EXHIBIT
4.2


AGREEMENT
OF SUBSTITUTION AND AMENDMENT OF


COMMON
SHARES RIGHTS AGREEMENT


 


This Agreement of Substitution and Amendment
is entered into as of September 8, 2004, by and between Coherent, Inc., a
Delaware corporation (the “Company”) and American Stock Transfer & Trust
Company, a New York banking corporation (“AST”).


 


RECITALS


 


A.                                   On
or about June 24, 1998, the Company entered into a First Amended and
Restated Common Shares Rights Agreements (the “Rights Agreement”) with Bank
Boston N.A. (the “Predecessor Agent”) as rights agent.


 


B.                                     The
Company wishes to remove the Predecessor Agent and substitute AST as rights
agent pursuant to Section 21 of the Rights Agreement.


 


C.                                     The
Company has given the Predecessor Agent notice of removal of the Predecessor Agent
as rights agent.


 


AGREEMENT


 


NOW THEREFORE, in
consideration of the foregoing and of other consideration, the sufficiency of
which is hereby acknowledged, the parties agree as follows:


 


1.                                       Section 21
of the Rights Agreement is hereby amended to provide that any successor rights
agent shall, at the time of its appointment as rights agent, have a combined
capital and surplus of at least $ 10 million, rather than $100 million.


 


2.                                       The
Company hereby appoints AST as rights agent pursuant to Section 21 of the
Rights Agreement, to serve in that capacity for the consideration and subject
to all of the terms and conditions of the Rights Agreement.


 


3.                                       AST
hereby accepts the appointment as rights agent pursuant to Section 21 of
the Rights Agreement and agrees to serve in that capacity for the consideration
and subject to all of the terms and conditions of the Rights Agreement.


 


4.                                       From
and after the effective date hereof, each and every reference in the Rights
Agreement to a “Rights Agent” shall be deemed to be a reference to AST.


 





















 


5.                                       Section 26
of the Rights Agreement is amended to provide that notices or demands shall be
addressed as follows (until another address is filed):


 


	
  If to the Company:

  	
   

  	
  Coherent, Inc.

  
	
   

  	
   

  	
  5100 Patrick Henry Drive

  
	
   

  	
   

  	
  Santa Clara, CA 95054

  
	
   

  	
   

  	
  Attn: General Counsel

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Wilson, Sonsini, Goodrich & Rosati

  
	
   

  	
   

  	
  650 Page Mill Road

  
	
   

  	
   

  	
  Palo Alto, CA 94304

  
	
   

  	
   

  	
  Attn: Larry W. Sonsini, Esq.

  
	
   

  	
   

  	
   

  
	
  If to AST:

  	
   

  	
  American Stock Transfer & Trust Company

  
	
   

  	
   

  	
  59 Maiden Lane

  
	
   

  	
   

  	
  New York, NY 10038

  
	
   

  	
   

  	
  Attention: Corporate Trust Department

  



 


6.                                       Except
as expressly modified herein, the Rights Agreement shall remain in full force
and effect.


 


7.                                       This
Agreement of Substitution and Amendment may be executed in one or more
counterparts, each of which shall together constitute one and the same
document.


 


IN WITNESS WHEREOF,  the
parties have caused this Agreement to be duly executed as of the date indicated
above.


 


	
   

  	
  COHERENT, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Scott H. Miller

  	
   

  
	
   

  	
  Scott H. Miller

  
	
   

  	
  Senior Vice President & General Counsel

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  AMERICAN STOCK TRANSFER 

  & TRUST COMPANY

  
	
   

  	
   

  
	
   

  	
  /s/ Herbert J. Lemmer

  	
   

  
	
   

  	
  Name: