<PAGE>

                                                                    Exhibit 10.8


                                   FORM OF
                      DIRECTOR INDEMNIFICATION AGREEMENT

     This Agreement made and entered into this [_______________] ("Agreement"),
by and between IPG Photonics Corporation, a Delaware corporation (the "Company"
which term shall include, where appropriate, any Entity (as hereinafter defined)
controlled directly or indirectly by the Company) and [___________] (the
"Indemnitee").

     WHEREAS, it is essential to the Company that it be able to retain and
attract as directors the most capable persons available;

     WHEREAS, increased corporate litigation has subjected directors to
litigation risks and expenses, and the limitations on the availability of
directors and officers liability insurance have made it increasingly difficult
for the Company to attract and retain such persons;

     WHEREAS, the Company desires to provide Indemnitee with specific
contractual assurance of Indemnitee's rights to full indemnification against
litigation risks and expenses (regardless, among other things, of any amendment
to or revocation of any such by-laws or any change in the ownership of the
Company or the composition of its Board of Directors); and

     WHEREAS, Indemnitee is relying upon the rights afforded under this
Agreement in continuing in Indemnitee's position as a director of the Company:

     NOW, THEREFORE, in consideration of the promises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:

1.  Definitions.

    (a)  "Corporate Status" describes the status of a person who is serving or
has served (i) as a director of the Company, including as a member of any
committee thereof, (ii) in any capacity with respect to any employee benefit
plan of the Company, or (iii) as a director, partner, trustee, officer,
employee, or agent of any other Entity at the request of the Company. For
purposes of subsection (iii) of this Section 1(a), an officer or director of the
Company who is serving or has served as a director, partner, trustee, officer,
employee or agent of a Subsidiary (as defined below) shall be deemed to be
serving at the request of the Company.

    (b)  "Entity" shall mean any corporation, partnership, limited liability
company, joint venture, trust, foundation, association, organization or other
legal entity.

    (c)  "Expenses" shall mean all fees, costs and expenses incurred in
connection with any Proceeding (as defined below), including, without
limitation, reasonable attorneys' fees, disbursements and retainers (including,
without limitation, any such fees, disbursements and retainers incurred by
Indemnitee pursuant to Sections 8 and 10(c) of this Agreement), fees and
disbursements of expert witnesses, private investigators and professional
advisors (including, without limitation, accountants and investment bankers),
court costs, transcript costs, fees of experts, travel expenses, duplicating,
printing and binding costs, telephone and fax transmission charges, postage,
delivery services, secretarial services and other disbursements and expenses.
<PAGE>

    (d)  "Indemnifiable Expenses," "Indemnifiable Liabilities" and
"Indemnifiable Amounts" shall have the meanings ascribed to those terms in
Section 3(a) below.

    (e)  "Liabilities" shall mean judgments, damages, liabilities, losses,
penalties, excise taxes, fines and amounts paid in settlement.

    (f)  "Proceeding" shall mean any threatened, pending or completed claim,
action, suit, arbitration, alternate dispute resolution process, investigation,
administrative hearing, appeal, or any other proceeding, whether civil,
criminal, administrative, arbitrative or investigative, whether formal or
informal, including a proceeding initiated by Indemnitee pursuant to Section 10
of this Agreement to enforce Indemnitee's rights hereunder.

    (g)  Subsidiary" shall mean any corporation, partnership, limited liability
company, joint venture, trust or other Entity of which the Company owns (either
directly or through or together with another Subsidiary of the Company) either
(i) a general partner, managing member or other similar interest or (ii) (A) 50%
or more of the voting power of the voting capital equity interests of such
corporation, partnership, limited liability company, joint venture or other
Entity, or (B) 50% or more of the outstanding voting capital stock or other
voting equity interests of such corporation, partnership, limited liability
company, joint venture or other Entity.

2.  Services of Indemnitee.  In consideration of the Company's covenants and
commitments hereunder, Indemnitee agrees to serve or continue to serve as a
director of the Company.  However, this Agreement shall not impose any
obligation on Indemnitee or the Company to continue Indemnitee's service to the
Company beyond any period otherwise required by law or by other agreements or
commitments of the parties, if any.

3.  Agreement to Indemnify.  The Company agrees to indemnify Indemnitee as
follows:

    (a)  Subject to the exceptions contained in Section 4(a) below, if
Indemnitee was or is a party or is threatened to be made a party to any
Proceeding (other than an action by or in the right of the Company) by reason of
Indemnitee's Corporate Status, Indemnitee shall be indemnified by the Company
against all Expenses and Liabilities incurred or paid by Indemnitee in
connection with such Proceeding (referred to herein as "Indemnifiable Expenses"
and "Indemnifiable Liabilities," respectively, and collectively as
"Indemnifiable Amounts").

    (b)  To the extent permitted by applicable law and subject to the exceptions
contained in Section 4(b) below, if Indemnitee was or is a party or is
threatened to be made a party to any Proceeding by or in the right of the
Company to procure a judgment in its favor by reason of Indemnitee's Corporate
Status, Indemnitee shall be indemnified by the Company against all Indemnifiable
Expenses.

4.  Exceptions to Indemnification.  Indemnitee shall be entitled to
indemnification under Sections 3(a) and 3(b) above in all circumstances other
than the following:

    (a)  If indemnification is requested under Section 3(a) and it has been
adjudicated finally by a court of competent jurisdiction that, in connection
with the subject of the Proceeding out of which the claim for indemnification
has arisen, Indemnitee failed to act (i) in good faith and (ii) in a manner
Indemnitee reasonably believed to be in or not opposed to the best interests

                                       2
<PAGE>

of the Company and, with respect to any criminal action or proceeding,
Indemnitee had reasonable cause to believe that Indemnitee's conduct was
unlawful, Indemnitee shall not be entitled to payment of Indemnifiable Amounts
hereunder.

    (b)  If indemnification is requested under Section 3(b) and

         (i)  it has been adjudicated finally by a court of competent
    jurisdiction that, in connection with the subject of the Proceeding out of
    which the claim for indemnification has arisen, Indemnitee failed to act (A)
    in good faith and (B) in a manner Indemnitee reasonably believed to be in or
    not opposed to the best interests of the Company, Indemnitee shall not be
    entitled to payment of Indemnifiable Expenses hereunder; or

         (ii) it has been adjudicated finally by a court of competent
    jurisdiction that Indemnitee is liable to the Company with respect to any
    claim, issue or matter involved in the Proceeding out of which the claim for
    indemnification has arisen, including, without limitation, a claim that
    Indemnitee received an improper personal benefit, no Indemnifiable Expenses
    shall be paid with respect to such claim, issue or matter unless the court
    of law or another court in which such Proceeding was brought shall determine
    upon application that, despite the adjudication of liability, but in view of
    all the circumstances of the case, Indemnitee is fairly and reasonably
    entitled to indemnity for such Indemnifiable Expenses which such court shall
    deem proper.

5.  Procedure for Payment of Indemnifiable Amounts.  Indemnitee shall submit to
the Company a written request specifying the Indemnifiable Amounts for which
Indemnitee seeks payment under Section 3 of this Agreement and the basis for the
claim.  The Company shall pay such Indemnifiable Amounts to Indemnitee within
ten (10) calendar days of receipt of the request.  At the request of the
Company, Indemnitee shall furnish such documentation and information as are
reasonably available to Indemnitee and necessary to establish that Indemnitee is
entitled to indemnification hereunder.

6.  Indemnification for Expenses of a Party Who is Wholly or Partly Successful.
Notwithstanding any other provision of this Agreement, and without limiting any
such provision, to the extent that Indemnitee is, by reason of Indemnitee's
Corporate Status, a party to and is successful, on the merits or otherwise, in
any Proceeding, Indemnitee shall be indemnified against all Expenses reasonably
incurred by Indemnitee or on Indemnitee's behalf in connection therewith.  If
Indemnitee is not wholly successful in such Proceeding but is successful, on the
merits or otherwise, as to one or more but less than all claims, issues or
matters in such Proceeding, the Company shall indemnify Indemnitee against all
Expenses reasonably incurred by Indemnitee or on Indemnitee's behalf in
connection with each successfully resolved claim, issue or matter.  For purposes
of this Agreement, the termination of any claim, issue or matter in such a
Proceeding by dismissal, with or without prejudice, shall be deemed to be a
successful result as to such claim, issue or matter.

7.  Effect of Certain Resolutions.  Neither the settlement or termination of any
Proceeding nor the failure of the Company to award indemnification or to
determine that indemnification is payable shall create an adverse presumption
that Indemnitee is not entitled to indemnification hereunder.  In addition, the
termination of any proceeding by judgment, order, settlement,

                                       3
<PAGE>

conviction, or upon a plea of nolo contendere or its equivalent shall not create
a presumption that Indemnitee did not act in good faith and in a manner which
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Company or, with respect to any criminal action or proceeding, had
reasonable cause to believe that Indemnitee's action was unlawful.

8.  Agreement to Advance Expenses; Conditions.  The Company shall pay to
Indemnitee all Indemnifiable Expenses incurred by Indemnitee in connection with
any Proceeding, including a Proceeding by or in the right of the Company, in
advance of the final disposition of such Proceeding, as the same are incurred.
To the extent required by Delaware law, Indemnitee hereby undertakes to repay
the amount of Indemnifiable Expenses paid to Indemnitee if it is finally
determined by a court of competent jurisdiction that Indemnitee is not entitled
under this Agreement to indemnification with respect to such Expenses.  This
undertaking is an unlimited general obligation of Indemnitee.

9.  Procedure for Advance Payment of Expenses.  Indemnitee shall submit to the
Company a written request specifying the Indemnifiable Expenses for which
Indemnitee seeks an advancement under Section 8 of this Agreement, together with
documentation evidencing that Indemnitee has incurred such Indemnifiable
Expenses.  Payment of Indemnifiable Expenses under Section 8 shall be made no
later than ten (10) calendar days after the Company's receipt of such request.

10.  Remedies of Indemnitee.

     (a)  Right to Petition Court.  In the event that Indemnitee makes a
          -----------------------
request for payment of Indemnifiable Amounts under Sections 3 and 5 above or a
request for an advancement of Indemnifiable Expenses under Sections 8 and 9
above and the Company fails to make such payment or advancement in a timely
manner pursuant to the terms of this Agreement, Indemnitee may petition a court
of law to enforce the Company's obligations under this Agreement.

     (b)  Burden of Proof.  In any judicial proceeding brought under
          ---------------
Section 10(a) above, the Company shall have the burden of proving that
Indemnitee is not entitled to payment of Indemnifiable Amounts hereunder.

     (c)  Expenses.  The Company agrees to reimburse Indemnitee in full for any
          --------
Expenses incurred by Indemnitee in connection with investigating, preparing for,
litigating, defending or settling any action brought by Indemnitee under Section
10(a) above, or in connection with any claim or counterclaim brought by the
Company in connection therewith.

     (d)  Validity of Agreement.  The Company shall be precluded from asserting
          ---------------------
in any Proceeding, including, without limitation, an action under Section 10(a)
above, that the provisions of this Agreement are not valid, binding and
enforceable or that there is insufficient consideration for this Agreement and
shall stipulate in court that the Company is bound by all the provisions of this
Agreement.

     (e)  Failure to Act Not a Defense.  The failure of the Company (including
          ----------------------------
its Board of Directors or any committee thereof, independent legal counsel or
stockholders) to make a determination concerning the permissibility of the
payment of Indemnifiable Amounts or the advancement of Indemnifiable Expenses
under this Agreement shall not be a defense in any

                                       4
<PAGE>

action brought under Section 10(a) above, and shall not create a presumption
that such payment or advancement is not permissible.

11.  Representations and Warranties of the Company.  The Company hereby
represents and warrants to Indemnitee as follows:

     (a)  Authority.  The Company has all necessary power and authority to enter
          ---------
into, and be bound by the terms of, this Agreement, and the execution, delivery
and performance of the undertakings contemplated by this Agreement have been
duly authorized by the Company.

     (b)  Enforceability.  This Agreement, when executed and delivered by the
          --------------
Company in accordance with the provisions hereof, shall be a legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the
enforcement of creditors' rights generally.

12.  Insurance.  The Company shall, as promptly as practicable following the
date hereof, obtain and maintain directors and officers' liability insurance
coverage on terms satisfactory to the Indemnitee of at least $1,000,000 per
occurrence, covering, among other things, violations of federal or state
securities laws.  The Company shall use its reasonable best efforts prior to any
initial public offering of the Company's capital stock to increase its
directors' and officers' liability insurance to at least $ 10,000,000 per
occurrence including coverage of claims under the Securities Act and the
Exchange Act, and shall use its reasonable best efforts to maintain such
coverage in effect thereafter.  In all policies of director and officer
liability insurance, Indemnitee shall be named as an insured in such a manner as
to provide Indemnitee the same rights and benefits as are accorded to the most
favorably insured of the Company's officers and directors.

13.  Fees and Expenses.  During the term of the Indemnitee's service as a
director, the Company shall promptly reimburse the Indemnitee for all expenses
incurred by him in connection with his service as a director or member of any
board committee or otherwise in connection with the Company's business and shall
pay or provide the Indemnitee with fees and other compensation, including stock
options or awards, in amounts and value which are at least equal to those
provided to any of the Company's other non-employee directors from time to time.

14.  Contract Rights Not Exclusive.  The rights to payment of Indemnifiable
Amounts and advancement of Indemnifiable Expenses provided by this Agreement
shall be in addition to, but not exclusive of, any other rights which Indemnitee
may have at any time under applicable law, the Company's by-laws or certificate
of incorporation, or any other agreement, vote of stockholders or directors (or
a committee of directors), or otherwise, both as to action in Indemnitee's
official capacity and as to action in any other capacity as a result of
Indemnitee's serving as a director of the Company.

15.  Successors.  This Agreement shall be (a) binding upon all successors and
assigns of the Company (including any transferee of all or a substantial portion
of the business, stock and/or assets of the Company and any direct or indirect
successor by merger or consolidation or otherwise by operation of law) and (b)
binding on and shall inure to the benefit of the heirs, personal
representatives, executors and administrators of Indemnitee.  This Agreement
shall

                                       5
<PAGE>

continue for the benefit of Indemnitee and such heirs, personal representatives,
executors and administrators after Indemnitee has ceased to have Corporate
Status.

16.  Subrogation.  In the event of any payment of Indemnifiable Amounts under
this Agreement, the Company shall be subrogated to the extent of such payment to
all of the rights of contribution or recovery of Indemnitee against other
persons, and Indemnitee shall take, at the request of the Company, all
reasonable action necessary to secure such rights, including the execution of
such documents as are necessary to enable the Company to bring suit to enforce
such rights.

17.  Change in Law.  To the extent that a change in Delaware law (whether by
statute or judicial decision) shall permit broader indemnification or
advancement of expenses than is provided under the terms of the by-laws of the
Company and this Agreement, Indemnitee shall be entitled to such broader
indemnification and advancements, and this Agreement shall be deemed to be
amended to such extent.

18.  Severability.  Whenever possible, each provision of this Agreement shall be
interpreted in such a manner as to be effective and valid under applicable law,
but if any provision of this Agreement, or any clause thereof, shall be
determined by a court of competent jurisdiction to be illegal, invalid or
unenforceable, in whole or in part, such provision or clause shall be limited or
modified in its application to the minimum extent necessary to make such
provision or clause valid, legal and enforceable, and the remaining provisions
and clauses of this Agreement shall remain fully enforceable and binding on the
parties.

19.  Indemnitee as Plaintiff.  Except as provided in Section 10(c) of this
Agreement and in the next sentence, Indemnitee shall not be entitled to payment
of Indemnifiable Amounts or advancement of Indemnifiable Expenses with respect
to any Proceeding brought by Indemnitee against the Company, any Entity which it
controls, any director or officer thereof, or any third party, unless such
Company has consented to the initiation of such Proceeding.  This Section shall
not apply to counterclaims or affirmative defenses asserted by Indemnitee in an
action brought against Indemnitee.

20.  Modifications and Waiver.  Except as provided in Section 17 above with
respect to changes in Delaware law which broaden the right of Indemnitee to be
indemnified by the Company, no supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by each of the parties
hereto.  No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provisions of this Agreement (whether or
not similar), nor shall such waiver constitute a continuing waiver.

21.  General Notices.  All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (a)
when delivered by hand, (b) when transmitted by facsimile and receipt is
acknowledged, or (c) if mailed by certified or registered mail with postage
prepaid, on the third business day after the date on which it is so mailed:

                                       6
<PAGE>

If to Indemnitee, to:

  [ADDRESS]

If to the Company, to:

  IPG Photonics Corporation
  P.O. Box 519
  660 Main Street
  Sturbridge, MA 01566
  Attn: Dr. Valentin P. Gapontsev

or to such other address as may have been furnished in the same manner by any
party to the others.

22.  Governing Law.  This Agreement shall be governed by and construed and
enforced under the laws of the State of Delaware without giving effect to the
provisions thereof relating to conflicts of law.

                                 [END OF TEXT]

                                       7
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.

                                 IPG PHOTONICS CORPORATION



                                 By:
                                     ------------------------------------
                                 Name:
                                 Title:

                                 INDEMNITEE



                                 ----------------------------------------

                                       8