Document:

Exhibit 10.5

 

COHERENT, INC. SUPPLEMENTARY RETIREMENT PLAN

(FOR “X” GRADE EMPLOYEES)

 

PLAN AND TRUST AGREEMENT

(EFFECTIVE JANUARY 1, 1990)

 

 

COHERENT, INC.

 

SUPPLEMENTARY RETIREMENT PLAN AND TRUST

 

THIS PLAN AND TRUST AGREEMENT,
effective as of January 1, 1990 is made and entered into by and between
Coherent, Inc. (Company) acting on behalf of itself and any subsidiaries and
Robert Quillinan and Dennis Bucek as Co-Trustees (collectively referred to in
the singular as the Trustee). Throughout, Company shall include wherever
relevant subsidiaries of the Company.

 

WITNESSETH:

 

WHEREAS, the Company
wishes to establish a supplementary employee retirement plan for the benefit of
a select group of highly compensated employees designated by the Company
according to Company personnel policies, and in its sole discretion, as “X”
grade employees, and

 

WHEREAS, the Company
wishes to provide that the plan to be established under this Agreement shall be
designated as the Coherent, Inc. Supplementary Retirement Plan (the “Plan”),
and

 

WHEREAS, the Company
wishes to provide under the Plan for the payment of vested accrued benefits to
the Executives and their beneficiary or beneficiaries (“Trust Beneficiaries”),
and

 

WHEREAS, the Company
wishes to provide under the Plan that the Company shall pay the entire of the
vested accrued benefits from its general assets, and

 

WHEREAS, the Company
wishes to establish an irrevocable trust (the “Trust”) to set aside
contributions by the Company to meet its obligations under the Plan, and

 

WHEREAS, the Company
wishes to make contributions to the Trust and that such contributions be held
by the Trustee and invested, reinvested and distributed, all in accordance with
the provisions of this Agreement, and

 

WHEREAS, the Company
intends that amounts allocated to the Trust and the earnings thereon shall be
used by the Trustee to satisfy the liabilities of the Company under the Plan
with respect to each Executive for whom an Account has been established and
such utilization shall be in accordance with the procedures set forth herein,
and

 

WHEREAS, the Company
intends that the Trust to be a “grantor trust” with the corpus and income of
the Trust treated as assets and income of the Company for federal and state
income tax purposes, and

 

WHEREAS, the Company
intends that the assets of the Trust shall at all times be subject to the
claims of the general creditors of the Company as provided in Article XI,
and

 

WHEREAS, the Company
intends that the existence of the Trust shall not alter the characterization of
the Plan as “unfunded” for purposes of the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”), and shall not be construed to provide income
to the Executives under the Plan prior to actual payment of the vested accrued
benefits thereunder,

 

NOW THEREFORE, the
Company does hereby establish the Plan and Trust as follows and does also
hereby agree that the Plan and Trust shall be structured, held and disposed of
as follows:

 

ARTICLE I

 

ELIGIBILITY, PARTICIPATION AND BENEFICIARY
DESIGNATION

 

(a)   Any employee designated by
the Company according to Company personnel policies, and in its sole
discretion, as an “X” grade employee is eligible to participate in the Plan. The
Company reserves the right to modify the definition of “X” grade employee at
any time. Any “X” grade employee who has commenced participation in the Plan
shall be referred to in this Agreement as an “Executive.”

 

1

 

(b)   Each “X” grade employee may
elect to commence participation in the Plan as of the January 1 coinciding
with or next following the later of (i) his date of hire or (ii) the
date the employee becomes an “X” grade employee, provided that the “X” grade
employee executes the Coherent Supplementary Retirement Plan Deferred
Compensation Agreement (“Deferred Compensation Agreement”) prior to the
January 1 on which the “X” grade employee elects to enter the Plan.

 

(c)   Each Executive, prior to
entering the Plan, shall designate a beneficiary or beneficiaries to receive
the remainder of any interest of the Executive under the Plan. An Executive may
change his beneficiary designation at any time on written notice to the Company.
Each beneficiary designation shall be in a form prescribed by the Company and
will be effective only when filed with the Company during the Executive’s
lifetime. Each beneficiary designation filed with the Company will cancel all
previously filed beneficiary designations. In the absence of a valid
designation, or if no designated beneficiary survives the Executive, his
interest shall be distributed to his estate.

 

ARTICLE II

 

PLAN CONTRIBUTIONS AND ALLOCATIONS

 

(a)   Each Executive participating
in the Plan shall elect in the Deferred Compensation Agreement to have the
Company make salary deferral contributions on his behalf in an amount not to
exceed 24% of the Executive’s Compensation. Compensation shall be defined for
purposes of the foregoing as the base salary paid by the Company in a calendar
year to an Executive with respect to services rendered during such calendar
year including all amounts which an Executive elects to have the Company
contribute on his behalf for the calendar year as a salary deferral
contribution (“Compensation”). Any salary deferrals made by an Executive under
this Plan shall be held as an asset of the Company and the Company intends to
deposit the amounts deferred into the Trust.

 

(b)   An Executive may discontinue
the Deferred Compensation Agreement at any time; however, no other
modifications to the Deferred Compensation Agreement may be made prior to the
commencement of the calendar year following written notification to the Company
of any desired modifications. The Company has the power to establish uniform
and nondiscriminatory rules and from time to time to modify or change such
rules governing the manner and method by which salary deferral contributions
shall be made, as well as the manner and method by which salary deferral
contribution may be changed or discontinued temporarily or permanently. All
salary deferral contributions shall be authorized by the Executive in writing,
made by payroll deduction, deducted from the Executive’s Compensation without
reduction for any taxes or withholding (except to the extent required by law or
the regulations) and paid over to the Trust by the Company.

 

(c)   In the event an Executive
ceases to be an “X” grade while also a participant in the Plan, such employee
may continue to make salary deferral contributions under the Plan through the
end of the calendar year in which the employee ceases to be an “X” grade
employee. Thereafter, such employee shall not make any further salary deferred
contributions to the Plan unless or until he again meets the eligibility
requirements of Article I above.

 

(d)   As of the last day of each
calendar year, the Company shall make a matching contribution to the Trust,
equal to the salary deferral of the Executive to this Plan; provided, however
that the matching contribution to this Plan combined with any matching
contribution made to the Coherent Employee Retirement and Investment Plan
(CERIP) for the year shall not exceed 6% of the Compensation of each such
Executive. An Executive may participate in this Plan notwithstanding whether
the Executive elects to have the Company make or not make contributions under
the Coherent Employee Retirement and Investment Plan in lieu of receiving cash.

 

(e)   The salary deferral
contributions and Company matching contributions made under the Plan on behalf
of each Executive shall be credited to the Executive’s Account. The Account consists
of the aggregate interest of the Executive under the Plan (and in the Trust
Fund), as reflected in the records maintained by the Company for such purposes.

 

ARTICLE III

 

VESTING, FORFEITURES AND RESTORATIONS

 

(a)   The value of an Executive’s Account shall
become fully vested upon:

 

(i)             The Executive attaining age 65 while an
employee of the Company,

 

(ii)          Upon the Executive’s termination of
employment by reason of death or disability, or

 

(iii)       Upon a Change in Control as defined in
Article VI(e).

 

2

 

Disability shall be determined by the Company according to the
provisions of the Coherent Employee Retirement and Investment Plan.

 

The value of that portion of an Executive’s Account which consists of
salary deferral contributions shall be fully vested at all times.

 

Except as otherwise provided in Article III, that portion of an
Executive’s Account which consists of matching contributions by the Company
shall become vested in accordance with the following schedule:

 

	
  Years of Service

  	
   

  	
  Vested Percentage

  
	
  Less than 3 years

  	
   

  	
  0%

  
	
  3 years

  	
   

  	
  20%

  
	
  4 years

  	
   

  	
  40%

  
	
  5 years

  	
   

  	
  60%

  
	
  6 years

  	
   

  	
  60%

  
	
  7 years or more

  	
   

  	
  100%

  

 

(b)   Years of Service for
Vesting.

 

(i)    Year
of Service. An Executive shall be credited with one year of Service for
each 12-month period ending on the last day of the calendar year in which he
has at least 1,000 Hours of Service.

 

(ii)   Termination
Prior to Vesting. If an Executive’s Service terminates prior to his earning
any vested percentage on his Company matching contributions, his Service prior
to such termination shall be disregarded for vesting purposes if he is
reemployed after he has incurred 5 consecutive Breaks in Service.

 

(iii)  Service
Prior to Break in Service. If an Executive is reemployed after a Break in
Service, Service prior to a Break in Service which is eligible to be credited
to the Executive upon reemployment shall not be credited for purposes of
vesting until he has completed one year of Service after renewal of Service.

 

(c)   Forfeitures and
Restorations.

 

(i)    Forfeitures
on Date of Termination. Any remainder of a terminating Executive’s Account
which is not vested shall be forfeited on the date his employment with the
Company terminates.

 

(ii)   Matching
Contribution Forfeitures Reduce Employer Contribution. Forfeitures
attributable to that portion of an Executive’s account which consists of
Company matching contributions during a calendar year which are not used to
restore Executives’ Accounts as of the last day of such calendar year shall
reduce the Company’s matching contributions for such year and shall be
allocated as of the last day of the calendar year to the Company matching
contribution portion of the Accounts of the Executives then participating in
the Plan as provided in Article 4.

 

(iii)  Reemployment
After Forfeiture. If an Executive is reemployed before incurring 5
consecutive Breaks in Service, the forfeited amount shall be treated as
follows:

 

(aa) Restoration if No
Distribution. In the event an Executive did not receive a distribution of
his vested interest, the forfeited amount shall be fully restored as provided
in (iv) below and shall be recredited to the Executive’s Account as of his
reemployment date.

 

(bb) Restoration If Total
Distribution Repaid. In the event a distribution of an Executive’s entire
vested Account was made to him, the forfeited amount shall be fully restored as
provided in (iv) below if he repays the full amount of the prior
distribution before the date which is 5 years after he is reemployed by the
Company or before the date on which he incurs 5 consecutive Breaks in Service,
if earlier. If the Executive does not make full repayment of the prior
distribution by that date, the forfeited amount will not be restored.

 

(cc) Full or Partial
Restoration If Partial Distribution. In the event a distribution was made
to an Executive of less than his entire vested interest, his forfeited amount
shall be fully restored together with any unpaid vested interest as provided in
(dd) below if he repays the full amount of the prior distribution

 

3

 

before the date which is 5 years after he is reemployed by the Company
or before the date on which he incurs 5 consecutive Breaks in Service, if
earlier.

 

(dd) Source of Restored Amounts.
Forfeited amounts to be restored for any calendar year may be restored from
Forfeitures as of the last day of a calendar year, from additional Company
contributions for such calendar year or from Trust income, as determined by the
Committee.

 

(iv)  No
Partial Repayments Permitted. An Executive shall not be permitted to repay
part of a distribution.

 

(v)   No
Restoration After 5 Consecutive Breaks in Service. If an Executive is
reemployed after 5 consecutive Breaks in Service, no portion of his non-vested
Account shall be restored and any undistributed vested interest shall be
maintained as a separate fully vested Account.

 

The vested Account balance of an Executive shall be paid from Trust
Funds only to the extent the Company is not at the time of payment Insolvent as
defined in Article XI. Any vested accrued benefits under the Plan
represent an unfunded, unsecured promise by the Company to pay these benefits
to the Executives when due. An Executive has no greater right to Trust assets
than the general creditors of the Company in the event that the Company shall
become Insolvent. Trust assets can be used to pay only vested accrued benefits
under the Plan or the claims of the Company’s general creditors.

 

ARTICLE IV

 

SERVICE

 

(a)   Definitions.

(i)    “Service”
means an Executive’s total period of employment with the Company.

 

(ii)   “Hours
of Service” means:

 

(aa) Each hour for which an
Executive is paid, or entitled to payment, for the performance of duties for
the Company.

 

(bb) Each hour for which an
Executive is paid, or entitled to payment, by the Company on account of a
period of time during which no duties are performed (regardless of whether the
employment relationship has terminated) due to vacation, holiday, illness,
incapacity (including disability), layoff, jury duty, military duty or leave of
absence; provided that no Hours of Service shall be credited to an Executive:

 

(1)   For
a period during which no duties are performed if payment is made or due under a
plan maintained solely for purpose of complying with applicable workers
compensation, unemployment compensation, or disability insurance laws;

 

(2)   On
account of any payment made or due an Executive solely as reimbursement for
medical or medically related expenses incurred by the Executive.

 

(cc) Each hour not otherwise
credited under the Plan for which back pay, irrespective of mitigation of
damages, has either been awarded or agreed to by the Company. Such hours are to
be credited to the period or periods to which the award or agreement pertains. If
this provision results in an Executive becoming eligible to participate in the
Plan for a calendar year in which he was not otherwise eligible to participate
under Article II or if this provision results in an increase in the vested
percentage applicable to an Executive’s Account which has been forfeited under
Article III, the Committee shall establish suitable procedures for
determining and allocating any resulting amounts to such Executive’s Account.

 

(dd) Solely for purposes of
determining whether a Break in Service has occurred, each hour not otherwise
credited under the Plan that would have been credited if the Executive had not
been absent:

 

(1)   By
reason of pregnancy or the birth of a child of the Executive;

 

4

 

(2)   By
reason of the placement of a child with the Executive in connection with his
adoption of such child; or

 

(3)   For
purposes of caring for any such child for a period beginning immediately
following such birth or placement:

 

In any case in which the Executive is unable to determine the number of
hours which would otherwise normally have been credited to such Executive (but
for such absence), such individual shall be credited with 8 Hours of Service
for each day of such absence. The hours described in this
Article 10(ii)(dd) shall be treated as Hours of Service only in the
calendar year in which the absence from work begins if the Executive would
thereby be prevented from incurring a Break in Service in such calendar year
or, in any other case, in the next following calendar year.

 

(ee) Each hour for any period
during which an Executive is not paid but is on an approved leave of absence,
military duty or is temporarily laid off, provided that the Executive:

 

(1)   Returns
to the employ of the Company immediately after the expiration of the leave or
layoff, or in the case of military duty, within 120 days or such longer period
as may be prescribed by applicable law, after first becoming eligible for
military discharge, and

 

(2)   Remains
in the employ of the Company for at least 30 days after such return, or

 

(3)   Fails
to return or remain employed as provided above by reason of his death,
Disability or normal retirement.

 

Hours credited for such periods shall be based on a 40-hour week or, if
different, on the Executive’s normally scheduled hours per week. However, if
the Executive fails to return to the employ of the Company or to remain in the
employ of the Company for at least 30 days after his return for reasons other
than his death, Disability or normal retirement, then his original leave date
shall be deemed to be his termination date.

 

(ff)   No more than 501 Hours of
Service shall be credited under Articles IV(ii)(bb), (cc), (dd), (ee) and (ff)
to an Executive on account of any single continuous period of time during which
the Executive performs no duties for the Company.

 

(iii)  “Break
in Service” means a 12 month period ending on the last day of a calendar
year in which an Executive is credited with 500 or fewer Hours of Service.

 

(b)   Crediting of Hours
Subject to DOL Relation. The calculation of the number of Hours of Service
to be credited under Articles IV(ii)(bb) and IV(ii)(cc) for periods during
which no duties are performed, and the crediting of such Hours of Service to
periods of time for purposes of computations under the Plan, shall be
determined by the Committee in accordance with the rules set forth in the
Department of Labor Regulation Section 2530.200b-2 paragraphs
(b) and (c) , which rules shall be consistently applied with respect
to all employees within the same job classifications.

 

(c)   Hours of Service
Equivalency. Hours of Service for Executives under Articles IV(ii)(aa),
(bb) and (cc) shall be determined by crediting each Executive with 190 Hours of
Service for each month in which the Employee would have been credited with at
least 1 Hour of Service under Articles IV(ii)(aa), (bb) and (cc) . However, for
classes of Employees paid on an hourly basis and for Employees for whom records
of hours are maintained, Hours of Service under Articles IV(ii)(aa), (bb) and
(cc) shall be determined on the basis of hours for which Compensation is paid
or due.

 

ARTICLE 
V

 

TRUST FUND

 

(a)   The Company hereby
establishes the Trust with the Trustee, consisting of such sums of money and
other property acceptable to the Trustee as from time to time shall be paid or
delivered to the Trustee. All such money and other property, all investments
and reinvestments made therewith or proceeds thereof and all earnings and
profits

 

5

 

thereon, less all payments and charges as authorized herein, shall
constitute the “Trust Fund” or “Trust”. The Trust Fund shall at all times be
subject to the claims of general creditors of the Company as provided in
Article XI.

 

(b)   The Trust hereby established
shall be irrevocable, but for the issuance by the Internal Revenue Service of
unfavorable tax rulings on the status of the Trust as a grantor trust. Subject
to Article XI, Trust assets shall be held for the exclusive purpose of
providing vested accrued benefits to the Trust Beneficiaries and defraying
expenses of the Trust in accordance with the provisions of this Agreement. No
part of the income or corpus of the Trust Fund shall be recoverable by or for
the Company prior to the termination of the Trust and the satisfaction of all
liabilities under the Plans.

 

(c)   No right or interest to
receive accrued benefits from the Trust may be assigned, sold, anticipated,
alienated or otherwise transferred by the Trust Beneficiaries.

 

(d)   The Trustee accepts the
Trust established under this Agreement on the terms and subject to the
provisions set forth herein, and it agrees to discharge and perform fully and
faithfully all of the duties and obligations imposed upon it under this
Agreement.

 

(e)   The principal of the Trust
and any earnings thereon shall be held separate and apart from other funds of
the Company and shall be used exclusively for the uses and purposes herein set
forth. Neither the Trust Beneficiaries nor the Plan shall have any preferred
claim on, or any beneficial ownership interest in, any assets of the Trust
prior to the time such assets are paid to a Trust Beneficiary as vested accrued
benefits as provided in Article VI, and all rights created under the Plan
and the Trust under this Agreement shall be mere unsecured, contractual rights
of the Executives against the Company.

 

ARTICLE VI

 

GENERAL DUTIES OF THE COMPANY AND THE TRUSTEE

 

(a)   The Company will provide the
Trustee with a copy of any future amendment to this Agreement promptly upon its
adoption.

 

(b)   The Company may from time to
time hire outside consultants, accountants, actuaries, legal counsel or
recordkeepers to perform such tasks as the Company may from time to time
determine.

 

(c)   The Trustee shall manage,
invest and reinvest the Trust Fund as provided in Article XII of this
Agreement. The Trustee shall collect the income on the Trust Fund, and make
distributions therefrom, all as hereinafter provided.

 

(d)   While the Plan remains in
effect, and prior to a Change in Control, as defined below, the Company shall
make contributions to the Trust Fund at least once each quarter. The amount of
any quarterly contributions shall be at the discretion the Company. At the
close of each calendar year, the Company shall make an additional contribution
to the Trust Fund to the extent that previous contributions to the Trust Fund
for the current calendar year are not equal to the total of the salary
deferrals made by each Executive plus Company matching contributions accrued,
as of the close of the current calendar year.

 

(e)   In the event of a “Change in
Control”, the Company shall make an additional contribution to the Trust Fund
to the extent that previous contributions to the Trust Fund for the current
calendar year are not equal to the total of the current year’s salary deferrals
made by each Executive plus Company matching contributions accrued, as of the
date of the Change in Control.

 

For purposes of this Agreement, a “Change in Control” shall be deemed
to have occurred if any person (including a “Group” as such term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934) acquires shares
of Coherent, Inc. either (i) having a majority of total number of votes
that may be cast for the election of directors of Coherent, Inc. or
(ii) possessing, directly or indirectly, the power to control the
direction of management or policies of the Company; provided, however, that no
Change of Control shall be deemed to occur in the event of a merger,
consolidation or reorganization of the Company where the shareholders of the
Company are substantially the same as before such merger, consolidation or
reorganization. The Trustee shall have no responsibility to determine a change
in control and shall be advised of such event by the Company.

 

6

 

(f)    The Trustee shall not be
liable for any failure by the Company to provide contributions sufficient to
pay all vested accrued benefits under the Plan in full in accordance with the
terms of this Agreement.

 

(g)   In the event that any
Executives are found to be ineligible, that is, not members of a select group
of highly compensated employees, according to a determination made by the
Department of Labor, the Company will take whatever steps it deems necessary,
in its sole discretion to equitably protect the interests of the affected
Executives.

 

ARTICLE VII

 

ALLOCATION OF TRUST INCOME OR LOSS

 

(a)   Determination of Net
Income. As of each Valuation Date, the Company shall determine the net
income or loss of the Trust Fund based on a statement from the Trustee of the
receipts and disbursements of the Trust Fund since the immediately preceding
Valuation Date and of the fair market value of the Fund as of the Valuation
Date. If one or more separate investment funds have been established as
provided in Article XII, each fund shall be valued separately on each
Valuation Date and the net income or loss of each fund shall be allocated to
each Account invested in such investment fund. In addition, self-directed
accounts as defined under Article XII(b) shall be valued according to
Section (c) of this Article.

 

(b)   Valuation. As of each
Valuation Date and prior to any allocation of contributions and forfeitures to
be made as of such date, the net income or loss of the Trust Fund since the
immediately preceding Valuation Date, including net appreciation or
depreciation and any expenses paid by the Trust, shall be allocated to each
Account in the ratio that the value, as of the immediately preceding Valuation
Date of each such Account invested in the Trust Fund bears to the value, as of
the immediately preceding Valuation Date, of all Accounts invested in the Trust
Fund. If one or more separate investment funds have been established, the net
income or loss of each fund shall be allocated to each Account invested in such
investment fund in proportion to the value of each Account invested in such
funds as of the immediately preceding Valuation Date. The Company shall adopt
suitable procedures to establish a proportionate crediting of Trust income or
loss to those portions of Accounts in the case of contributions or hardship
withdrawals that have occurred in the interim period since the immediately
preceding Valuation Date.

 

(c)   Valuation of Segregated
Accounts. The portion of any Executive’s Account invested on a segregated
basis as provided in Article XII shall be valued separately on each
Valuation Date and the net income or loss allocated to such Account shall be
based on the assets, including income, gain, loss and/or other change in value
of the assets constituting such portion of the Account.

 

(d)   Valuation Dates. The
Trust Fund, any separate investment funds and any segregated account shall be
valued as of the last day of each calendar year and as of any other date the
Company directs the Trustee to value the Trust Fund, as provided in
Article VII(e).

 

(e)   Special Valuation Dates
at Company Discretion. The Company may direct the Trustee to determine the
fair market value of the Trust Fund and may make a determination of Trust income
or loss as of any date other than the last day of a calendar year.

 

ARTICLE VIII

 

EXECUTIVES’ ACCOUNTS

 

(a)   Separate Accounts. The
Company shall open and maintain a separate Account for each Executive. Each
Executive’s Account shall reflect the amounts allocated thereto and distributed
therefrom and such other information as affects the value of such Account
pursuant to this Agreement. The Company may maintain records of Accounts to the
nearest whole dollar.

 

(b)   Statement of Accounts.
As soon as practicable after the end of each calendar year the Company shall
furnish to each Executive a statement of his Account, determined as of the end
of such calendar year. Upon the discovery of any error or miscalculation in an
Account, the Company shall correct it, to the extent correction is practically
feasible. Statements to Executives are for reporting purposes only, and no
allocation, valuation or statement shall vest any right or title in any part of
the Trust Fund, nor require any segregation of Trust assets, except as is
specifically provided in this Agreement.

 

7

 

(c)   Accounts Which Are Not
Segregated. When employment is terminated and payment is not deferred, the
amount of the payment shall be based on the value of the Executive’s Account as
of the Valuation Date immediately preceding his termination date plus any
contribution subsequently credited to such Account and less any distributions
subsequently made from the Account.

 

(d)   Segregated Accounts. Payment
to an Executive shall be based on the value of his segregated Account at the
date of distribution. The value of his segregated Account shall be the current
fair market value, including any income or loss, of the property constituting
such segregated Account.

 

ARTICLE IX

 

PAYMENTS TO A TRUST BENEFICIARY

 

(a)   Payments of vested accrued
benefits to Trust Beneficiaries from the Trust Fund shall be made in accordance
with the Deferred Compensation Agreement between the Company and the Executive;
provided, however, the Trustee shall make such payments, as directed by the
Company, to the extent the Company is not at such time Insolvent as defined in
Article XI. Except as otherwise expressly provided in this Agreement, no
distribution shall be made or commenced prior to the Executive’s termination of
employment or death, whichever occurs earlier.

 

(b)   Where the distribution of
all or any portion of an Executive’s Account is to be deferred in the form of
cash, the Account shall continue to be held and invested in the Trust subject
to revaluation as provided in Article VII.

 

(c)   In kind distributions shall
be (i) made only in a form of investment that was held on behalf of the
Executive as a segregated investment pursuant to Article XII(b) in a
separate investment fund pursuant to Article XII(d) immediately preceding
the date of distribution, (ii) limited to the amount of such investment so
held, and (iii) based on the fair market value of the distributable
property, as determined by the Trustee at the time of distribution.

 

(d)   Payment to any Trust
Beneficiary shall be made pursuant to the Deferred Compensation Agreement
executed by the Executive, in whole or in part.

 

(i)    In a lump sum, in cash
and/or in kind, or

 

(ii)   In annual installments
equal to l/n of the Executive’s vested accrued benefit where n is the number of
installments remaining to be paid.

 

(e)   In case of any distribution
to a minor or to a legally incompetent person, the Company may (1) direct the
Trustee to make the distribution to his legal representative, to a designated
relative, or directly to such person for his benefit, or (2) instruct the
Trustee to use the distribution directly for his support, maintenance, or
education. The Trustee shall not be required to oversee the application, by any
third party, of any distributions made pursuant to this Article IX(e).

 

(f)    Notwithstanding any other
provisions of this Agreement, if any amounts held in the Trust are found in a “determination”
(within the meaning of Section 1313(a) of the Internal Revenue Code of
1986, as amended (the “Code”)), to have been includible in the gross income of
any Trust Beneficiary prior to payment of such amounts from the Trust, the
Trustee shall, as soon as practicable pay such amounts to the Trust
Beneficiary, as directed by the Company. For purposes of this Section, the
Trustee shall be entitled to written notice from the Company that a
determination described in the preceding sentence has occurred and to receive a
copy of such notice. The Trustee shall have no responsibility until so advised
by the Company.

 

ARTICLE X

 

HARDSHIP WITHDRAWALS

 

(a)   At the request of an
Executive, the Company shall authorize a withdrawal at any time of the vested
accrued benefit attributable to the Executive’s salary deferrals and gains or
losses thereon under his Account, provided that authorization for such
withdrawal and the amount thereof shall be given only on account of an
unforeseeable emergency. The term “unforeseeable emergency” shall mean severe
financial hardship to the Executive resulting from a sudden and unexpected
illness or accident of the Executive or of a dependent (as defined in Internal
Revenue Code section 152(a)) of the Executive, loss of the Executive’s property
due to casualty, or other similar extraordinary and unforeseeable

 

8

 

circumstances arising as a result of events beyond the control of the
Executive. The circumstances that will constitute an unforeseeable emergency
will depend upon the facts of each case, but in any case, payment may not be
made to the extent that such hardship is or may be relieved —

 

(i)    Through reimbursement or
compensation by insurance or otherwise,

 

(ii)   By liquidation of the
Executive’s assets, to the extent the liquidation of such assets would not itself
cause severe financial hardship, or

 

(iii)  By cessation of deferrals
under the Plan.

 

The Company shall establish reasonable procedures and guidelines
uniformly applied, to determine whether an unforeseeable emergency exists;
provided, however, that no withdrawal request shall be granted if to do so
could result in the inclusion of Trust Fund amounts in the gross income of
Trust Beneficiaries prior to payment of such amounts from the Trust Fund
because approval of such request would be inconsistent with any applicable
statute, regulation, notice, ruling or other pronouncement of the Internal
Revenue Service interpreting this or similar provisions.

 

ARTICLE XI

 

TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO

TRUST BENEFICIARIES WHEN COMPANY INSOLVENT

 

(a)   The Company shall be
considered “Insolvent” and an “Insolvency” shall be deemed to exist for
purposes of this Agreement under any of the following circumstances:

 

(i)    The Company is unable to
pay its debts as they mature.

 

(ii)   A receiver or trustee is
appointed to take possession of all or substantially all of the assets of the
Company.

 

(iii)  There is a general
assignment by the Company for the benefit of creditors.

 

(iv)  An action or proceeding is
commenced by or against the Company under any insolvency or bankruptcy act, or
any other statute or regulation having as its purpose the protection of
creditors, and the action or proceeding is not discharged within 60 days after
the date of commencement.

 

(b)   Notwithstanding any
provision in this Agreement to the contrary, if at any time while the Trust is
still in existence the Company becomes Insolvent, the Trustee shall upon
written notice thereof suspend the payment of all amounts from the Trust Fund
and shall thereafter (i) not permit any further elective salary deferrals
by the Executives and (ii) discontinue all contributions by the Company to
the Trust on behalf of the Executives. The Trustee shall hold the Trust Fund in
suspense for the benefit of the Company’s creditors until it receives a court
order directing the disposition of the Trust Fund; provided, however, that the
Trustee may deduct or continue to deduct its fees and expenses, including fees
of any consultants, actuaries, accountants, legal counsel or recordkeepers
retained by the Company or Trustee to provide services to the Trust.

 

(c)   By its approval and
execution of this Agreement, the Company represents and agrees that its Board
of Directors and Chief Executive Officer, as from time to time acting, shall
have the fiduciary duty and responsibility on behalf of the Company’s creditors
to give to the Trustee prompt written notice of the Company’s Insolvency and
the Trustee shall be entitled to rely thereon to the exclusion of all
directions or claims to pay vested accrued benefits thereafter made. Absent
such notice, the Trustee shall have no responsibility for determining whether
or not the Company has become Insolvent.

 

(d)   If after being Insolvent,
the Company later becomes solvent without the entry of a court order concerning
the disposition of the Trust Fund, or if any bankruptcy or insolvency
proceedings referred to in Article XI(a) are dismissed, the Company shall
by written notice so inform the Trustee and the Trustee shall thereupon resume
all its duties and responsibilities under this Agreement without regard to this
Article XI until and unless the Company again becomes Insolvent as such
term is defined herein.

 

(e)   If the Trustee discontinues
payments from the Trust pursuant to this Article XI and subsequently
resumes payments, or removes the suspended status of the Trust, interest will
be added to the Accounts of all Executives, including those Accounts from which
a payment was held in suspense, for the period of discontinuance at not less
than the average rate

 

9

 

on 90-Day Treasury Bills auctioned during the period of discontinuance,
to be determined and calculated by the Company. The Company will not make any
other contributions to the Trust that otherwise would have been made during the
period of discontinuance.

 

ARTICLE XII

 

INVESTMENT AND ADMINISTRATION OF TRUST FUND

 

(a)   The Trustee shall have the
power:

 

(i)    To invest and reinvest the
Trust Funds; provided, however, the Trustee may delegate this investment
authority, in whole or in part, and subject to such terms and conditions and as
the Trustee shall require, to the Plan Committee of the Coherent Employee
Retirement and Investment Plan (“Plan Committee”), an Investment Manager who
meets the requirements under Article 10.04(i) of the Coherent Employee
Retirement and Investment Plan, and, in accordance with paragraphs
(b) through (f) below, Executives participating in the Plan (with respect
to their own account);

 

(ii)   To collect and receive any
and all money and other property due to the Trust Fund and to give full
discharge therefore;

 

(iii)  To settle, compromise or
submit to arbitration any claims, debts or damages due or owing to or from the
Trust; to commence or defend suits or legal proceedings to protect any interest
of the Trust; and to represent the Trust in all suits or legal proceedings in
any court or before any other body or tribunal;

 

(iv)  Generally to do all acts,
whether or not expressly authorized, which the Trustee may deem necessary or
desirable for the protection of the Trust Fund.

 

Persons dealing with the Trustee shall be under no obligation to see to
the proper application of any money paid or property delivered to the Trustee
or to inquire into the Trustee’s authority as to any transaction.

 

(b)   Segregated Investments —
Participant Direction Permitted. At the discretion of the Company,
Executives may be permitted to direct the Trustee in writing regarding the
investment of funds in their Accounts, in a manner and form prescribed by the
Company; provided that such right to direct shall apply on a nondiscriminatory
basis to all Executives who meet the requirements established by the Company. Such
directed investment Accounts shall be segregated and shall be valued separately
by the Trustee under the provisions of Article VII(c). Valuations of such
Accounts shall be made at such times as the Company may require, but no less
frequently than annually. In no event, for valuation purpose, shall the
property constituting such segregated Accounts, or the net income or loss thereon,
be commingled with other Executives’ Accounts. Such segregated Accounts may be
charged with their proportionate share of any general expenses charged to the
Trust or with the full share of any expense incurred directly or indirectly in
connection with such Accounts.

 

(c)   Participant Direction
Subject to Trustee Approval. The Trustee shall be under no obligation to
approve or disapprove any specific investment medium. Neither the Company nor
the Trustee has any liability for any losses or damage that may occur or result
from (i) the approval of or failure to approve of any specific investment
medium; (ii) the imposition of any administrative rules relating to the
timing of investment elections of any sort; or (iii) any administrative
delay in carrying out or failure to carry out investment elections within a
specified time. The Trustee may disapprove or refuse to carry out any
investment directions which in its opinion would subject the Trustee to
burdensome administrative responsibilities. Prior to carrying out any
investment direction of an Executive, the Trustee may require releases or any
other documents, agreements or indemnifications as it may consider necessary. The
Trustee, in approving any investment medium or in making investments under this
Plan, shall not be restricted by statutes governing the legal investment of
trust funds.

 

(d)   Separate Investment Funds —
Company May Establish Separate Funds. The Company
may, in its sole discretion, direct the Trustee to create one or more separate
investment funds, having such different specific investment objectives as the
Company shall from time to time determine. The Company shall determine and may
from time to time redetermine the number of investment funds and the specific
objectives of said funds and the investments or kinds of investment which shall
be authorized therefor.

 

10

 

Each Participant has the right to instruct the Plan Committee to direct
the Trustee in writing to invest his Account in one or more separate investment
funds, or in a directed investment, provided, however, that if any Executive
fails to make a direction pursuant to this Article as to all or any part of
such Account, the undirected portion of an Executive’s Account shall be
invested by the Trustee.

 

(e)   Purchase of Life
Insurance. In addition, and if authorized by the Company, an Executive may
also direct the Trustee in writing to purchase with the vested accrued benefits
in his Account insurance on the life of the Executive from an insurance company
licensed to do business under the insurance laws of the State of California.

 

(f)    Company To Establish
Rules. The Company may at any time make such uniform and nondiscriminatory
rules as it determines necessary regarding the administration of the directed
investment option. The Company may also develop and maintain rules governing
the rights of Executives to change their investment directions and the
frequency with which such changes can be made.

 

ARTICLE XIII

 

ACCOUNTING BY TRUSTEE

 

(a)   The Trustee shall keep
accurate and detailed records of all investments, receipts, disbursements, and
all other transactions required to be done, including such specific records as
shall be agreed upon in writing between the Company and the Trustee. All such
accounts, books and records shall be open to inspection and audit at all
reasonable times by the Company, the Company’s representatives or agents. Within
one hundred and twenty (120) days following the close of each calendar quarter
and within one hundred and twenty (120) days after the removal or resignation
of the Trustee, the Trustee shall deliver to the Company a written account of
its administration of the Trust during such quarter or during the period from
the close of the last preceding quarter to the date of such removal or
resignation, setting forth all investments, receipts, disbursements and other
actions effected by it, including a description of all securities and
investments purchased and sold, with the cost or net proceeds of such purchases
or sales (accrued interest paid or receivable being shown separately), and
showing all cash, securities and other property held in the Trust at the end of
such quarter or as of the date of such removal or resignation, as the case may
be. The written approval of any accounting by the Company shall be final as to
all matters and transactions stated or shown therein and binding upon the
Company and all persons who then shall be or then after shall become interested
in this Trust. Failure of the Company to notify the trustee within 180 days
after receipt of any accounting of its disapproval of such accounting shall be
the equivalent of written approval.

 

ARTICLE XIV

 

RESPONSIBILITY OF TRUSTEE

 

(a)   The Trustee shall act with
the care, skill, prudence and diligence under the circumstances then prevailing
that a prudent person acting in a like capacity and familiar with such matters
would use; provided, however, that the Trustee shall incur no liability to
anyone for any action taken pursuant to a direction, request or approval given
by the Company or any Executive which is contemplated by and complies with the
terms of this Trust Agreement, and to that extent the Trustee shall be relieved
of the Prudent Person Rule for investments.

 

(b)   The Trustee may hire agents,
accountants, actuaries recordkeepers and financial consultants. Expenses of
such persons shall be deemed to be expenses of management and administration of
the Trust within the meaning of Article XV(d), below.

 

(c)   The Trustee shall have,
without exclusion, all powers conferred on Trustees by applicable law unless
expressly provided otherwise herein.

 

11

 

ARTICLE XV

 

TAXES, EXPENSES AND COMPENSATION OF TRUSTEE

 

(a)   It is the intention of the
Company to have the corpus and income of the Trust established hereunder
treated as assets and income of the Company to be used to satisfy the Company’s
legal liability under the Plan in respect of all of the Executives, and the
Company agrees that all income, deductions and credits of the Trust Fund belong
to the Company as owner for income tax purposes and will be included on the
Company’s income tax returns.

 

(b)   The Company shall from time
to time pay taxes (references in this Agreement to the payment of taxes shall
include interest and applicable penalties) of any and all kinds whatsoever
which at any time are lawfully levied or upon or become payable in respect of
the Trust Fund, the income or any property forming a part thereof, or any
security transaction pertaining thereto. To the extent that any taxes levied or
assessed upon the Trust Fund are not paid by the Company or contested by the
Company pursuant to the last sentence of this Article, the Trustee shall pay
such taxes out of the Trust Fund, and the Company shall, upon demand by the
Trustee, deposit into the Trust Fund an amount equal to the amount paid from
the Trust Fund to satisfy such tax liability. If requested by the Company, the
Trustee shall at the Company’s expense, contest the validity of such taxes in
any manner deemed appropriate by the Company or its counsel, but only if it has
received an indemnity bond or other security satisfactory to it to pay any
expenses of such contest. Alternatively, the Company may itself contest the
validity of any such taxes, but any such contest shall not affect the Company’s
obligation to reimburse the Trust Fund for taxes paid from the Trust Fund.

 

(c)   In making payments from the
Trust, the Trustee shall be liable for federal income tax withholding, and
shall withhold the appropriate amount of tax, if any, as provided by applicable
law and regulation, from any payment made to a Trust Beneficiary, unless the
Company does not provide the Trustee with the necessary information as set
forth in regulations, in which case the Company shall assume all relevant
liability.

 

(d)   The Trustee may be paid
compensation by the Company in accordance with any written agreement for this
purpose between them; provided, however, that a Trustee who is an officer,
director or employee of the Company shall serve without compensation. The
Trustee shall be reimbursed by the Company for its reasonable expenses of
management and administration of the Trust, including reasonable compensation
of any agent engaged by the Trustee to assist it in such management and
administration. The Trustee shall be able to charge the Trust Fund for such
compensation and for any reasonable expenses including counsel, appraisal or
accounting fees, and the same may be deducted from the Trust Fund unless paid
by the Company within sixty (60) days after the Company receives written
billing by the Trustee; provided that this paragraph shall not apply while a
dispute over the amount of such charges exists.

 

ARTICLE XVI

 

PROTECTION OF TRUSTEE

 

(a)   The Company shall certify to
the Trustee the name or names of any person or persons authorized to act for
the Company. Such certification shall be signed by the Chief Executive Officer
or other officer of the Company duly authorized by the Board of Directors. Until
the Company notifies the Trustee, in a similarly signed notice, that any such
person is no longer authorized to act for the Company, the Trustee may continue
to rely upon the authority of such person. The Trustee may rely upon any
certificate, notice or direction of the Company which the Trustee reasonably
believes to have been signed by a duly authorized officer or agent of the
Company. Notices to the Trustee shall be sent in writing to the Trustee at the
offices of the Company, 3290 West Bayshore Road, Post Office Box 10321, Palo
Alto, California 94303-0811. No communication shall be binding upon the Trust
Fund or the Trustee until it is received by the Trustee and unless it is in
writing and signed by an authorized person. Notices to the Company shall be
sent in writing attention to the Company’s principal office at 3290 West
Bayshore Road, Post Office Box 10321, Palo Alto, California 94303-0811, or to
such other address as the Company may specify. No notice shall be binding upon
the Company until it is received by the Company.

 

(b)   The Trustee may consult with
any legal counsel (“Legal Counsel”) that is appointed according to the
Selection Process, except as provided in Article XVIII(c), for the purpose
of obtaining advice on topics including but not limited to the construction of
this Agreement, its duties hereunder, or any act which it pro poses to take or
omit, and shall not be liable for any action taken or omitted in good faith
pursuant to such advice. Expenses of Legal Counsel shall be deemed to be
expenses of management and administration of the Trust within the meaning of
Article XV(d) hereof.

 

12

 

(c)   The Trustee shall discharge
its duties under the Agreement in a manner consistent with the objectives of
this Agreement The Trustee shall not be liable for any loss sustained by the
Trust Fund by reason of the purchase, retention, sale or exchange of any
investment in good faith and in accordance with the provisions of this
Agreement. The Trustee shall have no responsibility or liability for any
failure of the Company to make contributions to the Trust Fund or to pay vested
accrued benefits when due. The Trustee’s duties and obligations shall be
limited to those expressly imposed upon it under the provisions of this
Agreement relating to the Trust, and the Trustee shall not have responsibility
under the provisions of this Agreement relating to the Plan, notwithstanding
any reference to the Plan.

 

ARTICLE XVII

 

INDEMNIFICATION OF TRUSTEE

 

To the fullest extent permitted by law, the Company agrees to
indemnify, to defend, and to hold harmless the Trustee against any liability
whatsoever for any action taken or omitted by such Trustee in good faith in
connection with this Agreement or duties hereunder and for any expenses or
losses for which the Trustee may become liable as a result of any such actions
or non-actions unless resultant from gross negligence or willful misconduct.

 

ARTICLE XVIII

 

RESIGNATION AND REMOVAL OF TRUSTEE AND LEGAL
COUNSEL

 

(a)   A Trustee (or a Co-Trustee)
may resign upon thirty (30) days’ prior written notice to the Company, except
that any such resignation shall not be effective until a successor trustee (or
Co-Trustee) has been appointed according to the Selection Process, as defined
below, and such successor has accepted the appointment in writing, but in any
event no later that 90 days after such resignation. The Company shall condition
its acceptance of such successor on the obtaining from such successor of a
written statement that the successor has read the Trust Agreement and
understands its obligations thereunder.

 

(b)   The Company may remove the
Trustee (or a Co-Trustee) upon thirty (30) days’ prior written notice to the
Trustee (or the Co- Trustee) . Any such removal shall not be effective until
the close of such notice period and delivery by the Company to the Trustee (or
Co-Trustee) of (i) an instrument in writing appointing a successor trustee
(if required, such appointment shall be according to the Selection Process, as
defined below), (ii) an acceptance of such appointment in writing executed
by such successor, and (iii) a written statement by such proposed
successor that the successor has read the Agreement and understands its
obligations thereunder.

 

(c)   During the 12 months
following a Change of Control, as defined in Article VI(e), the
appointment of Legal Counsel and/or a successor trustee shall be in accordance
with the following process (“Selection Process”): (i) the Executives who
have the five largest accrued benefits (whether or not vested) under the
Accounts established on their behalf in the Trust Fund (“Five Executives”) as
of the Valuation Date immediately preceding the day of selection shall be
determined, provided that if an Executive’s Account has been reduced to zero
after that Valuation Date, that Executive’s Account shall not be considered for
purpose of determining the five largest Accounts, and (ii) an appointment
or removal of Legal Counsel and/or a successor trustee shall be made by a
majority vote of the Five Executives with each of the Five Executives casting
one equal vote. Any of the Five Executives may waive the rights described in
this paragraph and assign them to the Company. In any case, the rights of the
Five Executives described in this paragraph shall revert to the Company following
12 months after the Change of Control.

 

(d)   All of the provisions set
forth herein with respect to the Trustee shall relate to each successor with
the same force and effect as if such successor had been originally named as the
Trustee hereunder.

 

(e)   Upon the resignation or
removal of the Trustee (or a Co-Trustee) and appointment of a successor, the
Trustee shall transfer and deliver the Trust Fund to such successor. Following
the effective date of the appointment of the successor, the Trustee’s responsibility
hereunder shall be limited to managing the assets in its possession,
transferring such assets to the successor and settling its final account. Neither
the Trustee nor the successor shall be liable for the acts of the other.

 

13

 

ARTICLE XIX

 

DURATION AND TERMINATION OF TRUST AND
AMENDMENT

 

(a)   The Trust is hereby declared
to be irrevocable and shall continue until all vested accrued benefits have
been paid.

 

(b)   If this Trust terminates
under the provisions of Article XIX(a), the Trustee shall liquidate the
Trust Fund and, after its final accounting has been settled, shall distribute
to the Company the net balance of any assets of the Trust Fund remaining after
all vested accrued benefits and administration expenses have been paid. Upon
making such distribution, the Trustee shall be relieved from all further
liability.

 

(c)   This Agreement may be
amended, or the Plan terminated or suspended, by an instrument in writing
executed on behalf of the Company by the Chief Executive Officer or a duly
appointed representative of the Board of Directors and delivered to the
Trustee, provided, however, that (i) no amendment will be made to this
Agreement which will cause this Agreement, the Trust, the Plan or the assets of
the Trust Fund to be governed by or subject to Part 2, 3 or 4 of
Title I of ERISA, (ii) no such amendment shall adversely affect any
Trust Beneficiary’s accrued benefit, (iii) no such amendment shall
increase the duties or responsibilities of the Trustee unless the Trustee
consents thereto in writing, (iv) no such amendment which would cause the
Trust to be other than a “grantor trust,” or have contributions to the Trust by
the Company, or income and gains of the Trust Fund, constitute a taxable event
to the Trust or to the Executives, and (v) no such amendment shall cause
the vested accrued benefit paid to Trust Beneficiaries from the Trust Fund to
become nondeductible to the Company in the year of payment.

 

(d)   Notwithstanding anything to
the contrary in this Agreement, during the 12 months following a Change of
Control, as defined in Article VI(e), the Five Executives, determined
pursuant to Article XVIII(c), shall have the authority in their absolute
discretion, to terminate the Plan and direct distribution of all Executive
Accounts.

 

ARTICLE XX

 

MISCELLANEOUS

 

(a)   This Agreement, the Trust
and the Plan hereby created shall be construed and regulated by the laws of the
State of California.

 

(b)   The headings of sections in
this Agreement are used herein for convenience of reference only and in case of
any conflict the text of this Agreement shall control.

 

(c)   This Agreement shall be
binding upon and inure to the benefit of any successor to the Company or its
business as the result of merger, consolidation, reorganization, transfer of
assets or otherwise, and any subsequent successor thereto; and any such
successor shall be deemed to be the “Company” under this Agreement. In the
event of any such merger, consolidation, reorganization, transfer of assets or
other similar transaction, the successor to the Company or its business or any
subsequent successor thereto shall promptly notify the Trustee in writing of
its successorship and furnish the Trustee with the information specified in
Article XVI(a) of this Agreement. In no event shall any such transaction
described herein suspend or delay the rights of Trust Beneficiaries to receive
their vested accrued benefits hereunder.

 

14

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.

 

 

	
  COHERENT, INC.

  	
   

  	
  TRUSTEE

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Henry E. Gauthier

  	
   

  	
  /s/ Robert Quillinan

  	
   

  
	
   

  	
   

  	
  ROBERT QUILLINAN

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  December 4, 1990

  	
   

  	
  Date: 

  	
  November 28, 1990

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Dennis Bucek

  	
   

  
	
   

  	
   

  	
  DENNIS BUCEK

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date: 

  	
  November 28, 1990

  	
   

  
							

 

15Exhibit 10.6

 

COHERENT, INC.

 

2005
DEFERRED COMPENSATION PLAN

 

 

PREAMBLE

 

This Coherent, Inc. 2005 Deferred
Compensation Plan is adopted by Coherent, Inc. for the benefit of certain
of its Employees and members of its Board of Directors, effective as of January 1,
2005 (the “Effective Date”). The purpose of the Plan is to provide supplemental
retirement income and to permit eligible Participants the option to defer
receipt of Compensation, pursuant to the terms of the Plan. The Plan is
intended to be an unfunded deferred compensation plan maintained for the
benefit of a select group of management or highly compensated employees under
sections 201(2), 301(a)(3) and 401(a)(1) of ERISA and is intended to
comply with Section 409A of the Internal Revenue Code. Participants shall
have the status of unsecured creditors of Coherent, Inc. with respect to
the payment of Plan benefits.

 

From and after the Effective Date, this Plan
replaces the Coherent, Inc. 1995 Deferred Compensation Plan, the Coherent, Inc.
Supplementary Retirement Plan and the Director Deferred Compensation Plan,
which have been frozen to new deferrals as of December 31, 2004 so as to
qualify these prior plans for “grandfather” treatment under Internal Revenue
Code Section 409A.

 

 

ARTICLE I

 

Definitions

 

1.1                                             Definitions.
Wherever used herein, the following terms have the meanings set forth below,
unless a different meaning is clearly required by the context:

 

(a)                                  “Account”
means an account established on the books of the Employer for the purpose of
recording amounts credited on behalf of a Participant and any expenses, gains
or losses included thereon.

 

(b)                                 “Administrator”
means the Employer, or the Committee, if one has been designated by such
Employer.

 

(c)                                  “Bankruptcy
Court Approval” means the approval of a bankruptcy court pursuant to 11
U.S.C. § 503(b)(1)(A).

 

(d)                                 “Beneficiary”
means the person or persons entitled under Section 6.4 to receive benefits
under the Plan upon the death of a Participant.

 

(e)                                  “Change of Control
Event” means a change in ownership or effective control of the Company or
in the ownership of a substantial portion of the Company’s assets, as defined
under Code Section 409A.

 

(f)                                    “Code” means
the Internal Revenue Code of 1986, as amended from time to time.

 

(g)                                 “Code Section 409A”
means Code Section 409A and the proposed or final (as applicable) Treasury
regulations and other official guidance promulgated thereunder.

 

(h)                                 “Code Section 409A
Distribution” means a distribution pursuant to Section 6.10 hereof.

 

(i)                                     “Committee”
means the Deferred Compensation Committee composed of three or more individuals
appointed by the Compensation Committee of the Board of Directors of the
Employer, or following a Change of Control, appointed by the Committee, to
function as the Administrator. Once appointed, the Deferred Compensation
Committee shall interpret and administer this Plan and take such other actions
as may be specified herein.

 

(j)                                     “Company”
means the Employer and any of its Subsidiaries.

 

(k)                                  “Compensation”
means (i) with respect to Eligible Employees, base salary, commissions,
variable compensation plan bonuses, sales commission plan bonuses and sales
incentive bonuses, including amounts that are otherwise excludable from the
gross income of the Participant under a salary reduction agreement by reason of
the application of Sections 125 or 402(a)(8) of the Code, and (ii) with
respect to Outside Directors, all cash retainers and cash meeting fees,
excluding expense reimbursements. Any deferral elections made under Employer’s
401(k) Plan shall be determined based on the Participant’s compensation prior
to reduction for the Deferral Contributions to this Plan.

 

(l)                                     “Corporate
Dissolution” means a dissolution of the Company that is taxed under Code Section 331.

 

(m)                               “Deferral Contributions”
means, for each Participant, the amount deferred pursuant to Section 3.1
hereof.

 

(n)                                 “Disability”
means the Participant (i) is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death or can be expected to last for a
continuous period of not less than twelve (12) months, or (ii) is, by
reason of any medically determinable physical or mental impairment which can be
expected to last for a continuous period of not less than twelve (12) months,
receiving income replacement benefits for a period of not less than three (3) months
under an accident and health plan covering Company employees.

 

3

 

(o)                                 “Domestic Relations
Order” means a court order that qualifies as a domestic relations order
under Code Section 414(p)(1)(B).

 

(p)                                 “Eligible
Participant” means (i) any employee with an annual base salary in
excess of the amount specified by the Committee, (ii) any Outside
Director, and (iii) any other employees designated as eligible by the
Committee.

 

(q)                                 “Employee”
means any employee of the Employer.

 

(r)                                    “Employer”
means Coherent, Inc. and any successors and assigns unless otherwise
provided herein.

 

(s)                                  “Entry Date”
means (i) January 1 (which is also the Entry Date for employees who
are promoted or given a base salary increase so as to become an Eligible
Participant for the first time and for re-hires who were previously Eligible
Participants), (ii) for new employees who are Eligible Participants
(including re-hires who were not previously Eligible Participants), the first
day of the next payroll period commencing after the next paydate following
receipt of their deferral election by the Company; provided, however, that such
new employee’s deferral election must be submitted no later than 30 days
following their becoming newly eligible, or (iii) for Non-Employee
Directors who are Eligible Participants for the first time, the first day of
the next Company fiscal quarter following their becoming a Non-Employee
Director; provided, however, that such new Non-Employee Director’s deferral
election must be submitted no later than 30 days following their becoming a
newly eligible Non-Employee Director.

 

(t)                                    “ERISA”
means the Employee Retirement Income Security Act of 1974, as from time to time
amended.

 

(u)                                 “FICA Amount”
means the aggregate Federal Insurance Contributions Act (FICA) tax imposed on
any Account under Code Sections 3101, 3121(a) and 3121(v)(2), as
applicable.

 

(v)                                 “Outside Director”
means a member of the Board whom is not an Employee.

 

(w)                               “Participant”
means any Employee or Outside Director who participates in the Plan in
accordance with Article 2 hereof.

 

(x)                                   “Plan” means
this Coherent, Inc. 2005 Deferred Compensation Plan.

 

(y)                                 “Plan Year”
means the 12-consecutive month period beginning January 1 and ending December 31.

 

(z)                                   “Retirement”
means a Participant’s Separation from Service after attaining 50 years of age.

 

(aa)                            “Separation From Service”
means a separation from service as defined under Code Section 409A.

 

(bb)                          “Specified Employee”
means a “key employee” as such term is defined in Code Section 416(i) without
regard to paragraph five (5) thereof. As of the Plan effective date, this
generally includes (i) the top fifty (50) Company officers making more
than $130,000 per year, (ii) a 5% owner of the Company, or (iii) a 1%
owner of the Company making more than $150,000 per year. The determination of
whom is a Specified Employee shall be made on December 31 of each year and
shall be effective on the following April 1.

 

(cc)                            “Subsidiary” means a
subsidiary of the Employer, as such term is defined in Code Section 424(f).

 

(dd)                          “Trading Day” means a
day upon which the major U.S. national stock exchanges are open for trading.

 

(ee)                            “Trust” means the
trust fund established pursuant to the terms of the Plan.

 

(ff)                                “Trustee” means
the corporation or individuals named in the agreement establishing the Trust
and such successor and/or additional trustees as may be named in
accordance with the Trust Agreement.

 

(gg)                          “Unforeseeable Emergency”
means a severe financial hardship to Participant resulting from an illness or
accident of Participant, the Participant’s spouse or a dependent of Participant
(as defined in

 

4

 

Section 152(a) of the Code), loss
of Participant’s property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of
Participant.

 

(hh)                          “Year of Service”
means a period of 12 consecutive months during which the Participant is
employed by the Employer or serves as a Board member. Service commences on the
date the Participant first commences service for the Employer and ends on the
date that the Participant quits, retires, is discharged, is determined to be
Totally Disabled or dies.

 

(ii)                                  “Valuation Date”
means (i) for re-allocations of amounts previously deferred, the date of
re-allocation, or, if that date is not a Trading Day, then the next Trading
Day, (ii) for distributions hereunder, the last day of the preceding
month, or, if that day is not a Trading Day, then the most recently concluded
Trading Day,  and (iii) for
allocations of deferrals, the next Trading Day following the payday to which
the deferral relates.

 

ARTICLE II

 

Participation

 

2.1                       Date of
Participation. Each Eligible Participant shall be become a Participant as
of the Entry Date next following their timely filing of an election to defer
Compensation in accordance with Section 3.1.

 

2.2                       Resumption
of Participation Following Return to Service. If a Participant ceases to be
an Employee or Outside Director and thereafter returns to the service of the
Employer he or she will again become a Participant as of the Entry Date following
the date on which he or she re-commences service with the Employer, provided he
or she is an Eligible Participant and has timely filed an election to defer
Compensation pursuant to Section 3.1. Any scheduled Plan payments the
Participant has been receiving shall continue to be paid as scheduled.

 

2.3                       Change
in Employment Status. If any Employee Participant continues in the employ
of the Employer or Related Employer but ceases to be an Eligible Participant,
the individual shall continue to be a Participant until the entire amount of
his benefit is distributed; provided, however, the individual shall not be
entitled to make Deferral Contributions during the period that he is not an
Eligible Participant. In the event that the individual subsequently again becomes
an Eligible Participant, the individual shall resume full participation in
accordance with Section 3.1.

 

ARTICLE III

 

Contributions

 

3.1                       Deferral
Contributions.

 

(a)                                  Annual Open
Enrollment. Prior to the beginning of each Plan Year, each Eligible Participant
may elect to execute a compensation reduction agreement with the Employer
to reduce his Compensation by a specified percentage not exceeding, (i) for
Eligible Employees, 75% of their base salary and 100% of their other
Compensation, and (ii) for Outside Directors, 100% of their Compensation,
equal in either case to whole number multiples of one (1) percent, and in
a scheduled amount of not less than $10,000. Such agreement shall become
irrevocable as of the last day of the calendar year in which it is made and
shall be effective, with respect to Eligible Employees, with the first payday
in the following Plan Year and with respect to Outside Directors, with the
first day of service in the following Plan Year. Except with respect to payroll
periods that cross-over from one calendar year to the next, the election shall
not be effective with respect to Compensation relating to services already
performed. An election once made will remain in effect for paydays falling in
the duration of the Plan Year. Amounts credited to a Participant’s Account
prior to the effective date of any new election will not be affected and will
be paid in accordance with that prior election.

 

(b)                                 Newly Eligible
Participants. The same rules as in Section 3.1(a) above
shall also apply to individuals who become Eligible Participants for the first
time, except (i) such new Eligible Participants shall have no more than
thirty (30) days following their becoming eligible in which to elect to have
their Compensation reduced, and (ii) the agreement shall become effective,
with respect to Eligible Employees, with the first full payroll period
commencing following the receipt of their election by the Company and with
respect to

 

5

 

Outside Directors, with the first day of
service following the receipt of their election by the Company. Outside
Directors may not, however, defer quarterly fees payable on account of the
Company’s fiscal quarter in which the election is made.

 

(c)                                  Variable
Compensation Plan, Sales Commission Plan and Sales Incentive Bonuses Payable in
a Subsequent Year. If a Variable Compensation Plan, Sales Commission Plan
or Sales Incentive Bonus is earned in one calendar year and would normally be
paid in the first quarter of the ensuing calendar year, it shall be deferred
and distributed based upon the election made by the Eligible Participant in the
open enrollment period in the year prior to the year in which it was earned. For
newly Eligible Participants, any such Variable Compensation Plan, Sales
Commission Plan or Sales Incentive Bonus shall be deferred and distributed
based upon their initial election made with respect to the year in which it was
earned.

 

EXAMPLE:
 In the December, 2005 open
enrollment period, an Eligible Participant elects to defer 75% of her Sales
Incentive Bonus for 2006. The 2006 Sales Incentive Bonus is normally paid in
March, 2007. The deferral and distribution of her 2006 Sales Incentive Bonus
otherwise payable in March 2007 are controlled by her election made in the
2005 open enrollment period.

 

(d)                                 Year-End Cross-Over
Payroll Periods. Paydays relating to periods of service that cross-over the
calendar year end shall be covered by the Participant’s deferral election in
effect for the later year, consistently with the default rules under
Proposed Treasury Regulation §1.409A-2(a)(11) or subsequent IRS guidance.

 

(e)                                  Limitation on
Deferrals. Plan deferrals shall be reduced as necessary to satisfy the
Participant’s required employment and income withholding taxes and other
Company employee benefit plan withholding elections; provided however, that any
deferral elections made under Employer’s 401(k) Plan shall be determined based
on the Participant’s Compensation prior to reduction for the Deferral
Contributions to this Plan.

 

3.2                                             Accounts.
The Employer shall credit an amount to the Account maintained on behalf of the
Participant corresponding to the amount of said reduction. Under no
circumstances may an election to defer Compensation be adopted
retroactively. A Participant may not revoke an election to defer
Compensation for a Plan Year during that year.

 

3.3                                             Company
Contributions. The Company may, in its sole discretion, make a contribution
to a Participant’s Account, subject to such vesting and distribution conditions
and limitations as the Company, in its sole discretion, shall impose. To the
extent such Company contributions do not vest, corresponding debits will be
made to a Participant’s Account, including any earnings on such forfeited
amounts.

 

3.4                                             Cancellation
of Elections Due to 401(k) Hardship Withdrawal or Unforeseeable Emergency
Distribution. 

 

(a)                401(k) Hardship
Withdrawal. A Participant’s deferral election shall be automatically
cancelled in the event the Participant obtains a hardship distribution from the
Employer’s 401(k) plan pursuant to Treasury Regulation §1.401(k)-1(d)(3). The
Participant, if still an Eligible Participant, may re-enroll in the Plan
in the next open enrollment period.

 

(b)               Unforeseeable
Emergency Distribution. A Participant’s deferral election shall be
automatically cancelled in the event the Participant obtains an unforeseeable
emergency distribution from the Plan pursuant to Section 6.2 hereof. The
Participant, if still an Eligible Participant, may re-enroll in the Plan
in the next open enrollment period.

 

(c)                Special 2005
Elections.

 

(i)       In accordance with Internal Revenue Service
Notice 2005-1, Q&A-21, Eligible Participants may make a deferral
election with respect to 2005 Compensation that has not been paid or become
payable at the time of election, and superseding their prior election, if any,
with respect to such Compensation, on or before March 15, 2005, or such
earlier time as is determined by the Administrator (or its designee) in its
sole discretion.

 

6

 

(ii)    In accordance with Internal Revenue Service Notice
2005-1 and the proposed Treasury regulations promulgated under Code Section 409A,
and notwithstanding any contrary provision of the Plan, a Participant may elect
to rescind or reduce his or her 2005 Compensation deferral election made under Section 3.1
by filing a form specified by the Administrator (or its designee) with the
Administrator (or its designee) no later than December 31, 2005, or such
earlier time as is determined by the Administrator (or its designee), in its
sole discretion. The amount subject to such election shall be distributed to
the Participant in a single lump sum payment of cash (or its equivalent) in
calendar year 2005 or, if later, the Participant’s taxable year in which the
amount becomes earned and vested.

 

ARTICLE IV

 

Participants’
Accounts

 

4.1                                             Individual
Accounts. The Administrator will establish and maintain an Account for each
Participant which will reflect Deferral Contributions credited to the Account
on behalf of the Participant with earnings, expenses, gains and losses credited
thereto, attributable to the investments made with the amounts in the
Participant’s Account. Participants will be furnished statements of their
Account values at least once each Plan Year.

 

4.2                                             Accounting
for Distributions. As of any date of a distribution to a Participant or a
Beneficiary hereunder, the distribution to the Participant or to the
Participant’s Beneficiary(ies) shall be charged to the Participant’s Account.

 

4.3                                             Separate
Accounts. A separate account under the Plan shall established and
maintained to reflect the Account for each Participant with subaccounts to show
separately the earnings, expenses, gains and losses credited or debited to that
Account.

 

ARTICLE V

 

Investment
of Contributions

 

5.1                                             Manner
of Investment. All amounts credited to the Accounts of Participants shall
be treated as though invested and reinvested only in eligible investments
selected by the Employer.

 

5.2                                             Investment
Decisions.

 

(a)          Investments in which the
Accounts of Participants shall be treated as invested and reinvested as
directed by the Participant. Participants may change their investment
allocations as specified by the Committee.

 

(b)         All dividends, interest,
gains and distributions of any nature earned in respect of an investment
alternative in which the Account is treated as investing shall be credited to
the Account in an amount equal to the net increase or decrease in the net asset
value of each investment option since the preceding Valuation Date in
accordance with the ratio that the portion of the Account of each Participant
that is invested in the designated investment option bears to the aggregate of
all amounts invested in the same investment option.

 

ARTICLE VI

 

Distributions

 

6.1                                             Certain
Distributions to Participants and Beneficiaries.

 

(a)                                  Earliest
Distributions

 

(i)             Regular
Participants. Except as permitted by the Plan and Code Section 409A in
connection with a Change of Control Event, a Corporate Dissolution, pursuant to
a Bankruptcy Court Approval, or a Code Section 409A Distribution, in no
event may a Participant’s account be distributed earlier than (i) the
Participant’s Separation From Service, (ii) the Participant’s Disability, (iii) the
Participant’s death, (iv) a specified time under Section 6.3
hereunder, (v) a Change in Control, (vi) the occurrence of an

 

7

 

Unforeseeable
Emergency, or (vii) to a former spouse of a Participant pursuant to a
Domestic Relations Order.

 

(ii)          Specified Employee
Participants. Except as permitted by the Plan and Code Section 409A in
connection with a Change of Control Event, a Corporate Dissolution, pursuant to
a Bankruptcy Court Approval, or a Code Section 409A Distribution, in no
event may a Specified Employee’s account be distributed earlier than (i) six
(6) months following the Specified Employee’s Separation From Service (or
if earlier, the Specified Employee’s death), (ii) the Specified Employee’s
Disability, (iii) the Specified Employee’s death, (iv) a specified
time under Section 6.3 hereunder, (v) a Change in Control, or (vi) the
occurrence of an Unforeseeable Emergency. In the event a Specified Employee’s
Plan distributions are delayed due to the six-month delay requirement, the
amounts otherwise payable to the Specified Employee during such period of delay
shall be paid on a date that is at least six months and one day following
Separation From Service, but no later than the end of the calendar year in
which such six month and one day period ends (or, if earlier, upon the death of
the Specified Employee). The Participant’s other scheduled distributions, if
any, shall not be affected by the period of delay.

 

(b)                                 Lump-Sum or
Installment Payment Initial Elections Upon Retirement or Disability. At the
same time their initial elections for any Plan Year are made, Participants
shall elect to have their Compensation deferrals for that Plan Year paid out,
either following their Retirement or their Disability, in one of the following forms
of payment:

 

(i)             Lump sum cash
payment; or

 

(ii)          Two to fifteen
substantially equal annual installments.

 

In no event shall any Plan payments be made
more than fifteen (15) years following a Participant’s Separation From Service.

 

(c)                                  Other Plan Payments.
All Plan payments not specified in Section 6.1(b), except for certain
scheduled in-service withdrawals as specified in Section 6.3, shall be
made in the form of a lump-sum payment.

 

(d)                                 Installment Payments
Treated as Single Payments. All installment payments under the Plan are
considered a single payment for purposes of complying with Code Section 409A.

 

(e)                                  Subsequent Election
to Delay or Change Form of Payment.

 

(i)             A Participant’s
initial election to receive a Retirement, Disability or in-service distribution
may be delayed or the form of payment changed by filing an election,
in the form required by the Administrator, at least one year in advance of
the date upon which any distribution would otherwise have been made pursuant to
the prior election. Such election shall not be effective for a period of one (1) year,
and must delay the initial payment by a period of at least five (5) years,
but may not result in the initial payment occurring more than then ten (10) years
following Retirement or Disability. In the absence of such timely filed
election, the value of such Participant’s Account shall be distributed in
accordance with their previously timely filed Account election.

 

(ii)          Because Plan installment
payments are considered a single payment for purposes of Code Section 409A,
a subsequent election may accelerate the method of distribution. For
example, if a Participant initially elected to receive Retirement or Disability
payments in five annual installments following her Separation From Service, she
could make a timely election to instead take a lump-sum distribution five years
following her Separation From Service. Moreover, a subsequent election may change
a lump-sum distribution to an installment election, so long as, in either case,
the initial payment is delayed for a period of at least five (5) years,
the election is not effective for one (1) year and is made at least one (1) year
in advance of the date upon which the first distribution would have otherwise
been made.

 

(iii)       Because installment
payments are treated as a single payment, any subsequent election must apply to
all of the installment payments. For example, if a Participant initially
elected to receive Retirement or Disability payments in five annual
installments following her Separation From Service, the

 

8

 

Participant may not
elect to defer the 1st, 2d, 3rd and 5th
installments only, but must also defer the 4th installment.

 

(f)                                    Lump-Sum
Distribution Timing. For Participants receiving a lump-sum distribution,
the value of their Account (or portion thereof specified in the Participant’s
election) shall be paid in a lump-sum cash payment in February their
following Separation From Service, or, for Specified Employees (or their
estates or beneficiaries), if later, at least six months and one day after the
date upon which they incur a Separation From Service, but no later than the end
of the calendar year in which such six month and one day period ends or, if
earlier, upon their death.

 

(g)                                 Lump-Sum
Distributions for Certain Accounts. Notwithstanding the Participant’s
election under Section 6.1(b) or (e) hereof, if the value of a
Participant’s Account is less than $10,000 on the date of his or her triggering
initial distribution event (other than a scheduled in-service distribution),
then the Participant’s Account shall be paid in a lump sum cash payment.

 

(h)                                 Installment Amounts.
For purposes of this Section 6.1, installment payments shall be determined
by dividing the value of the Participant’s Account at the time of such
installment by the number of payments remaining. Installment payments other
than in-service distributions shall commence in the next February following
the triggering distribution event, or, for Specified Employees undergoing a
Separation From Service triggering event, as soon as is practicable at least
six months and one day after the date upon which they incur a Separation From
Service, but no later than the end of the calendar year in which such six month
and one day period ends. However, in no event may installment payments be
made over a period exceeding fourteen years following the first installment,
even if the payments are postponed pursuant to an election made under Section 6.1(e) hereof.
In-service distributions will commence in the February of the specified
year.

 

6.2                     Unforeseeable Emergency
Distributions. With the consent of the Administrator, a Participant may withdraw
up to one hundred percent (100%) of his or her Account as may be required
to meet a sudden Unforeseeable Emergency of the Participant. Such distribution may only
be made if the amounts distributed with respect to an Unforeseeable Emergency may not
exceed the amounts necessary to satisfy such emergency plus amounts necessary
to pay taxes reasonably anticipated as a result of the distribution, after
taking into account the extent to which such hardship is or may be
relieved through reimbursement or compensation by insurance or otherwise or by
liquidation of the Participant’s assets (to the extent the liquidation of such
assets would not itself cause severe financial hardship).

 

6.3                     Scheduled In-Service
Distribution. A Participant may elect, as provided in his or her
Participant deferral election, to receive one or more scheduled in-service
(i.e., commencing while employed by the Company, or, for outside director
Participants, while serving as a Board member) distributions from their Account
balance. Such in-service distributions may only be for years at least two
full calendar years following the end of the calendar year to which the
deferrals relate. Participants may elect to receive in-service
distributions of deferrals of at least $10,000 in annual installments of up to
five years. In-service distributions of deferrals of less than $10,000 must be
paid out in a lump-sum.

 

EXAMPLE:
 In the December, 2005 open
enrollment period, an Eligible Participant elects to receive an in-service
distribution of 50% of her 2006 plan deferrals, plus earnings and losses
thereon, in 2009. This includes a variable compensation plan bonus paid in 2007
but earned in 2006. Because the scheduled in-service distribution is at least
two full calendar years following the end of 2006 (the end of the year to which
the deferrals relate), the election is permissible.

 

Each scheduled
in-service distribution may only be changed or postponed in accordance
with Section 6.1(e) hereof. In the event a Participant incurs a
Separation From Service prior to receiving the first scheduled payment, then
the scheduled in-service distribution election shall be without further force
and effect and the applicable Separation From Service distribution provisions
of the Plan and the Participant’s deferral election shall control. Similarly,
in the event a Participant incurs a Separation From Service after receiving the
first scheduled in-service distribution payment, and if the Separation From
Service is not pursuant to Retirement, Disability or death, then any scheduled
future installments of the in-service distribution election shall be without
further force and effect and the applicable Separation From Service
distribution provisions of the Plan and the Participant’s deferral election
shall control. If, however, a Participant incurs a Separation From Service due
to his or her Retirement,

 

9

 

Disability or death after receiving their
first scheduled in-service distribution payment, then the scheduled in-service
distributions will be made according to their schedule and will take
precedence over the Participant’s other deferral elections; provided, however,
that the first scheduled payment following the Separation From Service for a
Specified Employee shall be paid on a date that is at least six months and one
day following Separation From Service, but no later than the end of the
calendar year in which such six month and one day period ends (or, if earlier,
upon the death of the Specified Employee).

 

6.4                     Death. Except with respect
to certain in-service distributions as provided below, if a Participant dies,
his or her designated Beneficiary or Beneficiaries will receive the balance of
his or her Account in a lump-sum. Moreover, if such death occurs prior to a
Separation From Service, the Account shall vest 100% as to any previously
unvested Account balance. Distribution to the Beneficiary or Beneficiaries will
be made as soon as administratively practical in the month following the
Administrator’s receipt of satisfactory proof of the Participant’s death. If,
however, any installments of scheduled in-service distributions have commenced
on or prior to the Participant’s death, then the remaining installment payments
shall continue to be paid according to schedule.

 

A Participant may designate
a Beneficiary or Beneficiaries, or change any prior designation of Beneficiary
or Beneficiaries by giving notice to the Administrator on a form designated
by the Administrator (spousal consent to such change may be required on
the form designated by the Administrator). If more than one person is
designated as the Beneficiary, their respective interests shall be as indicated
on the designation form.

 

If upon the
death of the Participant there is, in the opinion of the Administrator, no
designated Beneficiary for part or all of the Participant’s Account, the
amount as to which there is no designated Beneficiary will be paid to his or
her surviving spouse or, if none, to his or her estate (such spouse or estate
shall be deemed to be the Beneficiary for purposes of the Plan) as soon as is
practicable.

 

6.5                     Notice to Trustee. The
Administrator will notify the Trustee in writing whenever any Participant or
Beneficiary is entitled to receive benefits under the Plan. The Administrator’s
notice shall indicate the form, amount and frequency of benefits that such
Participant or Beneficiary shall receive.

 

6.6                     Time of Distribution. In no
event will distribution to a Participant be made later than the date specified
by the Participant in his or her election to defer Compensation; provided,
however, that if a Participant becomes a Specified Employee, his or her
election shall be subject to the six (6) month distribution delay
requirements of the Plan and Code Section 409A.

 

6.7                     Limitation on Distributions to
Covered Employees Prior to a Change of Control. Notwithstanding any other
provision of this Article VI, in the event that, prior to a Change of
Control, the Participant is a “covered employee” as that term is defined in Section 162(m)(3) of
the Code, or would be a covered employee if his or her Account were distributed
in accordance with his or her election, and the Administrator reasonably
anticipates that Participant’s scheduled Plan distributions would cause the
Employer to forego an income tax deduction with respect to such distribution by
virtue of Code Section 162(m), then such Participant’s distributions shall
be delayed until the earlier of (i) the earliest date at which the
Administrator reasonably anticipates that the Employer’s deduction related to
the distribution will not be limited by virtue of Code Section 162(m), or (ii) the
calendar year in which the Participant undergoes a Separation From Service,
subject to complying with any six (6) month distribution delay
requirements of this Plan and Code Section 409A.

 

6.8                     Domestic Relations Order
Distributions. A payment to the former spouse of a Participant may be
accelerated as necessary to comply with the terms of a Domestic Relations
Order.

 

6.9                     FICA and Related Income Tax
Distribution. The Committee, in its sole discretion, may permit a
distribution from a Participant’s Account sufficient to pay any FICA Amounts
due upon the vesting of any Company contribution as well as to satisfy the
income tax withholding requirements with respect to the FICA Amount and income
tax payments under this Section 6.9. In no event may the total
payment under this Section 6.9 exceed the aggregate of the FICA Amount and
the related income tax withholding.

 

6.10               Code Section 409A Distribution.
In the event that the Plan fails to satisfy the requirements of Code Section 409A,
then the Committee, in its sole discretion, may permit a distribution from
a Participant’s Account up to the maximum amount required to be included in
income as a result of the failure to comply with Code Section 409A.

 

10

 

6.11               Tax Withholding. Payments under
this Article VI shall be subject to all applicable withholding
requirements for state and federal income taxes and to any other federal, state
or local taxes that may be applicable to such payments.

 

ARTICLE VII

 

Change
of Control

 

7.1                     No New Participants Following
Change of Control. No individual may commence participation in the
Plan following a Change of Control Event.

 

7.2                     No Deferrals Following a Change
of Control. Deferrals shall cease as of the date of a Change of Control
Event.

 

7.3                     Discretionary Termination 30
Days Prior to or Within 12 Months Following a Change in Control. The
Administrator, in its sole discretion, may terminate the Plan within 30
days prior to or 12 months following a Change in Control Event; provided that
such termination complies with the requirements of Code Section 409A.

 

ARTICLE VIII

 

Termination
Due to Corporate Dissolution or Pursuant to Bankruptcy Court Approval

 

8.1                     Corporate Dissolution. The
Administrator, in its sole discretion, may terminate the Plan within 12
months following a Corporate Dissolution; provided that such termination
complies with the requirements of Code Section 409A.

 

8.2                     Bankruptcy Court Approval. The
Administrator, in its sole discretion, may terminate the Plan pursuant to
Bankruptcy Court Approval; provided that such termination complies with the
requirements of Code Section 409A.

 

ARTICLE IX

 

Amendment
and Termination

 

9.1                     Amendment by Employer. The
Employer reserves the authority to amend the Plan. Any such change
notwithstanding, no Participant’s Account shall be reduced by such change below
the amount to which the Participant would have been entitled if he had
voluntarily left the employ of the Employer immediately prior to the date of
the change. The Employer may from time to time make any amendment to the
Plan that may be necessary to satisfy Code Section 409A or ERISA.

 

9.2                     Retroactive Amendments. An
amendment made by the Employer in accordance with Section 9.1 may be
made effective on a date prior to the first day of the Plan Year in which it is
adopted if such amendment is necessary or appropriate to enable the Plan and
Trust to satisfy the applicable requirements of Code Section 409A or ERISA
or to conform the Plan to any change in federal law or to any regulations
or rulings thereunder.

 

9.3                     Plan Deferral Termination. The
Employer has adopted the Plan with the intention and expectation that deferrals
will be permitted indefinitely. However, the Employer has no obligation to
maintain the Plan for any length of time and may discontinue future
Compensation deferrals under the Plan in advance of any Plan Year by written
notice delivered to Eligible Participants without any liability for any such
discontinuance.

 

9.4                     Distribution upon Certain Plan
Terminations. Upon termination of the Plan other than pursuant to a Change
of Control Event, Corporate Dissolution or pursuant to a Bankruptcy Court
Approval, no further Deferral Contributions or Employer Contributions shall be
made under the Plan, but Accounts of Participants maintained under the Plan at
the time of termination shall continue to be governed by the terms of the Plan
until paid out in accordance with the terms of the Plan, Participants’ deferral
elections and the requirements of Code Section 409A, which latter shall
take precedence over the terms of the Plan and Participants’ deferral elections
in the event of any conflict.

 

11

 

ARTICLE X

 

The
Trust

 

10.1               Establishment of Trust. The
Employer shall establish the Trust between the Employer and the Trustee, in
accordance with the terms and conditions as set forth in a separate agreement,
under which assets are held, administered and managed, subject to the claims of
the Employer’s creditors in the event of the Employer’s insolvency, until paid
to Participants and their Beneficiaries as specified in the Plan. The Trust is
intended to be treated as a grantor trust under the Code, and the establishment
of the Trust is not intended to cause Participants to realize current income on
amounts contributed thereto.

 

ARTICLE XI

 

Miscellaneous

 

11.1               Limitation of Rights. Neither the
establishment of the Plan and the Trust, nor any amendment thereof, nor the
creation of any fund or account, nor the payment of any benefits, will be
construed as giving to any Participant or other person any legal or equitable
right against the Employer, Administrator or Trustee, except as provided
herein; and in no event will the terms of employment or service of any
Participant be modified or in any way affected hereby

 

11.2               Nontransferability; Domestic
Relations Orders. The right of any Participant, any Beneficiary, or any
other person to the payment of any benefits under this Plan shall not be
assigned, transferred, pledged or encumbered; provided, however, that a Deferral
Account hereunder may be transferred to a Participant’s former spouse
pursuant to a Domestic Relations Order.

 

11.3               Facility of Payment. In the event
the Administrator determines, on the basis of medical reports or other evidence
satisfactory to the Administrator, that the recipient of any benefit payments
under the Plan is incapable of handling his affairs by reason of minority,
illness, infirmity or other incapacity, the Administrator may direct the
Trustee to disburse such payments to a person or institution designated by a
court which has jurisdiction over such recipient or a person or institution
otherwise having the legal authority under State law for the care and control
of such recipient. The receipt by such person or institution of any such payments
therefore, and any such payment to the extent thereof, shall discharge the
liability of the Trust for the payment of benefits hereunder to such recipient.

 

11.4               Information between Employer and
Trustee. The Employer agrees to furnish the Trustee, and the Trustee agrees
to furnish the Employer with such information relating to the Plan and Trust as
may be required by the other in order to carry out their respective duties
hereunder, including without limitation information required under the Code or
ERISA and any regulations issued or forms adopted thereunder.

 

11.5               Notices. Any notice or other
communication in connection with this Plan shall be deemed delivered in writing
if addressed as provided below and if either actually delivered at said address
or, in the case of a letter, three business days shall have elapsed after the
same shall have been deposited in the United States mails, first-class postage
prepaid and registered or certified:

 

(a)          If it is sent to the
Employer or Administrator, it will be at the address specified by the Employer;

 

(b)         If it is sent to the
Trustee, it will be sent to the address set forth in the Trust Agreement; or,
in each case at such other address as the addressee shall have specified by
written notice delivered in accordance with the foregoing to the addressor’s
then effective notice address.

 

11.6               Governing Law. The Plan will be
construed, administered and enforced according to ERISA, and to the extent not
preempted thereby, the laws of the state of California.

 

12

 

ARTICLE
XII

 

Plan
Administration

 

12.1               Powers and responsibilities of the
Administrator. The Administrator has the full power and the full
responsibility to administer the Plan in all of its details, subject, however,
to the applicable requirements of ERISA. The Administrator’s powers and
responsibilities include, but are not limited to, the following:

 

(a)          To make and enforce such
rules and regulations as it deems necessary or proper for the efficient
administration of the Plan;

 

(b)         The discretionary
authority to construe and interpret the Plan, its interpretation thereof in
good faith to be final and conclusive on all persons claiming benefits under
the Plan;

 

(c)          To decide all questions
concerning the Plan and the eligibility of any person to participate in the
Plan;

 

(d)         To administer the claims
and review procedures specified in Section 12.3;

 

(e)          To compute the amount of
benefits which will be payable to any Participant, former Participant or
Beneficiary in accordance with the provisions of the Plan;

 

(f)            To determine the
person or persons to whom such benefits will be paid;

 

(g)         To authorize the payment
of benefits;

 

(h)         To appoint such agents,
counsel, accountants, and consultants as may be required to assist in
administering the Plan;

 

(i)             By written
instrument, to allocate and delegate its responsibilities.

 

12.2               Nondiscriminatory Exercise of
Authority. Whenever, in the administration of the Plan, any discretionary
action by the Administrator is required, the Administrator shall exercise its
authority in a nondiscriminatory manner so that all persons similarly situated
will receive substantially the same treatment.

 

12.3               Claims and Review Procedures.

 

(a)          Purpose. Every
Participant or Beneficiary (or his or her representative who is authorized in
writing by the Claimant to act on his or her behalf) (hereinafter collectively,
“Claimant”) shall be entitled to file with the Administrator (and subsequently
with the individual(s) designated to review claims appealed after being
initially denied by the Administrator (the “Review Panel”)) a written claim for
benefits under the Plan. The Administrator and Review Panel shall each be able
to establish such rules, policies and procedures, consistent with ERISA and the
Plan, as it may deem necessary or appropriate in carrying out its duties
and responsibilities under this Section 12.3. In the case of a denial of
the claim, the Administrator or Review Panel, as applicable, shall provide the
Claimant with a written or electronic notification that complies with
Department of Labor Regulation Section 2520.104b-1(c)(1).

 

(b)         Denial of Claim. If
a claim is denied by the Administrator (or its authorized representative), in
whole or in part, then the Claimant shall be furnished with a denial notice
that shall contain the following:

 

(i)             specific reason(s) for the denial;

 

(ii)          reference to the specific Plan provision(s)
on which the denial is based;

 

(iii)       a description of any additional material or
information necessary for the Claimant to perfect the claim, and an explanation
of why the material or information is necessary; and

 

13

 

(iv)      an explanation of the Plan’s claims review
procedure and the time limits applicable to such procedures, including a
statement of the Claimant’s right to bring a civil action under ERISA Section 502(a) following
a denial on review (as set forth in Section 12.4 below).

 

The denial
notice shall be furnished to the Claimant no later than ninety (90)-days after
receipt of the claim by the Administrator, unless the Administrator determines
that special circumstances require an extension of time for processing the
claim. If the Administrator determines that an extension of time for processing
is required, then notice of the extension shall be furnished to the Claimant
prior to the termination of the initial ninety (90)-day period. In no event
shall such extension exceed a period of ninety (90)-days from the end of such
initial period. The extension notice shall indicate the special circumstances
requiring an extension of time and the date by which the Plan expects to render
the benefits determination.

 

(c)          Claim Review
Procedure. The Claimant may request review of the denial at any time
within sixty (60) days following the date the Claimant received notice of the
denial of his or her claim. The Administrator shall afford the Claimant a full
and fair review of the decision denying the claim and, if so requested, shall:

 

(i)             provide the Claimant with the opportunity
to submit written comments, documents, records and other information relating
to the claim for benefits;

 

(ii)          provide that the Claimant shall be provided,
upon request and free of charge, reasonable access to, and copies of, all
documents, records and other information (other than documents, records and
other information that is legally-privileged) relevant to the Claimant’s claim
for benefits; and

 

(iii)       provide for a review that takes into account all
comments, documents, records and other information submitted by the Claimant
relating to the claim, without regard to whether such information was submitted
or considered in the initial benefit determination.

 

(d)         If the claim is
subsequently also denied by the Review Panel, in whole or in part, then the
Claimant shall be furnished with a denial notice that shall contain the
following:

 

(i)             specific reason(s) for the denial;

 

(ii)          reference to the specific Plan provision(s)
on which the denial is based; and

 

(iii)       an explanation of the Plan’s claims review
procedure and the time limits applicable to such procedures, including a
statement of the Claimant’s right to bring a civil action under ERISA Section 502(a) following
the denial on review.

 

(e)          The decision on review
shall be issued within sixty (60) days following receipt of the request for
review. The period for decision may, however, be extended up to one hundred
twenty (120) days after such receipt if the Review Panel determines that
special circumstances require extension. In the case of an extension, notice of
the extension shall be furnished to the Claimant prior to the expiration of the
initial sixty (60)-day period. In no event shall such extension exceed a period
of sixty (60) days from the end of such initial period. The extension notice
shall indicate the special circumstances requiring an extension of time and the
date by which the Plan expects to render the benefits determination.

 

(f)            Special Procedure
for Claims Due to Disability. To the extent an application for distribution as a result of a Disability requires the Administrator or the
Review Panel, as applicable, to make a determination of Disability under the
terms of the Plan, then such determination shall be subject to all of the
general rules described in this Article, except as they are expressly
modified by this Section.

 

(i)             The initial decision on the claim for a
Disability distribution will be made within forty-five (45) days after the Plan
receives the Claimant’s claim, unless special circumstances require additional
time, in which case the Administrator will notify the Claimant before the end
of the initial forty-five (45)-day period of an extension of up to thirty (30)
days. If necessary, the Administrator may notify the Claimant, prior to
the end of the initial thirty (30)-day extension period, of a second extension
of up to thirty (30) days. If an extension is due to the Claimant’s failure to
supply the necessary information,

 

14

 

then the notice of extension will describe
the additional information and the Claimant will have forty-five (45) days to
provide the additional information. Moreover, the period for making the
determination will be delayed from the date the notification of extension was
sent out until the Claimant responds to the request for additional information.
No additional extensions may be made, except with the Claimant’s voluntary
consent. The contents of the notice shall be the same as described in Section 13.3(b) above.
If a disability distribution claim is denied in whole or in part, then the
Claimant will receive notification, as described in Section 13.3(b).

 

(g)         If an internal rule,
guideline, protocol or similar criterion is relied upon in making the adverse
determination, then the denial notice to the Claimant will either set forth the
internal rule, guideline, protocol or similar criterion, or will state that
such was relied upon and will be provided free of charge to the Claimant upon
request (to the extent not legally-privileged) and if the Claimant’s claim was
denied based on a medical necessity or experimental treatment or similar
exclusion or limit, then the Claimant will be provided a statement either
explaining the decision or indicating that an explanation will be provided to
the Claimant free of charge upon request.

 

(h)         Any Claimant whose
application for a Disability distribution is denied in whole or in part, may appeal
the denial by submitting to the Review Panel a request for a review of the
application within one hundred and eighty (180) days after receiving notice of
the denial. The request for review shall be in the form and manner
prescribed by the Review Panel. In the event of such an appeal for review, the
provisions of Section 13.3(c) regarding the Claimant’s rights and
responsibilities shall apply. Upon request, the Review Panel will identify any
medical or vocational expert whose advice was obtained on behalf of the Review
Panel in connection with the denial, without regard to whether the advice was
relied upon in making the determination. The entity or individual appointed by
the Review Panel to review the claim will consider the appeal de novo,
without any deference to the initial denial. The review will not include any
person who participated in the initial denial or who is the subordinate of a
person who participated in the initial denial.

 

(i)             If the initial
Disability distribution denial was based in whole or in part on a medical
judgment, then the Review Panel will consult with a health care professional
who has appropriate training and experience in the field of medicine involved
in the medical judgment, and who was neither consulted in connection with the
initial determination nor is the subordinate of any person who was consulted in
connection with that determination; and upon notifying the Claimant of an
adverse determination on review, include in the notice either an explanation of
the clinical basis for the determination, applying the terms of the Plan to the
Claimant’s medical circumstances, or a statement that such explanation will be
provided free of charge upon request.

 

(j)             A decision on review
shall be made promptly, but not later than forty-five (45) days after receipt
of a request for review, unless special circumstances require an extension of
time for processing. If an extension is required, the Claimant will be notified
before the end of the initial forty-five (45)-day period that an extension of
time is required and the anticipated date that the review will be completed. A
decision will be given as soon as possible, but not later than ninety (90) days
after receipt of a request for review. The Review Panel shall give notice of
its decision to the Claimant; such notice shall comply with the requirements
set forth in paragraph (h) above. In addition, if the Claimant’s claim was
denied based on a medical necessity or experimental treatment or similar
exclusion, then the Claimant will be provided a statement explaining the
decision, or a statement providing that such explanation will be furnished to
the Claimant free of charge upon request. The notice shall also contain the
following statement:  “You and your Plan may have
other voluntary alternative dispute resolution options, such as mediation. One
way to find out what may be available is to contact your local U.S.
Department of Labor Office and your State insurance regulatory agency.”

 

12.4               Exhaustion of Claims Procedure and
Right to Bring Legal Claim. No action in law or equity shall be brought
more than one (1) year after the Review Panel’s affirmation of a denial of
the claim, or, if earlier, more than four (4) years after the facts or
events giving rise to the Claimant’s allegation(s) or claim(s) first occurred.

 

12.5               Plan’s Administrative Costs. The
Employer shall pay all reasonable costs and expenses (including legal, accounting,
and employee communication fees) incurred by the Administrator and the Trustee
in administering the Plan and Trust.

 

15

 

IN WITNESS WHEREOF, the Employer by its duly
authorized officer(s), has caused this Plan to be adopted effective January 1,
2005.

 

 

	
   

  	
  COHERENT, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Henry Gauthier

  	
   

  

 

16

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