to time;
(b) made for the account of the Bank's branch selected by the Bank from time
to time;
(c) made in immediately available funds, or such other type of funds
selected by the Bank;
(d) evidenced by records kept by the Bank. In addition, the Bank may, at its
discretion, require the Borrower to sign one or more promissory notes.
3.3 TELEPHONE AND TELEFAX AUTHORIZATION.
(a) The Bank may honor telephone or telefax instructions for advances or
repayments and telefax requests for the issuance of letters of credit
given by any one of the individuals authorized to sign loan agreements
on behalf of the Borrower, or any other individual designated by any one
of such authorized signers.
(b) Advances will be deposited in and repayments will be withdrawn from the
Borrower's account number 14505-50312, or such other of the Borrower's
accounts with the Bank as designated in writing by the Borrower.
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(c) The Borrower indemnifies and excuses the Bank (including its officers,
employees, and agents) from all liability, loss, and costs in connection
with any act resulting from telephone or telefax instructions it
reasonably believes are made by any individual authorized by the
Borrower to give such instructions. This indemnity and excuse will
survive this Agreement's termination.
3.4 DIRECT DEBIT.
(a) The Borrower agrees that interest and principal payments and any fees
will be deducted automatically on the due date from the Borrower's
account number 14505-50312, or such other of the Borrower's accounts
with the Bank as designated in writing by the Borrower.
(b) The Bank will debit the account on the dates the payments become due. If
a due date does not fall on a banking day, the Bank will debit the
account on the first banking day following the due date.
(c) The Borrower will maintain sufficient funds in the account on the dates
the Bank enters debits authorized by this Agreement. If there are
insufficient funds in the account on the date the Bank enters any debit
authorized by this Agreement, the debit will be reversed.
3.5 BANKING DAYS. Unless otherwise provided in this Agreement, a banking day
is a day other than a Saturday or a Sunday on which the Bank is open for
business in California. All payments and disbursements which would be due on a
day which is not a banking day will be due on the next banking day. All payments
received on a day which is not a banking day will be applied to the credit on
the next banking day.
3.6 TAXES.
(a) If any payments to the Bank under this Agreement are made from outside
the United States, the Borrower will not deduct any foreign taxes from
any payments it makes to the Bank. If any such taxes are imposed on any
payments made by the Borrower (including payments under this paragraph),
the Borrower will pay the taxes and will also pay to the Bank, at the
time interest is paid, any additional amount which the Bank specifies as
necessary to preserve the after-tax yield the Bank would have received
if such taxes had not been imposed. The Borrower will confirm that it
has paid the taxes by giving the Bank official tax receipts (or
notarized copies) within 30 days after the due date.
(b) Payments made by the Borrower to the Bank will be made without deduction
of United States withholding or similar taxes. If the Borrower is
required to pay U.S. withholding taxes, the Borrower will pay such taxes
in addition to the amounts due to the Bank under this Agreement. If the
Borrower fails to make such tax payments when due, the Borrower
indemnifies the Bank against any liability for such taxes, as well as
for any related interest, expenses, additions to tax, or penalties
asserted against or suffered by the Bank with respect to such taxes.
3.7 ADDITIONAL COSTS. The Borrower will pay the Bank, on demand, for the
Bank's costs or losses arising from any statute or regulation, or any request or
requirement of a regulatory agency which is applicable to all national banks or
a class of all national banks. The costs and losses will be allocated to the
loan in a manner determined by the Bank, using any reasonable method. The costs
include the following:
(a) any reserve or deposit requirements; and
(b) any capital requirements relating to the Bank's assets and commitments
for credit.
3.8 INTEREST CALCULATION. Except as otherwise stated in this Agreement, all
interest and fees, if any, will be computed on the basis of a 360-day year and
the actual number of days elapsed. This results in more interest or a higher fee
than if a 365-day year is used. Instalments of principal which are not paid when
due under this Agreement shall continue to bear interest until paid.
3.9 DEFAULT RATE. Upon the occurrence and during the continuation of any
default under this Agreement, principal amounts outstanding under this Agreement
will at the option of the Bank bear interest at a rate which is 2.00 percentage
points higher than the rate of interest otherwise provided under this Agreement.
This will not constitute a waiver of any default.
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3.10 INTEREST COMPOUNDING. At the Bank's sole option in each instance, any
interest, fees or costs which are not paid when due under this Agreement shall
bear interest from the due date at the Bank's Reference Rate plus 1.00
percentage point. This may result in compounding of interest.
4. CONDITIONS
The Bank must receive the following items, in form and content acceptable to the
Bank, before it is required to extend any credit to the Borrower under this
Agreement:
4.1 AUTHORIZATIONS. Evidence that the execution, delivery and performance by
the Borrower (and any guarantor) of this Agreement and any instrument or
agreement required under this Agreement have been duly authorized.
4.2 GOVERNING DOCUMENTS. A copy of the Borrower's articles of incorporation.
4.3 OTHER ITEMS. Any other items that the Bank reasonably requires.
5. REPRESENTATIONS AND WARRANTIES
When the Borrower signs this Agreement, and until the Bank is repaid in full,
the Borrower makes the following representations and warranties. Each request
for an extension of credit constitutes a renewed representation.
5.1 ORGANIZATION OF BORROWER. The Borrower is a corporation duly formed and
existing under the laws of the state where organized.
5.2 AUTHORIZATION. This Agreement, and any instrument or agreement required
hereunder, are within the Borrower's powers, have been duly authorized, and do
not conflict with any of its organizational papers.
5.3 ENFORCEABLE AGREEMENT. This Agreement is a legal, valid and binding
agreement of the Borrower, enforceable against the Borrower in accordance with
its terms, and any instrument or agreement required hereunder, when executed and
delivered, will be similarly legal, valid, binding and enforceable.
5.4 GOOD STANDING. In each state in which the Borrower does business, it is
properly licensed, in good standing, and, where required, in compliance with
fictitious name statutes.
5.5 NO CONFLICTS. This Agreement does not conflict with any law, agreement,
or obligation by which the Borrower is bound.
5.6 FINANCIAL INFORMATION. All financial and other information that has been
or will be supplied to the Bank, is:
(a) sufficiently complete to give the Bank accurate knowledge of the
Borrower's (and any guarantor's) financial condition, including all
material contingent liabilities.
(b) in compliance with all government regulations that apply.
5.7 LAWSUITS. There is no lawsuit, tax claim or other dispute pending or
threatened against the Borrower, which, if lost, would impair the Borrower's
financial condition or ability to repay the loan, except as have been disclosed
in writing to the Bank.
5.8 PERMITS, FRANCHISES. The Borrower possesses all permits, memberships,
franchises, contracts and licenses required and all trademark rights, trade name
rights, patent rights and fictitious name rights necessary to enable it to
conduct the business in which it is now engaged.
5.9 OTHER OBLIGATIONS. The Borrower is not in default on any obligation for
borrowed money, any purchase money obligation or any other material lease,
commitment, contract, instrument or obligation.
5.10 INCOME TAX MATTERS. The Borrower is not subject to limitations on its
entitlement to deduct interest for federal income tax purposes under Section
163(j) of the Internal Revenue Code of 1986 (known as the "earnings stripping"
provisions) and has no knowledge of any pending assessments or adjustments of
its income tax for any year.
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5.11 NO TAX AVOIDANCE PLAN. The Borrower's obtaining of credit from the Bank
under this Agreement does not have as a principal purpose the avoidance of U.S.
withholding taxes.
5.12 NO EVENT OF DEFAULT. There is no event which is, or with notice or lapse
of time or both would be, a default under this Agreement.
5.13 ERISA PLANS.
(a) Each Plan (other than a multiemployer plan) is in compliance in all
material respects with the applicable provisions of ERISA, the Code and
other federal or state law. Each Plan has received a favorable
determination letter from the IRS and to the best knowledge of the
Borrower, nothing has occurred which would cause the loss of such
qualification. The Borrower has fulfilled its obligations, if any, under
the minimum funding standards of ERISA and the Code with respect to each
Plan, and has not incurred any liability with respect to any Plan under
Title IV of ERISA.
(b) There are no claims, lawsuits or actions (including by any governmental
authority), and there has been no prohibited transaction or violation of
the fiduciary responsibility rules, with respect to any Plan which has
resulted or could reasonably be expected to result in a material adverse
effect.
(c) With respect to any Plan subject to Title IV of ERISA:
(i) No reportable event has occurred under Section 4043(c) of ERISA
for which the PBGC requires 30 day notice.
(ii) No action by the Borrower or any ERISA Affiliate to terminate or
withdraw from any Plan has been taken and no notice of intent to
terminate a Plan has been filed under Section 4041 of ERISA.
(iii) No termination proceeding has been commenced with respect to a
Plan under Section 4042 of ERISA, and no event has occurred or
condition exists which might constitute grounds for the
commencement of such a proceeding.
(d) The following terms have the meanings indicated for purposes of this
Agreement:
(i) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(ii) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
(iii) "ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with the Borrower within the
meaning of Section 414(b) or (c) of the Code.
(iv) "PBGC" means the Pension Benefit Guaranty Corporation.
(v) "Plan" means a pension, profit-sharing, or stock bonus plan
intended to qualify under Section 401(a) of the Code, maintained
or contributed to by the Borrower or any ERISA Affiliate,
including any multiemployer plan within the meaning of Section
4001(a) (3) of ERISA.
5.14 YEAR 2000 COMPLIANCE. The Borrower has implemented a comprehensive
program to address the "year 2000 problem" (that is, the risk that computer
applications may not be able to properly perform date-sensitive functions after
December 31, 1999) and expects to resolve on a timely basis any material year
2000 problem. The Borrower has also made inquiry of each supplier, vendor and
customer of the Borrower that is of material importance to the financial
well-being of such Borrower with respect to the "year 2000 problem". On the
basis of that inquiry, the Borrower believes that each such supplier, vendor and
customer of the Borrower will resolve any material year 2000 problem on a timely
basis.
6. COVENANTS The Borrower agrees, so long as credit is available under this
Agreement and until the Bank is repaid in full:
6.1 USE OF PROCEEDS. To use the proceeds of the credit only for short term
working capital needs.
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6.2 FINANCIAL INFORMATION. To provide the following financial information
and statements in form and content acceptable to the Bank, and such additional
information as requested by the Bank from time to time:
(a) Within 90 days of the Borrower's fiscal year end, the Borrower's annual
financial statements. These financial statements must be audited (with
an opinion not qualified in any manner, including not qualified due to
possible failure to take all appropriate steps to successfully address
year 2000 system issues) by a Certified Public Accountant ("CPA")
acceptable to the Bank. The statements shall be prepared on a
consolidated basis.
(b) Within 45 days of the period's end, the Borrower's quarterly financial
statements. These financial statements may be Borrower prepared. The
statements shall be prepared on a consolidated and consolidating basis.
(c) Copies of the Borrower's Form 10-K Annual Report within 90 days of the
Borrower's fiscal year end.
(d) Copies of the Borrower's Form 10-Q Quarterly Report within 60 days after
the end of each quarterly accounting period.
6.3 QUICK RATIO. To maintain on a consolidated basis a ratio of quick assets
to current liabilities of at least 1.5:1.0 for each quarterly accounting period.
"Quick assets" means cash, short-term cash investments, net trade receivables
and marketable securities not classified as long-term investments. "Current
liabilities" shall include (a) all obligations classified as current liabilities
under generally accepted accounting principles, plus (b) all principal amounts
outstanding under revolving lines of credit, whether classified as current or
long-term, which are not already included under (a) above.
6.4 TANGIBLE NET WORTH. To maintain on a consolidated basis tangible net
worth equal to at least One Hundred Twenty Million Dollars ($120,000,000) for
each annual accounting period. "Tangible net worth" means the gross book value
of the Borrower's assets (excluding goodwill, patents, trademarks, trade names,
organization expense, treasury stock, unamortized debt discount and expense,
capitalized or deferred research and development costs, deferred marketing
expenses, deferred receivables, and other like intangibles) less total
liabilities, including but not limited to accrued and deferred income taxes, and
any reserves against assets.
6.5 TOTAL LIABILITIES TO TANGIBLE NET WORTH RATIO. To maintain on a
consolidated basis a ratio of total liabilities to tangible net worth not
exceeding 0.60:1.0 for each quarterly accounting period. "Total liabilities"
means the sum of current liabilities plus long term liabilities.
6.6 OTHER DEBTS. Borrower or any wholly owned subsidiary not to have
outstanding or incur any direct or contingent liabilities (other than those to
the Bank), or become liable for the liabilities of others without the Bank's
written consent. This does not prohibit:
(a) Acquiring goods, supplies, or merchandise on normal trade credit.
(b) Endorsing negotiable instruments received in the usual course of
business.
(c) Obtaining surety bonds in the usual course of business.
(d) Additional debts and lease obligations for business purposes which do
not exceed a total principal amount of Two Hundred Fifty Thousand
Dollars ($250,000) outstanding at any one time.
6.7 OTHER LIENS. Not to create, assume, or allow any security interest or
lien (including judicial liens) on property the Borrower now or later owns,
except:
(a) Deeds of trust and security agreements in favor of the Bank.
(b) Liens for taxes not yet due.
(c) Additional liens which secure obligations in a total principal amount
not exceeding Two Hundred Fifty Thousand Dollars ($250,000).
- 6 -
7
6.8 CAPITAL EXPENDITURES. Not to spend (including the total amount of any
capital leases) more than Seven Million Five Hundred Thousand ($7,500,000) in
any single fiscal year to acquire fixed or capital assets.
6.9 NOTICES TO BANK. To promptly notify the Bank in writing of:
(a) any lawsuit over Five Million Dollars ($5,000,000) against the Borrower
(or any guarantor).
(b) any substantial dispute between the Borrower (or any guarantor) and any
government authority.
(c) any failure to comply with this Agreement.
(d) any material adverse change in the Borrower's (or any guarantor's)
business condition (financial or otherwise), operations, properties or
prospects, or ability to repay the credit.
(e) any change in the Borrower's name, legal structure, place of business,
or chief executive office if the Borrower has more than one place of
business.
6.10 BOOKS AND RECORDS. To maintain adequate books and records.
6.11 AUDITS. To allow the Bank and its agents to inspect the Borrower's
properties (including taking and removing samples for environmental testing) and
examine, audit and make copies of books and records at any reasonable time. If
any of the Borrower's properties, books or records are in the possession of a
third party, the Borrower authorizes that third party to permit the Bank or its
agents to have access to perform inspections or audits and to respond to the
Bank's requests for information concerning such properties, books and records.
6.12 COMPLIANCE WITH LAWS. To comply with the laws (including any fictitious
name statute), regulations, and orders of any government body with authority
over the Borrower's business.
6.13 PRESERVATION OF RIGHTS. To maintain and preserve all rights, privileges,
and franchises the Borrower now has.
6.14 MAINTENANCE OF PROPERTIES. To make any repairs, renewals, or
replacements to keep the Borrower's properties in good working condition.
6.15 COOPERATION. To take any action reasonably requested by the Bank to
carry out the intent of this Agreement.
6.16 GENERAL BUSINESS INSURANCE. To maintain insurance as is usual for the
business it is in.
6.17 ADDITIONAL NEGATIVE COVENANTS. Not to, without the Bank's written
consent:
(a) engage in any business activities substantially different from the
Borrower's present business.
(b) liquidate or dissolve the Borrower's business.
(c) enter into any consolidation, merger, or other combination, or become a
partner in a partnership, a member of a joint venture, or a member of a
limited liability company.
(d) sell, assign, lease, transfer or otherwise dispose of any assets for
less than fair market value, or enter into any agreement to do so.
(e) sell, assign, lease, transfer or otherwise dispose of all or a
substantial part of the Borrower's business or the Borrower's assets.
(f) enter into any sale and leaseback agreement covering any of its fixed or
capital assets.
(g) acquire or purchase a business or its assets for a consideration,
including assumption of debt, in excess of Twenty Million Dollars
($20,000,000) in the aggregate.
(h) voluntarily suspend its business for more than 5 days in any 30 day
period.
- 7 -
8
6.18 ERISA PLANS. With respect to a Plan subject to Title IV of ERISA, to
give prompt written notice to the Bank of:
(a) The occurrence of any reportable event under Section 4043(c) of ERISA
for which the PBGC requires 30 day notice.
(b) Any action by the Borrower or any ERISA Affiliate to terminate or
withdraw from a Plan or the filing of any notice of intent to terminate
under Section 4041 of ERISA.
(c) The commencement of any proceeding with respect to a Plan under Section
4042 of ERISA.
7. HAZARDOUS WASTE INDEMNIFICATION
The Borrower will indemnify and hold harmless the Bank from any loss or
liability directly or indirectly arising out of the use, generation,
manufacture, production, storage, release, threatened release, discharge,
disposal or presence of a hazardous substance. This indemnity will apply whether
the hazardous substance is on, under or about the Borrower's property or
operations or property leased to the Borrower. The indemnity includes but is not
limited to attorneys' fees (including the reasonable estimate of the allocated
cost of in-house counsel and staff). The indemnity extends to the Bank, its
parent, subsidiaries and all of their directors, officers, employees, agents,
successors, attorneys and assigns. "Hazardous substances" means any substance,
material or waste that is or becomes designated or regulated as "toxic,"
"hazardous," "pollutant," or "contaminant" or a similar designation or
regulation under any federal, state or local law (whether under common law,
statute, regulation or otherwise) or judicial or administrative interpretation
of such, including without limitation petroleum or natural gas. This indemnity
will survive repayment of the Borrower's obligations to the Bank.
8. DEFAULT
If any of the following events occurs, the Bank may do one or more of the
following: declare the Borrower in default, stop making any additional credit
available to the Borrower, and require the Borrower to repay its entire debt
immediately and without prior notice. If an event of default occurs under the
paragraph entitled "Bankruptcy," below, with respect to the Borrower, then the
entire debt outstanding under this Agreement will automatically be due
immediately.
8.1 FAILURE TO PAY. The Borrower fails to make a payment under this
Agreement when due.
8.2 FALSE INFORMATION. The Borrower (or any guarantor) has given the Bank
false or misleading information or representations.
8.3 BANKRUPTCY. The Borrower (or any guarantor) files a bankruptcy petition,
a bankruptcy petition is filed against the Borrower (or any guarantor) or the
Borrower (or any guarantor) makes a general assignment for the benefit of
creditors.
8.4 RECEIVERS. A receiver or similar official is appointed for the
Borrower's (or any guarantor's) business, or the business is terminated.
8.5 LAWSUITS. Any lawsuit or lawsuits are filed on behalf of one or more
trade creditors against the Borrower in an aggregate amount of Five Million
Dollars ($5,000,000) or more in excess of any insurance coverage.
8.6 JUDGMENTS. Any judgments or arbitration awards are entered against the
Borrower (or any guarantor), or the Borrower (or any guarantor) enters into any
settlement agreements with respect to any litigation or arbitration, in an
aggregate amount of Two Million Dollars ($2,000,000) or more in excess of any
insurance coverage.
8.7 GOVERNMENT ACTION. Any government authority takes action that the Bank
believes materially adversely affects the Borrower's (or any guarantor's)
financial condition or ability to repay.
8.8 MATERIAL ADVERSE CHANGE. A material adverse change occurs, or is
reasonably likely to occur, in the Borrower's (or any guarantor's) business
condition (financial or otherwise), operations, properties or prospects, or
ability to repay the credit.
- 8 -
9
8.9 CROSS-DEFAULT. Any default occurs under any agreement in connection with
any credit the Borrower (or any guarantor) or any of the Borrower's related
entities or affiliates has obtained from anyone else or which the Borrower (or
any guarantor) or any of the Borrower's related entities or affiliates has
guaranteed.
8.10 DEFAULT UNDER RELATED DOCUMENTS. Any other document required by this
Agreement is violated or no longer in effect.
8.11 OTHER BANK AGREEMENTS. The Borrower (or any guarantor) fails to meet the
conditions of, or fails to perform any obligation under any other agreement the
Borrower (or any guarantor) has with the Bank or any affiliate of the Bank.
8.12 ERISA PLANS. The occurrence of any one or more of the following events
with respect to a Plan subject to Title IV of ERISA, provided such event or
events could reasonably be expected, in the judgment of the Bank, to subject the
Borrower to any tax, penalty or liability (or any combination of the foregoing)
which, in the aggregate, could have a material adverse effect on the financial
condition of the Borrower:
(a) A reportable event shall occur under Section 4043(c) of ERISA with
respect to a Plan.
(b) Any Plan termination (or commencement of proceedings to terminate a
Plan) or the full or partial withdrawal from a Plan by the Borrower or
any ERISA Affiliate.
8.13 OTHER BREACH UNDER AGREEMENT. The Borrower fails to meet the conditions
of, or fails to perform any obligation under, any term of this Agreement not
specifically referred to in this Article. This includes any failure or
anticipated failure by the Borrower to comply with any financial covenants set
forth in this Agreement, whether such failure is evidenced by financial
statements delivered to the Bank or is otherwise known to the Borrower or the
Bank.
9. ENFORCING THIS AGREEMENT; MISCELLANEOUS
9.1 GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all financial covenants will be made under
generally accepted accounting principles, consistently applied.
9.2 CALIFORNIA LAW. This Agreement is governed by California law.
9.3 SUCCESSORS AND ASSIGNS. This Agreement is binding on the Borrower's and
the Bank's successors and assignees. The Borrower agrees that it may not assign
this Agreement without the Bank's prior consent. The Bank may sell
participations in or assign this loan, and may exchange financial information
about the Borrower with actual or potential participants or assignees; provided
that such actual or potential participants or assignees shall agree to treat all
financial information exchanged as confidential. If a participation is sold or
the loan is assigned, the purchaser will have the right of set-off against the
Borrower.
9.4 ARBITRATION.
(a) This paragraph concerns the resolution of any controversies or claims
between the Borrower and the Bank, including but not limited to those
that arise from:
(i) This Agreement (including any renewals, extensions or
modifications of this Agreement);
(ii) Any document, agreement or procedure related to or delivered in
connection with this Agreement;
(iii) Any violation of this Agreement; or
(iv) Any claims for damages resulting from any business conducted
between the Borrower and the Bank, including claims for injury
to persons, property or business interests (torts).
(b) At the request of the Borrower or the Bank, any such controversies or
claims will be settled by arbitration in accordance with the United
States Arbitration Act. The United States Arbitration Act will apply
even though this Agreement provides that it is governed by California
law.
- 9 -
10
(c) Arbitration proceedings will be administered by the American Arbitration
Association and will be subject to its commercial rules of arbitration.
(d) For purposes of the application of the statute of limitations, the
filing of an arbitration pursuant to this paragraph is the equivalent of
the filing of a lawsuit, and any claim or controversy which may be
arbitrated under this paragraph is subject to any applicable statute of
limitations. The arbitrators will have the authority to decide whether
any such claim or controversy is barred by the statute of limitations
and, if so, to dismiss the arbitration on that basis.
(e) If there is a dispute as to whether an issue is arbitrable, the
arbitrators will have the authority to resolve any such dispute.
(f) The decision that results from an arbitration proceeding may be
submitted to any authorized court of law to be confirmed and enforced.
(g) The procedure described above will not apply if the controversy or
claim, at the time of the proposed submission to arbitration, arises
from or relates to an obligation to the Bank secured by real property
located in California. In this case, both the Borrower and the Bank must
consent to submission of the claim or controversy to arbitration. If
both parties do not consent to arbitration, the controversy or claim
will be settled as follows:
(i) The Borrower and the Bank will designate a referee (or a panel
of referees) selected under the auspices of the American
Arbitration Association in the same manner as arbitrators are
selected in Association-sponsored proceedings;
(ii) The designated referee (or the panel of referees) will be
appointed by a court as provided in California Code of Civil
Procedure Section 638 and the following related sections;
(iii) The referee (or the presiding referee of the panel) will be an
active attorney or a retired judge; and
(iv) The award that results from the decision of the referee (or the
panel) will be entered as a judgment in the court that appointed
the referee, in accordance with the provisions of California
Code of Civil Procedure Sections 644 and 645.
(h) This provision does not limit the right of the Borrower or the Bank to:
(i) exercise self-help remedies such as setoff;
(ii) foreclose against or sell any real or personal property
collateral; or
(iii) act in a court of law, before, during or after the arbitration
proceeding to obtain:
(A) an interim remedy; and/or
(B) additional or supplementary remedies.
(i) The pursuit of or a successful action for interim, additional or
supplementary remedies, or the filing of a court action, does not
constitute a waiver of the right of the Borrower or the Bank, including
the suing party, to submit the controversy or claim to arbitration if
the other party contests the lawsuit. However, if the controversy or
claim arises from or relates to an obligation to the Bank which is
secured by real property located in California at the time of the
proposed submission to arbitration, this right is limited according to
the provision above requiring the consent of both the Borrower and the
Bank to seek resolution through arbitration.
(j) If the Bank forecloses against any real property securing this
Agreement, the Bank has the option to exercise the power of sale under
the deed of trust or mortgage, or to proceed by judicial foreclosure.
9.5 SEVERABILITY; WAIVERS. If any part of this Agreement is not enforceable,
the rest of the Agreement may be enforced. The Bank retains all rights, even if
it makes a loan after default. If the Bank waives a default, it may enforce a
later default. Any consent or waiver under this Agreement must be in writing.
- 10 -
11
9.6 ADMINISTRATION COSTS. The Borrower shall pay the Bank for all reasonable
costs incurred by the Bank in connection with administering this Agreement.
9.7 ATTORNEYS' FEES. The Borrower shall reimburse the Bank for any
reasonable costs and attorneys' fees incurred by the Bank in connection with the
enforcement or preservation of any rights or remedies under this Agreement and
any other documents executed in connection with this Agreement, and including
any amendment, waiver, "workout" or restructuring under this Agreement. In the
event of a lawsuit or arbitration proceeding, the prevailing party is entitled
to recover costs and reasonable attorneys' fees incurred in connection with the
lawsuit or arbitration proceeding, as determined by the court or arbitrator. In
the event that any case is commenced by or against the Borrower under the
Bankruptcy Code (Title 11, United States Code) or any similar or successor
statute, the Bank is entitled to recover costs and reasonable attorneys' fees
incurred by the Bank related to the preservation, protection, or enforcement of
any rights of the Bank in such a case. As used in this paragraph, "attorneys'
fees" includes the allocated costs of in-house counsel.
9.8 ONE AGREEMENT. This Agreement and any related security or other
agreements required by this Agreement, collectively:
(a) represent the sum of the understandings and agreements between the Bank
and the Borrower concerning this credit; and
(b) replace any prior oral or written agreements between the Bank and the
Borrower concerning this credit; and
(c) are intended by the Bank and the Borrower as the final, complete and
exclusive statement of the terms agreed to by them.
In the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail.
9.9 INDEMNIFICATION. The Borrower will indemnify and hold the Bank harmless
from any loss, liability, damages, judgments, and costs of any kind relating to
or arising directly or indirectly out of (a) this Agreement or any document
required hereunder, (b) any credit extended or committed by the Bank to the
Borrower hereunder, and (c) any litigation or proceeding related to or arising
out of this Agreement, any such document, or any such credit. This indemnity
includes but is not limited to attorneys' fees (including the allocated cost of
in-house counsel). This indemnity extends to the Bank, its parent, subsidiaries
and all of their directors, officers, employees, agents, successors, attorneys,
and assigns. This indemnity will survive repayment of the Borrower's obligations
to the Bank. All sums due to the Bank hereunder shall be obligations of the
Borrower, due and payable immediately without demand.
9.10 NOTICES. All notices required under this Agreement shall be personally
delivered or sent by first class mail, postage prepaid, to the addresses on the
signature page of this Agreement, or to such other addresses as the Bank and the
Borrower may specify from time to time in writing.
9.11 HEADINGS. Article and paragraph headings are for reference only and
shall not affect the interpretation or meaning of any provisions of this
Agreement.
9.12 COUNTERPARTS. This Agreement may be executed in as many counterparts as
necessary or convenient, and by the different parties on separate counterparts
each of which, when so executed, shall be deemed an original but all such
counterparts shall constitute but one and the same agreement.
9.13 PRIOR AGREEMENT SUPERSEDED. This Agreement supersedes the Business Loan
Agreement entered into as of June 11, 1994, between the Bank and the Borrower,
and any credit outstanding thereunder shall be deemed to be outstanding under
this Agreement.
This Agreement is executed as of the date stated at the top of the first page.
- 11 -
12
[BANK OF AMERICA LOGO]
BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION COHU, INC.
X /s/ Paul M. Tuomainen, Jr. X /s/ John H. Allen
--------------------------------- ------------------------------
BY: PAUL M. TUOMAINEN, JR. BY: JOHN H. ALLEN
TITLE: VICE PRESIDENT TITLE: VICE PRESIDENT - FINANCE
AND CHIEF FINANCIAL OFFICER
ADDRESS WHERE NOTICES TO THE BANK ADDRESS WHERE NOTICES TO THE BORROWER
ARE TO BE SENT: ARE TO BE SENT:
450 B Street, Suite 100 5755 Kearny Villa Road
San Diego, California 92101 San Diego, California 92123
- 12 -
1
Exhibit 10.2
TERMINATION AGREEMENT
This Termination Agreement is executed July 17, 1997 between COHU, INC., a
Delaware corporation ("Company") and James A. Donahue ("Executive") in light of
the following facts:
A. Executive is a key and critically important member of the management of
Company upon whose continuing services Company is and will depend for its future
growth and prosperity.
B. Company desires to assure itself of the uninterrupted and unimpaired
performance of services by Executive in the future. In particular, Company
desires that there will be no interference with those services or Executive's
loyalty to Company which result from any actual or proposed change of control of
Company. Company believes that the interest of Company and its shareholders will
best be served by providing Executive with economic assurances which will
relieve him of worry about his economic interests in the event of any proposed
change of control and thereby permit him to devote his uninterrupted attention
to the performance of his duties to Company.
NOW, THEREFORE, IT IS AGREED:
1. "Event" Defined. The term "Event" as used in this Agreement shall mean
any one or a combination of the following:
a. A sale by Company of all or substantially all of its assets, whether
for money, securities or other consideration.
b. A merger or consolidation of Company with or into any other
corporation or business entity (excepting only a wholly owned subsidiary of
Company) without regard to whether Company or other party to such transaction is
the surviving corporation.
c. The acquisition of beneficial ownership of a majority of the
outstanding voting stock of Company by any person or entity or affiliated group
of persons and/or entities without regard to whether such stock is held directly
of indirectly.
d. A change in the identities of a majority of the directors of Company
occurring within a period of thirty (30) consecutive months resulting in whole
or in part from the election at one or more meetings of shareholders of persons
who are not listed in the Company's proxy statement as management nominees.
e. Any other agreement, happening or device which has substantially the
same effect on control of Company as any of the foregoing.
2. "Termination" Defined. The term "Termination" as used in this Agreement
shall mean any one or a combination of the following:
2
a. The discharge of Executive by Company or its successor in interest
as the operator of all or substantially all of the business assets of Company
for any reason whatsoever, excepting only discharge by reason of the following:
(i) Death of Executive;
(ii) The mental or physical disability of Executive continuing for a
period exceeding nine months, which prevents Executive from performing a major
portion of his duties;
(iii) For cause consisting of the commission by Executive of a
criminal act related to the performance of his duties, the furnishing of
proprietary confidential information of Company to a competitor or a potential
competitor except in the bona fide belief that such action was for the benefit
and best interests of Company;
(iv) Habitual intoxication by alcohol or drugs during working hours;
(v) Habitual neglect of duties not corrected following written
notice from Company specifying details thereof;
(vi) Required retirement of Executive at or after the Company's
normal retirement age for senior executives, in accordance with established
policies applied on a nondiscriminating basis.
b. Resignation of Executive following the occurrence of one or more of
the following:
(i) Relocation of the principal place at which Executive's duties
are performed to a location outside the County of San Diego, California;
(ii) A reduction in Executive's compensation;
(iii) A change in the benefits or perquisites provided to Executive
which is deemed materially adverse by Executive;
(iv) A change in Executive's responsibilities, authorities or
functions which is deemed materially adverse by Executive;
(v) A change in Executive's work conditions which is deemed
materially adverse by Executive.
3. Payment. In the event that a termination occurs concurrently with or
within five (5) years following an Event, forthwith upon such Termination
occurring, Company or its successor in interest shall pay to Executive a sum
equal to the largest sum of money which would not result in there being an
"Excess Parachute Payment" as defined in Section 280G of the Internal Revenue
Code as amended to the date of this Agreement. This payment shall be in addition
to any and all other benefits to which Executive may be entitled in connection
with such termination, including but not limited to, payment for accrued and
unused vacation or sick pay.
2
3
4. Consideration. This contract is for the purpose of inducing Executive to
continue his employment with Company and is in consideration of the services
rendered by Executive to Company from and after the date of this Agreement,
which consideration Company hereby acknowledges is fair and adequate.
5. Complete Agreement. This constitutes the complete agreement between the
parties with respect to its subject matter. It shall not be amended or rescinded
except by a further written agreement executed by both parties.
6. Successors. This contract shall inure to the benefit of Executive, his
heirs, personal representatives and assigns and shall bind Company and its
successors.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written, in accordance with a resolution made and
instructions given by the Board of Directors of Cohu, Inc. at a meeting held
July 17, 1997.
COHU, INC.
By: /s/ Charles A. Schwan
----------------------------------------
Title: President and Chief Executive Officer
EXECUTIVE
/s/ James A. Donahue
----------------------------------------
3
5
1,000
6-MOS
DEC-31-1997
JAN-01-1998
JUN-30-1998
48,862
8,684
38,571
0
43,748
150,948
33,240
14,114
172,398
30,944
0
0
0
9,736
130,322
172,398
111,893
111,893
68,992
68,992
0
0
0
20,729
7,200
13,529
0
0
0
13,529
1.39
1.35
