Employee Stock Benefit Plans

6 Months Ended

Jun. 30, 2012

Employee Stock Benefit Plans [Abstract]

Employee Stock Benefit Plans

4. Employee Stock Benefit Plans

Employee Stock Purchase Plan

The Cohu, Inc. 1997 Employee Stock Purchase Plan (“the ESPP”) provides for the issuance of shares of our common stock. Under the ESPP, eligible employees may purchase shares of Cohu common stock through payroll deductions at a price equal to 85 percent of the lower of the fair market value of Cohu common stock at the beginning or end of each 6-month purchase period, subject to certain limits. During the quarter ended June 30, 2012, 68,439 shares of our common stock were purchased under the ESPP leaving 568,915 shares available for future issuance.

Stock Options

Under our equity incentive plans, stock options may be granted to employees, consultants and directors to purchase a fixed number of shares of our common stock. The exercise prices of options granted are at least equal to the fair market value of our common stock on the dates of grant. Options generally vest and become exercisable after one year or in four annual increments beginning one year after the grant date and expire ten years from the grant date. On May 9, 2012 our stockholders approved an amendment to the 2005 Equity Plan which increased the number of shares that may be issued under the Plan by 1,400,000 shares. Subsequent to this amendment, at June 30, 2012, there were 1,874,202 shares available future equity grants under the 2005 Equity Plan. We have historically issued new shares of our common stock upon share option exercise.

Subsequent to December 31, 2011, we awarded stock options covering 400,646 shares of our common stock to employees and at June 30, 2012, we had 3,216,696 stock options outstanding. These options had a weighted average exercise price of $12.59 per share, an aggregate intrinsic value of approximately $2.6 million and the weighted average remaining contractual term was approximately 5.6 years.

At June 30, 2012, we had 2,219,521 stock options outstanding that were exercisable. These options had a weighted average exercise price of $13.41 per share, an aggregate intrinsic value of $1.8 million and the weighted average remaining contractual term was approximately 4.3 years.

Restricted Stock Units

We issue restricted stock units to certain employees, consultants and directors. Restricted stock units vest over either a one-year or a four-year period from the date of grant. Prior to vesting, restricted stock units do not have dividend equivalent rights, do not have voting rights and the shares underlying the restricted stock units are not considered issued and outstanding. Shares of our common stock will be issued on the date the restricted stock units vest.

Subsequent to December 31, 2011, we awarded restricted stock units covering 432,314 shares of our common stock to employees and at June 30, 2012, we had 674,129 restricted stock units outstanding with an aggregate intrinsic value of approximately $6.8 million and the weighted average remaining vesting period was approximately 3.0 years.

Equity-Based Performance Stock Units

In March 2012, we granted equity-based performance units covering 128,916 shares of our common stock to certain employees. The number of shares of stock ultimately issued to participants will depend upon the extent to which the financial performance goals set by our Board of Directors are met. The award measurement period is based on a one-year period which ends on December 29, 2012. Based upon the level of achievement of performance goals the number of shares we will issue can range from 0% up to 150% of the number of shares under each grant which will vest over 3 years from the date of initial grant. We record a provision for equity-based performance units outstanding based on our current assessment of achievement of the performance goals. Shares of our common stock will be issued on the date the equity-based performance units vest.