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                                                                    EXHIBIT 10.5

                            IPG PHOTONICS CORPORATION

                                SENIOR EXECUTIVE

                            SHORT-TERM INCENTIVE PLAN

                                ARTICLE I GENERAL

SECTION 1.1 PURPOSE.

     The purpose of the IPG Photonics Corporation Senior Executive Short-Term
Incentive Plan (the "Plan") is to benefit and advance the interests of IPG
Photonics Corporation, a Delaware corporation (the "Company"), by providing to
selected senior executives of the Company and its subsidiaries performance-based
incentive compensation ("Awards") that are based upon the level of achievement
of financial, business and other performance criteria.

SECTION 1.2 ADMINISTRATION OF THE PLAN.

     The Plan shall be administered by a committee (the "Committee") appointed
by the Board of Directors of the Company (the "Board"), consisting of at least
such number of directors who have qualifications that satisfy the "outside
director" requirements of Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code") and the regulations thereunder. The Committee shall
adopt such rules as it may deem appropriate in order to carry out the purpose of
the Plan. All questions of interpretation, administration and application of the
Plan shall be determined by a majority of the members of the Committee then in
office, except that the Committee may authorize any one or more of its members,
or any officer of the Company, to execute and deliver documents on behalf of the
Committee. The determination of such majority shall be final and binding in all
matters relating to the Plan. The Committee shall have authority to designate
the eligible persons specified in Section 1.3 below who will receive Awards
under, and become participants in, the Plan ("Participants") and to determine
the terms and conditions of such Awards.

     With respect to any restrictions in the Plan that are based on the
requirements of Section 162(m) of the Code or any other applicable law, rule or
restriction, to the extent that any such restrictions are no longer required,
the Committee shall have the sole discretion and authority to grant Awards that
are not subject to such restrictions and/or to waive any such restrictions with
respect to outstanding Awards.

SECTION 1.3 ELIGIBLE PERSONS.

     Awards may be granted only to employees of the Company or one of its
subsidiaries who are at the level of Vice President or employee-Director of the
Company or one of its subsidiaries or at a more senior level. An individual
shall not be deemed an employee for purposes of the Plan unless such individual
is classified and receives compensation from either the Company or one of its
subsidiaries for services performed as an employee of the Company or any of its
subsidiaries.

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                                ARTICLE II AWARDS

SECTION 2.1 AWARDS.

     The Committee may grant Awards to eligible employees with respect to each
fiscal year of the Company, subject to the terms and conditions set forth in the
Plan.

SECTION 2.2 TERMS OF AWARDS.

     Not later than ninety days after the start of each fiscal year of the
Company (but not after more than 25% of the Performance Period (as such term is
defined below) has elapsed) or, for fiscal 2005, not later than April 15, 2005,
the Committee shall (i) determine the Participants from the eligible persons
under Section 1.3 above, (ii) establish for such period ("Performance Period")
the applicable performance goals and objectives ("Performance Targets") for the
Company and the subsidiaries and divisions thereof and for each individual
Participant and the percentage allocation to each such Performance Target, and
(iii) establish target awards ("Target Awards") for each Participant which shall
equal a percentage (up to 200%) of the Participant's Salary (as such term is
defined below). Performance Targets under the Plan may include (but shall not be
limited to) any of the following: net earnings; operating earnings or income;
earnings growth; net income (absolute or competitive growth rates comparative);
net income applicable to common stock; gross revenue or revenue by pre-defined
business segment (absolute or competitive growth rates comparative); revenue
backlog; margins realized on delivered services; cash flow, including operating
cash flow, free cash flow, discounted cash flow return on investment, and cash
flow in excess of cost of capital; earnings per share of common stock; return on
stockholders equity (absolute or peer-group comparative); stock price (absolute
or peer-group comparative); absolute and/or relative return on common
stockholders equity; absolute and/or relative return on capital; absolute and/or
relative return on assets; economic value added (income in excess of cost of
capital); customer satisfaction; expense reduction; ratio of operating expenses
to operating revenues; product development milestones; debt-to-capital ratio or
market share. The Committee may specify any reasonable definition for the
Performance Targets that it uses during a Performance Period.

     "Salary" shall mean the annual base salary of the Participant for the
Performance Period, and (ii) an amount equal to the annual rate of any deferred
compensation for such Performance Period; PROVIDED that, if the Participant has
an employment agreement as in effect on the "Effective Date" (as defined below)
and such employment agreement expires prior to the end of any Performance
Period, the amount of base salary and deferred compensation determined hereunder
shall relate to the highest annual amounts that were provided for under such
employment agreement. Notwithstanding the foregoing, "Salary" determined
hereunder shall not include any amounts that would cause the Committee to
exercise discretion not otherwise permitted by Section 162(m) of the Code to the
extent Section 162(m) of the Code shall be applicable.

SECTION 2.3 DETERMINATION OF AWARDS.

     As soon as administratively practicable after the end of the relevant
Performance Period, the Committee, or, if applicable, the


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Committee's delegate, shall determine the amount of the Award for each
Participant by: (i) determining the actual performance results for each
Performance Target; (ii) determining the amount to which each Participant is
entitled based on the percentage allocated by the Committee to each Performance
Target against the Target Award for each Participant; and (iii) certifying by
resolution duly adopted by the Committee (or equivalent action by the
Committee's delegate) the value of the Award for each Participant so determined.
The Committee may, in its sole discretion, reduce the amount of any Award to
reflect the Committee's assessment of the Participant's individual performance
during a Performance Period or for any other reason.

SECTION 2.4 PAYMENT OF AWARDS.

     Payment of an Award to a Participant shall be made as soon as practicable
after determination of the amount of the Award under Section 2.3 above, and
after the Committee has approved the aggregate bonus payout amount for the
Performance Period, but in no event later than 2-1/2 months after the end of the
Performance Period. Subject to the requirements of applicable law, a Participant
may defer the payment of all or any portion of an Award under a deferred
compensation arrangement maintained by the Company by making a timely deferral
election pursuant to such rules and procedures as the Committee may establish
from time to time with respect to such arrangement.

SECTION 2.5 EMPLOYMENT REQUIREMENT.

     The payment of an Award with respect to a specific Performance Period
requires that the Participant be on the payroll of the Company or any of its
subsidiaries as of the end of such Performance Period, PROVIDED that, if a
Participant becomes "permanently disabled" (as determined by the Committee in
its sole discretion), retires under the terms of a qualified pension plan
maintained by the Company in which such Participant participates, or dies during
a Performance Period, or if a Participant is on an approved leave of absence
that began prior to the end of the Performance Period, such Participant or his
estate shall be awarded, unless his employment agreement provides otherwise, a
pro rata portion of the amount of the Award earned for such Performance Period,
except that the Committee may, in its sole discretion, reduce the amount of such
Award to reflect the Committee's assessment of such Participant's individual
performance prior to such Participant's becoming permanently disabled,
retirement or such Participant's death or approved leave as the case may be, or
for any other reason.

                        ARTICLE III ADJUSTMENT OF AWARDS

SECTION 3.1 ADJUSTMENTS.

     In the event that, during a Performance Period, any recapitalization,
reorganization, merger, acquisition, divestiture, consolidation, spin-off,
combination, liquidation, dissolution, sale of assets, or other similar
corporate transaction or event, or any other extraordinary item or event not
foreseen at the time of the grant of the Award, or any other event that distorts
the applicable Performance Targets occurs involving the Company or a subsidiary
or division thereof, the Committee shall, to the extent consistent with Section
162(m) of the Code (to the extent Section 162(m) of the Code shall be
applicable), adjust or modify, as determined by the Committee in its


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sole and absolute discretion, such Performance Targets, to the extent necessary
to prevent reduction or enlargement of Participants' Awards under the Plan for
such Performance Period attributable to such transaction or event. Such
adjustments shall be conclusive and binding for all purposes.

SECTION 3.2 PAYMENT UPON CHANGE IN CONTROL.

     Anything to the contrary notwithstanding, within five days following the
occurrence of a Change in Control (as defined below), the Company shall pay to
each Participant an interim lump-sum cash payment (the "Interim Payment") with
respect to his or her participation in the Plan. For each Participant, the
amount of the Interim Payment shall equal the product of (x) the number of
months, including fractional months, that have elapsed until the occurrence of
the Change in Control in the Performance Period in which the Change of Control
occurs and (y) one-twelfth of the greater of (i) the amount of most recently
paid Award to the Participant for a full calendar year, or (ii) the Target Award
for the Participant for the Performance Period in which the Change in Control
occurs. The Interim Payment shall not reduce the obligation of the Company to
make a final payment under the terms of the Plan, but any Interim Payment made
shall be offset against any later payment required under the terms of the Plan
for the calendar year in which a Change in Control occurs. No Participant may be
required to refund to the Company, or have offset against any other payment due
any participant from or on behalf of the Company, all or any portion of the
Interim Payment.

     "Change in Control" means:

          (i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the combined
voting power of the then outstanding voting securities of the Company entitled
to vote generally in the election of directors (the "Outstanding Company Voting
Securities"); PROVIDED, HOWEVER, that the following acquisitions shall not
constitute a Change of Control: (A) any acquisition directly from the Company
(other than by exercise of a conversion privilege), (B) any acquisition by the
Company or any of its subsidiaries, (C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any of its
subsidiaries or (D) any acquisition by any corporation with respect to which,
following such acquisition, more than 50% of the then outstanding combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then beneficially
owned by all or substantially all of the individuals and entities who were the
beneficial owners of the Outstanding Company Voting Securities immediately prior
to such acquisition in substantially the same proportions as their ownership,
immediately prior to such acquisition, of the Outstanding Company Voting
Securities; or

          (ii) Approval by the shareholders of the Company of a reorganization,
merger or consolidation, or a sale or other disposition of all or substantially
all of the assets of the Company, in each case, with respect to which all or
substantially all of the individuals and


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entities who were the beneficial owners of the Outstanding Company Voting
Securities immediately prior to such reorganization, merger, consolidation or
sale, do not, following such reorganization, merger, consolidation or sale,
beneficially own, directly or indirectly, more than 50% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
reorganization, merger, consolidation or sale in substantially the same
proportions as their ownership, immediately prior to such reorganization,
merger, consolidation or sale of the Outstanding Company Voting Securities.

                            ARTICLE IV MISCELLANEOUS

SECTION 4.1 NO ADDITIONAL PARTICIPANT RIGHTS.

     The selection of an individual as a Participant in the Plan shall not give
such Participant any right to be retained in the employ of the Company or any of
its subsidiaries, and the Company and any such subsidiary specifically reserve
the right to dismiss the Participant or to terminate any arrangement pursuant to
which any such Participant provides services to the Company, with or without
cause. No person shall have claim to an Award under the Plan, except as
otherwise provided for herein, or to continued participation under the Plan.
There is no obligation for uniformity of treatment of Participants under the
Plan. The benefits provided for Participants under the Plan shall be in addition
to and shall in no way preclude other forms of compensation to or in respect of
such Participants. It is expressly agreed and understood that the employment of
the Participant is terminable at the will of either party and, if such
Participant is a party to an employment contract with the Company or one of its
subsidiaries, in accordance with the terms and conditions of the Participant's
employment contract.

SECTION 4.2 NO ASSIGNMENT.

     The rights of a Participant with respect to Awards granted under the Plan
shall not be transferable by the Participant, otherwise than by will or the laws
of descent and distribution prior to the payment thereof.

SECTION 4.3 TAX WITHHOLDING.

     The Company or a subsidiary thereof, as appropriate, shall have the right
to deduct from all payments made under the Plan to a Participant or to a
Participant's beneficiary or beneficiaries any federal, state or local taxes
required by law to be withheld with respect to such payments.

SECTION 4.4 NO RESTRICTION ON RIGHT OF COMPANY TO EFFECT CHANGES.

     The Plan shall not affect in any way the right or power of the Company or
its stockholders to make or authorize any recapitalization, reorganization,
merger, acquisition, divestiture, consolidation, spin-off, combination,
liquidation, dissolution, sale of assets, or other similar corporate transaction
or event involving the Company or a subsidiary thereof or any other event or
series of events, whether of a similar character or otherwise.


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SECTION 4.5 SOURCE OF PAYMENTS.

     The Company shall not have any obligation to establish any separate fund or
trust or other segregation of assets to provide for payments under the Plan. To
the extent any person acquires any rights to receive payments hereunder from the
Company, such rights shall be no greater than those of an unsecured creditor.

SECTION 4.6 AMENDMENT AND TERMINATION.

     The Board may at any time and from time to time alter, amend, suspend or
terminate the Plan in whole or in part; PROVIDED, HOWEVER, that no alteration or
amendment will be effective without stockholder approval if such approval is
required by law. In the case of Participants employed outside the United States,
the Committee or its designees may vary the provisions of the Plan as deemed
appropriate to conform with local laws, practices and procedures. In addition,
the General Counsel of the Company is authorized to make certain minor or
administrative changes required by or made desirable by government regulation.

SECTION 4.7 GOVERNMENTAL REGULATIONS.

     The Plan, and all Awards hereunder, shall be subject to all applicable
rules and regulations of governmental or other authorities.

SECTION 4.8 HEADINGS.

     The headings of articles and sections herein are included solely for
convenience of reference and shall not affect the meaning of any of the
provisions of the Plan.

SECTION 4.9 GOVERNING LAW AND SEVERABILITY.

     The Plan and all rights and Awards hereunder shall be construed in
accordance with and governed by the laws of the State of Delaware without regard
to conflicts of law principles and applicable federal law. If any portion of
this Plan is deemed to be in conflict with local law, that portion of the Plan,
and that portion only, will be deemed null and void under that local law. All
other provisions of the Plan will remain in full effect.

SECTION 4.10 EFFECTIVE DATE.

     The Plan shall become effective upon its adoption by the Board. The Plan
shall be effective, unless amended or terminated in accordance with Section 4.6
above.

Adopted by IPG BOD on April 6, 2005


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