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                                                                   Exhibit 10.16


                              Employment contract

                            between IPG Laser GmbH

                            and its General Manager

                            Dr. Eugene Shcherbakov



Between the company named


     IPG Laser GmbH
     Siemensstrasse 7
     57299 Burbach

     hereinafter Company

     its shareholders
     -       Dr. Valentin P. Gapontsev, Burbach/Germany
             and
     -       IPG Photonics Corporation, Sturbridge/USA
             represented by its President, Mr. John Dalton

and


     Dr. Eugene Shcherbakov
     Am Sudhang 12
     57299 Burbach

     hereinafter General Manager


there is entered into by agreement the following Employment Contract:
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                              Employment Contract


                   ' 1 Scope of duties and other obligations


(1)  Effective 18 September 2000 Dr. Eugene Shcherbakov shall be appointed
     General Manager of the Company. The Employment Contract shall be valid from
     18 September 2000 on.


(2)  The General Manager shall represent the Company alone as provided by the
     statutes and the articles of incorporation.

     He shall be obligated and authorized to conduct the affairs of the Company
     alone.

     The General Manager shall be exempt from the restrictions of the
     prohibition against self-contracting per 181 per the articles of
     incorporation and this Contract.


(3)  Directives of the Shareholders' Meeting shall be obeyed.


(4)  In connection with general management, the General Manager shall be
     obligated to fulfill the duties of the Company in accordance with the
     statutes and the articles of incorporation.

     Furthermore, he shall take care of the economic, financial and
     organizational concerns of the Company in the best possible manner. In all
     decisions the General Manager shall be guided by the good of the Company.


(5)  The General Manager shall be required to maintain the strictest silence on
     all commercial, operational or technical information and processes which
     concern the Company and have been entrusted or otherwise have become known
     to him.

     This obligation shall also survive termination of this Employment Contract.


(6)  Commercial and operational documents of all kinds shall be carefully
     retained and may be used only for the purpose of the Company. The documents
     may not be made accessible to third parties.

     No right to retain documents shall be granted to the General Manager.


(7)  The General Manager shall be liable to the Company and to the Shareholders
     only in the case of malicious damage to the Company.
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(8)  The General Manager shall have the right to furnish his service even
     outside the registered office of the Company.
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     The working time per week shall be 40 hours; the General Manager shall not
     be bound to working at fixed times of the day.

     The General Manager shall be obligated to make himself available to the
     Company at any time when and if the good of the Company so requires.



                           ' 2 Secondary occupation


(1)  The General Manager shall be permitted to continue his activity as General
     Manager of VPG Laser Components GmbH. Approval of the Shareholders' Meeting
     shall not be required either for taking on further activities or for
     continuing same.


                               ' 3 Contract term


(1)  This Employment Contract shall become effective on 18 September 2000 and
     shall be entered into for an indefinite time.


(2)  In the first 3 years of the term, the Contract may be canceled by either
     party only for cause.

     Examples of such cause shall be refusal by the Tax Administration to
     approve this Employment Contract or individual provisions thereof.

     Thereafter the Contract may be canceled by either party to the contract by
     notice of 6 months to the end of a calendar year.


(3)  The General Manager may be removed from office only for cause. Removal from
     office shall not simultaneously result in cancellation of the contract for
     services. Should layoff take place by mutual understanding, the obligation
     of the Company to continue paying earnings shall be unaffected thereby.

     Should removal from office be ruled legally valid, the contract for
     services shall be treated as terminated as soon as the judgment ruling
     removal from office to be legally valid becomes legally enforceable.



                                 ' 4 Earnings


(1)  As remuneration for his activity, the General Manager shall receive a
     monthly salary in the amount of DM 28,000.00.
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     The salary payment shall be due on the last working day of each calendar
     month.

     In addition, Dr. Shcherbakov shall receive a prorated 13th and 14th salary
     payment in the same amount. The additional salary payments shall be
     disbursed in July and November respectively.

     The statutory wage tax obligation as well as the obligation to provide
     insurance shall be taken into consideration for aliens.


(2)  In the event of incapacity for work due to illness or accident, the General
     Manager shall continue to receive payment of all earnings for a period of 8
     weeks.


(3)  In the event of death of the General Manager, his family shall continue to
     receive payment of all earnings for a period of 6 weeks.



                         ' 5 Vacation and vacation pay


(1)  The General Manager shall be granted 30 working days per year of paid
     relaxation vacation.


(2)  Should the General Manager be unable to take his annual vacation because
     Company interests dictate otherwise, he shall have the right to
     compensation for the vacation on the basis of the amount of the base
     salary.



                           ' 5 Extra considerations


(1)  For the duration of this Employment Contract the General Manager shall have
     the right to have the Company provide him with an official car of luxury
     class, which may also be used for personal travel.

     Payment of taxes due on the equivalent monetary value of the resulting
     benefit shall be made by the General Manager.


(2)  The General Manager shall have the right to all voluntary, collectively
     agreed or statutory special and social benefits that the Company also
     grants to its other employees.


(3)  The General Manager shall receive from the Company reimbursement for
     charges and expenses against documented proof up to the maximum amounts
     allowed for tax purposes or up to the lump-sum amounts allowed for tax
     purposes.
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(4)  The General Manager shall be entitled temporarily to waive (defer) payment
     of his salary amounts in their entirety or partly for the good of the
     Company. His rights to payment of the salary shall remain unaffected by
     such deferral.

     In such a case a written loan agreement shall be entered into immediately,
     in which the interest rate and the repayment terms shall be defined in
     advance.

     Declarations of waiver of earnings without written loan agreement shall be
     deemed null and void.


(5)  The Company shall take out for the benefit of the General Manager an
     accident insurance policy with the following base coverage sums:

     a) death                                              DM 200,000.00
     b) progressive invalidity (350% model)         DM 200,000.00

     The insurance policy shall cover industrial and personal accidents in
     accordance with the General Accident Insurance Terms. It shall lapse on the
     day of his resignation from the Company.



                             ' 6 Final provisions


(1)  This Employment Contract shall be reviewed each year on 31 December to
     determine whether its provisions are effective and up-to-date and whether
     the salary is appropriate.

     Should it prove on the basis of the review that individual provisions have
     become or are likely to become ineffective or that special economic changes
     must be taken into account, an updated form of the Employment Contract
     shall be drafted within 6 weeks and at the latest 2 weeks thereafter signed
     by the parties to the contract.


(2)  Should individual provisions of this Contract be or become ineffective, the
     validity of the other provisions shall not be affected thereby.

     Instead of the ineffective provisions there shall be adopted an appropriate
     adjustment which most closely approaches the economic content of the
     ineffective clause.


(3)  Oral subsidiary agreements to this Contract have not been made.

     As a rule, all amendments and additions to the Contract shall be made in
     writing.
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     Retroactive amendments and additions, however, shall not be permitted.


(4)  In cases of doubt, the Articles of Incorporation shall have priority over
     the provisions of this Employment Contract.



Burbach, 18 September 2000



Dr. Eugene Shcherbakov          /s/ Dr. Eugene Shcherbakov
                                ------------------------------------------------



For the Company:          IPG Laser GmbH
                          represented by the General Manager, Dr. Valentin P.
                          Gapontsev



                          /s/ Dr. Valentin P. Gapontsev
                          ----------------------------------------------------



For the Shareholders:     Dr. Valentin P. Gapontsev, Burbach/Germany



                                 /s/ Dr. Valentin P. Gapontsev
                                ----------------------------------------------



                                IPG Photonics Corporation, Sturbridge/USA,
                                represented by the President, John Dalton