Exhibit 10.24


 


LOAN
AGREEMENT


 


THIS LOAN AGREEMENT
(“Agreement”) is made and entered into
as of March 31, 2008 by and between COHERENT, INC., a Delaware corporation
(“Borrower”), and UNION BANK OF
CALIFORNIA, N.A., a national banking association (“Bank”).


 


SECTION 1.
THE CREDIT


 


1.1          CREDIT FACILITIES


 


1.1.1       The Revolving Loan.  Bank will loan to Borrower an amount not to
exceed Forty Million and 00/100 Dollars ($40,000,000.00) outstanding in the
aggregate at any one time (the “Revolving Loan”).  The proceeds of the Revolving Loan shall be
used for Borrower’s general working capital and corporate purposes.  Borrower may borrow, repay and reborrow all
or part of the Revolving Loan in amounts of not less than One Million and
00/100 Dollars ($1,000,000.00) in accordance with the terms of the Revolving
Note (defined below).  All borrowings of
the Revolving Loan must be made before March 31, 2010, at which time all
unpaid principal and interest of the Revolving Loan shall be due and
payable.  The Revolving Loan shall be
evidenced by Bank’s standard form of commercial promissory note (the “Revolving Note”). 
Bank shall enter each amount borrowed and repaid in Bank’s records and
such entries shall be deemed correct absent manifest error.  Omission of Bank to make any such entries
shall not discharge Borrower of its obligation to repay in full with interest
all amounts borrowed.


 


1.1.1 (a)        The Commercial L/C Sublimit.  As a sublimit under the Revolving Loan, Bank
shall issue, for the account of Borrower, one or more irrevocable commercial
letters of credit (individually, a “Commercial L/C”)
with transport documents presented in a full set to Bank (and, in case of
airway bills, consigned to Bank).  The
aggregate amount available to be drawn under all outstanding Commercial L/Cs
and the aggregate amount of unpaid reimbursement obligations under drawn
Commercial L/Cs (collectively, the “Commercial L/C Exposure”)
plus the Standby L/C Exposure (as defined below) as of such time, shall
not exceed Five Million and 00/100 Dollars ($5,000,000.00) and shall reduce,
dollar for dollar, the maximum amount available under the Revolving Loan.  All Commercial L/Cs shall be drawn on terms
and conditions acceptable to Bank and shall be governed by the terms of (and
Borrower agrees to execute) Bank’s standard form of commercial letter of credit
application and reimbursement agreement. 
No Commercial L/C shall expire more than one hundred twenty (120) days
from the date of its issuance, and in no event later than March 31, 2010.


 


1.1.1 (b)        The Standby L/C Sublimit.  As a sublimit under the Revolving Loan, Bank
shall issue, for the account of Borrower, one or more irrevocable standby
letters of credit (individually, a “Standby L/C”).  The aggregate amount available to be drawn
under all Standby L/Cs and the aggregate amount of unpaid reimbursement
obligations under drawn Standby L/Cs (collectively, the “Standby L/C
Exposure”) plus the Commercial L/C Exposure as of such time,
shall not exceed Five Million and 00/100 Dollars ($5,000,000.00) and shall
reduce, dollar for dollar, the maximum amount available under the Revolving
Loan.  All Standby L/Cs shall be drawn on
terms and conditions acceptable to Bank and shall be governed by the terms of
(and Borrower agrees to execute) Bank’s standard form of standby letter of
credit application and


 


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reimbursement
agreement.  No Standby L/C shall expire
more than three hundred sixty-five (365) days from the date of its issuance,
and in no event later than March 31, 2010.


 


1.2          Terminology.  The following words and phrases, whether used
in their singular or plural form, shall have the meanings set forth below:


 


“GAAP” means generally accepted accounting
principles and practices consistently applied. 
Accounting terms used in this Agreement but not otherwise expressly
defined have the meanings given them by GAAP.


 


“L/C” means the Commercial L/Cs or the Standby
L/Cs, or both, as the context may require.


 


“Lien” means any voluntary or involuntary
security interest, mortgage, pledge, encumbrance or title retention agreement
covering all or any part of the property of Borrower or any Guarantor.


 


“Loan
Documents” means
this Agreement, the Note, and all other documents, instruments and agreements
required by Bank and executed in connection with this Agreement, the Note, the
Loans, the Revolving Loans and any L/Cs.


 


“Note” means the Revolving Note described above
and any other promissory note(s) that may from time to time evidence the
obligations of Borrower under this Agreement.


 


“Permitted
Liens” means the Liens permitted pursuant to Section 5.1
below.


 


“Revolving
Loan” has the
meaning given to such term in Section 1.1.1 above.


 


1.3          Prepayment.  The Revolving Loan may be prepaid in full or
in part but only in accordance with the terms of the Note, and any such
prepayment shall be subject to any prepayment fee provided for therein.  In the event of a principal prepayment on any
term indebtedness, the amount prepaid shall be applied to the scheduled
principal installments due in the reverse order of their maturity on the Loan
being prepaid.


 


1.4          Interest. 
The unpaid principal balance of the Revolving Loan shall bear interest
at the rate or rates provided in the Note.


 


1.5          Commitment Fee.  On the last calendar day of each calendar
quarter (commencing June 30, 2008), Borrower shall pay to Bank a fee of
one-quarter of one percent (0.25%) per year on the unused portion of the
Revolving Loan for the calendar quarter then ended (or portion thereof during
which this Agreement is in effect), computed on the basis of a 360 day year for
actual days elapsed.


 


1.6          Disbursement.  Bank shall disburse the proceeds of the
Revolving Loan as provided in Bank’s standard form Authorization(s) to
Disburse executed by Borrower.


 


SECTION 2.
CONDITIONS PRECEDENT


 


Bank shall not be
obligated to disburse all or any portion of the Revolving Loan or issue any
L/Cs unless at or prior to the time of each such disbursement or issuance, the
following conditions have been fulfilled to Bank’s satisfaction:


 


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2.1          Compliance.  Borrower shall have performed and complied
with all terms and conditions required by this Agreement to be performed or
complied with, and shall have executed and delivered to Bank the Note and all
other Loan Documents.


 


2.2          Authorization to Obtain Credit.  Borrower shall have provided Bank with an
executed copy of Bank’s form Authorization to Obtain Credit with certified
copies of resolutions duly adopted by Borrower’s board of directors and in form
satisfactory to Bank, authorizing the execution, delivery and performance of
this Agreement and the other Loan Documents. 
Such resolutions shall also designate the persons who are authorized to
act on Borrower’s behalf in connection with this Agreement to do the things
required of Borrower pursuant to this Agreement.


 


2.3          Continuing Compliance.  At the time any disbursement is to be made
and immediately thereafter, there shall not exist any Event of Default (as
hereinafter defined) or any event, condition, or act which with notice or lapse
of time, or both, would constitute an Event of Default.


 


SECTION 3.
REPRESENTATIONS AND WARRANTIES


 


Borrower represents and
warrants that:


 


3.1          Business Activity.  Borrower’s principal business is the
manufacture of lasers and the design and manufacture of photonic solutions for
a multitude of laser-based applications.


 


3.2          Intentionally Omitted.


 


3.3          Organization and Qualification.  Borrower is duly organized and existing under
the laws of the state of its organization, is duly qualified and in good
standing in any jurisdiction where such qualification is required except to the
extent that a failure to qualify could not reasonably be expected to result in
a material adverse effect upon Borrower or its financial condition, and has the
power and authority to carry on the business in which it is engaged and/or
proposes to engage.


 


3.4          Power and Authorization.  Borrower has the power and authority to enter
into this Agreement and to execute and deliver the Note and all other Loan
Documents.  This Agreement and all things
required by this Agreement and the other Loan Documents have been duly
authorized by all requisite action of Borrower.


 


3.5          Authority to Borrow.  The execution, delivery and performance of
this Agreement, the Note and all other Loan Documents are not in contravention
of any of the terms of any material indenture, agreement or undertaking to
which Borrower is a party or by which it or any of its property is bound or
affected.


 


3.6          Compliance with Laws.  Borrower is in compliance with all applicable
laws, rules, ordinances or regulations which materially affect the operations
or financial condition of Borrower.


 


3.7          Title. 
Except for assets which may have been disposed of in the ordinary course
of business, Borrower has good and marketable title to all property reflected
in its financial statements delivered to Bank and to all property acquired by
Borrower since the date of said 


 


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financial statements,
free and clear of all Liens, except Liens specifically referred to in said
financial statements and Permitted Liens.


 


3.8          Financial Statements.  Borrower’s financial statements, including
its unaudited balance sheet as at December 29, 2007, and its unaudited
statement of operation, unaudited statement of stockholders equity, and
unaudited statement of cash flows for its three fiscal months ended December 29,
2007, each prepared on a consolidated basis, have heretofore been furnished to
Bank, and fairly present in all material respects Borrower’s financial
condition and results of operations for the period covered thereby.  Since September 29, 2007, there has been
no material adverse change in Borrower’s financial condition or operations.


 


3.9          Litigation.  Except as disclosed in the Company’s public
filings with the Securities and Exchange Commission, there is no litigation or
proceeding pending or threatened against Borrower or any of its property which
could reasonably be expected to result in a material adverse effect upon
Borrower or its financial condition.


 


3.10        ERISA. 
Borrower’s defined benefit pension plans (as defined in the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”)),
meet, as of the date hereof, the minimum funding standards of Section 302
of ERISA, and no Reportable Event or Prohibited Transaction as defined in ERISA
has occurred with respect to any such plan, except to the extent that any such
event could not reasonably be expected to result in a material adverse effect
upon Borrower or its financial condition.


 


3.11        Regulation U.  No action has been taken or is currently
planned by Borrower, or any agent acting on its behalf, which would cause this
Agreement or the Note to violate Regulation U or any other regulation of the
Board of Governors of the Federal Reserve System, or to violate the Securities
and Exchange Act of 1934, in each case as in effect now or as the same may
hereafter be in effect.  Borrower is not
engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock as one of its important activities and, except as may be
expressly agreed to and documented between Borrower and Bank, none of the
proceeds of the Revolving Loan, nor any L/C, will be used directly or
indirectly for such purpose.


 


3.12        No Event of Default.  Borrower is not now in default in the payment
of any of its material obligations, and there exists no Event of Default, and
no condition, event or act which with notice or lapse of time, or both, would
constitute an Event of Default.


 


3.13        Continuing Representations and Warranties.  The foregoing representations and warranties
shall be considered to have been made again at and as of the date of each and
every Revolving Loan disbursement and every L/C issuance and shall be true and
correct in al material respects as of each such date.


 


SECTION 4.
AFFIRMATIVE COVENANTS


 


Until all sums payable
pursuant to this Agreement, the Note and the other Loan Documents have been
paid in full (which with respect to any L/C that remains outstanding shall
include the delivery to Bank of cash collateral acceptable to Bank in an amount
equal to not less than one hundred five percent (105%) of the outstanding face
amount thereof) and Bank has no further obligations to make Revolving Loans or issue
or permit to remaining outstanding any L/C, unless Bank otherwise consents in
writing, Borrower agrees that:


 


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4.1          Use of Proceeds.  Borrower will use the proceeds of the
Revolving Loan and any L/C that is issued only as provided in Section 1
above.


 


4.2          Payment of Obligations.  Borrower will pay and discharge promptly all
material taxes, assessments and other governmental charges and claims levied or
imposed upon it or its property, or any part thereof; provided,
however, that Borrower shall have the right in good faith to contest
any such taxes, assessments, charges or claims and, pending the outcome of such
contest, to delay or refuse payment thereof provided that adequately funded
reserves are established by it to pay and discharge any such taxes,
assessments, charges and claims.


 


4.3          Maintenance of Existence.  Borrower will maintain and preserve its
existence, and all rights, franchises, licenses and other authority necessary
for the conduct of its business, and will maintain and preserve its property
and assets, equipment and facilities in good order, condition and repair
(ordinary wear and tear excepted); provided, however, that subject to any other
provisions of this Agreement or the other Loan Documents, Borrower shall retain
the right to dispose of property, assets, equipment and facilities if Borrower
deems it to be in the best interests of its business.


 


4.4          Records. 
Borrower will keep and maintain full and accurate accounts and records
of its operations in accordance with GAAP and will permit Bank, at Borrower’s
expense, to have access thereto, to make examination and photocopies thereof,
and to make audits of Borrower’s accounts and records during regular business
hours; provided, however, that Borrower shall have the right to deny access to
Bank and its representatives to any documents or information that are subject
to attorney-client privilege, so long as Borrower makes reasonable efforts to
provide Bank or its representatives any non-privileged documents or information
included therein.


 


4.5          Information Furnished.  Borrower will furnish to Bank:


 


(a)           Within forty-five
(45) days after the close of each fiscal quarter, except for the final quarter
of each fiscal year, its unaudited balance sheet as of the close of such fiscal
quarter, and its unaudited statement of operation, unaudited statement of
stockholders equity, and unaudited statement of cash flows for that fiscal
quarter, each prepared on a consolidated basis, with year-to-date totals and
supportive schedules, all prepared in accordance with GAAP.


 


(b)           Within ninety (90)
days after the close of each fiscal year, a copy of its balance sheet as of the
close of such fiscal year, and its statement of operation, statement of
stockholders equity, and statement of cash flows for that fiscal year, each
prepared on a consolidated basis, examined and prepared on an audited basis by
independent certified public accountants selected by Borrower and reasonably
satisfactory to Bank, in accordance with GAAP along with any management letter
provided by such accountants.


 


(c)           As soon as
available, copies of any Form 10-Q quarterly reports, Form 10-K
annual reports, and any other material filings (such as a Form 8-K current
report regarding any material occurrence) made by Borrower with the SEC or any
other federal or state regulatory authority. 
Anything required to be delivered pursuant to Sections 4.5(a) or
4.5(b) above or this 4.5(c) (to the extent any such financial
statements, reports or proxy statements are included in materials otherwise
filed with the SEC) may be delivered electronically and if so delivered, shall
be deemed to have been 


 


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delivered on the date on
which the Borrower posts such reports, or provides a link thereto, on the
Borrower’s website on the Internet.


 


(d)           Within forty-five
(45) days after the close of each fiscal quarter (except for the final quarter
of each fiscal year, in which case within ninety (90) days after the close of
such fiscal year), a certification of compliance with all covenants under this
Agreement, executed by Borrower’s chief financial officer or other duly
authorized officer, in form acceptable to Bank.


 


(e)           Prompt written
notice to Bank of any Event of Default, any litigation which could reasonably
be expected to have a material adverse effect on Borrower’s financial
condition, and any other matter which has resulted in, or could reasonably be
expected to result in, a material adverse change in Borrower’s financial
condition or operations.


 


(f)            Written notice to
Bank reasonably promptly (and in any case within four (4) business days)
of any change in Borrower’s executive officers, Borrower’s name or Borrower’s
state of organization.


 


(g)           Within fifteen (15)
days after Borrower knows that any Reportable Event or Prohibited Transaction
(as defined in ERISA) has occurred with respect to any defined benefit pension
plan of Borrower, a statement of an authorized officer of Borrower describing
such event or condition and the action, if any, which Borrower proposes to take
with respect thereto.


 


(h)           Such other
financial statements and information as Bank may reasonably request from time
to time; provided, however, that no information will be provided to the extent
that such information is subject to attorney-client privilege, so long as
Borrower makes reasonable efforts to provide Bank or its representatives any
non-privileged documents or information included therein.


 


4.6          Quick Ratio.  Borrower, on a consolidated basis, will at
all times maintain a ratio of cash, accounts receivable and marketable
securities to current liabilities (including for purposes of this calculation
the outstanding amount of the Revolving Loan) of not less than 1.0:1.0.


 


4.7          Total Liabilities to Tangible Net Worth.  Borrower, on a consolidated basis, will at
all times maintain a ratio of total liabilities to Tangible Net Worth of not
greater than 1.0:1.0.  “Tangible Net Worth” means Borrower’s consolidated net worth
increased by indebtedness subordinated to Bank and decreased by patents,
licenses, trademarks, trade names, goodwill and other similar intangible
assets, organizational expenses, security deposits, prepaid costs and expenses
and monies due from affiliates (including officers, shareholders and
directors).


 


4.8          Funded Debt to EBITDA.  Borrower, on a consolidated basis, will
maintain as of the last day of each fiscal quarter a ratio of Funded Debt to
EBITDA of not greater than 2.0:1.0.  “Funded Debt” means (a) all indebtedness for borrowed
money or for the deferred purchase price of property or services (including
reimbursement and all other obligations with respect to surety bonds, letters
of credit and bankers’ acceptances or hedge agreements, in each case whether or
not matured, but excluding obligations to trade creditors incurred in the
ordinary course of business and not more than 90 days past due and excluding
deferred taxes); (b) all obligations evidenced by notes, bonds, debentures
or similar instruments; (c) all indebtedness created or arising under any
conditional sale or other title retention agreements with respect to property
acquired (even though the rights and remedies of the seller or lender under
such 


 


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agreement in the event of
default are limited to repossession or sale of such property); (d) all
capitalized lease obligations; (e) guaranties of indebtedness described in
clauses (a) through (d) above and all other guaranteed indebtedness
that is not otherwise reflected in the consolidated financial statements of
Borrower; (f) all indebtedness referred to in clauses (a), (b), (c), (d) or
(e) above secured by (or for which the holder of such indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien upon or in
property owned by it, even though it has not assumed or become liable for the
payment of such indebtedness; (g) all obligations to Bank under the Loan
Documents; and (h) all liabilities under Title IV of ERISA.  “EBITDA” means
earnings before interest, taxes, depreciation and amortization, plus
non-cash stock compensation and other non-cash charges, for the four (4) fiscal
quarters preceding the date of calculation. 
For purposes of calculating the amount of any outstanding obligations
with respect to hedging arrangements, such amount shall mean, in respect of any
one or more hedge agreements, after taking into account the effect of any
netting agreement relating to such hedge agreements, (a) for any date on
or after the date such hedge agreements have been closed out and termination
value(s) determined in accordance therewith, such termination value(s),
and (b) for any date prior to the date referenced in clause (a), the
amount(s) determined as the mark-to-market value(s) for such hedging
agreements, as determined based upon one or more mid-market or other readily
available quotations provided by any recognized dealer in such hedging
agreements.


 


4.9          Insurance.  Borrower will keep all of its insurable
property, whether real, personal or mixed, adequately insured by good and
responsible companies against fire and such other risks for damages to persons
and property as are customarily insured against by companies conducting similar
business with respect to like properties. 
Borrower will maintain adequate worker’s compensation insurance.


 


4.10        Maintenance of Account for Payment of Amounts Due to Bank.  Borrower will at all times (a) maintain
with Bank a deposit account that Bank is authorized to charge for any amounts
then due to Bank from borrower under this Agreement, the Note or any other Loan
Documents, including interest, principal, fees, costs, expenses or other
amounts due to Bank hereunder or thereunder, and (b) ensure that such
account has immediately available funds sufficient to pay any such amounts
payable to Bank as and when they become due and payable.


 


4.11        Additional Requirements.  Upon Bank’s demand, Borrower will promptly
take such further action and execute all such additional documents and
instruments in connection with this Agreement and the other Loan Documents as
Bank in its reasonable discretion deems necessary, and promptly supply Bank
with such other information concerning its affairs as Bank may reasonably
request from time to time; provided, however, that no information will be provided
to the extent that such information is subject to attorney-client privilege, so
long as Borrower makes reasonable efforts to provide Bank or its
representatives any non-privileged documents or information included therein.


 


4.12        Litigation and Attorneys’ Fees.  Upon Bank’s demand, Borrower will promptly
pay to Bank reasonable attorneys’ fees, including the reasonable estimate of
the allocated costs and expenses of in-house legal counsel and staff, and all
costs and other reasonable expenses paid or incurred by Bank in collecting,
modifying or compromising the Revolving Loan or in enforcing or exercising its
rights or remedies created by, connected with or provided for in this Agreement
and the other Loan Documents.  If any
judicial action, arbitration or other proceeding is commenced, only the
prevailing party shall be entitled to attorneys’ fees and court costs.


 


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4.13        Bank Expenses.  Upon Bank’s request, Borrower will pay or
reimburse Bank for all reasonable costs, expenses and fees incurred by Bank in
preparing and documenting this Agreement and the Revolving Loan and any L/C,
and all amendments and modifications to any Loan Documents, including but not
limited to all filing and recording fees, costs of appraisals, insurance and
reasonable attorneys’ fees, including the reasonable estimate of the allocated
costs and expenses of in-house legal counsel and staff.


 


SECTION 5.
NEGATIVE COVENANTS


 


Until all sums payable
pursuant to this Agreement, the Note and the other Loan Documents have been
paid in full (which with respect to any L/C that remains outstanding shall
include the delivery to Bank of cash collateral acceptable to Bank in an amount
equal to not less than one hundred five percent (105%) of the outstanding face
amount thereof) and Bank has no further obligations to make Revolving Loans or
issue or permit to remaining outstanding any L/C, unless Bank otherwise
consents in writing, Borrower agrees that:


 


5.1          Liens. 
Borrower will not create, assume or suffer to exist any Lien on any of
its property, whether real, personal or mixed, now owned or hereafter acquired,
or upon the income or profits thereof, except for the following:


 


(a)           Liens, if any, in favor of Bank,


 


(b)           Liens for taxes not delinquent and
taxes and other items being contested in good faith,


 


(c)           minor encumbrances and easements on
real property which do not affect its market value in any material respect


 


(d)           existing Liens as of the date hereof
on Borrower’s personal property,


 


(e)           purchase money security interests
encumbering only the personal property purchased,


 


(f)            judgment Liens that do not
constitute an Event of Default under this Agreement,


 


(g)           the interests of lessors under
operating leases and capital leases,


 


(h)           Liens on property of an entity
existing at the time such entity is merged into or consolidated with the
Borrower; provided that such Liens were not created in contemplation of such
merger, consolidation or acquisition and do not extend to any assets other than
those of the entity so merged into or consolidated with the Borrower,


 


(i)            Liens in favor of warehousemen,
landlords, carriers, mechanics, materialmen, laborers, or suppliers, incurred
in the ordinary course of Borrowers’ business and not in connection with the
borrowing of money,


 


(j)            Liens on amounts deposited in
connection with obtaining worker’s compensation or other unemployment
insurance,


 


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(k)           Liens on amounts deposited in
connection with the making or entering into of bids, tenders, or leases in the
ordinary course of business and not in connection with the borrowing of money,


 


(l)            Liens on amounts deposited as
security for surety or appeal bonds in connection with obtaining such bonds in
the ordinary course of business,


 


(m)          bankers’ Liens, rights of set-off and
similar rights and remedies arising by law or contract in favor of banks,
brokerage firms and other such financial institutions with respect to cash and
securities deposited with such banks, brokerage firms and other such financial
institutions to the extent such Liens, rights and remedies secure or extend
solely to amounts due as a result of the administration or maintenance of such
deposited cash and securities,


 


(n)           Liens securing the payment of
insurance premiums financed by an insurance financing company to the extent
such Liens extend solely to returned premiums on the insurance policies so
financed,


 


(o)           licenses of property granted in the
ordinary course of business,


 


(p)           customary Liens granted in favor of a
trustee to secure fees and other amounts owing to such trustee under an
indenture or other agreement, and


 


(q)           other Liens securing indebtedness in
an aggregate principal amount not to exceed Two Million Five Hundred Thousand
Dollars ($2,500,000) at any time outstanding.


 


Borrower shall not agree
or consent to any restriction on Borrower’s ability to create, assume or suffer
to exist any Lien on any of its property to secure its obligations under this
Agreement, except (i) agreements in favor of the Bank or (ii) prohibitions
or conditions under (A) any purchase money debt or capital lease
obligation solely to the extent that the agreement or instrument governing such
purchase money debt or capital lease obligation prohibits a Lien on the property
acquired with the proceeds of such purchase money debt or capital lease, (B) customary
provisions in joint venture agreements and other similar agreements applicable
to joint ventures entered into in the ordinary course of business, (C) customary
provisions contained in leases or licenses of intellectual property and other
similar agreements entered into in the ordinary course of business, (D) customary
provisions restricting subletting or assignment of any lease governing a
leasehold interest, (E) customary provisions restricting assignment of any
agreement entered into in the ordinary course of business, (F) customary
restrictions and conditions contained in any agreement relating to the sale of
any asset pending the consummation of such sale, including any sale structured
as a merger or consolidation of a subsidiary of Borrower, (G) any
transaction in which a condition to consummating such transaction is that all
obligations under this Agreement be paid in full and that the commitment of
Bank hereunder is terminated, or (H) customary restrictions and conditions
contained in the document relating to any Lien, so long as (1) such Lien
is permitted under Section 5.1 and such restriction or conditions relate
only to the specific asset subject to such Lien, and (2) such restrictions
and conditions are not created for the specific purpose of avoiding the
restrictions imposed by this paragraph.


 


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5.2          Borrowings.  Borrower will not sell, discount or otherwise
transfer any account receivable or any note, draft or other evidence of
indebtedness, except to Bank or except to a financial institution at face value
for deposit or collection purposes and discounting of account receivables with
customers in the ordinary course of business, and without any fees other than
the financial institution’s normal fees for such services.  Borrower will not borrow any money, except (a) pursuant
to agreements with Bank, (b) pursuant to transactions entered into with
Borrower’s subsidiaries in the ordinary course of business as currently
conducted, (c) borrowed money that is secured by a Lien that is otherwise
permitted by Section 5.1, or (d) other borrowed money in an aggregate
principal amount not to exceed Ten Million Dollars ($10,000,000) outstanding at
any time.


 


5.3          Sale of Assets, Liquidation or Merger.  Borrower will not liquidate, dissolve or
enter into any consolidation, merger, partnership or other combination, or
convey, sell or lease all or the greater part of its assets or business, or
purchase or lease all or the greater part of the assets or business of another;
provided, however, that Borrower may
acquire, merge or consolidate if (a) Borrower is the surviving entity, (b) the
assets so acquired will not be subject to any Lien following the effective date
of such combination, except for Liens that are otherwise permitted pursuant to Section 5.1,
(c) no Event of Default shall have occurred and be continuing or shall
result therefrom, (d) as of the effective date of and after giving effect
to such acquisition, merger or consolidation, Borrower would be in compliance
on a pro forma basis with the financial covenants in Sections 4.6, 4.7 and 4.8,
and (e) based on projections prepared by Borrower, after giving effect to
such acquisition, merger or consolidation Borrower could not reasonably be
expected to be in violation of the financial covenants in Sections 4.6, 4.7 or
4.8 during the term of this Agreement.


 


5.4          Loans, Advances and Guaranties.  Borrower will not, except in the ordinary
course of business as currently conducted, make any loans or advances, or
become a guarantor or surety.  The
foregoing sentence shall not prohibit Borrower from making loans or advances
to, or becoming a guarantor or surety for, Borrower’s subsidiaries, in each
case in the ordinary course of business as currently conducted.


 


5.5          Redemption of Stock.  Except pursuant to either (a) Borrower’s
tender offer commenced February 15, 2008 to purchase up to 7,990,000
shares of its common stock at a price per share not less than $26 and not
greater than $29.50, or (b) Borrower’s repurchase program to purchase up
to an additional $25 million worth of its common stock following the completion
or termination of the tender offer and terminating no later than February 11,
2009, Borrower will not redeem or retire any share of its capital stock for
value.


 


5.6          Affiliate Transactions.  Borrower will not transfer any property to
any affiliate, except for value received in the normal course of business and
for an amount, including any management or service fee(s), as would be
conducted and charged with an unrelated or unaffiliated entity, except that the
following in any event shall be permitted:


 


(a)           transactions between Borrower and its
subsidiaries and between its subsidiaries in the ordinary course of business as
currently conducted;


 


(b)           the payment of reasonable fees,
compensation, or employee benefit arrangements to, and any indemnity provided
for the benefit of, officers, employees, and directors; and


 


(c)           loans or advances
to employees in the ordinary course of business.


 


10














 


SECTION 6.
EVENTS OF DEFAULT


 


Any one or more of the
following events shall constitute an event of default (each an “Event of Default”) under this Agreement:


 


6.1          Borrower shall default in the due and
punctual payment of the principal of or the interest on the Note, or the
commitment fee pursuant to Section 1.5 above, and such failure shall
continue for five (5) business days, or on any other amounts owing under
any of the Loan Documents and such failure shall continue for ten (10) business
days.


 


6.2          Borrower shall default in the due
performance or observance of Sections 4.1, 4.5, 4.6, 4.7, 4.8, 4.10, or Section 5
of this Agreement.


 


6.3          Borrower shall default in the due
performance or observance of any covenant or condition of the Loan Documents
(other than Sections 4.1, 4.5, 4.6, 4.7, 4.8, 4.10, or Section 5 of this
Agreement) and such failure shall continue for 30 days after written notice
from Bank to Borrower of such default.


 


6.4          Any representation or warranty made by
the Borrower herein or by the Borrower (or any of its officers) in connection
with this Agreement shall prove to have been incorrect in any material respect
when made or deemed made.


 


6.5          The insolvency of Borrower or the
failure of Borrower generally to pay Borrower’s debts as such debts become due.


 


6.6          The commencement as to Borrower of any
voluntary or involuntary proceeding under any laws relating to bankruptcy,
insolvency, reorganization, arrangement, debt adjustment or debtor relief (and
with respect to any involuntary proceeding, either such proceeding shall remain
undismissed or unstayed and in effect for a period of sixty (60) days or the
court shall have entered a decree or order granting the relief sought in such
proceeding).


 


6.7          Borrower shall make a general
assignment for the benefit of its creditors.


 


6.8          The appointment, or commencement of
any proceedings for the appointment, of a receiver, trustee, custodian or
similar official for all or substantially all of Borrower’s property.


 


6.9          The commencement of any proceeding for
the dissolution or liquidation of Borrower.


 


6.10        The termination of existence of
Borrower.


 


6.11        The revocation of any guaranty or
subordination agreement given in connection with this Agreement.


 


6.12        Judgments or orders for the payment of
money in excess of $10,000,000 in the aggregate shall be rendered against the
Borrower and either (i) enforcement proceedings shall have been commenced
by any creditor upon such judgment or order or (ii) there shall be any
period of 30 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect; provided, however, that any such judgment or order shall not be an
Event of Default if and for so long as the amount of such 


 


11

















 


judgment or order is
fully covered (subject to customary deductibles) by insurance under which the
carrier has acknowledged coverage.


 


6.13        Borrower shall fail to pay any principal
or interest on any borrowed money that is outstanding in a principal amount of
at least $5,000,000 in the aggregate when the same becomes due and payable
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise), and such failure shall continue after the applicable grace period,
if any, specified in the agreement or instrument relating to such borrowed
money; or any other event shall occur or condition shall exist under any
agreement or instrument relating to any such borrowed money and shall continue
after the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or condition is to accelerate, or to
permit the acceleration of, the maturity of such borrowed money; or any such
borrowed money shall be declared to be due and payable.


 


6.14        If any material portion of Borrower’s
assets is attached, seized, subjected to a writ or distress warrant, or is
levied upon, and the same is not discharged before the earlier of 30 days after
the date it first arises.


 


Upon the occurrence and
during the continuance of an Event of Default, Bank (i) may, by notice to
the Borrower, terminate its obligation to make Revolving Loans and issue L/Cs,
and (ii)  may, by notice to the Borrower, (A) declare the Revolving
Loans, all interest thereon and all other amounts payable under this Agreement
to be immediately due and payable, whereupon the Revolving Loans, all such
interest and all such amounts shall become and be immediately due and payable,
without presentment, demand, protest or further notice of any kind, all of
which are hereby expressly waived by the Borrower and (B) require the
delivery to Bank of cash collateral acceptable to Bank in an amount equal to
not less than one hundred five percent (105%) of the outstanding face amount of
all outstanding L/C; provided, however, that upon the occurrence of an Event of
Default described in Sections 6.6, 6.7, 6.8 or 6.9 above, (i) Bank’s
obligation to make Revolving Loans and issue L/Cs shall automatically
terminate, (ii) the Revolving Loans, all interest thereon and all other
amounts payable under this Agreement shall automatically become immediately due
and payable, and (iii) Borrower shall automatically be required to deliver
to Bank cash collateral acceptable to Bank in an amount equal to not less than
one hundred five percent (105%) of the outstanding face amount of all
outstanding L/C.


 


SECTION 7.
GENERAL PROVISIONS


 


7.1          Additional Remedies.  The rights, powers and remedies given to Bank
hereunder shall be cumulative and not alternative and shall be in addition to
all rights, powers and remedies given to Bank by law against Borrower or any
other person or entity, including but not limited to Bank’s rights of setoff
and banker’s lien.


 


7.2          Nonwaiver.  Any forbearance or failure or delay by Bank
in exercising any right, power or remedy hereunder shall not be deemed a waiver
thereof and any single or partial exercise of any right, power or remedy shall
not preclude the further exercise thereof. 
No waiver shall be effective unless it is in writing and signed by an
officer of Bank.


 


7.3          Inurement.  The benefits of this Agreement and the other
Loan Documents shall inure to the successors and assigns of Bank and the
permitted successors and assigns of Borrower, but any attempted assignment by
Borrower without Bank’s prior written consent shall be null and void.


 


12

















 


7.4          Applicable Law.  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE INTERNAL LAWS OF THE STATE
OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE, WITHOUT
REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF LAWS, AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.


 


7.5          Severability.  Should any one or more provisions of this
Agreement or any other Loan Document be determined to be illegal or
unenforceable, all other provisions of such document shall nevertheless be
effective.


 


7.6          Controlling Document.  In the event of any inconsistency between the
terms of this Agreement and any other Loan Document, the terms of the other
Loan Document shall prevail.


 


7.7          Construction.  The section and subsection headings herein
are for convenient reference only and shall not limit or otherwise affect the
interpretation of this Agreement.


 


7.8          Amendments.  This Agreement may be amended only in writing
signed by all parties hereto.


 


7.9          Counterparts.  Borrower and Bank may execute one or more
counterparts to this Agreement, each of which shall be deemed an original, but
all such counterparts when taken together, shall constitute one and the same
agreement.


 


7.10        Notices.  Any notices or other communications provided
for or allowed hereunder shall be effective only when given by one of the
following methods and addressed to the parties at their respective addresses
and shall be considered to have been validly given (a) upon delivery, if
delivered personally, (b) upon receipt, if mailed, first class postage
prepaid, with the United States Postal Service, (c) on the next business
day, if sent by overnight courier service of recognized standing, or (d) upon
telephoned confirmation of receipt, if telecopied or e-mailed.  The addresses to which notices or demands are
to be given may be changed from time to time by notice delivered as provided above.


 


7.11        Integration Clause.  Except for the other Loan Documents, this
Agreement constitutes the entire agreement between Bank and Borrower regarding
the Revolving Loan and any L/Cs, and all prior oral or written communications
between Borrower and Bank shall be of no further effect or evidentiary value.


 


7.12        Disputes. 
TO THE EXTENT PERMITTED BY LAW, IN CONNECTION WITH ANY CLAIM, CAUSE OF
ACTION, PROCEEDING OR OTHER DISPUTE CONCERNING THE LOAN DOCUMENTS (EACH A “CLAIM”), THE PARTIES TO THIS AGREEMENT EXPRESSLY,
INTENTIONALLY, AND DELIBERATELY WAIVE ANY RIGHT EACH MAY OTHERWISE HAVE TO
TRIAL BY JURY.  IN THE EVENT THAT THE
WAIVER OF JURY TRIAL SET FORTH IN THE PREVIOUS SENTENCE IS NOT ENFORCEABLE
UNDER THE LAW APPLICABLE TO THIS AGREEMENT, THE PARTIES TO THIS AGREEMENT AGREE
THAT ANY CLAIM, INCLUDING ANY QUESTION OF LAW OR FACT RELATING THERETO, SHALL,
AT THE WRITTEN REQUEST OF ANY PARTY, BE DETERMINED BY JUDICIAL REFERENCE
PURSUANT TO THE STATE LAW APPLICABLE TO THIS AGREEMENT.  THE PARTIES SHALL SELECT A SINGLE NEUTRAL
REFEREE, WHO SHALL BE A RETIRED STATE OR FEDERAL JUDGE.  IN THE EVENT THAT THE PARTIES CANNOT AGREE
UPON A REFEREE, THE COURT SHALL APPOINT THE REFEREE.  THE REFEREE SHALL REPORT A STATEMENT OF
DECISION TO THE COURT.  NOTHING IN THIS
PARAGRAPH 


 


13

















 


SHALL LIMIT THE RIGHT OF
ANY PARTY AT ANY TIME TO EXERCISE SELF-HELP REMEDIES, FORECLOSE AGAINST
COLLATERAL OR OBTAIN PROVISIONAL REMEDIES. 
THE PARTIES SHALL BEAR THE FEES AND EXPENSES OF THE REFEREE EQUALLY,
UNLESS THE REFEREE ORDERS OTHERWISE.  THE
REFEREE SHALL ALSO DETERMINE ALL ISSUES RELATING TO THE APPLICABILITY,
INTERPRETATION, AND ENFORCEABILITY OF THIS PARAGRAPH.  THE PARTIES ACKNOWLEDGE THAT IF A REFEREE IS
SELECTED TO DETERMINE THE CLAIMS, THEN THE CLAIMS WILL NOT BE DECIDED BY A
JURY.


 


7.13        Patriot Act Notice.  Bank is subject to the USA PATRIOT
Improvement and Reauthorization Act of 2005 (the “Patriot Act”)
and hereby notifies Borrower that, pursuant to the requirements of the Patriot
Act, Bank is required to obtain, verify and record information that identifies
Borrower, which information includes the name and address of Borrower and other
information that will allow Bank to identify Borrower in accordance with the
Patriot Act.


 


7.14        Confidentiality.  Bank agrees that material, non-public
information regarding the Borrower and its subsidiaries, their operations,
assets, and existing and contemplated business plans shall be treated by Bank
in a confidential manner, and shall not be disclosed by Bank to persons or
entities who are not parties to this Agreement, except:  (i) to attorneys for and other advisors,
accountants, auditors, and consultants to the Bank, (ii) to subsidiaries
and affiliates of the Bank, provided that any such subsidiary or affiliate
shall have agreed to receive such information hereunder subject to the terms of
this Section 7.14, (iii) as may be required by statute, decision, or
judicial or administrative order, rule, or regulation, (iv) as requested
or required by any governmental authority pursuant to any subpoena or other
legal process, (v) as to any such information that is or becomes generally
available to the public (other than as a result of prohibited disclosure by
Bank), (vi) in connection with any assignment or participation of Bank’s
interest under this Agreement, provided that any such assignee or participant
shall have agreed in writing to receive such information hereunder subject to
the terms of this Section 7.14, and (vii) in connection with any
litigation or other adversary proceeding involving parties hereto which such
litigation or adversary proceeding involves claims related to the rights or
duties of such parties under this Agreement or the other Loan Documents.  The provisions of this Section 7.14
shall survive the payment in full of the obligations under this Agreement.


 


[Signature page follows]


 


14

















 


THIS AGREEMENT
is executed on behalf of the parties by their duly authorized representative(s) as
of the date first above written.


 


 


	
  COHERENT, INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ John Ambrosso

  	
   

  
	
  Title:

  	
  President & CEO

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Helene Simonet

  	
   

  
	
  Title:

  	
  EVP & CFO

  	
   

  
	
   

  	
   

  
	
  Address:

  	
   

  
	
   

  	
   

  
	
  5100 Patrick Henry
  Drive

  	
   

  
	
  Santa Clara, CA 95054

  	
   

  
	
  Attention: Chief
  Financial Officer and

  General Counsel

  	
   

  
	
  Telecopier: (408)
  764-4928

  	
   

  
	
  Telephone: (408)
  764-4000

  	
   

  



 


 


	
  UNION BANK OF CALIFORNIA, N.A.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ James Goudy

  	
   

  
	
  Title:

  	
  Vice President

  	
   

  
	
   

  	
   

  
	
  Address:

  	
   

  
	
   

  	
   

  
	
  99 Almaden Boulevard,
  Suite 200

  	
   

  
	
  San Jose, California
  95113

  	
   

  
	
  Attention: Allan Miner
  and James Goudy

  	
   

  
	
  Telecopier: (408)
  280-7163

  	
   

  
	
  Telephone: (408)
  279-7714

  	
   

  



 


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