EX-10.3






EXHIBIT 10.3




COHU, INC.




CHANGE IN CONTROL AGREEMENT




This Change in Control Agreement (the “Agreement”) is made and entered into by and between
     (“Executive”) and Cohu, Inc. (the “Company”), effective as of      , 2008
(the “Effective Date”).



RECITALS




1. It is expected that the Company from time to time will consider the possibility of an
acquisition by another company or other change in control. The Board of Directors of the Company
(the “Board”) recognizes that such consideration can be a distraction to Executive and can cause
Executive to consider alternative employment opportunities. The Board has determined that it is in
the best interests of the Company and its stockholders to assure that the Company will have the
continued dedication and objectivity of Executive, notwithstanding the possibility, threat or
occurrence of a Change in Control (as defined herein) of the Company.



2. The Board believes that it is in the best interests of the Company and its stockholders to
provide Executive with an incentive to continue his or her employment and to motivate Executive to
maximize the value of the Company upon a Change in Control for the benefit of its stockholders.



3. The Board believes that it is imperative to provide Executive with certain severance
benefits upon Executive’s termination of employment following a Change in Control. These benefits
will provide Executive with enhanced financial security and incentive and encouragement to remain
with the Company notwithstanding the possibility of a Change in Control.



4. Certain capitalized terms used in the Agreement are defined in Section 6 below.



AGREEMENT




NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto
agree as follows:



1. Term of Agreement. This Agreement will terminate upon the date that all of the
obligations of the parties hereto with respect to this Agreement have been satisfied.



2. At-Will Employment. The Company and Executive acknowledge that Executive’s
employment is and will continue to be at-will, as defined under applicable law. If Executive’s
employment terminates for any reason, including (without limitation) any termination prior to a
Change in Control, Executive will not be entitled to any payments, benefits, damages, awards or
compensation other than as provided by this Agreement.



3.



1



Severance Benefits.



(a) Involuntary Termination Following a Change in Control. If within twenty-four (24)
months following a Change in Control (i) Executive terminates his or her employment with the
Company (or any parent, subsidiary or successor of the Company) for Good Reason (as defined herein)
or (ii) the Company (or any parent, subsidiary or successor of the Company) terminates Executive’s
employment without Cause (as defined herein), and Executive signs and does not revoke the release
of claims required by Section 4, Executive will receive the following severance benefits from the
Company:



(i) Severance Payment. Executive will receive a lump sum cash payment (less
applicable withholding taxes) in an amount equal to the sum of (A) an amount equal to twenty-four
(24) months (the “Severance Period”) of the Executive’s base salary rate (as in effect immediately
prior to (1) the Change in Control, or (2) Executive’s termination, whichever is greater) and (B)
an amount equal to two times the Executive’s target annual incentive established for the year prior
to the year of Executive’s termination of employment.



(ii) Bonus Payment. Executive will also receive a lump sum cash severance payment
(less applicable withholding taxes) in an amount equal to the current year’s target annual
incentive pro-rated to the date of termination, with such pro-rated amount to be calculated by
multiplying the current year’s target incentive level by a fraction with a numerator equal to the
number of days between the start of the current fiscal year and the date of termination and a
denominator equal to 365. The actual annual incentive for the year of termination shall be
forfeited and Executive shall not be entitled to any payment thereof, other than the severance
payment described in this Section 3(a)(ii).



(iii) Equity Awards. One hundred percent (100%) of Executive’s then outstanding and
unvested awards relating to the Company’s common stock (whether stock options, stock appreciation
rights, shares of restricted stock, restricted stock units, or otherwise (collectively, the “Equity
Awards”)) as of the date of Executive’s termination of employment will become vested and will
otherwise remain subject to the terms and conditions of the applicable Equity Award agreement. In
addition, the post-termination exercise period for any outstanding stock option and/or stock
appreciation right shall be extended so as to terminate on the first to occur of (1) twelve (12)
months from the date of Executive’s termination, or (2) the stock option and/or stock appreciation
rights original term expiration (e.g., the awards original ten (10) year expiration date).
Notwithstanding the foregoing, if (A) in a Change of Control the acquirer refuses to assume
Executive’s Equity Awards and/or refuses to substitute such Equity Awards with equivalent awards
reflecting acquirer’s stock, or (B) in a Change of Control where the acquirer is not a publicly
traded corporation as defined in Section 162(m)(2) of the Code (regardless of whether or not such
acquirer is willing to assume the Equity Awards), then one hundred percent (100%) of Executive’s
Equity Awards outstanding as of the Change of Control will become vested immediately prior to the
effective date of the Change of Control.



(iv) Benefits. The Company agrees to reimburse Executive for the same level of health
coverage and benefits as in effect for Executive on the day immediately preceding the date of
termination; provided, however, that (1) Executive constitutes a qualified beneficiary, as defined
in Section 4980(B)(g)(1) of the Internal Revenue Code of 1986, as amended (the “Code”); and
(2) Executive elects continuation coverage pursuant to the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended (“COBRA”), within the time period prescribed pursuant to
COBRA. The Company will continue to reimburse Executive for continuation coverage through the
Severance Period. Executive will thereafter be responsible for the payment of COBRA premiums
(including, without limitation, all administrative expenses) for the remaining COBRA period. Such
reimbursements shall be made within thirty (30) days of the premium payment.



(b) Timing of Severance Payments. Unless otherwise required pursuant to Section 10 of
this Agreement, the Company will pay the severance payments to which Executive is entitled pursuant
to Section 3(a) in a lump sum as soon as practicable following the date of termination.



(c) Voluntary Resignation; Termination For Cause. If Executive’s employment with the
Company terminates (i) voluntarily by Executive (other than for Good Reason) or (ii) for Cause by
the Company, then Executive will not be entitled to receive severance or other benefits except for
those (if any) as may then be established under the Company’s then existing severance and benefits
plans and practices or pursuant to other written agreements with the Company, including, without
limitation, any Equity Award agreement.



(d) Disability; Death. If the Company terminates Executive’s employment as a result
of Executive’s Disability, or Executive’s employment terminates due to his or her death, then
Executive will not be entitled to receive severance or other benefits except for those (if any) as
may then be established under the Company’s then existing written severance and benefits plans and
practices or pursuant to other written agreements with the Company, including, without limitation,
any Equity Award agreement.



(e) Termination Apart from Change in Control. In the event Executive’s employment is
terminated for any reason, either prior to the occurrence of a Change in Control or after the
twenty-four (24) month period following a Change in Control, then Executive will be entitled to
receive severance and any other benefits only as may then be established under the Company’s
existing written severance and benefits plans and practices or pursuant to other written agreements
with the Company, including, without limitation, any Equity Award agreement.



(f) Exclusive Remedy. In the event of a termination of Executive’s employment within
twenty-four (24) months following a Change in Control, the provisions of this Section 3 are
intended to be and are exclusive and in lieu of any other rights or remedies to which Executive or
the Company may otherwise be entitled, whether at law, tort or contract, in equity, or under this
Agreement. Executive will be entitled to no benefits, compensation or other payments or rights
upon termination of employment following a Change in Control other than those benefits expressly
set forth in this Section 3, except as may be provided in any Equity Award agreement.



4.



2



Conditions to Receipt of Severance.



(a) Release of Claims Agreement. The receipt of any severance or other benefits
pursuant to Section 3 will be subject to Executive signing and not revoking a release of claims
agreement in a form reasonably acceptable to the Company, and such release becoming effective
within forty-five (45) days of Executive’s termination. No severance or other benefits will be
paid or provided until the release of claims agreement becomes effective, and any severance amounts
or benefits otherwise payable between the date of Executive’s termination and the date such release
becomes effective shall be paid on the effective date of such release.



(b) Non-solicitation. The receipt of any severance or other benefits pursuant to
Section 3 will be subject to Executive agreeing that during the Severance Period, Executive will
not solicit any employee of the Company for employment other than at the Company.



(c) Non-disparagement. The receipt of any severance or other benefits pursuant to
Section 3 will be subject to Executive agreeing that during the Severance Period, Executive will
not knowingly and materially disparage, criticize, or otherwise make any derogatory statements
regarding the Company. During the Severance Period, the Company will not knowingly and materially
disparage, criticize, or otherwise make any derogatory statements regarding Executive.
Notwithstanding the foregoing, nothing contained in this Agreement will be deemed to restrict
Executive, the Company or any of the Company’s current or former officers and/or directors from (1)
providing information to any governmental or regulatory agency (or in any way limit the content of
any such information) to the extent they are requested or required to provide such information
pursuant to applicable law or regulation or (2) enforcing his or its rights pursuant to this
Agreement.



(d) Other Requirements. Executive’s receipt of any payments or benefits under Section
3 will be subject to Executive continuing to comply with the terms of any form of confidential
information agreement and the provisions of this Section 4.



(e) No Duty to Mitigate. Executive will not be required to mitigate the amount of any
payment contemplated by this Agreement, nor will any earnings that Executive may receive from any
other source reduce any such payment.



5. Limitation on Payments. In the event that the severance and other benefits
provided for in this Agreement or otherwise payable to Executive (i) constitute “parachute
payments” within the meaning of Section 280G of the Code and (ii) but for this Section 5, would be
subject to the excise tax imposed by Section 4999 of the Code, then Executive’s severance benefits
under Section 4 will be either:



(a) delivered in full, or




	 	(b)	 	delivered as to such lesser extent which would result in no
portion of such severance benefits being subject to excise tax under Section
4999 of the Code,





whichever of the foregoing amounts, taking into account the applicable federal, state and local
income taxes and the excise tax imposed by Section 4999, results in the receipt by Executive on an
after-tax basis, of the greatest amount of severance benefits, notwithstanding that all or some
portion of such severance benefits may be taxable under Section 4999 of the Code. Unless the
Company and Executive otherwise agree in writing, any determination required under this Section 5
will be made in writing by the Company’s independent public accountants immediately prior to a
Change in Control (the “Accountants”), whose determination will be conclusive and binding upon
Executive and the Company for all purposes. For purposes of making the calculations required by
this Section 5, the Accountants may make reasonable assumptions and approximations concerning
applicable taxes and may rely on reasonable, good faith interpretations concerning the application
of Sections 280G and 4999 of the Code. The Company and Executive will furnish to the Accountants
such information and documents as the Accountants may reasonably request in order to make a
determination under this Section. The Company will bear all costs the Accountants may reasonably
incur in connection with any calculations contemplated by this Section 5. Any reduction in
payments and/or benefits required by this Section 5 shall occur in the following order: (1)
reduction of cash payments; and (2) reduction of other benefits paid to Executive. In the event
that acceleration of vesting of Equity Awards is to be reduced, such acceleration of vesting shall
be cancelled in the reverse order of the date of grant for Executive’s Equity Awards.



6. Definition of Terms. The following terms referred to in this Agreement will have
the following meanings:



(a) Cause. For purposes of this Agreement, “Cause” will mean:



(i) Executive’s willful and continued failure to perform the duties and responsibilities of
his position (other than as a result of Executive’s illness or injury) after there has been
delivered to Executive a written demand for performance from the Board which describes the basis
for the Board’s belief that Executive has not substantially performed his duties and provides
Executive with thirty (30) days to take corrective action;



(ii) Any material act of personal dishonesty taken by Executive in connection with his
responsibilities as an employee of the Company with the intention that such action may result in
the substantial personal enrichment of Executive;



(iii) Executive’s conviction of, or plea of nolo contendere to, a felony that the Board
reasonably believes has had or will have a material detrimental effect on the Company’s reputation
or business;



(iv) A willful breach of any fiduciary duty owed to the Company by Executive that has a
material detrimental effect on the Company’s reputation or business;



(v) Executive being found liable in any Securities and Exchange Commission or other civil or
criminal securities law action (regardless of whether or not Executive admits or denies liability),
which the Board determines, in its reasonable discretion, will have a material detrimental effect
on the Company’s reputation or business;



(vi) Executive entering any cease and desist order with respect to any action which would bar
Executive from service as an executive officer or member of a board of directors of any
publicly-traded company (regardless of whether or not Executive admits or denies liability);



(vii) Executive (A) obstructing or impeding; (B) endeavoring to obstruct or impede, or (C)
failing to materially cooperate with, any investigation authorized by the Board or any governmental
or self-regulatory entity (an “Investigation”). However, Executive’s failure to waive
attorney-client privilege relating to communications with Executive’s own attorney in connection
with an Investigation will not constitute “Cause”; or



(viii) Executive’s disqualification or bar by any governmental or self-regulatory authority
from serving in the capacity contemplated by this Agreement, if (A) the disqualification or bar
continues for more than thirty (30) days, and (B) during that period the Company uses its
commercially reasonable efforts to cause the disqualification or bar to be lifted. While any
disqualification or bar continues during Executive’s employment, Executive will serve in the
capacity contemplated by this Agreement to whatever extent legally permissible and, if Executive’s
employment is not permissible, Executive will be placed on administrative leave (which will be paid
to the extent legally permissible).



Other than for a termination pursuant to Section 6(a)(iii), Executive shall receive notice and an
opportunity to be heard before the Board with Executive’s own attorney before any termination for
Cause is deemed effective. Notwithstanding anything to the contrary, the Board may immediately
place Executive on administrative leave (with full pay and benefits to the extent legally
permissible) and suspend all access to Company information, employees and business should Executive
wish to avail himself of his opportunity to be heard before the Board prior to the Board’s
termination for Cause. If Executive avails himself of his opportunity to be heard before the
Board, and then fails to make himself available to the Board within five (5) business days of such
request to be heard, the Board may thereafter cancel the administrative leave and terminate
Executive for Cause.



(b) Change in Control. For purposes of this Agreement, “Change in Control” means the
occurrence of any of the following, in one or a series of related transactions:



(i) Any one person, or more than one person acting as a group (“Person”) acquires ownership of
the Company’s securities that, together with the stock held by such Person, constitutes more than
fifty percent (50%) of the total voting power of the Company’s then outstanding stock. The term
“Person” shall include any natural person, corporation, partnership, trust, or association, or any
group or combination thereof, whose ownership of the Company’s securities would be required to be
reported under Regulation 13(D) under the Securities Exchange Act of 1934, as amended, or any
similar successor regulation or rule. For purposes of this clause (i), if any Person is considered
to be in effective control of the Company, the acquisition of additional control of the Company by
the same Person will not be considered a Change in Control;



(ii) A change in the effective control of the Company which occurs on the date that a majority
of members of the Board is replaced during any twelve (12) month period by members of the Board
whose appointment or election is not endorsed by a majority of the members of the Board prior to
the date of the appointment or election; or



(iii) The closing of any transaction involving a change in ownership of a substantial portion
of the Company’s assets which occurs on the date that any Person acquires (or has acquired during
any twelve (12) month period ending on the date of the most recent acquisition by such Person or
Persons) assets from the Company that have a total gross fair market value equal to or more than
fifty percent (50%) of the total gross fair market value of all of the assets of the Company
immediately prior to such acquisition or acquisitions. For purposes of this subsection (iii),
gross fair market value means the value of the assets of the Company, or the value of the assets
being disposed of, determined without regard to any liabilities associated with such assets.



Notwithstanding the foregoing, the term “Change in Control” shall not include a consolidation,
merger, or other reorganization if upon consummation of such transaction all of the outstanding
voting stock of the Company is owned, directly or indirectly, by a holding company, and the holders
of the Company’s common stock immediately prior to the transaction have substantially the same
proportionate ownership and voting control of such holding company after such transaction.



Notwithstanding the foregoing, a transaction will not be deemed a Change in Control unless the
transaction qualifies as a change in control event within the meaning of Section 409A of the Code,
and the final regulations and any guidance promulgated thereunder (“Section 409A”).



For purposes of this Section 6(b), Persons will be considered to be acting as a group if they are
owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock,
or similar business transaction with the Company.



(c) Disability. For purposes of this Agreement, “Disability” shall have the same
meaning as that term is defined in the Company’s 2005 Equity Incentive Plan. Notwithstanding the
foregoing however, should the Company maintain a long-term disability plan at any time Executive’s
employment with the Company, a determination of disability under such plan shall also be considered
a “Disability” for purposes of this Agreement.



(d) Good Reason. For purposes of this Agreement, “Good Reason” means the occurrence
of any of the following, without Executive’s express written consent:



(i) A material reduction in Executive’s base salary, except where there is a general reduction
applicable to the management team generally;



(ii) A material reduction in Executive’s overall responsibilities or authority, or scope of
duties; or



(iii) A material change in the geographic location at which Executive must perform his
services; provided that in no instance will the relocation of Executive to a facility or a location
of fifty (50) miles or less from Executive’s then current office location be deemed material for
purposes of this Agreement;



provided, however, that before Executive may resign for Good Reason, (A) Executive must
provide the Company with written notice within ninety (90) days of the initial event that Executive
believes constitutes “Good Reason” specifically identifying the facts and circumstances claimed to
constitute the grounds for Executive’s resignation for Good Reason and the proposed termination
date (which will not be more than thirty (30) days after the giving of written notice hereunder by
Executive to the Company), and (B) the Company must have an opportunity within thirty (30) days
following delivery of such notice to cure the Good Reason condition.



7. Successors.



(a) The Company’s Successors. Any successor to the Company (whether direct or
indirect and whether by purchase, merger, consolidation, liquidation or otherwise) to all or
substantially all of the Company’s business and/or assets will assume the obligations under this
Agreement and agree expressly to perform the obligations under this Agreement in the same manner
and to the same extent as the Company would be required to perform such obligations in the absence
of a succession. For all purposes under this Agreement, the term “Company” will include any
successor to the Company’s business and/or assets which executes and delivers the assumption
agreement described in this Section 7(a) or which becomes bound by the terms of this Agreement by
operation of law.



(b) Executive’s Successors. The terms of this Agreement and all rights of Executive
hereunder will inure to the benefit of, and be enforceable by, Executive’s personal or legal
representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.



8. Notice.



(a) General. Notices and all other communications contemplated by this Agreement will
be in writing and will be deemed to have been duly given when personally delivered or when mailed
by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of
Executive, mailed notices will be addressed to him or her at the home address which he or she most
recently communicated to the Company in writing. In the case of the Company, mailed notices will
be addressed to its corporate headquarters, and all notices will be directed to the attention of
its President.



(b) Notice of Termination. Any termination by the Company for Cause or by Executive
for Good Reason or as a result of a voluntary resignation will be communicated by a notice of
termination to the other party hereto given in accordance with Section 8(a) of this Agreement.
Such notice will indicate the specific termination provision in this Agreement relied upon, will
set forth in reasonable detail the facts and circumstances claimed to provide a basis for
termination under the provision so indicated, and will specify the termination date. The failure
by Executive to include in the notice any fact or circumstance which contributes to a showing of
Good Reason will not waive any right of Executive hereunder or preclude Executive from asserting
such fact or circumstance in enforcing his or her rights hereunder.



9. Arbitration. The Company and the Executive each agree that any and all disputes
arising out of the terms of this Agreement, Executive’s employment by the Company, Executive’s
service as an officer or director of the Company, or Executive’s compensation and benefits, their
interpretation and any of the matters herein released, will be subject to binding arbitration. In
the event of a dispute, the parties (or their legal representatives) will promptly confer to select
a single arbitrator mutually acceptable to both parties. If the parties cannot agree on an
arbitrator, then the moving party may file a demand for arbitration with the American Arbitration
Association (“AAA”) in San Diego County, California, who will be selected and appointed consistent
with the AAA-Employment Dispute Resolution Rules, except that such arbitrator must have the
qualifications set forth in this paragraph. Any arbitration will be conducted in a manner
consistent with AAA National Rules for the Resolution of Employment Disputes, supplemented by the
California Rules of Civil Procedure. The parties further agree that the prevailing party in any
arbitration will be entitled to injunctive relief in any court of competent jurisdiction to enforce
the arbitration award. The parties hereby agree to waive their right to have any dispute between
them resolved in a court of law by a judge or jury. This paragraph will not prevent either party
from seeking injunctive relief (or any other provisional remedy) from any court having jurisdiction
over the parties and the subject matter of their dispute relating to Executive’s obligations under
this Agreement and the Company’s form of confidential information agreement.



10. Code Section 409A.



(a) Notwithstanding anything to the contrary in this Agreement, if Executive is a “specified
employee” within the meaning of Section 409A at the time of Executive’s termination (other than due
to death), then the cash severance benefits payable to Executive under this Agreement, if any, and
any other severance payments or separation benefits that may be considered deferred compensation
under Section 409A (together, the “Deferred Compensation Separation Benefits”) otherwise due to
Executive on or within the six (6) month period following Executive’s termination shall accrue
during such six (6) month period and shall become payable in a lump sum payment on the date six (6)
months and one (1) day following the date of Executive’s termination of employment. All subsequent
payments, if any, shall be payable in accordance with the payment schedule applicable to each
payment or benefit. Notwithstanding anything herein to the contrary, if Executive dies following
his termination but prior to the six (6) month anniversary of his date of termination, then any
payments delayed in accordance with this Section shall be payable in a lump sum as soon as
administratively practicable after the date of Executive’s death and all other Deferred
Compensation Separation Benefits shall be payable in accordance with the payment schedule
applicable to each payment or benefit.



(b) It is the intent of this Agreement to comply with the requirements of Section 409A so that
none of the severance payments and benefits to be provided hereunder shall be subject to the
additional tax imposed under Section 409A, and any ambiguities herein shall be interpreted to so
comply. The Company and Executive agree to work together in good faith to consider amendments to
this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to
avoid imposition of any additional tax or income recognition under Section 409A prior to actual
payment to Executive.



11.



3



Miscellaneous Provisions.



(a) Waiver. No provision of this Agreement will be modified, waived or discharged
unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by
an authorized officer of the Company (other than Executive). No waiver by either party of any
breach of, or of compliance with, any condition or provision of this Agreement by the other party
will be considered a waiver of any other condition or provision or of the same condition or
provision at another time.



(b) Headings. All captions and section headings used in this Agreement are for
convenient reference only and do not form a part of this Agreement.



(c) Choice of Law. The validity, interpretation, construction and performance of this
Agreement will be governed by the laws of the State of California (with the exception of its
conflict of laws provisions).



(d) Integration. This Agreement, together with the form of confidential information
agreement, the standard forms of Equity Award agreement that describe Executive’s outstanding
Equity Awards, and, if applicable, the written agreement between the Company and Executive which
provides for retiree medical coverage represents the entire agreement and understanding between the
parties as to the subject matter herein and supersedes all prior or contemporaneous agreements
whether written or oral. No waiver, alteration, or modification of any of the provisions of this
Agreement will be binding unless in a writing and signed by duly authorized representatives of the
parties hereto. In entering into this Agreement, no party has relied on or made any
representation, warranty, inducement, promise, or understanding that is not in this Agreement. To
the extent that any provisions of this Agreement conflict with those of any other agreement between
the Executive and the Company, the terms in this Agreement will prevail.



(e) Severability. In the event that any provision or any portion of any provision
hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable, or
void, this Agreement will continue in full force and effect without said provision or portion of
provision. The remainder of this Agreement shall be interpreted so as best to effect the intent of
the Company and Executive.



(f) Withholding. All payments made pursuant to this Agreement will be subject to
withholding of applicable income and employment taxes.



(g) Counterparts. This Agreement may be executed in counterparts, each of which will
be deemed an original, but all of which together will constitute one and the same instrument.



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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the
Company by its duly authorized officer, as of the day and year set forth below.



	 	 	 
	COMPANY

	 	COHU, INC.

By:
	
 
	 	 
	
 
	 	Title:
	
 
	 	 
	EXECUTIVE

	 	By:
	
 
	 	 
	
 
	 	Title:
	
 
	 	 







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