avatar Coherent, Inc. Manufacturing
  • Location: California 
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    ANNUAL REPORT, PROXY STATEMENT & NOTICE OF ANNUAL MEETING 2015


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    O COHERENT. DEAR SHAREHOLDERS, CUSTOMERS AND EMPLOYEES Fiscal 2015 was a very dynamic year for Coherent. We launched a number of new products, led by our second-generation HighLight fiber laser platform, a revolutionary carbon monoxide (CO) laser, and perhaps the most flexible industrial ultrafast laser in the Monaco. The fiber platform is designed to address metal cutting and joining. The CO and Monacolasers can be used in a wide range of applications including medical therapeutics, electronics packaging, materials processing and fundamental research. We acquired two businesses that shored up our supply chain in the flat panel display market, gave us access to new customers in automotive and medical device manufac- turing and increased our expertise in ultrafast processing. Our financial results were also encouraging. GAAP earnings per share of $3.06 were up 30% on an annual basis due to lower costs, a lower tax rate, and a favorable product mix. This resulted in strong cash flow of $124 million, which aided us in repurchasing $75 million of common stock (5.2% of the outstanding shares at the end of fiscal 2014) during the fiscal year. This round of buybacks brings the total returned to shareholders through share repurchases and dividends to $495 million since fiscal 2008. Microelectronics continues to be our biggest end market, and flat panel display manufacturing is the largest submarket. OLED manufacturing dominated the headlines to start and end the fiscal year. A manufacturing buildup in China for LTPS-enabled displays covered the balance of the year. We completed delivery of the first round of Triple VYPER LineBeam 1500 systems for OLED production. The systems are performing very well and have validated the customer's goals of high performance (i.e. pixel density and brightness) and high throughput. A government-sponsored effort in China to develop a


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    €3 COHERENT. domestic high-definition display capability led to multiple installations across the country. The larger installed base provides an attractive vehicle for service revenue and profit growth on a go-forward basis. Over the last several months, there has been tremendous speculation regarding a shift to OLEDsfor a signif- icant portion of the handset market. Such a shift would be beneficial for our business. An OLED expansion would likely rely upon larger format LineBeam tools at or above 1000 mm. Long-term service revenue should also benefit from this shift since the OLED process window is more demanding than LCDs. The semiconductor market began fiscal 2015 with encouraging expectations. Unfortunately, sluggish growth for logic and memory devicesled to reductions in capital expenditures. The growth profile did not adversely affect factory utilization rates, and service revenues from this submarket werelargely stable throughout the year. Consolidation also may have contributed to the disap- pointing unit numbers. Several large deals were announced within the semi- conductor industry, which may have influenced inventory levels and buying pat- terns. Our analysis is that these consolidations likely have limited impact upon our business since they are largely complementary from a product standpoint. The advanced packaging market showed modest improvement due to selec- tive capacity additions in the industry, but a sustained recovery has not been forthcoming. Returning to growth is dependent upon several factors including an industry transition to smaller hole (microvia) sizes, new substrate materials, and new packaging architectures. We are well positioned to capitalize on these potential trends due to the breadth and depth ofour existing and future product portfolio.


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    €3 COHERENT. Our materials processing business held up surprisingly well in fiscal 2015 despite growth concerns in China. Part of the stability came from successes in consumer packaging with our DIAMOND Series lasers. We were pleased with the strength in China, although it was skewed towards large OEMs, whose financial strength was a salve for their customers’ anxieties over long-term support. On the productfront, our second generation kilowatt-classfiber laser has been well received by customers due to its resistance to feedback effects, modular architecture and field serviceability. We expect to spend fiscal 2016 seeding the market and to ramp unit volumes in fiscal 2017. We had another solid year in OEM instrumentation with some exciting opportunities on the horizon. The efficacy of laser-based dental treatment is leading to increased adoption. We have made significant progress in DNA sequencing with lasers and subsystems (i.e., lasers with an optical delivery system). Our Monacolaser is producing exciting and never-before-seen results for cataract treatment. Even the COlaser is in on the act, albeit in the research phase, where efficient surgical cuts are enabled due to better absorption by target tissue. Aesthetic demand has lost some steam as consumer spending, particularly in Asia, cooled. The long-term adoption of home-based procedures remains positive, however. There were some interesting trends in the research market. Optogenetics, a method to control cells in living tissue, is growing rapidly and becoming a larger component of the biological imaging market, with a reliance on broader and more flexible laser solutions than traditional multiphoton imaging. In fundamental physics and chemistry research, we saw a shift from


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    €3 COHERENT. individual users to large multi-user facilities, especially in Europe. This is likely an effort to maximize the utilization of capital purchases and drive employ- ment. Governmentsin Asia continue to increase spending at a higher rate than their Western counterparts. Coherent is celebrating its golden anniversary in fiscal 2016. Over its 50-year history, the company has remained at the forefront of its markets and been a technology leader. It is a remarkable achievement and a lasting testament to the creativity and dedication of its employees. And our best yearsarestill ahead ofus! Respectfully, Garry W. Rogerson, le bo Chairman of the Board 71 John R. Ambroseo, Á President and Chief Executive Officer


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    14JAN201416185898 Notice of Annual Meeting of Stockholders February 26, 2016 8:00 a.m. The Silicon Valley Capital Club 50 West San Fernando San Jose, CA 95113 MATTERS TO BE VOTED ON: 1. To elect the seven directors named in the proxy statement; 2. To ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending October 1, 2016; 3. Advisory vote to approve executive officer compensation; and 4. To transact such other business as may properly be brought before the meeting and any adjournment(s) thereof. The foregoing items of business are more fully described in the Proxy Statement accompanying this Notice. Stockholders of record at the close of business on January 19, 2016 are entitled to notice of and to vote at the meeting and at any adjournments or postponements thereof. All stockholders are cordially invited to attend the meeting. However, to ensure your representation at the meeting, you are urged to mark, sign, date and return the enclosed proxy card as promptly as possible in the postage-prepaid envelope enclosed for that purpose or follow the instructions on the enclosed proxy card to vote by telephone or via the Internet. Any stockholder of record attending the meeting may vote in person even if he or she has returned a proxy. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain a proxy issued in your name from that record holder. Santa Clara, California Sincerely, January 27, 2016 13JAN201423125288 John R. Ambroseo President and Chief Executive Officer Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to Be Held on February 26, 2016 The proxy statement and annual report to stockholders are available at www.proxyvote.com. YOUR VOTE IS IMPORTANT In order to assure your representation at the meeting, you are requested to complete, sign and date the enclosed proxy card as promptly as possible and return it in the enclosed envelope or follow the instructions on the enclosed proxy card to vote by telephone or via the Internet. Any stockholder attending the Annual Meeting may vote in person even if he or she returned a proxy card.


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    Table of Contents GENERAL INFORMATION ABOUT THE MEETING 3 PROPOSAL ONE Election of Directors 6 PROPOSAL TWO Ratification of the Appointment of Deloitte & Touche LLP as Independent Registered Public Accounting Firm 14 PROPOSAL THREE Advisory Vote to Approve Executive Officer Compensation 15 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 16 OUR EXECUTIVE OFFICERS 17 COMPENSATION DISCUSSION AND ANALYSIS 18 SUMMARY COMPENSATION AND EQUITY TABLES 29 EQUITY COMPENSATION PLAN INFORMATION 35 CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS 35 REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS 36 OTHER MATTERS 37


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    PROXY STATEMENT General Information About the Meeting General The enclosed Proxy is solicited on behalf of the Board of Directors adjournment(s) thereof, for the purposes set forth herein and in the (the ‘‘Board’’) of Coherent, Inc. for use at the Annual Meeting of accompanying Notice of Annual Meeting of Stockholders. Our Stockholders (the ‘‘Annual Meeting’’ or ‘‘meeting’’) to be held at telephone number is (408) 764-4000. These proxy solicitation 8:00 a.m., local time, on February 26, 2016 at The Silicon Valley materials were first mailed on or about January 27, 2016 to all Capital Club, 50 West San Fernando, San Jose, CA 95113, and at any stockholders entitled to vote at the Annual Meeting. Who May Vote at the Meeting? You are entitled to vote at the Annual Meeting if our records show that you held your shares as of the close of business of our record date, January 19, 2016 (the ‘‘Record Date’’). On the Record Date, 24,193,167 shares of our common stock, $0.01 par value, were issued and outstanding. What Does Each Share of Common Stock I Own Represent? On all matters, each share has one vote, unless, with respect to Proposal 1 regarding the election of directors, cumulative voting is in effect. See ‘‘Election of Directors—Vote Required’’ for a description of cumulative voting rights with respect to the election of directors. How Does a Stockholder Vote? Whether or not you plan to attend the Annual Meeting, we urge you provided. If your signed proxy card is received before the Annual to vote by proxy to ensure your vote is counted. If you are entitled to Meeting, the designated proxies will vote your shares as you direct. vote, you may do so as follows: • Using the Telephone: Dial toll-free 1-800-690-6903 using a • Through your broker: If your shares are held through a broker, touch-tone phone and follow the recorded instructions. You will be bank or other nominee (commonly referred to as held in ‘‘street asked to provide the control number from the enclosed proxy card. name’’), you will receive instructions from them that you must • Through the Internet: Go to www.proxyvote.com to complete an follow to have your shares voted. If you want to vote in person, you electronic proxy card. You will be asked to provide the control will need to obtain a legal proxy from your broker, bank or other number from the enclosed proxy card. nominee and bring it to the meeting. For telephone or Internet use, your vote must be received by • In person: Attend the Annual Meeting and, if you request, we will 11:59 P.M. Eastern Time on February 25, 2016 to be counted. give you a ballot at the time of voting. If you have previously submitted a proxy card, you must notify us at the Annual Meeting If you return a signed and dated proxy card without marking any that you intend to cancel your prior proxy and vote by ballot at the voting directions, your shares will be voted ‘‘for’’ the election of all meeting. seven nominees for director and ‘‘for’’ all other proposals. • Returning a Proxy Card: Simply complete, sign and date the enclosed proxy card and return it promptly in the envelope Matters to be Presented at the Meeting We are not aware of any matters to be presented at the meeting other beneficial owners of shares for their expenses in forwarding than those described in this proxy statement. If any other matter is solicitation material to such beneficial owners. In addition, proxies properly presented at the Annual Meeting, your proxy holders (one of may be solicited by certain of our directors, officers and regular the individuals named on your proxy card) will vote your shares in employees, without additional compensation, personally or by their discretion. The cost of this solicitation will be borne by us. We telephone or facsimile. may reimburse brokerage firms and other persons representing 3


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    GENERAL INFORMATION Revoking Your Proxy If you hold your shares in street name, you must follow the in writing at our principal executive offices at 5100 Patrick Henry Dr., instructions of your broker, bank or other nominee to revoke your Santa Clara, California 95054 before the proxies vote your shares at voting instructions. If you are a holder of record and wish to revoke the meeting, (ii) timely deliver later-dated proxy instructions or your proxy instructions, you must (i) advise the Corporate Secretary (iii) attend the meeting and vote your shares in person. Attendance at the Annual Meeting All stockholders of record as of the Record Date may attend the sufficient to us that you were a stockholder of record as of the Record Annual Meeting. Please note that cameras, recording devices and Date or that you are a duly authorized representative of a stockholder similar electronic devices will not be permitted at the Annual of record as of the Record Date. For directions to attend the Annual Meeting. No items will be allowed into the Annual Meeting that Meeting or other questions, please contact Investor Relations by might pose a concern for the safety of those attending. Additionally, to telephone at (408) 764-4110 no later than noon (California time) on attend the meeting you will need to bring identification and proof February 25, 2016. Quorum; Abstentions; Broker Non-Votes Our bylaws provide that stockholders holding a majority of the shares received instructions with respect to the proposal from the beneficial of common stock issued and outstanding and entitled to vote on the owner. Abstentions will not be taken into account in determining the Record Date constitute a quorum at meetings of stockholders. Votes outcome of the election of directors and will have no effect on the will be counted by the inspector of election appointed for the Annual outcome of Proposals Two and Three. We intend to separately report Meeting, who will separately count ‘‘For’’ and ‘‘Against’’ votes, abstentions and our Compensation and H.R. Committee will abstentions and broker non-votes. generally view abstentions as neutral when considering the results of Proposal Three. Broker non-votes represented by submitted proxies A ‘‘broker non-vote’’ occurs when a nominee holding shares for a will not be taken into account in determining the outcome of any beneficial owner does not vote because the nominee does not have proposal. discretionary voting power with respect to the proposal and has not Deadline for Receipt of Stockholder Proposals In order to submit stockholder proposals for inclusion in the the 90th day prior to the annual meeting and the tenth day following Company’s proxy statement pursuant to Rule 14a-8 of the Securities public announcement of the date the annual meeting will be held and Exchange Act of 1934, as amended (‘‘SEC Rule 14a-8’’) for the annual must otherwise be in compliance with applicable laws and regulations meeting to be held in 2017, written materials must be received by the in order to be considered for inclusion in the proxy statement and Corporate Secretary at the Company’s principal office in Santa Clara, form of proxy relating to that meeting. We have not received any California no later than September 29, 2016. Stockholder proposals notice regarding any such matters to be brought at the meeting on must otherwise comply with the requirements of SEC Rule 14a-8. February 26, 2016. Proposals must be addressed to: Bret DiMarco, Corporate Secretary, If a stockholder who has notified us of his or her intention to present a Coherent, Inc., 5100 Patrick Henry Dr., Santa Clara, California proposal at an Annual Meeting does not appear to present his or her 95054. Simply submitting a proposal does not guarantee its inclusion. proposal at such meeting, we need not present the proposal for vote at such meeting. The Chair of the Annual Meeting has the final Section 2.15 of the Company’s bylaws also establishes an advance discretion whether or not to allow any matter to be considered at the notice procedure with regards to director nominations and meeting which did not timely comply with all applicable notice stockholder proposals that are not submitted for inclusion in the requirements. proxy statement, but that a stockholder instead wishes to present directly from the floor at any Annual Meeting. To be properly brought If a stockholder wishes only to recommend a candidate for before the Annual Meeting to be held in 2017, a notice of the consideration by the Governance and Nominating Committee as a nomination or the matter the stockholder wishes to present at the potential nominee for the Company’s Board, see the procedures meeting must be delivered to the Corporate Secretary (see above), no discussed in ‘‘Proposal One—Election of Directors—Board Meetings later than the close of business on the 45th day (December 13, 2016), and Committees—Process for Stockholders to Recommend nor earlier than the close of business on the 75th day (November 13, Candidates for Election to the Board of Directors.’’ 2016), prior to the one year anniversary of the date these proxy The attached proxy card grants to the proxyholders discretionary materials were first mailed by us unless the annual meeting of authority to vote on any matter raised at the Annual Meeting, stockholders is held prior to January 27, 2017 or after April 27, 2017, including proposals which are timely raised at the meeting, but did in which case, the proposal must be received by us not earlier than the not meet the deadline for inclusion in this proxy statement. 120th day prior to the annual meeting and not later than the later of 4


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    GENERAL INFORMATION Eliminating Duplicative Proxy Materials To reduce the expense of delivering duplicate voting materials to our Similarly, if you share an address with another stockholder and have stockholders who may hold shares of Coherent common stock in received multiple copies of our proxy materials, you may contact us at more than one stock account, we are delivering only one set of the the address or telephone number specified above to request that only a proxy solicitation materials to certain stockholders who share an single copy of these materials be delivered to your address in the address, unless otherwise requested. A separate proxy card is included future. Stockholders sharing a single address may revoke their consent in the voting materials for each of these stockholders. to receive a single copy of our proxy materials in the future at any time by contacting our distribution agent, Broadridge, either by calling We will promptly deliver, upon written or oral request, a separate copy toll-free at 1-800-542-1061, or by writing to Broadridge, of the annual report or this proxy statement to a stockholder at a Householding Department, 51 Mercedes Way, Edgewood, NY shared address to which a single copy of the documents was delivered. 11717. It is our understanding that Broadridge will remove such To obtain an additional copy, you may write us at 5100 Patrick Henry stockholder from the Householding program within 30 days of Drive, Santa Clara, California 95054, Attn: Investor Relations, or receipt of such written notice, after which each such stockholder will contact our Investor Relations department by telephone at receive an individual copy of our proxy materials. (408) 764-4110. Electronic Delivery of Proxy Materials In an effort to reduce paper mailed to your home and help lower paper copies of these documents. To participate during the voting printing and postage costs, we are offering stockholders the season, registered stockholders may follow the instructions when convenience of viewing online proxy statements, annual reports and voting online. related materials. With your consent, we can stop sending future Incorporation by Reference To the extent that this proxy statement has been or will be specifically Board of Directors’’ (to the extent permitted by the rules of the SEC) incorporated by reference into any other filing of Coherent with the and ‘‘Compensation Discussion and Analysis’’ shall not be deemed to Securities and Exchange Commission (‘‘SEC’’), the sections of this be so incorporated (other than in our annual report on Form 10-K), proxy statement entitled ‘‘Report of the Audit Committee of the unless specifically provided otherwise in such filing. FURTHER INFORMATION We will provide without charge to each stockholder solicited by these proxy solicitation materials a copy of our annual report on Form 10-K for the fiscal year ended October 3, 2015 without exhibits and any amendments thereto upon request of such stockholder made in writing to Coherent, Inc., 5100 Patrick Henry Drive, Santa Clara, California 95054, Attn: Investor Relations. We will also furnish any exhibit to the annual report on Form 10-K if specifically requested in writing. You can also access our SEC filings, including our annual reports on Form 10-K, and all amendments thereto on the SEC website at www.sec.gov. IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON FEBRUARY 26, 2016 The proxy statement and annual report to stockholders are available at www.proxyvote.com. Stockholder List A list of stockholders entitled to vote at the Annual Meeting will be available for examination by stockholders of record at the Annual Meeting. 5


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    PROPOSAL ONE ELECTION OF DIRECTORS Nominees Seven (7) members of our Board of Directors are to be elected at the as a director will continue until the next Annual Meeting of Annual Meeting. Unless otherwise instructed, the proxy holders will Stockholders or until a successor has been elected and qualified or vote the proxies received by them for the nominees named below. until his or her earlier resignation or removal. There are no Each nominee has consented to be named a nominee in the proxy arrangements or understandings between any director or executive statement and to continue to serve as a director, if elected. If any officer and any other person pursuant to which he or she is or was to nominee becomes unable or declines to serve as a director, if be selected as a director or officer. additional persons are nominated at the meeting or if stockholders are The names of the nominees, all of whom are currently directors entitled to cumulate votes, the proxy holders intend to vote all proxies standing for re-election, and certain information about them as of received by them in such a manner (in accordance with cumulative December 31, 2015 are set forth below. All of the nominees have been voting) as will ensure the election of as many of the nominees listed unanimously recommended for nomination by the Board acting on below as possible, and the specific nominees to be voted for will be the unanimous recommendation of the Governance and Nominating determined by the proxy holders. Committee of the Board. The committee consists solely of We are not aware of any reason that any nominee will be unable or will independent members of the Board. There are no family relationships decline to serve as a director. The term of office of each person elected among directors or executive officers of Coherent. Name Age Director Since Principal Occupation John R. Ambroseo 54 2002 President and Chief Executive Officer Jay T. Flatley(3) 63 2011 Chief Executive Officer of Illumina, Inc. Susan M. James(1)(2) 69 2008 Retired Audit Partner, Ernst & Young L. William Krause(2)(3) 73 2009 President of LWK Ventures Garry W. Rogerson(1)(2) 63 2004 Former Chief Executive Officer of Advanced Energy Industries, Inc. Steve Skaggs(1) 53 2013 Senior Vice President and Chief Financial Officer of Atmel Corporation Sandeep Vij(3) 50 2004 Former President and Chief Executive Officer of MIPS Technologies, Inc. (1) Member of the Audit Committee. (2) Member of the Governance and Nominating Committee. (3) Member of the Compensation and H.R. Committee. Except as set forth below, each of our directors has been engaged in his President. Prior to joining Illumina, Mr. Flatley was President, Chief or her principal occupation set forth above during the past five years. Executive Officer, and a member of the Board of Directors of Molecular Dynamics, Inc., a Nasdaq-listed life sciences company John R. Ambroseo. Mr. Ambroseo has served as our President and Chief focused on genetic discovery and analysis, from 1994 until its sale to Executive Officer as well as a member of the Board of Directors since Amersham Pharmacia Biotech Inc. in 1998. Additionally, he was a October 2002. Mr. Ambroseo served as our Chief Operating Officer co-founder of Molecular Dynamics and served in various other from June 2001 through September 2002. Mr. Ambroseo served as positions there from 1987 to 1994. From 1985 to 1987, he was Vice our Executive Vice President and as President and General Manager of President of Engineering and Vice President of Strategic Planning at the Coherent Photonics Group from September 2000 to June 2001. Plexus Computers, a UNIX computer company. Mr. Flatley holds a From September 1997 to September 2000, Mr. Ambroseo served as B.A. in Economics from Claremont McKenna College and a B.S. and our Executive Vice President and as President and General Manager of a M.S. in Industrial Engineering from Stanford University. the Coherent Laser Group. From March 1997 to September 1997, Mr. Ambroseo served as our Scientific Business Unit Manager. From Mr. Flatley’s years of executive and management experience in the high August 1988, when Mr. Ambroseo joined us, until March 1997, he technology industry, including serving as the chief executive officer of served as a Sales Engineer, Product Marketing Manager, National several public companies, his service on the boards of other publicly held Sales Manager and Director of European Operations. Mr. Ambroseo companies, and his years of service as a director of Coherent make him an received a Bachelor degree from SUNY-College at Purchase and a invaluable member of our Board of Directors. PhD in Chemistry from the University of Pennsylvania. Susan M. James. Ms. James originally joined Ernst & Young, a global Mr. Ambroseo’s status as our Chief Executive Officer, his over 25 year accounting services firm in 1975, serving as a partner from 1987 until tenure with Coherent, his extensive knowledge of our products, her retirement in June 2006, and as a consultant from June 2006 to technologies and end markets and his over a decade of service as a director December 2009. During her tenure with Ernst & Young, she was the of Coherent make him an invaluable member of our Board of Directors. lead partner or partner-in-charge for the audit work for a significant number of technology companies, including Intel Corporation, Sun Jay T. Flatley. Since 1999, Mr. Flatley has served as Chief Executive Microsystems, Inc., Amazon.com, Inc., Autodesk, Inc. and the Officer and a member of the Board of Directors of Illumina, Inc., a Hewlett-Packard Company, as well as for the Ernst & Young North leading developer, manufacturer and marketer of life science tools and America Global Account Network. She also served on the Ernst & integrated systems for the analysis of genetic variation and function. Young Americas Executive Board of Directors from January 2002 From 1999 to December 2013, Mr. Flatley also served as Illumina’s through June 2006. She is a certified public accountant (inactive) and 6


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    PROPOSAL ONE ELECTION OF DIRECTORS a member of the American Institute of Certified Public Accountants. Steve Skaggs. Since May 2013, Mr. Skaggs has served as Senior Vice Ms. James also serves on the boards of directors of Applied President and Chief Financial Officer of Atmel Corporation, a leading Materials, Inc., a global leader in materials engineering solutions for supplier of microcontrollers. Mr. Skaggs joined Atmel in September the semiconductor, flat panel display and solar photovoltaic 2010 and served as Senior Vice President, Corporate Strategy and industries, Yahoo! Inc., an Internet technology company, and Development until his appointment as Chief Financial Officer. Tri-Valley Animal Rescue, a non-profit corporation dedicated to Mr. Skaggs has more than 25 years of experience in the semiconductor providing homes for homeless pets. Ms. James holds Bachelor’s industry, including serving as President, Chief Executive Officer and degrees in Mathematics from Hunter College and Accounting from Chief Financial Officer of Lattice Semiconductor, a supplier of San Jose State University. programmable logic devices and related software. From 2008 to Ms. James’ years in the public accounting industry, her service on the September 2010, Mr. Skaggs was employed as an independent boards and committees of a number of other publicly held companies and management consultant, providing strategic advisory and consulting her years of service as a director of Coherent make her an invaluable services to clients. From 2005 to 2008, Mr. Skaggs served as Chief member of our Board of Directors. Executive Officer of Lattice Semiconductor, a supplier of programmable logic devices and related software, and also served as L. William (Bill) Krause. Since 1991, Mr. Krause has served as President of Lattice from 2003 to 2005 and as Chief Financial Officer President of LWK Ventures, a private advisory and investment firm. In of Lattice from 1996 to 2003. He was also previously a member of the addition, Mr. Krause served as President and Chief Executive Officer Board of Directors of Lattice. Prior to Lattice, Mr. Skaggs was of 3Com Corporation, a global data networking company, from 1981 employed by Bain & Company, a global management consulting to 1990 and as its Chairman from 1987 to 1993 when he retired. firm, where he specialized in high technology product strategy, Mr. Krause currently serves as a director of Brocade Communications mergers and acquisitions and corporate restructurings. Mr. Skaggs Systems, Inc., a networking solutions and services company and holds an MBA degree from the Harvard Business School and a B.S. CommScope Holding Company, Inc., a networking infrastructure degree in Chemical Engineering from the University of California, company. Mr. Krause previously served as a director for the following Berkeley. public companies: Core-Mark Holding Company, Inc., Mr. Skaggs’ years of executive and management experience in the high Packeteer, Inc., Sybase, Inc. and TriZetto Group, Inc. Mr. Krause technology industry, including serving as the chief executive officer and holds a B.S. degree in electrical engineering and received an honorary chief financial officer of other public companies, his prior service on the Doctorate of Science from The Citadel. board of another publicly held company and his years of service as a Mr. Krause’s years of executive and management experience in the high director of Coherent make him an invaluable member of our Board of technology industry, including serving as the chief executive officer of Directors. several companies, his service on the boards and committees of a number of other publicly held companies, and his years of service as a director of Sandeep Vij. Since February 2013, Mr. Vij has been a private investor. Coherent make him an invaluable member of our Board of Directors. Previously, he held the position of President and Chief Executive Officer of MIPS Technologies, Inc., a leading provider of processor Garry W. Rogerson. Mr. Rogerson has served as Coherent’s Chairman architectures and cores, from January 2010 until its sale in February of the Board since June 2007. Since September 2014, Mr. Rogerson 2013. In addition, Mr. Vij had been the Vice President and General has been a private investor. From August 2011 to September 2014, Manager of the Broadband and Consumer Division of Cavium Mr. Rogerson was Chief Executive Officer and a member of the Board Networks, Inc., a provider of highly integrated semiconductor of Directors of Advanced Energy Industries, Inc., a provider of power products from May 2008 to January 2010. Prior to that, he held the and control technologies for thinfilm manufacturing and solar-power position of Vice President of Worldwide Marketing, Services and generation, after which he agreed to serve as a special advisor for a Support for Xilinx Inc., a digital programmable logic device provider, period of time. He was Chairman and Chief Executive Officer of from 2007 to April 2008. From 2001 to 2006, he held the position of Varian, Inc., a major supplier of scientific instruments and Vice President of Worldwide Marketing at Xilinx. From 1997 to consumable laboratory supplies, vacuum products and services, from 2001, he served as Vice President and General Manager of the General February 2009 and 2004, respectively, until the purchase of Varian by Products Division at Xilinx. Mr. Vij joined Xilinx in 1996 as Director Agilent Technologies, Inc. in May 2010. Mr. Rogerson served as of FPGA Marketing. He is a graduate of General Electric’s Edison Varian’s Chief Operating Officer from 2002 to 2004, as Senior Vice Engineering Program and Advanced Courses in Engineering. He President, Scientific Instruments from 2001 to 2002, and as Vice holds an MSEE from Stanford University and a BSEE from San Jose President, Analytical Instruments from 1999 to 2001. Mr. Rogerson State University. received an honours degree and Ph.D. in biochemistry as well as an Mr. Vij’s years of executive and management experience in the high honorary doctoral science degree from the University of Kent at technology industry, including serving as the chief executive officer of Canterbury. another public company, his service on the board of another publicly held Mr. Rogerson’s years of executive and management experience in the high company, and his years of service as a director of Coherent make him an technology industry, including serving as the chief executive officer of invaluable member of our Board of Directors. several public companies, his service on the boards of other publicly held companies, and his years of service as a director of Coherent make him an invaluable member of our Board of Directors. 7


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    PROPOSAL ONE ELECTION OF DIRECTORS Director Independence The Board has determined that, with the exception of Mr. Ambroseo, all of its current members and all of the nominees for director are ‘‘independent directors’’ as that term is defined in the listing rules of the Nasdaq Stock Market. Board Meetings and Committees The Board held a total of five (5) formal meetings and acted twice by Compensation and H.R. Committee unanimous written consent during fiscal 2015. Additionally, from time to time between formal meetings, members of the Board The Compensation and H.R. Committee of the Board consists of participate in update or status telephone calls and briefings, which are directors Krause, Flatley and Vij (Chair). As noted above, all of the not included in these totals. During fiscal 2015, the Board had three members of the Compensation and H.R. Committee are standing committees: the Audit Committee; the Compensation and ‘‘independent’’ as defined under the listing rules of the Nasdaq Stock H.R. Committee; and the Governance and Nominating Committee. Market. The Compensation and H.R. Committee held nine From time to time, the Board may create limited ad hoc committees, (9) meetings during fiscal 2015 and acted once by unanimous written service on which does not provide additional compensation. In the consent. The Compensation and H.R. Committee, among other past, the Board has also established special committees, service on things, reviews and approves our executive compensation policies and which did provide compensation. No director serving during fiscal programs, and makes equity grants to our employees, including 2015 attended fewer than 75% of the aggregate of all meetings of the officers, pursuant to our equity plan. This committee has the sole Board and the committees of the Board upon which such director authority delegated to it by the Board to make employee equity grants, served. All of the members of each standing committee are which are done at a meeting rather than by written consent. For ‘‘independent’’ as defined under the applicable rules established by the additional information about the committee’s processes and Nasdaq Stock Market. procedures for the consideration and determination of executive compensation, see ‘‘Compensation Discussion and Analysis’’. Audit Committee Governance and Nominating Committee The Audit Committee consists of directors James (Chair), Rogerson, and Skaggs. The Audit Committee held thirteen (13) meetings during The Governance and Nominating Committee consists of directors fiscal 2015. The Board has determined that directors James, Rogerson James, Krause and Rogerson (Chair). The Governance and and Skaggs are ‘‘audit committee financial experts’’ as that term is Nominating Committee held five (5) meetings during fiscal 2015. defined in the rules of the SEC. Among other things, the Audit The Governance and Nominating Committee, among other things, Committee has the sole authority for appointing and supervising our assists the Board by making recommendations to the Board on independent registered public accounting firm and is primarily matters concerning director nominations and elections, board responsible for approving the services performed by our independent committees and corporate governance, allocation of risk oversight registered public accounting firm and for reviewing and evaluating amongst the Board and its committees and compensation for our accounting principles and our system of internal accounting directors. For fiscal 2015, the committee retained an independent controls. compensation consultant to advise it on compensation for service on the Board. Copies of the charters for each of our committees may be found on our website at www.coherent.com under ‘‘Investor Relations.’’ Attendance at Annual Meeting of Stockholders by the Members of the Board of Directors All directors are encouraged, but not required, to attend our annual meeting of stockholders. At our annual meeting held on March 4, 2015, all members of the Board attended in person. Process for Stockholders to Recommend Candidates for Election to the Board of Directors The Governance and Nominating Committee will consider nominees nominee or on his or her behalf, information regarding any properly recommended by stockholders. A stockholder that desires to arrangements or understandings between the nominee and the recommend a candidate for election to the Board must direct the stockholder nominating the nominee or any other persons relating to recommendation in writing to us at our principal executive offices the nomination, a written statement by the nominee acknowledging (Attention: Corporate Secretary) and must include the candidate’s that the nominee will owe a fiduciary duty to Coherent if elected, a name, age, home and business contact information, principal written statement of the nominee that such nominee, if elected, occupation or employment, the number of shares beneficially owned intends to tender, promptly following such nominee’s election or by the nominee and the stockholder making the recommendation, re-election, an irrevocable resignation effective upon such nominee’s whether any hedging transactions have been entered into by the failure to receive the required vote for re-election at the next meeting 8


  • Page 15

    PROPOSAL ONE ELECTION OF DIRECTORS at which such nominee would face re-election and upon acceptance of qualifications of the candidates, the Governance and Nominating such resignation by the Board in accordance with Coherent’s Committee considers many factors, including, issues of character, guidelines or policies, and any other information required to be judgment, independence, age, expertise, diversity of experience, disclosed about the nominee if proxies were to be solicited to elect the length of service, other commitments and the like. While Coherent nominee as a director. does not have a formal policy with regard to the consideration of For a stockholder recommendation to be considered by the diversity in identifying director nominees, as noted above, diversity Governance and Nominating Committee as a potential candidate at a of experience is one of many factors that the committee considers; meeting of stockholders, nominations must be received on or before • the Governance and Nominating Committee evaluates such factors, the deadline for receipt of stockholder proposals for such meeting. In among others, and does not assign any particular weighting or the event a stockholder decides to nominate a candidate for director priority to any of these factors. The Governance and Nominating and solicits proxies for such candidate, the stockholder will need to Committee considers each individual candidate in the context of follow the rules set forth by the SEC and in our bylaws. See ‘‘General the current perceived needs of the Board as a whole. While the Information About the Meeting-Deadline for Receipt of Stockholder Governance and Nominating Committee has not established Proposals.’’ specific minimum qualifications for director candidates, the The Governance and Nominating Committee’s criteria and process committee believes that candidates and nominees must reflect a for evaluating and identifying the candidates that it approves as Board that is comprised of directors who (i) are predominantly director nominees are as follows: independent, (ii) are of high integrity, (iii) have qualifications that • the Governance and Nominating Committee regularly reviews the will increase the overall effectiveness of the Board, and (iv) meet current composition and size of the Board; other requirements as may be required by applicable rules, such as financial literacy or financial expertise with respect to audit • the Governance and Nominating Committee reviews the committee members; qualifications of any candidates who have been properly recommended by a stockholder, as well as those candidates who • in evaluating and identifying candidates, the Governance and have been identified by management, individual members of the Nominating Committee has the authority to retain and terminate Board or, if the Governance and Nominating Committee any third party search firm that is used to identify director determines, a search firm. Such review may, in the Governance and candidates and has the authority to approve the fees and retention Nominating Committee’s discretion, include a review solely of terms of any search firm; and information provided to the Governance and Nominating • after such review and consideration, the Governance and Committee or may also include discussions with persons familiar Nominating Committee recommends the slate of director with the candidate, an interview with the candidate or other actions nominees to the full Board for its approval. that the committee deems proper; • the Governance and Nominating Committee evaluates the The Governance and Nominating Committee will endeavor to notify, performance of the Board as a whole and evaluates the or cause to be notified, all director candidates, including those qualifications of individual members of the Board eligible for recommended by a stockholder, of its decision as to whether to re-election at the annual meeting of stockholders; nominate such individual for election to the Board. • the Governance and Nominating Committee considers the Our corporate governance guidelines require that upon a member of suitability of each candidate, including the current members of the the Board turning 72 years old, he or she shall submit a conditional Board, in light of the current size and composition of the Board. resignation to the Governance and Nominating Committee effective Except as may be required by rules promulgated by the Nasdaq upon the next annual meeting of stockholders. The committee then Stock Market or the SEC, it is the current belief of the Governance determines whether to recommend that the Board accept of such and Nominating Committee that there are no specific, minimum resignation. Mr. Krause has so notified the committee, which qualifications that must be met by any candidate for the Board, nor determined that it was not in the best interest of the Company’s are there specific qualities or skills that are necessary for one or more stockholders to accept such resignation and has included Mr. Krause of the members of the Board to possess. In evaluating the in the slate for this year’s election of directors. Majority Voting and Conditional Resignations from the Board of Directors Upon the recommendation of the Governance and Nominating not Contested Elections, the Board also adopted a director election Committee the Board of Directors amended our bylaws, effective policy to (i) establish procedures under which any incumbent director December 1, 2013, to change the voting standard for the election of who fails to receive a majority of the votes cast in an election that is directors that are not Contested Elections (as defined below) from a not a Contested Election shall tender his or her resignation to the plurality to a majority of the votes cast. A majority of the votes cast Governance and Nominating Committee for consideration; and means the number of votes cast ‘‘for’’ a director’s election exceeds the (ii) provide that the Governance and Nominating Committee will number of votes cast against that director’s election (with make recommendations to the Board regarding the actions to be taken ‘‘abstentions’’ and ‘‘broker non-votes’’ not counted as a vote cast either with respect to all such offers to resign. The Board shall act on the ‘‘for’’ or ‘‘against’’ that director’s election). However, if the number of resignation within 90 days following certification of the election nominees exceeds the number of directors to be elected (a ‘‘Contested results. In the event that the Board does not accept such resignation, Election’’), the directors shall be elected by a plurality of the votes cast. then such director shall continue to serve until such time as his or her In connection with the amendment to the Bylaws establishing a successor is elected. majority vote standard for the election of directors in elections that are 9


  • Page 16

    PROPOSAL ONE ELECTION OF DIRECTORS Stockholder Communication with the Board of Directors While the Board believes that management speaks for Coherent, the communication as well as the identity and contact information of the Board encourages direct communication from stockholders. correspondent in our stockholder communications log. Accordingly, any stockholder may contact any member of our Board Our Corporate Secretary will review, summarize and, if appropriate, of Directors individually or as a group by writing by mail to our investigate the complaint under the direction of the appropriate principal executive offices (c/o Corporate Secretary) at 5100 Patrick committee of the Board in a timely manner. In the case of accounting Henry Dr., Santa Clara, CA 95054. or auditing related matters, a member of the Audit Committee, or the Any stockholder may report to us any complaints or comments Audit Committee as a whole, will then review the summary of the regarding accounting, internal accounting controls, or auditing communication, the results of the investigation, if any, and, if matters. Any stockholder who wishes to so contact us should send appropriate, the draft response. The summary and response will be in such complaints or comments to the Audit Committee c/o Corporate the form of a memo, which will become part of the stockholder Secretary, at our principal executive offices. communications log that the Corporate Secretary maintains with respect to all stockholder communications. Any stockholder communications that the Board receives will first go to our Corporate Secretary, who will log the date of receipt of the Independent Chair and Board Leadership Our Board leadership structure consists of an independent Chairman, Given that our Chairman is an independent director, the Board does who is elected by the independent directors, and independent not feel the need for a separate ‘‘lead independent director,’’ as our committee chairs. We separate the positions of Chief Executive independent Chairman performs that function. The Board takes its Officer and Chairman in recognition of the differences between the independence seriously and reinforces this standard with six of its two roles. The Board believes this structure provides independent seven members being independent. Board leadership and engagement. The Role of the Board and its Committees in Risk Oversight The Board oversees Coherent’s risk profile and management’s general the Board and its committees oversee the following risk processes for assessing and managing risk, both as a Board and categories: through its committees, with our Governance and Nominating • the Board generally oversees the Company’s overall enterprise risk Committee delegated the responsibility for assigning oversight management process and specifically with regards to the areas of responsibilities to each committee and the Board as a whole. Our strategy, mergers and acquisitions, communications and operations; senior executive team provides regular updates to the Board and each committee regarding our strategies and objectives and the risks • the Audit Committee generally oversees risks primarily related to inherent with them. financial controls, IT, accounting, tax, treasury, capital, legal, regulatory and compliance; Each regular meeting of the Board includes a discussion of risks related to the Company’s financial results and operations and each • the Compensation and H.R. Committee generally oversees our committee schedules risk-related presentations regularly throughout compensation programs so that they do not incentivize excessive the year. In addition our directors have access to our management to risk taking as well as overseeing human resources related risks; and discuss any matters of interest, including those related to risk. Those members of management most knowledgeable of the issues attend • the Governance and Nominating Committee oversees the Board and committee meetings to provide additional insight on the assignment of risk oversight categories by each particular committee matters being discussed, including risk exposures. Our Chief and/or the Board as a whole as well as those risks related to Financial Officer and General Counsel both report directly to our compensation of members of the Board, succession planning for the Chief Executive Officer, providing him with further visibility to our Board and Chief Executive Officer. risk profile. A Vice President, Finance is the designated officer In the winter of calendar 2015, management presented an assessment overseeing our enterprise risk management program and works closely of the risks associated with the Company’s compensation plans. The with both our Chief Financial Officer and General Counsel on these Compensation and H.R. Committee agreed with the conclusion that matters. the risks were within our ability to effectively monitor and manage These regular meetings also provide our Board members the and that these risks are not reasonably likely to have a material adverse opportunity to discuss issues of concern directly with management. In effect on the Company. 10


  • Page 17

    PROPOSAL ONE ELECTION OF DIRECTORS Additional Governance Matters The Board of Directors (acting on the recommendation of the • Audit Committee members—No more than three (3) other Governance and Nominating Committee) has approved the public company audit committees in addition to the Company; Company’s Corporate Governance Guidelines, which include, among • Each independent member of the Board must within five years of other items (in addition to those items described elsewhere in this initial appointment acquire and thereafter maintain a minimum proxy): value of Company stock equal to three times such director’s annual • At each regular meeting of the Board the independent directors also Board cash retainer (exclusive of any cash retainer for service as meet in executive session without the presence of management; Chair or committee service); • To avoid ‘‘over-boarding’’ we maintain the following limits on • The Board is responsible for reviewing the Company’s succession service on other boards: planning and senior management development on an annual basis; • CEO—No more than one (1) other public company board of • The Board maintains an age-based term limit of 72 (provided, that directors in addition to the Company (note, however, that the Governance and Nominating Committee maintains the Mr. Ambroseo does not serve on any public company boards flexibility to not apply such limit on a facts and circumstances other than ours); basis). • Independent Directors—No more than four (4) other public company board of directors in addition to the Company; Fiscal 2015 Director Compensation During fiscal 2015, we paid our non-employee directors an annual retainer (depending upon position) and for service on the Board as follows: Position Annual Retainer Board Member $ 40,000 Board Chair $ 40,000 Audit Committee Chair $ 34,000 Compensation and H.R. Committee Chair $ 16,000 Governance & Nominating Committee Chair $ 10,750 Audit Committee member (non-Chair) $ 12,500 Compensation and H.R. Committee member (non-Chair) $ 8,500 Governance and Nominating Committee member (non-Chair) $ 6,500 The Governance and Nominating Committee annually reviews Board does as the Compensation and H.R. Committee’s independent and committee compensation with the assistance of an independent consultant for executive compensation. As noted elsewhere in this compensation consultant, which for fiscal 2015 was Compensia. proxy statement, Compensia has not provided any other service for Compensia is separately compensated for this work from the work it the Company other than as directed by a committee of the Board. The chart below summarizes the gross cash amounts earned by non-employee directors for service during fiscal 2015 on the Board and its committees: Compensation Nominating Annual Board Audit and H.R. and Governance Name Service Committee Committee Committee Total Jay T. Flatley $ 40,000 — $ 8,500 — $ 48,500 Susan M. James $ 40,000 $ 34,000 — $ 6,500 $ 80,500 L. William Krause $ 40,000 — $ 8,500 $ 6,500 $ 55,000 Garry W. Rogerson $ 80,000 $ 12,500 — $ 10,750 $ 103,250 Steve Skaggs $ 40,000 $ 12,500 $ — — $ 52,500 Sandeep Vij $ 40,000 — $ 16,000 — $ 56,000 11


  • Page 18

    PROPOSAL ONE ELECTION OF DIRECTORS The chart below presents information concerning the total compensation of our non-employee directors for services (including both Board and, where applicable, committee service) provided during the fiscal year ended October 3, 2015: Fees Paid in Stock Awards Option Awards Name Cash ($) ($)(1)(2) ($)(3) Total ($) Jay T. Flatley 48,500 229,250 — 277,750 Susan M. James 80,500 229,250 — 309,750 L. William Krause 55,000 229,250 — 284,250 Garry W. Rogerson 103,250 229,250 — 332,500 Steve Skaggs 52,500 229,250 — 281,750 Sandeep Vij 56,000 229,250 — 285,250 (1) These amounts do not reflect compensation actually received. Rather, these amounts represent the aggregate grant date fair value computed in accordance with ASC 718, for restricted stock units (‘‘RSUs’’) which were granted in fiscal 2015. The assumptions used to calculate the value of these stock units are set forth in Note 12. ‘‘Employee Stock Award, Option and Benefit Plans’’ of the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for fiscal 2015. (2) The directors’ aggregate outstanding RSU grants as of the end of fiscal 2015 were as follows: Name Shares(a) Jay T. Flatley 3,500(b) Susan M. James 3,500(b) L. William Krause 3,500(b) Garry W. Rogerson 3,500(b) Steve Skaggs 5,250(c) Sandeep Vij 3,500(b) (a) The shares underlying the RSUs will vest to the extent an individual is a member of the Board of Directors on the applicable vesting date. (b) 3,500 shares vest on February 15, 2016. (c) 1,750 shares vest on December 12, 2015 (from Mr. Skaggs’ grant received when he first joined the Board) and 3,500 shares vest on February 15, 2016. (3) No stock option awards were granted to members of the Board during fiscal 2015. The directors’ aggregate holdings of stock option awards (both vested and unvested) as of October 3, 2015 were as follows: Name Shares Jay T. Flatley 24,000 Susan M. James — L. William Krause 30,000 Garry W. Rogerson — Steve Skaggs — Sandeep Vij — The following table shows equity grants received by non-employee directors in fiscal 2015: Restricted Stock Units Granted in Fiscal 2015 Name (# shares) Jay T. Flatley 3,500 Susan M. James 3,500 L. William Krause 3,500 Garry W. Rogerson 3,500 Steven Skaggs 3,500 Sandeep Vij 3,500 Our stockholders approved the adoption of our 2011 Equity the following year. Effective in December 2011, the Board determined Incentive Plan at our annual meeting held in March 2011 (the ‘‘2011 that upon the initial appointment of a non-employee member to the Plan’’). Board, such new director will receive a grant of 3,500 RSUs, which vest over two years (fifty percent on each anniversary of grant). Following the recommendation of the Governance and Nominating Committee (based upon the review by Compensia), the Board has For option grants held by a director who retires after at least eight adopted resolutions automatically granting under the 2011 Plan each years of service on the Board which are outstanding under the 1998 non-employee member of the Board of Directors 3,500 RSUs upon Director Plan, such grants will fully vest and the director will have the such member’s reelection to the Board, with vesting on February 15 of right to exercise his or her option as to both vested and unvested shares 12


  • Page 19

    PROPOSAL ONE ELECTION OF DIRECTORS as of such date. The option will remain exercisable for the lesser of With the adoption of our 2011 Plan, the 1998 Director Plan has been (i) two (2) years following the date of such director’s retirement or terminated other than for outstanding historical grants made (ii) the expiration of the option’s original term. No unvested options thereunder. As of October 3, 2015, 548,000 shares have been issued remain outstanding. This provision was not adopted for option grants upon the exercise of options and the vesting of RSUs under the 1998 under the 2011 Plan. Director Plan. Option Exercises and Stock Vested at 2015 Fiscal Year-End The table below sets forth certain information for each non-employee director regarding the exercise of options and the vesting of stock awards during the year ended October 3, 2015, including the aggregate value realized upon such exercise or vesting. Option Awards Stock Awards Number of Shares Number of Shares Acquired on Value Realized Acquired on Value Realized Exercise on Exercise Vesting on Vesting Name (#) ($) (#) ($)(1) Jay T. Flatley — — 3,500 227,325 Susan M. James — — 3,500 227,325 L. William Krause — — 3,500 227,325 Garry W. Rogerson — — 3,500 227,325 Steve Skaggs — — 5,250 329,333 Sandeep Vij — — 3,500 227,325 (1) Reflects the market price of our Common Stock on the vesting date. Vote Required Every stockholder voting for the election of directors may cumulate cumulate the stockholder’s votes. If cumulative voting occurs at the such stockholder’s votes and give one candidate a number of votes meeting and you do not specify how to distribute your votes, your equal to the number of directors to be elected multiplied by the proxy holders (the individuals named on your proxy card) will number of votes to which the stockholder’s shares are entitled. cumulate votes in such a manner as will ensure the election of as many Alternatively, a stockholder may distribute his or her votes on the of the nominees listed above as possible, and the specific nominees to same principle among as many candidates as the stockholder thinks be voted for will be determined by the proxy holders. fit, provided that votes cannot be cast for more than seven If a quorum is present, each of the seven (7) nominees who receives (7) candidates. However, no stockholder will be entitled to cumulate more ‘‘FOR’’ votes than ‘‘AGAINST’’ votes will be elected. votes for a candidate unless (i) such candidate’s name has been properly placed in nomination for election at the Annual Meeting The Board recommends that Stockholders vote prior to the voting and (ii) the stockholder, or any other stockholder, has given notice at the meeting prior to the voting of the intention to ‘‘FOR’’ the seven nominees presented herein. 13


  • Page 20

    PROPOSAL TWO RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Audit Committee of the Board has selected Deloitte & believes that such a change would be in the best interest of Coherent Touche LLP, an independent registered public accounting firm, to and its stockholders. If the stockholders do not ratify the appointment audit our financial statements for the fiscal year ending October 1, of Deloitte & Touche LLP, the Audit Committee may reconsider its 2016, and recommends that stockholders vote for ratification of such selection. The Audit Committee selected Deloitte & Touche LLP to appointment. Deloitte & Touche LLP has audited our financial audit our financial statements for the fiscal year ended October 3, statements since the fiscal year ended September 25, 1976. Although 2015, which was ratified by our stockholders. ratification by stockholders is not required by law, the Audit Representatives of Deloitte & Touche LLP are expected to be present Committee has determined that it is desirable to request ratification of at the meeting and will be afforded the opportunity to make a this selection by the stockholders as a matter of good corporate statement if they desire to do so. The representatives of Deloitte & practice. Notwithstanding its selection, the Audit Committee, in its Touche LLP are also expected to be available to respond to appropriate discretion, may appoint a new independent registered public questions. accounting firm at any time during the year if the Audit Committee Principal Accounting Fees and Services The following table sets forth fees for services provided by Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates (collectively, ‘‘Deloitte’’) during fiscal 2015 and 2014: 2015 2014 Audit fees(1) $ 2,030,577 $ 1,918,649 Tax fees(2) 176,323 166,382 All other fees(3) 2,600 2,600 Total $ 2,209,500 $ 2,087,631 (1) Represents fees for professional services provided in connection with the integrated audit of our annual financial statements and internal control over financial reporting and review of our quarterly financial statements, advice on accounting matters that arose during the audit and audit services provided in connection with other statutory or regulatory filings. (2) Represents tax compliance and related services. (3) Represents the annual subscription for access to the Deloitte Accounting Research Tool, which is a searchable on-line accounting database. Pre-Approval of Audit and Non-Audit Services The Audit Committee has determined that the provision of non-audit the delegated authority from the Committee to pre-approve certain services by Deloitte is compatible with maintaining Deloitte’s additional services, and such pre-approvals are communicated to the independence. In accordance with its charter, the Audit Committee full Committee at its next meeting. During fiscal years 2015 and approves in advance all audit and non-audit services to be provided by 2014, 100% of the services were pre-approved by the Audit Deloitte. In other cases, the Chairman of the Audit Committee has Committee in accordance with this policy. Vote Required The affirmative vote of a majority of the votes cast will be required to The Audit Committee and the Board recommends that ratify the selection of Deloitte & Touche LLP as our independent Stockholders vote ‘‘FOR’’ the ratification of the registered public accounting firm for the fiscal year ending October 1, appointment of Deloitte & Touche LLP as our 2016. independent registered public accounting firm for the fiscal year ending October 1, 2016. 14


  • Page 21

    PROPOSAL THREE ADVISORY VOTE TO APPROVE EXECUTIVE OFFICER COMPENSATION At our Annual Meeting in March 2011, our stockholders indicated As described in our Compensation Discussion and Analysis, we have that they would like to have an annual advisory vote on executive adopted an executive compensation philosophy designed to provide compensation. Accordingly, our Board of Directors proposes that alignment between executive pay and performance and to focus stockholders provide advisory (non-binding) approval of the executives on making decisions that enhance our stockholder value in compensation of our named executive officers, as disclosed pursuant both the short and long term. Executives are compensated in a to the compensation disclosure rules of the SEC, including the manner consistent with Coherent’s strategy, competitive practices, Compensation Discussion and Analysis, the Fiscal 2015 Summary stockholder interest alignment, and evolving compensation Compensation Table and related tables and disclosure. governance standards. Vote Required Under our bylaws the affirmative vote of the holders of a majority of significant vote against the named executive officer compensation as the votes cast is required to approve the compensation of our named disclosed in this proxy statement, we will consider our stockholders’ executive officers disclosed in this proxy statement. The vote is an concerns and the Compensation and H.R. Committee will evaluate advisory vote, and therefore not binding. Our Board of Directors whether any actions are necessary to address those concerns. values the opinions of our stockholders and to the extent there is any Recommendation The Board of Directors unanimously recommends that Stockholders vote ‘‘FOR’’ the approval of our Executive Officer Compensation disclosed in this proxy statement. 15


  • Page 22

    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of December 31, 2015, certain executive officers and directors as a group, based on information information with respect to the beneficial ownership of common available to the Company as of filing this proxy statement. We do not stock by (i) any person (including any ‘‘group’’ as that term is used in know of any arrangements, including any pledge by any person of our Section 13(d)(3) of the Exchange Act known by us to be the beneficial securities, the operation of which may at a subsequent date result in a owner of more than 5% of our voting securities, (ii) each director and change of control. Unless otherwise indicated, the address of each each nominee for director, (iii) each of the executive officers named in stockholder in the table below is c/o Coherent, Inc., 5100 Patrick the Summary Compensation Table appearing herein, and (iv) all Henry Drive, Santa Clara, California 95054. Number Percent of Name and Address of Shares Total(1) BlackRock Fund Advisors(2) 2,024,556 8.37% 400 Howard St. San Francisco, CA 94105 NWQ Investment Management Company(2) 1,953,909 8.08% 2049 Century Park East Los Angeles, CA 90067 Vanguard Group Inc.(2) 1,800,795 7.44% P.O. Box 2600 Valley Forge, PA 19482 Eagle Asset Management, Inc.(2) 1,362,014 5.63% 880 Carillon Parkway St. Petersburg, FL 33716 Dimensional Fund Advisors LP(2) 1,351,112 5.59% 6300 Bee Cave Rd. Austin, TX 78746 John R. Ambroseo 181,984 * Helene Simonet 25,404 * Mark Sobey 18,246 * Paul Sechrist 37,471 * Bret DiMarco 14,297 * (3) Jay T. Flatley 40,000 * Susan M. James(4) 9,000 * L. William Krause(5) 51,500 * (6) Garry W. Rogerson 26,500 * Steve Skaggs(7) 10,500 * (8) Sandeep Vij 18,400 * All directors and executive officers as a group (12 persons)(9) 444,548 1.83% * Represents less than 1%. (1) Based upon 24,189,610 shares of Coherent common stock outstanding as of December 31, 2015. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to the securities. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, each share of Coherent common stock subject to options held by that person that are currently exercisable or will be exercisable within 60 days of December 31, 2015 and all RSUs which will vest within 60 days of December 31, 2015, are deemed outstanding. In addition, such shares, are not deemed outstanding for the purpose of computing the percentage ownership of any other person. (2) Based on the institutional holding report provided by NASDAQ, which reflects the most recent Schedule 13D, 13F or 13G (or amendments thereto) filed by such person with the SEC, or a Schedule 13D, 13F or 13G filing made after our receipt of this report. (3) Includes 24,000 shares issuable upon exercise of options held by Mr. Flatley which were exercisable and 3,500 shares issuable upon vesting of RSUs within 60 days of December 31, 2015. (4) Includes 3,500 shares issuable upon vesting of RSUs within 60 days of December 31, 2015 held by Ms. James. (5) Includes 30,000 shares issuable upon exercise of options held by Mr. Krause which were exercisable and 3,500 shares issuable upon vesting of RSUs within 60 days of December 31, 2015. (6) Includes 3,500 shares issuable upon vesting of RSUs within 60 days of December 31, 2015 held by Mr. Rogerson. (7) Includes 3,500 shares issuable upon vesting of RSUs within 60 days of December 31, 2015 held by Mr. Skaggs. (8) Includes 3,500 shares issuable upon vesting of RSUs within 60 days of December 31, 2015 held by Mr. Vij. (9) Includes an aggregate of 54,000 options and 21,000 shares issuable upon vesting of RSU’s which were exercisable or would become exercisable or vested, as the case may be, within 60 days of December 31, 2015. 16


  • Page 23

    OUR EXECUTIVE OFFICERS Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934 (the ‘‘Exchange to Section 16(a). Based solely on our review of the copies of such Act’’) requires our officers and directors, and persons who own more forms received by us, and on written representations from certain than ten percent of a registered class of our equity securities to file reporting persons that no other reports were required for such reports of ownership and changes in ownership with the SEC. Such persons, we believe that, during fiscal 2015, our officers, directors officers, directors and ten-percent stockholders are also required by and, to our knowledge, greater than ten percent stockholders SEC rules to furnish us with copies of all forms that they file pursuant complied with all applicable Section 16(a) filing requirements OUR EXECUTIVE OFFICERS The name, age, position and a brief account of the business experience of our Chief Executive Officer and each of our other executive officers as of December 31, 2015 are set forth below: Name Age Office Held John R. Ambroseo(1) 54 President and Chief Executive Officer Helene Simonet(1) 63 Executive Vice President and Chief Financial Officer Mark Sobey(1) 55 Executive Vice President and General Manager, Specialty Laser Systems Paul Sechrist(1) 56 Executive Vice President, Worldwide Sales and Service Luis Spinelli 68 Executive Vice President and Chief Technology Officer Bret DiMarco(1) 47 Executive Vice President, General Counsel and Corporate Secretary (1) Designated as a ‘‘Named Executive Officer’’ for purposes of our Compensation Discussion and Analysis Please see heading ‘‘Nominees’’ under Proposal One above for 35 years of experience with Coherent, including roles as Senior Vice Mr. Ambroseo’s biographical information. President and General Manager of Commercial Lasers and Components from October 2008 to March 2011, Vice President and Helene Simonet. Ms. Simonet has served as our Executive Vice General Manager of Specialty Laser Systems, Santa Clara from March President and Chief Financial Officer since April 2002. Ms. Simonet 2008 to October 2008 and Vice President for Components from April served as Vice President of Finance of our former Medical Group and 2005 to October 2008. Mr. Sechrist received an AA degree from San Vice President of Finance, Photonics Division from December 1999 Jose City College, with Physics studies at California State University, to April 2002. Prior to joining Coherent, she spent over twenty years Hayward. in senior finance positions at Raychem Corporation’s Division and Corporate organizations, including Vice President of Finance of Luis Spinelli. Mr. Spinelli has served as our Executive Vice President Raynet Corporation. Since October 2014, Ms. Simonet has served as and Chief Technology Officer since February 2004. Mr. Spinelli a member of the Board of Directors of Rogers Corporation, a joined the Company in May 1985 and has since held various NYSE-listed provider of engineered materials. Ms. Simonet has both engineering and managerial positions, including Vice President, Master’s and Bachelor degrees from the University of Leuven, Advanced Research from April 2000 to September 2002 and Vice Belgium. As previously disclosed, Ms. Simonet has notified the President, Corporate Research from September 2002 to February Company that she intends to retire from her current positions with 2004. Mr. Spinelli has led the Advanced Research Unit from its the Company effective February 1, 2016. inception in 1998, whose charter is to identify and evaluate new and emerging technologies of interest for us across a range of disciplines in Mark Sobey. Mr. Sobey was appointed Executive Vice President of the laser field. Mr. Spinelli holds a degree in Electrical Engineering Coherent and General Manager of Specialty Laser Systems (SLS) in from the University of Buenos Aires, Argentina with post-graduate April 2010. He has served as Senior Vice President and General work at the Massachusetts Institute of Technology. Manager for the SLS Business Group, which primarily serves the Microelectronics and Research markets, since joining Coherent in July Bret M. DiMarco. Mr. DiMarco has served as our Executive Vice 2007. Prior to Coherent, Mr. Sobey spent over 20 years in the Laser President and General Counsel since June 2006 and our Corporate and Fiber Optics Telecommunications industries, including roles as Secretary since February 2007. From February 2003 until May 2006, Senior Vice President Product Management at Cymer from January Mr. DiMarco was a member and from October 1995 until January 2006 through June 2007 and previously as Senior Vice President 2003 was an associate at Wilson Sonsini Goodrich & Rosati, P.C., a Global Sales at JDS Uniphase through October 2005. He received his law firm. Mr. DiMarco received a Bachelor’s degree from the PhD in Engineering and BSc in Physics, both from the University of University of California at Irvine and a Juris Doctorate degree from Strathclyde in Scotland. the Law Center at the University of Southern California. Mr. DiMarco is also a member of the Nasdaq Listing and Hearing Paul Sechrist. Mr. Paul Sechrist was appointed Executive Vice Review Council. President, Worldwide Sales and Service in March 2011. He has over 17


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    COMPENSATION DISCUSSION AND ANALYSIS Set forth below are tables reflecting several performance metrics from Introduction the last three fiscal years. In this section, we describe the material components of our executive Our revenue decreased 2% from fiscal 2013 to fiscal 2014 and compensation program for our ‘‘Named Executive Officers’’ or increased 1% from fiscal 2014 to fiscal 2015 (dollars in millions): ‘‘NEOs’’: Ms. Simonet and Messrs. Ambroseo, Sobey, Sechrist and DiMarco. We also provide an overview of our executive compensation philosophy, principal compensation policies and practices by which the Compensation and H.R. Committee, or the committee, arrives at its decisions regarding NEO compensation. Stockholder Feedback The committee carefully considers feedback from our stockholders regarding our executive compensation program, including the results 9JAN201617534427 of our annual advisory vote on executive compensation, which our stockholders have historically strongly supported. All stockholders are Our pro forma EBITDA% decreased 3% from fiscal 2013 to fiscal invited to express their views to the committee as described in this 2014 and increased 12% from fiscal 2014 to fiscal 2015: proxy under the heading ‘‘Stockholder Communication with the Board of Directors.’’ The committee welcomes direct stockholder feedback and considers such feedback as well as the results of our historical ‘‘say on pay’’ results in its deliberations on executive compensation. We strongly urge our stockholders to read this Compensation Discussion and Analysis in conjunction with the advisory vote under Proposal Three. Executive Summary Our Business Founded in 1966, Coherent, Inc. is one of the leading providers of * lasers and laser-based technology for scientific, commercial and industrial customers. Our common stock is listed on the Nasdaq 9JAN201617534304 Global Select Market and is part of the Russell 2000 and Standard & Our non-GAAP earnings per share decreased 10% from fiscal 2013 to Poor’s SmallCap 600 Index. For more information about our business, fiscal 2014 and increased 22% from fiscal 2014 to fiscal 2015: please read ‘‘Business’’ and ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ sections in our Annual Report on Form 10-K filed with SEC on December 1, 2015. Selected Business Highlights While we experienced slight growth in revenues, we did not meet our own internal revenue growth targets in fiscal 2015. Offsetting our revenue results, however, we were able to significantly grow our pro forma EBITDA% and earnings per share. Accordingly, the Company did not fully meet the performance-related goals for our executive compensation programs, including both metrics in our annual cash program as well as our long-term performance measurement under * our performance-based RSU design. As a result, you will see in the 9JAN201617534055 coming pages that in fiscal 2015 our performance-related executive compensation had below target payouts. For a reconciliation table of earnings per share on a GAAP basis to non-GAAP basis and net income % to pro forma EBITDA % as a percentage of revenue, please refer to the ‘‘Reconciliation Table’’ at the end of this section. 18


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    COMPENSATION DISCUSSION AND ANALYSIS Compensation Overview Compensation Philosophy. We tie executive total compensation to • Align compensation with stockholder interests—Our stockholder value with two measures: our operational results and the stockholders benefit from continued strong operating performance comparative performance of our stock price. This approach provides by the Company and we believe that having a significant portion of strong alignment between executive pay and performance and focuses compensation tied to equity with both time and performance-based executives on making decisions that enhance our stockholder value in vesting requirements directly aligns management to stockholder both the short and long-term. We design our executive compensation returns. The performance-based RSUs make up the largest potential program to achieve the following goals: portion of the equity grants for our CEO. Grants of performance- based RSUs in fiscal 2015 have the same measurement as in fiscal • Pay for performance, with both short and long-term 2014: a single vesting date three years from grant solely dependent measurements—A significant portion of the annual compensation upon the performance of Coherent’s common stock price measured of our executives is designed to vary with annual business against the Russell 2000 Index, with target at meeting the index’s performance and the long-term relative performance of Coherent’s performance. For each 1% that Coherent’s common stock exceeds stock price in comparison to the Russell 2000 Index (by way of a the performance of the Russell 2000 Index for the trailing 90 single three year vesting period). The committee and management trading days from the vesting measurement date against the set demanding performance targets, so that even though the comparable period from the date of grant, the grant recipient will Company’s financial performance has been solid, payouts and get a 2% increase in the number of shares above target (up to a vesting achievements have not been as robust. As seen over the last maximum cap of 200% of target), and for each 1% below the several fiscal years, this direct connection has been demonstrated by Russell 2000 Index’s performance, a 4% decrease in the number of the reduced payouts under our annual cash bonus plan as well as the shares (down to zero). As a result, compensation decreases faster for below target vesting for our performance share grants. The failing to achieve the target than it increases for exceeding it. If following chart shows the payout percentages for each of the last Coherent’s stock underperforms the Russell 2000 performance by three fiscal years under our annual variable compensation program: more than 25%, then there is no payout, but in order to hit the maximum possible payout, Coherent’s stock has to outperform the index by at least 50% (the downside is faster achieved than the upside). Accordingly, for our executives to achieve the committee’s targeted compensation, Coherent’s common stock must at least meet the Russell 2000 Index. The chart below shows this structure: 9JAN201617533651 • Tie compensation to performance of the core business—Our fiscal 2015 annual cash bonus plan was dependent upon Coherent’s achievement against two criteria: adjusted EBITDA dollars and revenue. The committee determined that these were the most effective metrics for tying management’s compensation directly to 9JAN201617534180 Coherent’s core operating result for fiscal 2015. Elements of Executive Compensation. During fiscal 2015, the • Retain and hire talented executives—Our executives should have compensation of our NEOs primarily consisted of (A) base salary, market competitive compensation and the committee orients our (B) participation in our annual variable compensation plan (referred target total compensation generally near the 50th percentile of the to herein as our ‘‘cash bonus plan’’ or ‘‘VCP’’), and (C) long-term committee’s selected peer group (as noted below), with actual equity incentive awards divided between time-based RSUs and compensation falling above or below depending upon Coherent’s performance-based RSUs. For fiscal 2015, on average, approximately financial performance. Additionally, certain compensation 77% of our NEO’s target compensation and approximately 84% of components may be above or below such percentile target and varies our CEO’s target compensation was delivered through our cash bonus by individual executive. plan and long-term equity incentives (both time and performance vesting). 19


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    COMPENSATION DISCUSSION AND ANALYSIS As a demonstration of how executive cash compensation is tied to • We have eliminated historical perquisites as an element of executive company performance, the cash compensation for our CEO during compensation; fiscal 2015 at target, maximum and actual can be illustrated as • Our change-of-control plan provides for payment only in ‘‘double- follows (dollars in thousands): trigger’’ circumstances-namely a change-of-control coupled with a termination of employment; • None of our executive officers are entitled to any ‘‘gross-up’’ to offset the impact of IRS Code Section 280G in connection with a change-of-control; and • None of our executive officers have other than ‘‘at will’’ employment. Our stockholders have historically strongly supported our executive compensation philosophy and design as seen in the significant majorities approving our ‘‘say on pay’’ proposal (does not include broker non-votes; rounded): 18JAN201617160649 You will note that our CEO’s performance-based cash compensation was below target since the Company did not fully meet the performance criteria under our cash bonus plan. Compensation Governance. ‘‘Pay for performance’’ has been and remains at the core of Coherent’s executive compensation coupled with appropriately managing risk and aligning our compensation programs with long-term stockholder interests. We accomplish this primarily by having a majority of our NEOs’ potential compensation being ‘‘at risk’’ through a combination of (i) a fiscal year variable cash bonus program tied to achievement of financial metrics and (ii) equity grant vesting tied to achievement of a performance metric. The 9JAN201617534555 committee monitors and considers evolving governance approaches and standards in executive compensation, as well as communications Role of Management it receives directly from stockholders. As more fully discussed below, recent examples of how this philosophy The committee regularly meets with Mr. Ambroseo, our Chief is applied and changes made pursuant to compensation practices as Executive Officer, to obtain recommendations with respect to the well as governance practices in effect during fiscal 2015, include: compensation programs, practices and packages for our Named Executive Officers other than Mr. Ambroseo. Additionally, • In fiscal 2015, the payouts of our annual cash bonus plan to our Ms. Simonet, our Executive Vice President and Chief Financial NEOs were approximately 85% as compared to a target of 100%; Officer, Mr. DiMarco, our Executive Vice President and General Counsel, and members of our human resources department are • We have a recoupment or ‘‘claw-back’’ policy for our Chief regularly invited to meetings of the committee or otherwise asked to Executive Officer and Chief Financial Officer, as described below; assist the committee. • We have minimum share ownership requirements for our Chief The assistance of these individuals include providing financial Executive Officer and members of the Board of Directors; information and analysis for the committee and its compensation • Our performance-based RSU program is measured by the consultant, taking minutes of the meeting or providing legal advice, Company’s stock price achievement against the Russell 2000 over a developing compensation proposals for consideration, and providing three year period, which the committee believes is a direct insights regarding our employees (executive and otherwise) and the connection to long-term total stockholder return; business context for the committee’s decisions. Named Executive Officers attend portions of committee meetings when invited by the • The committee is composed entirely of directors who satisfy the committee, but leave the meetings when matters potentially affecting standards of independence in Coherent’s Corporate Governance them are discussed. Guidelines and Nasdaq listing standards; The committee makes decisions regarding Mr. Ambroseo’s • Executive incentive compensation programs include limits on compensation without him present. maximum payouts to contain the risk of excessive payouts; 20


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    COMPENSATION DISCUSSION AND ANALYSIS Role of the Committee’s Compensation The independent compensation consultant serves at the discretion of the committee and is not permitted to do other work for Coherent Consultant unless expressly authorized by the committee. Since retention, Compensia has not performed any work for Coherent other than its The committee utilizes the services of an independent compensation work with the committee, the Board of Directors or other committees consultant and in fiscal 2015, engaged Compensia as its independent of the Board of Directors. The committee is focused on maintaining compensation consultant. Compensia assisted the committee by: the independence of its compensation consultant and, accordingly, • Reviewing and analyzing our executive compensation program, does not anticipate having its consultant perform any other work for including providing NEO tally sheets to the Committee at each of the Company in addition to its direct work for the committee or the its regular meetings; Board. The committee has assessed the independence of Compensia and concluded that no conflict of interest exists. • Providing market data and ranges for fiscal 2015 compensation; and The Company also participates in and maintains a subscription to the Radford Global Technology Survey. This survey provides benchmark • Providing further insight on compensation governance trends. data and compensation practices reports of a broad cross-section of Additionally, in fiscal 2015, Compensia was retained by the technology companies similar in size to Coherent to assist us with Governance and Nominating Committee to review, analyze and make regards to employee compensation generally. recommendations regarding compensation for service on the Board of Directors and its committees. Pay Positioning Strategy and Benchmarking of Compensation Philosophically the committee initially orients the midpoint of our than the targeted amounts for each individual based primarily on the target total compensation for our NEOs generally near the Company’s performance. For example, the performance RSUs 50th percentile of our peers (as measured by our designated peer granted in 2012 only vested as to 60% of target, which resulted in group and, when applicable, data from the Radford Global value received that is significantly lower than the ‘‘accounting value’’ Technology Survey), resulting in targeted total compensation that is reflected for equity compensation for each NEO reflected in the competitive for performance that meets the objectives established by summary compensation table for that year. the committee. A Named Executive Officer’s actual salary, cash In analyzing our executive compensation program relative to this incentive compensation opportunity and equity compensation grant target market positioning, the committee reviews information value may fall below or above the target position based on the provided by its independent compensation consultant, which includes individual’s experience, seniority, skills, knowledge, performance and an analysis of data from peer companies’ proxy filings with respect to contributions as well as the historical pay structure for each executive. similarly situated individuals at the peer companies (when available) These factors are weighed individually by the committee in its and the Radford Global Technology Survey (as a supplement when judgment, and no single factor takes precedence over others nor is any peer group company data is unavailable). It is important to note that formula used in making these decisions. In light of the fact that the these are the peers selected by the committee. The committee uses committee has designed the significant majority of the Chief criteria as described below in determining the appropriate group. Executive Officer’s compensation to be at risk, including 2/3rds of his There are proxy advisory services which use their own criteria to select long-term equity compensation, for fiscal 2015 the committee asked peers for the Company and, accordingly, stockholders should be aware Compensia to provide information at the 50th and 75th percentile for that these advisory services do not, in fact, follow the same our Chief Executive Officer. Given the significant ties to performance, methodology of the committee and there may be wide variances the committee oriented his compensation target closer to the between the different peer groups used by these services. Any 75th percentile. comparison of company performance or market data for executive The Chief Executive Officer’s review of the performance of the other compensation using a completely different peer group will, therefore, Named Executive Officers is considered by the committee in making naturally result in a different analysis. We encourage our stockholders individual pay decisions. With respect to the Chief Executive Officer, to consider the peer group used in any comparisons and direct any the committee additionally considered the performance of Coherent questions to the committee regarding such comparisons or any other as a whole and the views of the Board of Directors regarding the Chief matters when considering how to vote on Proposal Three. Executive Officer’s performance. Actual realized pay is higher or lower 21


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    COMPENSATION DISCUSSION AND ANALYSIS For pay decisions made for fiscal 2015, after consulting with our independent compensation consultant, the committee determined that the following companies comprise the peer group for fiscal 2015: Emulex (ELX) MKS Instruments (MKSI) Entegris (ENTG) MTS Systems Corp. (MTSC) FEI Company (FEIC) National Instruments (NATI) Finisar Corp. (FNSR) Newport Corporation (NEWP) FLIR Systems, Inc. (FLIR) OSI Systems (OSIS) Harmonic (HLIT) Plantronics (PLT) Infinera (INFN) PMC-Sierra, Inc. (PMCS) JDS Uniphase (JDSU) Polycom (PLCM) The committee made the following change to the group of peer Secondary Criteria companies from fiscal 2014 primarily as a result of filtering such companies through the selection criteria noted below: • Sustained (‘‘multi-year’’) revenue growth; Added: MTS Systems Corp. • Market capitalization between 0.5 and 2.0x of Coherent; Several factors are considered in selecting the peer group, the most • Market capitalization as a multiple of revenues of greater than 1.5x; important of which are: and • A disclosed peer of a peer company. Primary Criteria The committee reviews the composition of the peer group annually to • Industry (primarily companies in the Electronic Equipment and ensure it is the most relevant set of companies to use for comparison Semiconductor sub-industry classifications defined by the Global purposes. Industry Classification Standard (GICS) system); and • Revenue level (primarily companies with annual revenues between 0.5x-2.0x that of Coherent). Components of Our Executive Compensation Program The principal components of our executive officer compensation and continued overwhelming vote totals in favor of our executive employment arrangements during fiscal 2015 included: compensation through our annual ‘‘say-on-pay’’ proposal. • Base salary; • Cash bonus plan; • Equity awards; and • Other benefits. These components were selected because the committee believes that a combination of salary, incentive pay and benefits is necessary to help us attract and retain the executive talent on which Coherent’s success depends. The following table shows the components of total direct compensation at target for our named executive officers as a group for fiscal 2015. In maintaining the design for fiscal 2015, the committee recognized the significant support received from the Company’s stockholders for the compensation program design, as reflected in the 9JAN201617533917 Base Salary Base salary is the foundation to providing an appropriate total direct information provided by Compensia with respect to similarly situated compensation package. We use base salary to fairly and competitively individuals to assist it in determining the base salary for each Named compensate our executives for the jobs we ask them to perform. This Executive Officer, depending upon the particular executive’s is the most stable component of our executive compensation program, experience, seniority, skills, knowledge, performance and as this amount is not at risk. The committee reviewed market data contribution. At management’s recommendation our named 22


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    COMPENSATION DISCUSSION AND ANALYSIS executive officers have had few salary increases in recent years: one data, the Committee determined to increase salaries in fiscal 2015 for individual in fiscal 2013 and one individual in fiscal 2014. After Ms. Simonet and Messrs. DiMarco, Sechrist, and Sobey. reviewing this base salary trend and in reviewing peer compensation Variable Cash Incentive Compensation A substantial portion of each individual’s potential short-term The actual awards (if any) payable for each semi-annual period varied compensation is in the form of variable incentive pay tied to depending on the extent to which actual performance met, exceeded committee-established goals. In fiscal 2015, Coherent maintained one or fell short of the goals approved by the committee. The 2015 VCP incentive cash program under which executive officers were eligible to goals were tied to Coherent achieving varying levels of revenue and receive cash bonuses, the 2015 Variable Compensation Plan (‘‘2015 adjusted EBITDA dollars (‘‘adjusted EBITDA $’’), with revenue VCP’’). weighted at 25% and adjusted EBITDA weighted at 75%. Each performance metric is measured and paid out independently, but the 2015 VCP revenue payout is capped at 100% achievement until adjusted EBITDA reaches a minimum dollar target. Adjusted EBITDA is The 2015 VCP was designed as an ‘‘at risk’’ bonus compensation defined as earnings before interest, taxes, depreciation, amortization program to promote a focus on Coherent’s growth and profitability. It and certain other non-operating income and expense items and other provided incentive compensation opportunity in line with targeted items, such as the impact of stock option expensing under the market rates to our Named Executive Officers. Under the 2015 VCP, Accounting Standards Codification 718, ‘‘Compensation—Stock participants were eligible to receive bi-annual bonuses (with Compensation’’ and certain acquisition related expenses. The measurement periods for the first half and the second half of the 2015 Committee also reviews the financial impact of mergers and fiscal year). In setting the performance goals at the beginning of the acquisitions to determine if any adjustments in VCP are required. fiscal year, the committee assessed the anticipated difficulty and Each measurement period had the same range of between zero and importance to the success of Coherent of achieving the performance 200%, with target at 100% of the executive’s participation rate. goals. Fiscal 2015 Variable Compensation Plan Scale for Named Executive Officers Revenue achievement for the first half of fiscal 2015 was Second Half Fiscal 2015 VCP Scale $404.3 million, with a corresponding cash bonus payout of Revenue $(in millions) Payout approximately 45.3% of target. Adjusted EBITDA$ achievement for $396.1 (actual) None (actual) the first half of fiscal 2015 was $80.8 million, with a corresponding $405.0 (threshold) 0% cash bonus payout of approximately 125.0% of target. The weighted, $434.4 (target) 100% combined cash bonus payout was approximately 105.1% of target. $465.0 200% First Half Fiscal 2015 VCP Scale Revenue $(in millions) Payout Adjusted EBITDA $(in millions) Payout $395.0 (threshold) 0% $69.0 (threshold) 0% $404.3 (actual) 45.3% (actual) $86.2 (actual) 86.0% (actual) $415.6 (target) 100% $89.0 (target) 100% $435.0 200% $109.0 200% Adjusted EBITDA $(in millions) Payout The tables below describe for each Named Executive Officer under the 2015 VCP (i) the target percentage of base salary, (ii) the potential $67.0 (threshold) 0% award range as a percentage of base salary, and (iii) the actual award $78.0 (target) 100% earned for the measurement period in fiscal 2015. $80.8 (actual) 125.0% (actual) $89.0 200% FIRST HALF OF FISCAL 2015 Actual Revenue achievement for the second half of fiscal 2015 was Payout Award as a Named Target Percentage Actual Percentage of $396.1 million, with a corresponding cash bonus payout of 0%. Executive Percentage Range of Award Target Adjusted EBITDA$ achievement for the second half of fiscal 2015 Officer of Salary Salary ($)(1) Award(2) was $86.2 million, with a corresponding cash bonus payout of John Ambroseo 100% 0-200% 328,416 105.09% approximately 86.0% of target. The weighted, combined cash bonus Helene Simonet 70% 0-140% 151,948 105.09% payout was approximately 64.47% of target. Mark Sobey 65% 0-130% 128,904 105.09% Paul Sechrist 50% 0-100% 93,796 105.09% Bret DiMarco 50% 0-100% 90,249 105.09% 23


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    COMPENSATION DISCUSSION AND ANALYSIS SECOND HALF OF FISCAL 2015 (1) Reflects gross amounts earned during the applicable half of fiscal 2015. (2) This reflects the aggregate bonuses earned by the Named Executive Officers for Actual Payout Award as a the applicable half of fiscal 2015 under the 2015 VCP. Named Target Percentage Actual Percentage of Executive Percentage Range of Award Target Officer of Salary Salary ($)(1) Award(2) John Ambroseo 100% 0-200% 201,475 64.47% Helene Simonet 70% 0-140% 93,216 64.47% Mark Sobey 65% 0-130% 79,079 64.47% Paul Sechrist 50% 0-100% 57,541 64.47% Bret DiMarco 50% 0-100% 55,366 64.47% Equity Awards We believe that equity awards provide a strong alignment between the committee believed that using the Russell 2000 Index (in which interests of our executives and our stockholders. We seek to provide Coherent is a member) as a proxy of total stockholder return directly equity award opportunities that are consistent with our compensation aligns executive compensation with stockholder interest. The philosophy, with the potential for increase for exceptional financial committee determined that both the performance-based and performance, consistent with the reasonable management of overall time-based RSU grants provide a further retention tool in that the equity compensation expense and stockholder dilution. Finally, we time-based grants vest over three years with pro rata annual vesting believe that long-term equity awards are an essential tool in promoting and, for the performance-based grants, a single measurement period executive retention. For fiscal 2015, our long-term incentive program three years from the date of grant with three-year cliff vesting shortly included the grant of time-based RSUs and performance-based RSUs. thereafter if such grants vest at all since such grants vest purely based These components provide a reward for past corporate and individual on performance. performance and as an incentive for future performance. Our Performance-based RSU grants in fiscal 2015 vest solely dependent performance-based RSU grants are tied to the Company’s upon the performance of Coherent’s common stock price measured performance and, as a result, may fluctuate from no vesting to vesting against the Russell 2000 Index. For each 1% that Coherent’s common which is above target. When making its compensation decisions, the stock exceeds the performance of the Russell 2000 Index for the committee reviews a compensation overview prepared by its trailing 90 trading days from the vesting measurement date against the independent compensation consultant which reflects potential comparable period from the date of grant, the grant recipient will get a realizable value under current short and long-term compensation 2% increase in the number of shares above target (up to a maximum arrangements for each Named Executive Officer. cap of 200% of target), and for each 1% below the Russell 2000 Index’s performance, a 4% decrease in the number of shares (down to Fiscal 2015 Equity Grants zero). As a result, compensation decreases faster for failing to achieve the target than it increases for exceeding it. The performance-based For fiscal 2015, the committee based the equity program on a RSUs make up the largest potential portion of the equity grants for combination of time-based and performance-based RSUs over a three our Chief Executive Officer. year period. In particular, the committee determined to measure achievement for the performance grants by the relative performance of The following table summarizes some of the key features of our fiscal Coherent’s stock price in comparison to the Russell 2000 Index. The 2015 equity grants: Fiscal 2015 Equity Grants Type RSUs and PRSUs Vesting for RSUs One-third each grant anniversary Vesting for PRSUs Single vesting date three years from grant Fiscal 2015 Equity Grants 100% tied to Russell 2000 Index Minimum vest: zero PRSU Metrics Target vest: Even with Russell 2000 Index Maximum vest: 200% of target For our Chief Executive Officer, greater than half of his total equity In the event of a change of control of the Company, the performance- awards are performance-based. Accordingly, for our Chief Executive based grants will be measured, with respect to performance periods Officer, at target, approximately 66% of his equity awards are not yet completed, by the relative stock performance of Coherent in performance-based and at maximum achievement that percentage comparison to the Russell 2000 Index through the date of the change increases to approximately 80%. of control and such performance-based shares would, subject to the terms of the Change of Control Severance Plan, then convert to 24


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    COMPENSATION DISCUSSION AND ANALYSIS time-based vesting with a single vesting date at the three year Equity Award Practices anniversary of the grant. Equity grants to our employees are driven by our annual review The following charts show the aggregate composition of equity process. Grant guidelines are based on competitive market practices. grants for fiscal 2015 to our Chief Executive Officer, at target and at Typically, an eligible employee is granted equity at the first committee maximum achievement under the terms of the performance-based meeting after beginning employment and may be eligible for periodic grants: grants thereafter. Eligibility for and the size of grants are influenced by the then-current guidelines for non-executive officer grants and the individual’s performance or particular requirements at the time of hire. No option grants have been made to an employee since 2010. In fiscal 2015 the committee granted an aggregate of 318,842 shares subject to time-based and performance-based restricted stock units (at maximum), representing approximately 1.33% of Coherent’s outstanding common stock as of October 3, 2015 (excluding automatic and initial grants to directors). With the assistance of Compensia, the committee has reviewed this burn rate relative to peer practices and guidance from Institutional Shareholder Services (ISS) and found that the total dilution was consistent with the median of 21DEC201513125074 peer practices and complied with ISS guidelines. During fiscal 2015 equity grants were only made at meetings of the committee. Chief Executive Officer Minimum Stock Ownership Guidelines During fiscal 2012, the committee adopted mandatory stock ownership guidelines for our Chief Executive Officer. Our guidelines require that the Chief Executive Officer hold shares with a value of at least three times base salary, without counting vested or unvested 21DEC201513125226 option grants or unvested grants of RSUs. Compliance is measured as of the date of each year’s annual meeting based on the stock price of The following tables reflect the equity grants to the Named Executive the shares as of the date of their acquisition. In the event that our Officers during the first quarter of fiscal 2015: Chief Executive Officer does not satisfy the minimum requirements, then 25% of the net after-tax shares (e.g. exercised options/shares Performance-Based Named Performance-Based RSU Grants Range received on the vesting of RSUs) must be held until the guidelines are Executive Time-Based RSU Grants (issuance dependent met. As of December 31, 2015, Mr. Ambroseo held stock worth Officer RSU Grants at Target upon achievement) approximately 19 times his base salary and, accordingly, significantly John Ambroseo 13,600 26,800 0 – 53,600 exceeded the minimum stock ownership guideline. Helene Simonet 7,832 3,916 0 – 7,832 Mark Sobey 7,362 3,681 0 – 7,362 Paul Sechrist 6,276 3,138 0 – 6,276 Bret DiMarco 6,417 3,209 0 – 6,418 Other Benefits Retirement Plans We maintain a Deferred Compensation Plan for certain employees and members of the Board. The Deferred Compensation Plan permits Executive officers are eligible to participate in our 401(k) Retirement eligible participants to defer receipt of compensation pursuant to the Plan on the same terms as all other U.S. employees, including a 4% terms of the plan. The Deferred Compensation Plan permits Company matching contribution. Our 401(k) Retirement Plan is a participants to contribute, on a pre-tax basis, up to 75% of their base tax-qualified plan and therefore is subject to certain Internal Revenue salary earnings, up to 100% of their bonus pay and commissions and Code limitations on the dollar amounts of deferrals and Company up to 100% of directors’ annual retainer earned in the upcoming plan contributions that can be made to plan accounts. These limitations year. We provide no matching or other additional contributions to apply to our more highly-compensated employees (including the such Deferred Compensation Plan. Plan participants may invest Named Executive Officers). deferrals in a variety of different deemed investment options. To preserve the tax-deferred status of deferred compensation plans, the IRS requires that the available investment alternatives be ‘‘deemed 25


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    COMPENSATION DISCUSSION AND ANALYSIS investments.’’ Participants do not have an ownership interest in the ownership of Coherent, a change in effective control of Coherent, or a funds they select; the funds are only used to measure the gains or losses change in ownership of a substantial portion of Coherent’s assets (in that are attributed to the participant’s deferral account over time. each case as construed under Section 409A of the Internal Revenue Code and the regulations thereunder)(a ‘‘change of control’’) and The committee considers the Deferred Compensation Plan to be a within two years thereafter (or within two months prior thereto) the reasonable and appropriate program because it promotes executive participant’s employment is terminated without cause or is voluntarily officer retention by offering a deferred compensation plan that is terminated following a constructive termination event. The comparable to and competitive with what is offered by our peer group committee believes the Change of Control Plan serves as an important of companies. retention tool in the event of a pending change of control transaction. Employee Stock Purchase Plan The committee completed its review of the provisions of the Change of Control Plan during fiscal 2015 and determined to review the plan Our stockholders have approved an employee stock purchase plan again in four years. Compensia assisted the Committee in its review whereby employees can purchase shares for a discount, subject to and analysis of the Change of Control Plan. The committee believes various participation limitations. As employees, our Named Executive that reviewing the Change of Control Plan every four years allows for Officers are eligible to participate in this plan. the right balance in providing certainty for the participants while providing the committee with the opportunity to revise the plan consistent with corporate governance best practices, evolving peer Severance and Change of Control group practices and regulatory changes. Arrangements The committee does not consider the potential payments and benefits Our Change of Control Severance Plan (the ‘‘Change of Control under these arrangements when making compensation decisions for Plan’’) provides certain benefits in the event of a change of control of our NEOs. These arrangements serve specific purposes unrelated to Coherent for certain executives, including each of our Named the determination of the NEOs’ total direct compensation for a Executive Officers. Benefits are provided if there is a change in specific year. Tax and Accounting Considerations • Accounting for Stock-Based Compensation—We account for stock- payments under our 2015 VCP) and time-based full-value awards are based compensation in accordance with the requirements of ASC not qualified as ‘‘performance-based’’ compensation under 718. We also take into consideration ASC 718 and other generally Section 162(m). We may from time to time pay compensation to accepted accounting principles in determining changes to policies our executive officers (including under our VCP) that may not be and practices for our stock-based compensation programs. tax deductible when, for example, we believe that such compensation is appropriate and in the best interests of the • Section 162(m) of the Internal Revenue Code—This section limits stockholders after taking various factors into consideration, Coherent’s income tax deduction of compensation for our Chief including business conditions and the performance of the executive Executive Officer and our four other most highly compensated officer. Named Executive Officers (other than the Chief Financial Officer) unless the compensation is less than $1 million during any fiscal • Section 409A of the Internal Revenue Code—Section 409A imposes year or is ‘‘performance-based’’ under Section 162(m). Our 2001 additional significant taxes in the event that an executive officer, Stock Plan and 2011 Plan are designed to permit option grants and director or service provider received ‘‘deferred compensation’’ that certain performance-based full value awards to be fully does not satisfy the requirements of Section 409A. We consider tax-deductible. Cash compensation (including both base salary and Section 409A in the design and operation of any plans. Other Compensation Policies To further align our executive compensation program with the incentive or equity based compensation related to such accounting interests of our stockholders, at the end of fiscal 2009, a committee of restatement received by such individual during the 12-month period the Board approved a recoupment policy. The recoupment policy following the originally filed financial document. Under our Insider provides that, in the event that there is an accounting restatement and Trading Policy, no employees or directors are allowed to hedge or there is a finding by the Board that such restatement was due to the pledge Coherent securities. The Committee continues to monitor the gross recklessness or intentional misconduct of the Chief Executive SEC rule-making related to Section 954 of the Dodd-Frank Act. Officer or Chief Financial Officer and it caused material Following the final rules being adopted by the SEC, the Committee noncompliance with any financial reporting requirement, then intends to review and update its clawback policy. Coherent shall seek disgorgement of any portion of the bonus or other 26


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    COMPENSATION DISCUSSION AND ANALYSIS Compensation Committee Interlocks and Insider Participation During fiscal 2015, the Compensation and H.R. Committee of the executive officer that serves on our Board or Compensation and H.R. Board consisted of Messrs. Vij (Chair), Flatley and Krause. None of Committee. No member of our Board is an executive officer of a the members of the committee has been or is an officer or employee of company in which one of our executive officers serves as a member of Coherent. None of our executive officers serve on the board of the board of directors or compensation committee of that company. directors or compensation committee of a company that has an Committee Independence Each of the members of the committee qualifies as (i) an ‘‘independent director’’ under the requirements of The Nasdaq Stock Market, (ii) a ‘‘non-employee director’’ under Rule 16b-3 of the Securities Exchange Act of 1934 (the ‘‘1934 Act’’), (iii) an ‘‘outside director’’ under Section 162(m) of the Code and (iv) an ‘‘independent outside director’’ as that term is defined by ISS. 27


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    COMPENSATION DISCUSSION AND ANALYSIS Compensation and H.R. Committee Report The Compensation and H.R. Committee of the Board has reviewed Respectfully submitted by the Compensation and H.R. Committee and discussed the Compensation Discussion and Analysis required by Sandeep Vij, Chair Item 402(b) of Regulation S-K with management and, based on such Jay Flatley review and discussions, the Compensation and H.R. Committee L. William Krause recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement. RECONCILIATION TABLE—NON-GAAP EARNINGS PER SHARE Fiscal Year 2015 2014 2013 GAAP NET INCOME PER DILUTED SHARE $3.06 $2.36 $2.70 Stock based compensation 0.56 0.54 0.55 Intangible amortization 0.25 0.29 0.32 Non-recurring tax benefit (0.04) — — Customs audit 0.05 — — Impairment of investment 0.05 — — Gain from business combination (0.05) — — Scotland valuation adjustment — — (0.06) Purchase accounting step up 0.01 — 0.05 NON-GAAP NET INCOME PER DILUTED SHARE $3.89 $3.19 $3.56 RECONCILIATION TABLE—PRO FORMA EBITDA% Fiscal Year 2015 2014 2013 NET INCOME % OF REVENUE 9.5% 7.4% 8.2% Income tax expense 2.9% 2.5% 2.1% Interest and other income (expense), net 0.1% 0.3% 0.5% Depreciation and amortization 4.1% 4.6% 4.5% Customs audit 0.2% —% —% Purchase accounting step up 0.1% —% 0.2% Gain on business combination (0.2)% —% —% Impairment of investment 0.3% —% —% Stock based compensation 2.3% 2.4% 2.3% PRO FORMA EBITDA % OF REVENUE 19.3% 17.2% 17.8% 28


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    SUMMARY COMPENSATION AND EQUITY TABLES Fiscal 2015 Summary Compensation Table The table below presents information concerning the total compensation of our Named Executive Officers for the fiscal years ended October 3, 2015, September 27, 2014, and September 28, 2013. Non-Equity Incentive Plan All Other Fiscal Stock Awards Compensation Compensation Name and Principal Position Year Salary ($) ($)(2) ($)(3) ($)(4) Total ($) John Ambroseo, 2015 625,019(1) 2,773,100 529,891 11,776 3,939,786 President and 2014 625,019 3,387,440 208,631 11,596 4,232,686 Chief Executive Officer 2013 625,019 3,293,280 214,694 33,623 4,166,616 Helene Simonet, 2015 411,553(1) 784,179 245,164 14,098 1,454,994 Executive Vice President 2014 405,018 758,864 94,636 13,918 1,272,436 and Chief Financial Officer 2013 405,018 735,948 97,386 20,774 1,259,126 Mark Sobey, 2015 375,992(1) 737,120 207,983 12,565 1,333,660 Executive Vice President and 2014 370,011 713,227 80,281 11,596 1,175,115 General Manager, Specialty Laser Systems 2013 360,006 691,808 80,380 12,147 1,144,341 Paul Sechrist, 2015 355,663(1) 628,385 151,337 12,856 1,148,241 Executive Vice President 2014 350,002 608,035 58,415 12,427 1,028,879 Worldwide Sales and Services 2013 345,194 589,604 60,113 10,822 1,005,733 Bret DiMarco, 2015 341,876(1) 642,537 145,615 11,344 1,141,372 Executive Vice President, 2014 335,005 621,766 55,912 11,164 1,023,847 General Counsel and Corporate Secretary 2013 335,005 492,248 57,537 12,934 897,724 (1) Reflects the dollar amount of salary earned in fiscal year 2015. (2) Amounts shown reflect the grant date fair value of awards granted in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718. Reflects unvested time-based and performance-based restricted stock units; there is no guaranty that the recipients will ultimately receive this amount, or any amount. No stock options were granted to the named executive officers in fiscal 2013, 2014 and 2015. (3) Reflects the dollar amounts earned under the Variable Compensation Plan (VCP) during fiscal 2015, 2014 and 2013. (4) As previously noted, effective January 1, 2011, the Compensation and H.R. Committee announced the elimination and phasing out of executive perquisites. No ‘‘perquisites’’ are included for any named executive officers in the summary compensation table for fiscal 2015. Executives continue to receive certain ‘‘other compensation’’ other than perquisites, such as the regular Company-provided employee 401(k) plan contribution match (subject to applicable IRS rule limitations). During fiscal 2015, each of the named executive officers received a 401(k) match of approximately $10,500. 29


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    SUMMARY COMPENSATION AND EQUITY TABLES Grants of Plan-Based Awards in Fiscal 2015 Except as set forth in the footnotes, the following table shows all plan-based equity and non-equity incentive awards granted to our Named Executive Officers during fiscal 2015. Our Named Executive Officers did not receive any option awards during fiscal 2015. All Other Actual Stock Estimated Future Payouts Under Payouts Estimated Future Payouts Awards: Non-Equity Incentive Plan Under Under Equity Incentive Plan # of Awards Non-Equity Awards Securities Grant Incentive Underlying Date Fair Thresh- Maxi- Plan Awards Thresh- Maxi- Options Value (1) Name Type Grant Date hold($) Target($) mum($) ($)(2) hold(#) Target(#) mum(#) (#) ($)(3) John Ambroseo PRSU 11/3/2014 0 26,800 53,600 1,891,276 RSU 11/3/2014 13,600 881,824 1st semi-annual bonus 0 312,510 625,019 328,416 2nd semi-annual bonus 0 312,510 625,019 201,475 Total 0 625,020 1,250,038 529,891 Helene Simonet PRSU 11/3/2014 0 3,916 7,832 276,352 RSU 11/3/2014 7,832 507,827 1st semi-annual bonus 0 144,588 289,176 151,948 2nd semi-annual bonus 0 144,588 289,176 93,216 Total 0 289,176 578,352 245,164 Mark Sobey PRSU 11/3/2014 0 3,681 7,362 259,768 RSU 11/3/2014 7,362 477,352 1st semi-annual bonus 0 122,660 245,320 128,904 2nd semi-annual bonus 0 122,660 245,320 79,079 Total 0 245,320 490,641 207,983 Paul Sechrist PRSU 11/3/2014 0 3,138 6,276 221,449 RSU 11/3/2014 6,276 406,936 1st semi-annual bonus 0 89,253 178,506 93,796 2nd semi-annual bonus 0 89,253 178,506 57,541 Total 0 178,506 357,011 151,337 Bret DiMarco PRSU 11/3/2014 0 3,209 6,417 226,459 RSU 11/3/2014 6,417 416,078 1st semi-annual bonus 0 85,878 171,756 90,249 2nd semi-annual bonus 0 85,878 171,756 55,366 Total 0 171,756 343,512 145,615 (1) Reflects the dollar amount recognized for financial statement reporting purposes (disregarding an estimate of forfeitures related to service-based vesting conditions) for fiscal 2015 in accordance with ASC 718, and includes grants made in fiscal 2015. The assumptions used in the valuation of these awards are set forth in Note 12 ‘‘Employee Stock Option and Benefits Plans’’ of the Financial Statements in the Annual Report on Form 10-K. For informational purposes, if the maximum level of performance for the PRSU awards was achieved, the value, calculated by multiplying the closing price of the Company’s common stock on the date of grant by the number of shares issuable upon achievement of the maximum level of performance under the PRSU is $3,475,424, $507,824, $477,352, $406,936 and $416,143, for Mr. Ambroseo, Ms. Simonet, Mr. Sobey, Mr. Sechrist and Mr. DiMarco, respectively. These amounts do not correspond to the actual value, if any, that will be recognized by the Named Executive Officers. See ‘‘‘‘Compensation Discussion and Analysis-Equity Awards’’’’ for a description of the PRSUs. (2) Failure to meet a minimum level of performance would have resulted in no bonus paid out under the 2015 Variable Compensation Plan. (3) Reflects the amount earned under the 2015 Variable Compensation Plan during the 2015 fiscal year. 30


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    SUMMARY COMPENSATION AND EQUITY TABLES Option Exercises and Stock Vested at 2015 Fiscal Year-End The table below sets forth certain information for each Named Executive Officer regarding the exercise of options and the vesting of stock awards during the year ended October 3, 2015, including the aggregate value realized upon such exercise or vesting. Option Awards Stock Awards Number of Number of Shares Shares Acquired on Value Realized Acquired on Value Realized Exercise (#) on Exercise ($)(1) Vesting (#) on Vesting ($)(2) John Ambroseo — — 34,947 2,041,812 Helene Simonet — — 10,358 605,037 Mark Sobey — — 9,704 566,835 Paul Sechrist — — 8,300 484,824 Bret DiMarco — — 7,277 425,082 (1) Reflects the difference between the exercise price of the option and market price of our Common Stock on the exercise date. (2) Reflects the market price of our Common Stock on the vesting date. 31


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    SUMMARY COMPENSATION AND EQUITY TABLES Outstanding Equity Awards at Fiscal 2015 Year-End The following table presents information concerning unexercised options and stock that has not yet vested for each Named Executive Officer outstanding as of October 3, 2015. Equity Equity incentive Option Awards(1) Stock Awards incentive plan awards: plan awards: Market or Number of Number of Market Value Number of payout value Number of Securities Shares or of Shares or unearned of unearned Securities Underlying Units of Units of shares, units shares, units Underlying Unexercised Option Option Stock That Stock That or other rights or other rights Options (#) Options (#) Exercise Expiration Have Not Have Not that have that have Name Grant Date exercisable unexercisable Price ($) Date Vested (#) Vested ($)(2) not vested (#) not vested ($) John Ambroseo 11/3/2014 — — — — — 53,600(5) 2,930,848 11/3/2014 — — — — 13,600 743,648 — — 11/8/2013 — — — — — — 59,000(4) 3,226,120 11/8/2013 — — — — 17,000 929,560 — — 11/14/2012 — — — — — — 94,000(3) 5,139,920 11/14/2012 — — — — 12,000 656,160 Helene Simonet 11/3/2014 — — — — — — 7,832(5) 428,254 11/3/2014 — — — — 7,832 428,254 — — 11/8/2013 — — — — — — 7,296(4) 398,945 11/8/2013 — — — — 7,295 398,891 — — 11/14/2012 — — — — — — 11,000(3) 601,480 11/14/2012 — — — — 5,550 303,474 — — Mark Sobey 11/3/2014 — — — — — — 7,362(5) 402,554 11/3/2014 — — — — 7,362 402,554 — — 11/8/2013 — — — — — — 6,856(4) 374,886 11/8/2013 — — — — 6,857 374,941 — — 11/14/2012 — — — — — — 10,400(3) 568,672 11/14/2012 5,200 284,336 — — Paul Sechrist 11/3/2014 — — — — — — 6,276(5) 343,172 11/3/2014 — — — — 6,276 343,172 11/8/2013 — — — — — — 5,846(4) 319,659 11/8/2013 — — — — 5,845 319,605 — — 11/14/2012 — — — — — — 8,800(3) 481,184 11/14/2012 — — — 4,450 243,326 — — 11/20/2009 8,000 — 26.16 11/20/2016 — — — — Bret DiMarco 11/3/2014 — — — — — — 6,418(5) 350,936 11/3/2014 — — — — 6,417 350,882 — — 11/8/2013 — — — — — — 5,978(4) 326,877 11/8/2013 — — — — 5,977 326,822 — — 11/14/2012 — — — — — — 7,400(3) 404,632 11/14/2012 — — — — 7,400 404,632 — — (1) Each of the unvested option grants set forth above vest in three equal installments on the anniversary of the date of grant. (2) Market value is determined by multiplying the number of shares by $54.68, the closing price of the Company’s common stock on October 2, 2015, the last trading date of the fiscal year. (3) The performance-based RSU vesting determination date was November 14, 2015. The performance based RSUs vested at 58% based on the achievement of certain performance metrics, however the amount reflected in the table is the maximum amount or 200%. (4) The performance-based RSU vesting determination date is November 8, 2016. The performance based RSUs will vest in an amount which is 0-200% subject to the achievement of certain performance metrics. The amount reflected in the table is the maximum amount or 200%. (5) The performance-based RSU vesting determination date is November 3, 2017. The performance based RSUs will vest in an amount which is 0-200% subject to the achievement of certain performance metrics. The amount reflected in the table is the maximum amount or 200%. 32


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    SUMMARY COMPENSATION AND EQUITY TABLES Fiscal 2015 Non-Qualified Deferred Compensation For a description of our Deferred Compensation Plan, see ‘‘Compensation Discussion and Analysis-Retirement Plans.’’ The following table presents information regarding the non-qualified deferred compensation activity for each Named Executive Officer during fiscal 2015: Executive Deferrals Aggregate Executive including Company Registrant Earnings in Aggregate Aggregate Contributions Contribution in Contributions Last Withdrawals/ Balance at Last Name in last FY ($)(1) Last FY ($) in Last FY ($)(3) FY ($) Distributions ($) FYE ($)(2) John Ambroseo $ 144,606 $ — $ — $ (51,735) $ — $ 8,024,067 SRP(4) $ — $ — $ — $ (8,320) $ — $ 1,523,082 Helene Simonet $ 30,189 $ — $ — $ (16,020) $ — $ 1,091,525 SRP(4) $ — $ — $ — $ (2,108) $ — $ 156,013 Paul Sechrist $ 55,375 $ — $ — $ (12,698) $ — $ 869,147 SRP(4) $ — $ — $ — $ 2,488 $ — $ 210,245 Mark Sobey $ 124,964 $ — $ — $ (7,375) $ — $ 238,657 Bret DiMarco $ 9,025 $ — $ — $ (533) $ — $ 86,618 (1) Amounts in column (B) ‘‘Executive Contributions in Last FY ($)’’ consist of salary and/or bonus earned during fiscal 2015, which is also reported in the Summary Compensation Table. (2) The deferred compensation in a participant’s account is fully vested and is credited with positive or negative investment results based upon plan investment options selected by the participant. (3) Deferred Compensation company contributions were terminated on December 31, 2010. (4) Amounts represent account balances and earnings from the Supplementary Retirement Plan (SRP) which was suspended on December 31, 2004. Deferrals (both executive and company) into this plan have been suspended. The Deferred Compensation Plan is the only non-qualified deferred compensation plan available for executive management. 33


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    SUMMARY COMPENSATION AND EQUITY TABLES Potential Payments upon Termination or Change of Control The following table shows the potential payments and benefits that nonqualified deferred compensation distributions that would be made we (or our successor) would be obligated to make or provide upon to the Named Executive Officers following a termination of termination of employment of each our Named Executive Officers employment (for those amounts and descriptions, see the prior table). pursuant to the terms of the Change of Control Severance Plan. Other There can be no assurance that a triggering event would produce the than this plan, there are no other executive employment agreements or same or similar results as those estimated below if such event occurs on other contractual obligations triggered upon a change of control. For any other date or at any other price, of if any other assumption used to purposes of this table, it is assumed that each Named Executive estimate potential payments and benefits is not correct. Due to the Officer’s employment terminated at the close of business on number of factors that affect the nature and amount of any potential October 2, 2015 (the last business day before the end of our fiscal year payments or benefits, any actual payments and benefits may be on October 3, 2015). These payments are conditioned upon the different. These are aggregate payments and do not reflect such execution of a form release of claims by the Named Executive Officer individual’s net after tax benefit. No officer is entitled to any ‘‘gross in favor of us. The amounts reported below do not include the up’’ to offset the impact of IRS Code Section 280G. Multiplier for Base Termination Any Other Named Executive Officer Salary and Bonus Nature of Benefit for Cause Termination John Ambroseo 2.99X Salary Severance(1) — 1,868,807 Bonus Severance — 1,868,807 Equity Compensation Acceleration(2) — 12,660,224 Aggregate Healthcare Related Monthly Payment(3) — 99,000 TOTAL BENEFIT 16,496,838 Helene Simonet 2X Salary Severance(1) — 826,218 Bonus Severance — 578,352 Equity Compensation Acceleration(2) — 2,122,842 Aggregate Healthcare Related Monthly Payment(3) — 66,000 TOTAL BENEFIT 3,593,412 Mark Sobey 2X Salary Severance(1) — 754,832 Bonus Severance — 490,641 Equity Compensation Acceleration(2) — 1,998,609 Aggregate Healthcare Related Monthly Payment(3) — 66,000 TOTAL BENEFIT 3,310,082 Paul Sechrist 2X Salary Severance(1) — 714,022 Bonus Severance — 357,011 Equity Compensation Acceleration(2) — 1,700,220 Aggregate Healthcare Related Monthly Payment(3) — 66,000 TOTAL BENEFIT 2,837,253 Bret DiMarco 2X Salary Severance(1) — 687,024 Bonus Severance — 343,512 Equity Compensation Acceleration(2) — 1,651,172 Aggregate Healthcare Related Monthly Payment(3) — 66,000 TOTAL BENEFIT 2,747,708 (1) Reflects salary as in effect as of December 31, 2015. (2) Equity Compensation Acceleration is the in-the-money value of unvested stock options, time-based restricted stock units and performance-based restricted stock units, in each case as of October 2, 2015 at the closing stock price on that date ($54.68). The value of accelerated stock options are thus calculated by multiplying the number of unvested shares subject to acceleration by the difference between the exercise price and the closing stock price on October 2, 2015; the value of accelerated restricted stock is calculated by multiplying the number of unvested shares subject to acceleration by the closing stock price on October 2, 2015. This assumes immediate release and vesting of the performance-based restricted stock units at the maximum, or 200% of target, achievement. The amounts reflected for Equity Compensation Acceleration do not reflect any applicable taxes, just gross proceeds. Since the table assumes a triggering event on October 2, 2015, only those stock options and restricted stock/RSU grants outstanding as of that date are included in the table. (3) Aggregate Monthly Payment is a monthly payment of $2,750 in lieu of receiving company subsidized COBRA benefits, life insurance premiums and/or other welfare benefits, 36 months for the Chief Executive Officer and 24 months for the other named executive officers. 34


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    EQUITY COMPENSATION PLAN INFORMATION The following table provides information as of October 3, 2015 about the Company’s equity compensation plans under which shares of our common stock may be issued to employees, consultants or members of our Board: (a) Number of (c) Number of securities securities to be issued (b) Weighted-average remaining available for upon exercise of exercise price of future issuance under equity outstanding options, outstanding options, compensation plans (excluding Plan category warrants and rights warrants and rights(1) securities reflected in column (a)) Equity compensation plans approved by security holders 679,453(2) $30.09 6,176,071(3) Equity compensation plans not approved by security holders — — — TOTAL 679,453 $30.09 6,176,071 (1) These weighted average exercise prices do not reflect the shares that will be issued upon the payment of outstanding awards of RSUs. (2) This number does not include any options which may be assumed by us through mergers or acquisitions, however, we do have the authority, if necessary, to reserve additional shares of common stock under these plans to the extent necessary for assuming such options. (3) This number of shares includes 661,900 shares of common stock reserved for future issuance under the Employee Stock Purchase Plan and 5,514,171 shares reserved for future issuance under the 2011 Plan. CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS Review, Approval or Ratification of Related Person Transactions In accordance with the charter for the Audit Committee of the Board, • Any immediate family member, as defined in Item 404(a) of the members of the Audit Committee, all of whom are independent Regulation S-K, of a director, nominee for director, executive officer directors, review and approve in advance any proposed related person and 5% Stockholder. We will report all such material related person transactions. Additionally, from time to time the Board may directly transactions under applicable accounting rules, federal securities consider these transactions. For purposes of these procedures, the laws and SEC rules and regulations. individuals and entities that are considered ‘‘related persons’’ include: • Any of our directors, nominees for director and executive officers; • Any person known to be the beneficial owner of five percent or more of our common stock (a ‘‘5% Stockholder’’); and Related Person Transactions We have entered into indemnification agreements with each of our executive officers and directors. Such indemnification agreements require us to indemnify these individuals to the fullest extent permitted by law. We also intend to execute these agreements with our future directors and officers. 35


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    REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS The Audit Committee is responsible for overseeing our accounting The Audit Committee approved the engagement of Deloitte & and financial reporting processes and audits of our financial Touche LLP as our independent registered public accounting firm for statements, including reviewing and approving the fees for the fiscal 2015, including the fees to be paid for their audit work, and performance of the audit by our independent auditors. As set forth in reviewed with the internal auditors and independent registered public its charter, the Audit Committee acts only in an oversight capacity and accounting firm their respective overall audit scope and plans. In relies on the work and assurances of both management, which has approving Deloitte & Touche LLP, the Audit Committee considered primary responsibilities for our financial statements and reports, as the qualifications of Deloitte & Touche LLP and discussed with well as the independent registered public accounting firm that is Deloitte & Touche LLP their independence, including a review of the responsible for expressing an opinion on the conformity of our audit and non-audit services provided by them to us. The Audit audited financial statements to generally accepted accounting Committee also discussed with Deloitte & Touche LLP the matters principles. required to be discussed by Auditing Standard No. 16, ‘‘Communications with Audit Committees’’ issued by the Public The Audit Committee met thirteen (13) times either in person or by Company Oversight Board (PCAOB), and it received the written telephone during fiscal 2015. In the course of these meetings, the disclosures and the letter from Deloitte & Touche LLP required by the Audit Committee met with management, the internal auditors and applicable requirements of the Public Company Accounting our independent registered public accounting firm and reviewed the Oversight Board regarding Deloitte & Touche LLP’s communications results of the internal and external audit examinations, evaluations of with Audit Committee concerning independence and has discussed our internal controls and the overall quality of our financial reporting. Deloitte & Touche LLP’s independence with Deloitte & Touche LLP. The Audit Committee believes that a candid, substantive and focused Management has reviewed and discussed the audited financial dialogue with the internal auditors and the independent registered statements for fiscal 2015 with the Audit Committee, including a public accounting firm is fundamental to the Audit Committee’s discussion of the quality and acceptability of the financial reporting, oversight responsibilities. To support this belief, the Audit Committee the reasonableness of significant accounting judgments and estimates periodically meets separately with the internal auditors and the and the clarity of disclosures in the financial statements. In independent auditors, without management present. In the course of connection with this review and discussion, the Audit Committee its discussions in these meetings, the Audit Committee asked a asked a number of follow-up questions of management and the number of questions intended to bring to light any areas of potential independent registered public accounting firm to help give the Audit concern related to our financial reporting and internal controls. These Committee comfort in connection with its review. questions include: In reliance on the reviews and discussions referred to above, the Audit • Are there any significant accounting judgments, estimates or Committee recommended to the Board that the audited financial adjustments made by management in preparing the financial statements be included in the annual report on Form 10-K for the statements that would have been made differently had the auditors fiscal year ended October 3, 2015, for filing with the SEC. themselves prepared and been responsible for the financial statements; Respectively submitted by the Audit Committee • Based on the auditors’ experience, and their knowledge of our Susan James, Chair business, do our financial statements fairly present to investors, with Garry Rogerson clarity and completeness, our financial position and performance Steve Skaggs for the reporting period in accordance with generally accepted accounting principles and SEC disclosure requirements; • Based on the auditors’ experience, and their knowledge of our business, have we implemented internal controls and internal audit procedures that are appropriate for our business. 36


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    OTHER MATTERS We know of no other matters to be submitted to the meeting. If any other matters properly come before the meeting, it is the intention of the persons named in the enclosed form Proxy to vote the shares they represent as the Board may recommend. Dated: January 27, 2016 By Order of the Board of Directors 13JAN201423125288 John R. Ambroseo President and Chief Executive Officer 37


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    UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One)  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended October 3, 2015 or  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-33962 COHERENT, INC. Delaware 94-1622541 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5100 Patrick Henry Drive, Santa Clara, California 95054 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (408) 764-4000 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, $0.01 par value The NASDAQ Stock Market LLC Nasdaq Global Select Market Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  No  Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 (the ‘‘Exchange Act’’). Yes  No  Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes  No  Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes  No  Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of ‘‘large accelerated filer’’, ‘‘accelerated filer’’ and ‘‘smaller reporting company’’ in Rule 12b-2 of the Exchange Act. Large accelerated filer  Accelerated filer  Non-accelerated filer  Smaller reporting company  (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No  As of November 30, 2015, 24,187,438 shares of common stock were outstanding. The aggregate market value of the voting shares (based on the closing price reported on the NASDAQ Global Select Market on April 4, 2015, of Coherent, Inc., held by nonaffiliates was approximately $1,384,567,684. For purposes of this disclosure, shares of common stock held by persons who own 5% or more of the outstanding common stock and shares of common stock held by each officer and director have been excluded in that such persons may be deemed to be ‘‘affiliates’’ as that term is defined under the Rules and Regulations of the Exchange Act. This determination of affiliate status is not necessarily conclusive. DOCUMENT INCORPORATED BY REFERENCE Portions of the registrant’s Proxy Statement for the registrant’s fiscal 2016 Annual Meeting of Stockholders are incorporated by reference into Part III of the Form 10-K to the extent stated herein. The Proxy Statement or an amended report on Form 10-K will be filed within 120 days of the registrant’s fiscal year ended October 3, 2015.


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    TABLE OF CONTENTS PART I ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 ITEM 1A. RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 ITEM 1B. UNRESOLVED STAFF COMMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 ITEM 4. MINE SAFETY DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . 46 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . 69 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . 69 ITEM 9A. CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 ITEM 9B. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE . 74 ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS . . . . . . . . . . 76 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES . . . . . . . . . . . . . . . . . . . . . 76 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES . . . . . . . . . . . . . . . . . . . . 78 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 2


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    SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS This annual report contains certain forward-looking statements. These forward-looking statements include, without limitation, statements relating to: • expansion into, and financial returns from, new markets; • maintenance and development of current and new customer relationships; • enhancement of market position through existing or new technologies; • timing of new product introductions and shipments; • optimization of product mix; • future trends in microelectronics, scientific research and government programs, OEM components and instrumentation and materials processing; • utilization of vertical integration; • adoption of our products or lasers generally; • applications and processes that will use lasers, including the suitability of our products; • capitalization on market trends; • alignment with current and new customer demands; • positioning in the marketplace and gains of market share; • design and development of products, services and solutions; • control of supply chain and partners; • protection of intellectual property rights; • compliance with environmental and safety regulations; • net sales and operating results; • capital spending; • order volumes; • variations in stock price; • growth in our operations; • market acceptance of products; • controlling our costs; • sufficiency and management of cash, cash equivalents and investments; • acquisition efforts, payment methods for acquisitions and utilization of technology from our acquisitions; • sales by geography; • effect of legal claims; • expectations regarding the payment of future dividends; • effect of competition on our financial results; • plans to renew leases when they expire; 3


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    • compliance with standards; • future dividends; • effect of our internal controls; • optimization of financial results; • repatriation of funds; • accounting for goodwill and intangible assets, inventory valuation, warranty reserves and taxes; and • impact from our use of financial instruments. In addition, we include forward-looking statements under the ‘‘Our Strategy’’ and ‘‘Future Trends’’ headings set forth below in ‘‘Business’’ and under the ‘‘Bookings and Book-to-Bill Ratio’’ heading set forth below in ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations.’’ You can identify these and other forward-looking statements by the use of the words such as ‘‘may,’’ ‘‘will,’’ ‘‘could,’’ ‘‘would,’’ ‘‘should,’’ ‘‘expects,’’ ‘‘plans,’’ ‘‘anticipates,’’ ‘‘estimates,’’ ‘‘intends,’’ ‘‘potential,’’ ‘‘projected,’’ ‘‘continue,’’ ‘‘our observation,’’ or the negative of such terms, or other comparable terminology. Forward-looking statements also include the assumptions underlying or relating to any of the foregoing statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth below in ‘‘Business,’’ ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ and under the heading ‘‘Risk Factors.’’ All forward-looking statements included in this document are based on information available to us on the date hereof. We undertake no obligation to update these forward-looking statements as a result of events or circumstances or to reflect the occurrence of unanticipated events or non-occurrence of anticipated events, except to the extent required by law. 4


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    PART I ITEM 1. BUSINESS GENERAL Business Overview Our fiscal year ends on the Saturday closest to September 30. Fiscal years 2015, 2014 and 2013 ended on October 3, September 27, and September 28, respectively, and are referred to in this annual report as fiscal 2015, fiscal 2014 and fiscal 2013 for convenience. Fiscal year 2015 included 53 weeks and fiscal years 2014 and 2013 included 52 weeks. We are one of the world’s leading suppliers of photonics-based solutions in a broad range of commercial and scientific research applications. We design, manufacture, service and market lasers and related accessories for a diverse group of customers. Since inception in 1966, we have grown through internal expansion and through strategic acquisitions of complementary businesses, technologies, intellectual property, manufacturing processes and product offerings. We are organized into two operating segments: Specialty Lasers and Systems (‘‘SLS’’) and Commercial Lasers and Components (‘‘CLC’’). This segmentation reflects the go-to-market strategies for various products and markets. While both segments deliver cost-effective photonics solutions, SLS develops and manufactures configurable, advanced performance products largely serving the microelectronics, scientific research and government programs and original equipment manufacturer (‘‘OEM’’) components and instrumentation markets. The size and complexity of many of the SLS products require service to be performed at the customer site by factory-trained field service engineers. CLC focuses on higher volume products that are offered in set configurations. The product architectures are designed for easy exchange at the point of use such that substantially all product service and repairs are based upon advanced replacement and depot (i.e., factory) repair. CLC’s primary markets include materials processing, OEM components and instrumentation and microelectronics. Income from operations is the measure of profit and loss that our chief operating decision maker (‘‘CODM’’) uses to assess performance and make decisions. Income from operations represents the sales less the cost of sales and direct operating expenses incurred within the operating segments as well as allocated expenses such as shared sales and manufacturing costs. We do not allocate to our operating segments certain operating expenses, which we manage separately at the corporate level. These unallocated costs include stock-based compensation and corporate functions (certain advanced research and development, management, finance, legal and human resources) and are included in Corporate and other. Management does not consider unallocated Corporate and other costs in its measurement of segment performance. We were originally incorporated in California on May 26, 1966 and reincorporated in Delaware on October 1, 1990. Our common stock is listed on the NASDAQ Global Select Market and we are a member of the Standard & Poor’s SmallCap 600 Index and the Russell 2000 Index. Additional information about Coherent, Inc. (referred to herein as the Company, we, our, or Coherent) is available on our web site at www.coherent.com. We make available, free of charge on our web site, access to our annual report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’), as soon as reasonably practicable after we file or furnish them electronically with the Securities and Exchange Commission (‘‘SEC’’). Information contained on our web site is not part of this annual report or our other filings with the SEC. Any product, product name, process, or technology described in these materials is the property of Coherent. 5


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    INDUSTRY BACKGROUND The word ‘‘laser’’ is an acronym for ‘‘light amplification by stimulated emission of radiation.’’ A laser emits an intense coherent beam of light with some unique and highly useful properties. Most importantly, a laser is orders of magnitude brighter than any lamp. As a result of its coherence, the beam can be focused to a very small and intense spot, useful for applications requiring very high power densities including cutting and other materials processing procedures. The laser’s high spatial resolution is also useful for microscopic imaging and inspection applications. Laser light can be monochromatic— all the beam energy is confined to a narrow wavelength band. Some lasers can be used to create ultrafast output—a series of pulses with pulse durations as short as attoseconds (i.e., 10ǁ18 seconds). There are many types of lasers and one way of classifying them is by the material or medium used to create the lasing action. This can be in the form of a gas, liquid, semiconductor, solid state crystal or fiber. Lasers can also be classified by their output wavelength: ultraviolet, visible, infrared or wavelength tunable. We manufacture all of these laser types. There are also many options in terms of pulsed output versus continuous wave, pulse duration, output power, beam dimensions, etc. In fact, each application has its specific requirements in terms of laser performance. The broad technical depth at Coherent enables us to offer a diverse set of product lines characterized by lasers targeted at growth opportunities and key applications. In all cases, we aim to be the supplier of choice by offering a high-value combination of superior technical performance and high reliability. Photonics has taken its place alongside electronics as a critical enabling technology for the twenty- first century. Photonics based solutions are entrenched in a broad array of industries that include industrial automation, textile processing, microelectronics, flat panel displays and medical diagnostics, with adoption continuing in ever more diverse applications. Growth in these applications stems from two sources. First, there are many applications where the laser is displacing conventional technology because it can do the job faster, better or more economically. Second, there are new applications where the laser is the enabling tool that makes the work possible (e.g., the production of sub 50 micron microvias); these lasers are used in the manufacturing of high density printed circuit boards (‘‘PCBs’’) found in the latest smart phones and tablet computers. Key laser applications include: semiconductor inspection; manufacturing of advanced PCBs; flat panel display manufacturing; solar cell production; medical and bio-instrumentation; materials processing; metals cutting and welding; industrial process and quality control; marking; imaging and printing; graphic arts and display; and, research and development. For example, ultraviolet (‘‘UV’’) lasers are enabling the move towards miniaturization, which drives innovation and growth in many markets. In addition, the advent of industrial grade ultrafast lasers continues to open up new applications for laser processing. OUR STRATEGY We strive to develop innovative and proprietary products and solutions that meet the needs of our customers and that are based on our core expertise in lasers and optical technologies. In pursuit of our strategy, we intend to: • Leverage our technology portfolio and application engineering to lead the proliferation of photonics into broader markets—We will continue to identify opportunities in which our technology portfolio and application engineering can be used to offer innovative solutions and gain access to new markets. We plan to utilize our expertise to increase our market share in the mid to high power material processing applications. • Optimize our leadership position in existing markets—There are a number of markets where we have historically been at the forefront of technological development and product deployment and from which we have derived a substantial portion of our revenues. We plan to optimize our financial returns from these markets. 6

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