8.	Acquisition of Xcerra

Completion of the Acquisition of Xcerra

Pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) dated as of

May 7, 2018

among Cohu, Inc., a Delaware corporation (“Cohu”), Xcerra Corporation, a Massachusetts corporation (“Xcerra”), and Xavier Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of Cohu (“Merger Sub”), Merger Sub merged with and into Xcerra (the “Merger”), with Xcerra surviving such merger as a wholly owned subsidiary of Cohu. The Merger was effective on

October 1, 2018 (

the “Effective Time”). As described above, as a result of the Merger, Xcerra became a wholly owned subsidiary of Cohu. The Merger is a taxable transaction for U.S. federal income tax purposes. Cohu incurred

$5.2

million of acquisition related costs for the Xcerra transaction in the

first

nine

months of

2018.

At the Effective Time, each share of Xcerra’s common stock, par value

$0.05

per share (“Xcerra Common Stock”), issued and outstanding immediately prior to the Effective Time other than dissenting shares and shares held by Cohu, Merger Sub, Xcerra or any direct or indirect wholly owned subsidiary of Cohu or Xcerra was converted into the right to receive (i)

$9.00

in cash, without interest, (the “Cash Consideration”) and (ii)

0.2109

of a validly issued, fully paid and nonassessable share of common stock of Cohu, par value

$1.00

per share (“Cohu Common Stock”), (the “Stock Consideration” and, together with the Cash Consideration, the “Merger Consideration”).

fractional shares of Cohu Common Stock were issued in the Merger, and Xcerra’s former stockholders received an amount of cash in lieu of fractional shares, if any, of Cohu Common Stock calculated in accordance with Section

2.11

of the Merger Agreement. The sources of cash funds used in connection with the Merger included cash and cash equivalents on hand with Cohu and Xcerra and the proceeds from the Credit Facility, as defined below.

October 1, 2018,

approximately

$70.5

million of Cohu’s cash and short-term investments were used to fund the Merger with Xcerra.

Consideration Transferred

October 1, 2018,

the total consideration transferred to former Xcerra shareholders consisted of

11,776,315

shares of Cohu common stock and

$502.5

million in cash. Additionally, unvested RSUs held by employees of Xcerra were assumed and converted into approximately

530,000

Cohu RSUs that were awarded as replacement awards as a result of the completed Merger. At the Effective Time, Xcerra shares ceased to be traded on the NASDAQ Global Market effective,

October 1, 2018.

Secured Term Loan Facility

To provide the majority of the Cash Consideration for the Merger, on

October 1, 2018,

Cohu entered into a Credit and Guaranty Agreement (the “Credit Agreement”) with Cohu, as borrower, certain of its subsidiaries as guarantor subsidiaries, the financial institutions party thereto from time to time as lenders, and Deutsche Bank AG New York Branch, as administrative agent and collateral agent, providing for a

$350.0

million secured term loan facility (the “Credit Facility”). Cohu’s obligations under the Credit Facility are (and will be) guaranteed by certain of its existing and subsequently acquired or formed material wholly-owned domestic subsidiaries, (subject to certain exceptions and exclusions) under the Credit Facility (the “Guarantors”). The Credit Facility is secured by a security interest in substantially all existing and after-acquired assets and property (subject to certain exceptions and exclusions) of Cohu and the Guarantors.

October 1, 2018,

Cohu borrowed the entire amount of the Credit Facility. The proceeds of the Credit Facility were used, along with cash and cash equivalents on hand of Cohu and Xcerra, to pay the Cash Consideration and to pay certain fees and expenses related to the Merger and the Credit Agreement.

Loans under the Credit Facility amortize in equal quarterly installments equal to

0.25%

of the original principal amount thereof, with the balance payable at maturity. Subject to certain exceptions and thresholds, the Credit Facility will also require mandatory prepayments in connection with (i) excess cash flow, (ii) non-ordinary course asset sales and other dispositions and (iii) the issuance of certain debt obligations, among other things. Cohu has the right to prepay loans under the Credit Agreement in whole or in part at any time, without premium or penalty other than a

1.00%

prepayment fee in connection with certain “repricing” transactions on or before the

sixth

month anniversary of the closing date of the Credit Agreement. Amounts repaid in respect of loans under the Credit Facility

may

not

be reborrowed. All outstanding principal and interest in respect of the Credit Facility must be repaid on or before

October

2025.

Loans under the Credit Facility bear interest at a floating annual rate equal to the LIBOR plus a margin of

3.00%.

While a payment or bankruptcy event of default exists, Cohu is obligated to pay a per annum default rate of interest of

2.00%

in excess of the interest rate otherwise payable with respect to the overdue principal amount of any loans outstanding and overdue interest payments and other overdue fees and amounts.

The Credit Agreement has incremental facility capacity in an aggregate amount of the greater of

$145

million and

100%

of consolidated EBITDA, with an additional

$35

million available for revolving facilities, subject to certain conditions. Once Cohu’s

first

lien net leverage ratio is below a certain threshold, incremental facilities

may

be utilized in an unlimited amount.

The Credit Agreement contains certain customary affirmative and negative covenants, including covenants that limit the ability of Cohu and its subsidiaries to, among other things, grant liens, incur debt, dispose of assets, make loans and investments, make acquisitions, make certain restricted payments, merge or consolidate or change their business, in each case subject to customary exceptions for a credit facility of this size and type.

The Credit Agreement includes customary events of default that include, among other things, non-payment of principal, interest or fees, inaccuracy of representations and warranties, breach of covenants, cross-default to certain material indebtedness, bankruptcy and insolvency and change of control. Upon the occurrence and during the continuance of an event of default, the lenders

may

declare all outstanding principal and accrued but unpaid interest under the Credit Agreement immediately due and payable and

may

exercise the other rights and remedies provided under the Credit Agreement and related loan documents.