COHERENT, INC.

                           PRODUCTIVITY INCENTIVE PLAN
                        (AS LAST AMENDED MARCH 24, 2000)

         1. PURPOSE. The purpose of this Productivity Incentive Plan is to
afford an incentive to employees of Coherent, Inc. and its subsidiaries and to
enable Coherent, Inc. and its subsidiaries to retain and attract personnel of
the highest caliber who by their position, ability and diligence are able to
make important contributions to the Company's success.

         2. DEFINITIONS.

            (a) "Company" means Coherent, Inc. and its majority-owned domestic
and foreign subsidiaries the employees of which are designated from time to time
by the Board of Directors as eligible to participate in the Plan.

            (b) "Common Stock" means the Common Stock, $.01 par value, of the
Company.

            (c) "Employee" means any person, including an officer or director of
the Company, who is customarily employed for at least twenty (20) hours per week
by, and receives a regular salary from, the Company.

            (d) "Participating Employee" means any Employee of the Company, who
has not elected to discontinue his or her participation in the Plan.

            (e) "Three Month Period of the Plan" means the three months
commencing on or about October 1, January 1, April 1 and July 1 of each fiscal
year.

            (f) "Quarterly Base Earnings" means the aggregate regular salary and
earnings paid to a Participating Employee during each Three Month Period of the
Plan, exclusive of: bonuses, certain commissions as determined by the Board of
Directors from time to time, overtime payments, lead or swing premiums, shift
premiums, location cost premiums, or any other form of extra compensation;
Company payments for social security, worker's compensation, unemployment
compensation, or other Company payments required by statute; or Company
contributions for insurance, annuity, or employee benefit plans.

            (g) "Quarterly Pre-tax Profit Percentage" means that percentage
calculated to the nearest tenth of a percent arrived at by dividing (i) the
consolidated pre-tax profit earned by the Company for the Three Month Period of
the Plan, after deduction of the total Amount of Incentive Compensation under
the Plan, by (ii) the Company's consolidated net sales for the Three Month
Period of the Plan.



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                The Quarterly Pre-tax Profit Percentage shall be calculated by
the Company, and such calculation shall be final and conclusive on all
participants. In determining such amounts, the Company may be entitled to rely
upon a certificate or estimate prepared by the Company's independent public
accountants or by the Company's chief accounting or financial officer. After
such determination, no recalculation shall be made on account of any subsequent
adjustments or for any other reason.

            (h) "Amount of Incentive Compensation" means that amount arrived at
by multiplying (i) the Quarterly Base Earnings of a Participating Employee by
(ii) fifty percent of the Quarterly Pre-tax Profit Percentage.

            (i) "Fair Market Value of Common Stock" means the fair market value
of the Common Stock as determined by the Board of Directors of the Company based
on the closing price per share, as reported in the Wall Street Journal on the
last day of each Three Month Period of the Plan.

            (j) "Plan" means this Productivity Incentive Plan, as amended from
time to time.

         3. ADMINISTRATION. The Plan shall be administered by the management of
the Company under the direction of the Board of Directors. The administration,
interpretation or application of the Plan by the Board or management shall be
final, conclusive and binding upon all participants. Members of the Board of
Directors and management are permitted to participate in the Plan provided such
persons are eligible Employees.

         4. EFFECTIVE DATE. The effective date of the Plan was October 1, 1972.

         5. PARTICIPATION. All Employees automatically become participants in
the Plan. Once an Employee elects to become a participant in the Plan, such
participation shall continue until the Employee has filed with the Company a
written statement on a form prescribed by the Company stating his or her
intention to discontinue participation.

         6. DISTRIBUTION OF CASH OR COMMON STOCK. At the end of each Three Month
Period of the Plan, the Company shall distribute cash or shares of Common Stock,
at the election of the Participating Employee, to each Participating Employee;
provided, however, that only cash shall be distributed to a Participating
Employee when the Amount of Incentive Compensation is less than one day's base
earnings (i.e., eight hours) for such Participating Employee. The Company will
distribute cash to each Participating Employee unless the Participating Employee
notifies the Company in writing on or before the last day of the Three Month
Period that he or she elects to receive Common Stock. The amount of cash
distributed to a Participating Employee shall be the Amount of Incentive
Compensation. The number of shares of Common Stock distributed to a
Participating Employee shall be that number arrived at by dividing the Amount of
Incentive Compensation by the Fair Market Value of Common Stock. No fractional
shares shall be distributed, but the dollar amount of such fractional share
shall be carried forward and included in the Amount of Incentive Compensation
for the succeeding Three Month Period if the Employee is still an eligible and
Participating Employee at that time.



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         7. DELIVERY OF CASH OR SHARE CERTIFICATES. As promptly as practicable
after each Three Month Period of the Plan, the Company shall arrange to deliver
to each Participating Employee who elected to receive shares of Common Stock,
the share certificates evidencing the shares of Common Stock distributed for the
Three Month Period of the Plan. As promptly as practicable after each Three
Month Period of the Plan, the Company shall arrange to deliver to each
Participating Employee who elected to receive cash, a check in the amount of the
cash distribution for the Three Month Period.

         8. TERMINATION OF EMPLOYMENT; DEATH. Upon termination of a
Participating Employee's employment for any reason, including retirement or
death, his participation in the Plan shall be automatically terminated. If such
termination occurs during a Three Month period of the Plan, such Participating
Employee shall not be entitled to any cash or stock distribution for that
period, unless the termination is caused by the Employee's death, in which case
his designated beneficiary shall receive a cash or Common Stock distribution at
the election of the designated beneficiary, such election to be made on or
before the last day of the relevant Three Month Period, for the portion of the
Three Month Period of the Plan in which the Participating Employee's
participation under the Plan was effective.

         9. TRANSFERABILITY. A Participating Employee's rights to receive cash
or shares of Common Stock under the Plan may not be assigned, transferred,
pledged or otherwise disposed of in any way by the Participating Employee,
except to the extent provided in Section 8.

        10. STOCK. The maximum number of shares of Common Stock which shall be
made available for distribution under the Plan shall be 2,125,000 shares,
subject to adjustment upon changes in capitalization of the Company. The shares
of Common Stock to be distributed to Participating Employees may, at the
election of the Company, be either treasury shares or shares authorized but
unissued.

            A Participating Employee shall have no interest in the shares of
Common Stock until such shares are distributed.

            Shares of Common Stock to be distributed to a Participating Employee
under the Plan will be registered in the name of the Participating Employee or
in the name of the Participating Employee and his or her spouse, or in the name
of the Participating Employee's designated beneficiary pursuant to Section 8.

        11. AMENDMENT OR TERMINATION. The Board of Directors of the Company may
at any time terminate, modify, or amend the Plan; provided, however, that
approval of the holders of a majority of the outstanding shares of the Company
entitled to vote shall be required for any modification or amendment which
materially increases the benefits accruing hereunder to Participating Employees,
materially increases the number of shares issuable pursuant to the Plan, or
materially changes the standards of eligibility for participation in the Plan.



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