COHU INC

The 2026 Plan empowers the Compensation Committee to provide incentive compensation in the form of stock options, stock appreciation rights, restricted stock and stock units, performance shares and units, other stock-based awards, and cash-based awards. Under the 2026 Plan, the initial reserve will be a maximum of 3,400,000 shares, consisting of the sum of:

In no event shall the number of shares subject to any equity award granted under the 2005 Plan after March 20, 2026, and prior to the annual meeting exceed 10,000 shares. As further described below, the share reserve will automatically increase by an additional number of shares which is equal to any shares subject to outstanding awards granted under 2005 Plan that are outstanding as of the annual meeting, and with respect to grants made under the 2026 Plan after the annual meeting date, that may subsequently be forfeited after the annual meeting due to expiration or failure to vest or which are instead settled in cash.

Our Board recommends stockholders approve the 2026 Plan to promote our long-term growth and profitability by aligning the interests of our key employees with those of other stockholders and providing additional incentives to enhance stockholder value.

Our Board believes that Cohu’s success is due to its highly talented employee base and that future success depends on our ability to continue attracting and retaining high-caliber employees. Our ability to grant equity awards is a necessary and powerful recruiting and retention tool to maintain and create stockholder value. Apart from our broad-based 1997 Employee Stock Purchase Plan (see Proposal No. 5 in this proxy statement), the 2005 Plan is our only active current employee equity incentive plan. As a result, we believe that the current authorized number of shares under the 2005 Plan is completely inadequate to provide reasonable incentives to our employees going forward. Non-approval of the 2026 Plan may compel us to increase the cash component of employee compensation because the Company would need to replace components of compensation previously delivered through equity awards.

If this proposal is approved, the 2026 Plan will become effective on the date of the annual meeting and the 2005 Plan will terminate.

In connection with our share-based compensation programs, we are committed to using equity incentive awards prudently and within reasonable limits. We closely monitor our share award annual “burn rate.” Our annual burn rate is determined by dividing a) two-times the number of our common shares subject to “full-value” time-based awards we grant during a fiscal year (currently all in the form of RSUs) and the performance share units (“PSUs”) that are earned and become vested based on the achievement of the applicable performance goals during the fiscal year by b) the weighted average number of our shares of common stock outstanding during that fiscal year. We do not include deferred stock unit awards issued in lieu of cash compensation of equal value in determining the burn rate illustrated in the following table.

On March 16, 2026, the closing price of our common stock on the Nasdaq Global Select Market was $28.58 per share. As of March 16, 2026, 46,903,489 shares of our common stock were outstanding. The table below presents the number of shares that were subject to outstanding equity awards as of March 16, 2026.

In determining the number of shares to request for approval under the 2026 Plan, our Compensation Committee considered various factors, including our recent share usage, anticipated hiring needs in the next two years, potential dilution, our current stock price, recent experiences in the equity awards expected by new hire candidates, and general guidance from institutional proxy advisory firms, such as ISS, that our stockholders might consider in evaluating the 2026 Plan .

Based on our current equity award practices, the Compensation Committee estimates that the additional shares that would be authorized by the 2026 Plan may be sufficient to provide us with an opportunity to grant equity awards for approximately three (3) years. Circumstances that could alter this estimate include the future price of our common shares, the mix of options and full-value awards provided as long-term incentive compensation, grant amounts provided by our competitors, payout of performance-based awards in excess of target in the event of superior performance, hiring activity, and promotions during the next few years.

Our Board adopted the 2026 Plan on March 20, 2026, subject to approval by our stockholders. If stockholders do not approve the 2026 Plan, the 2005 Plan will not terminate and we can continue to grant awards under the 2005 Plan

Highlights of the 2026 Plan

The 2026 Plan continues to contain provisions that are included in the 2005 Plan that we believe are consistent with best practices in equity compensation and which protect the stockholders’ interests, as described below.