Document:

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                                                                   EXHIBIT 10.42

                                 PROMISSORY NOTE

$786,381                                                  as of January 22, 2001

     FOR VALUE RECEIVED, Vincent Au-Yeung ("Maker") promises to pay to IPG
Photonics Corporation, a Delaware corporation (the "Company"), or order, the
principal sum of Seven Hundred and Eighty-Six Thousand, Three Hundred and Eighty
One Dollars ($786,381), together with interest (compounded annually) on the
unpaid principal hereof from the date hereof at the rate of 5.61% per annum.

     Interest and principal shall be due and payable on the fifth anniversary of
the date of this Note, provided that in the event that he shall sell any shares
of common stock acquired under the Notice of Award of Restricted Stock and Stock
Issuance Agreement for Awards of Restricted Stock ("Stock Issuance Agreement")
between Maker and Company of even date herewith, Maker shall repay to the
Company the entire proceeds of such sale to reduce the principal and interest on
this Note. Should the Maker fail to make full payment of principal or interest
for a period of 10 days or more after the due date thereof, the entire unpaid
principal balance of this Note and all accrued and unpaid interest thereon shall
become immediately due at the option of the holder of this Note. Payments of
principal and interest shall be made in lawful money of the United States of
America.

     The Maker may at any time prepay all or any portion of the principal or
interest owing hereunder without penalty. Payments shall be applied first to
accrued and unpaid interest and then to unpaid principal.

     This Note is subject to the terms of the Stock Issuance Agreement. This
Note is secured pursuant to the terms of a Pledge Agreement between the Maker
and the Company of even date herewith, as amended from time to time.

     The holder of this Note shall have full recourse against the undersigned,
and shall not be required to proceed against collateral securing this Note in
the event of default.

     In the event the Maker shall cease to be an employee of the Company for any
reason constituting Cause within the meaning of Section 8 of the Employment
Agreement between the Company and the Maker dated November 29, 2000, or in the
event of the Maker's termination for other than Good Reason within the meaning
of Section 9 of such Employment Agreement, this Note shall, at the option of the
Company, be accelerated, and the whole unpaid balance on this Note of principal
and accrued interest shall be immediately due and payable. In the event that the
Company is entitled to and elects to repurchase the shares sold to Maker
pursuant to the Stock Issuance Agreement (the "Shares"), then Maker may elect to
have the Company cancel the amount due and payable on this Note (or a portion
thereof) in lieu of receiving

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payment from the Company of that portion of the repurchase price for the Shares
as equals the due and payable amount to be cancelled.

     Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
Maker. This Note shall be governed by the laws of the State of Massachusetts,
without giving effect to its choice of law principles thereof.

                                        /s/ Vincent Au-Yeung
                                        ----------------------------------------
                                        Vincent Au-Yeung

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                                                                   EXHIBIT 10.43

                             STOCKHOLDERS AGREEMENT

     THIS STOCKHOLDERS AGREEMENT (the "Agreement") is made as of this 30th day
of August, 2000, by and among IPG Photonics Corporation, a Delaware corporation
(the "Company"), the stockholders of the Company identified as such on the
signature pages hereto (the "Founders"), IPG Fibre Devices Ltd., a U.K.
corporation ("Fibre Devices"), the persons identified on the signature pages
hereto as the Investors and any assignees or transferees thereof (each, an
"Investor" and collectively, the "Investors"), and any other stockholder or
option holder who from time to time becomes party to this Agreement by execution
of a Joinder Agreement in substantially the form attached hereto as Exhibit A
(the "Other Stockholders"). The Founders, Fibre Devices and the Other
Stockholders are herein referred to collectively as the "Stockholders," and
individually as a "Stockholder."

     WHEREAS, reference is made to the Stock Purchase Agreement, dated as of
August 25, 2000, by and between the Company and the Investors (the "Purchase
Agreement"), pursuant to which the Investors have agreed to purchase from the
Company shares of Series B Convertible Participating Preferred Stock, par value
$.0001 per share, of the Company (the "Convertible Preferred Stock") which
shares are convertible into shares of Common Stock, par value $.0001 per share,
of the Company (the "Common Stock") and warrants to purchase Common Stock as
described in the Purchase Agreement ("Warrants");

     WHEREAS, the execution and delivery of this Agreement is a condition
precedent to the transactions contemplated by the Purchase Agreement; and

     WHEREAS, the parties hereto desire to agree upon the terms on which the
securities of the Company, now or hereafter outstanding, and held by them will
be held, transferred and voted.

     NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter set forth, the parties hereto agree as follows:

ARTICLE I DEFINITIONS

     Section 1.1 Construction of Terms. As used herein, the masculine, feminine
or neuter gender, and the singular or plural number, shall be deemed to be or to
include the other genders or number, as the case may be, whenever the context so
indicates or requires.

     Section 1.2 Terms Not Defined. Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to them in the Purchase
Agreement.

     Section 1.3 Number of Shares of Stock. Whenever any provision of this
Agreement calls for any calculation based on a number of shares of capital stock
held by a Stockholder or an Investor, the number of shares deemed to be held by
that Stockholder or Investor shall be the total number of shares of Common Stock
then owned by the Stockholder or Investor, plus the total number of shares of
Common Stock issuable upon the conversion of any Convertible Preferred Stock or
other convertible securities or the exercise of any vested options, warrants or
subscription rights then owned by such Stockholder or Investor (but not
including the Warrants).

     Section 1.4 Defined Terms. The following capitalized terms, as used in this
Agreement, shall have the meanings set forth below.

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     An "Affiliate" of any Person (as defined herein) means a Person that,
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with the first mentioned Person. A
Person shall be deemed to control another Person if such first Person possesses,
directly or indirectly, the power to direct, or cause the direction of, the
management and policies of the second Person, whether through the ownership of
voting securities, by contract or otherwise.

     "Board of Directors" means the Board of Directors of the Company.

     "Common Stock" means the Common Stock, par value $.0001 per share, and any
other common equity securities issued by the Company, and any other shares of
stock issued or issuable with respect thereto (whether by way of a stock
dividend or stock split or in exchange for or upon conversion of such shares or
otherwise in connection with a combination of shares, recapitalization, merger,
consolidation or other corporate reorganization), including, without limitation,
the Shares.

     "Company" shall refer to the Company and any successor or successors
thereto.

     "Majority Interest" means the Investors holding not less than a majority
interest in the outstanding Shares (as hereinafter defined) held by all of the
Investors.

     "Person" means an individual, a corporation, an association, a joint
venture, a partnership, a limited liability company, an estate, a trust, an
unincorporated organization and any other entity or organization, governmental
or otherwise.

     "Preferred Stock" means the Convertible Preferred Stock, together with any
shares issued or issuable with respect thereto (whether by way of a stock
dividend or stock split or in exchange for or in replacement of such shares or
otherwise in connection with a combination of shares, recapitalization, merger,
consolidation or other corporate reorganization).

     "Qualified Public Offering" has the meaning set forth in the Company's
Amended and Restated Certificate of Incorporation in effect as of the date
hereof.

     "Sale Event" means a transaction of the type specified in Article IV,
Section B.3.1 or .3 of the Company's Amended and Restated Certificate of
Incorporation as in effect on the date hereof.

     "Series B Director Designee" has the meaning set forth in the Company's
Amended and Restated Certificate of Incorporation in effect as of the date
hereof.

     "Shares" means (i) with respect to the Investors or any Investor Permitted
Transferee (as defined in Section 2.1 below), the shares of Common Stock subject
to acquisition upon the conversion of the Preferred Stock at the relevant time
(such number being subject to possible adjustment in accordance with the terms
of the Company's Amended and Restated Certificate of Incorporation), together
with the shares of Common Stock held by the Investors or any Investor Permitted
Transferees thereof at the relevant time if conversion of any of the Convertible
Preferred Stock has then occurred, (ii) with respect to the Stockholders or any
Stockholder Permitted Transferee (as defined in Section 2.1 below) thereof, all
shares of Common Stock then held by the Stockholders and any Stockholder
Permitted Transferees thereof, and (iii) any other equity securities now or
hereafter issued by the Company, together with any options thereon and any other
shares of stock issued or issuable with

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respect thereto (whether by way of a stock dividend, stock split or in exchange
for or upon conversion of such shares or otherwise in connection with a
combination of shares, recapitalization, merger, consolidation or other
corporate reorganization).

     "Transfer" means any direct or indirect transfer, donation, sale,
assignment, pledge, hypothecation, grant of a security interest in or other
disposal or attempted disposal of all or any portion of a security or of any
rights. "Transferred" means the accomplishment of a Transfer, and "Transferee"
means the recipient of a Transfer.

     "Transaction Documents" means collectively, this Agreement, the Purchase
Agreement and the Registration Rights Agreement dated as of August 30, 2000 by
and among the Company and the persons designated as Investors on the signature
pages thereto.

ARTICLE II RESTRICTIONS ON TRANSFER; RIGHT OF LAST REFUSAL; CO-SALE PROVISIONS

     The following provisions of this Article II shall terminate immediately
upon and shall not apply with respect to, the closing of a Qualified Public
Offering or Sale Event.

     Section 2.1 Restrictions on Transfer.

          (a) Each Stockholder agrees that such Stockholder will not, without
the prior written consent of a Majority Interest of the Investors, Transfer all
or any portion of the Shares now owned or hereafter acquired by such
Stockholder, except in connection with, and strictly in compliance with the
conditions of, any of the following:

               (i) Transfers effected pursuant to Section 2.2 or Section 2.3, in
each case made in accordance with the procedures set forth therein;

               (ii) Transfers by any Stockholder to (A) such Stockholder's
spouse, children or siblings, (B) a partnership or other corporate entity of
which the Stockholder has the right to the exercise more than fifty percent
(50%) of the voting interests in such entity or the right to more than fifty
percent (50%) of the assets and/or funds available for distribution in a
liquidation of such entity or (C) a trust of which such Stockholder is the
settlor and a trustee for the benefit of such Stockholder's spouse, children or
siblings, provided that any such trust or entity does not require or permit
distribution of such Shares during the term of this Agreement, and provided,
further that the Transferee shall have entered into a Joinder Agreement in the
form attached hereto as Exhibit A providing that all Shares so Transferred shall
continue to be subject to all provisions of this Agreement as if such Shares
were still held by such Stockholder, except that no further Transfer shall
thereafter be permitted hereunder except in compliance with Section 2.2 or
Section 2.3;

               (iii) Transfers upon the death of any Stockholder to such
Stockholder's heirs, executors or administrators or to a trust under such
Stockholder's will, or Transfers between such Stockholder and such Stockholder's
guardian or conservator, provided that the Transferee shall have entered into a
Joinder Agreement in the form attached hereto as Exhibit A providing that all
Shares so Transferred shall continue to be subject to all provisions of this
Agreement as if such Shares were still held by such Stockholder, except that no
further Transfer shall thereafter be permitted hereunder except in compliance
with Section 2.2 and Section 2.3; and

               (iv) Transfers of Shares of Common Stock by the Founders and/or
Fibre Devices that on an annual basis do not exceed five percent (5%)

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of the aggregate outstanding shares of Common Stock held by such parties
(adjusted appropriately for stock splits, stock dividends, recapitalizations and
the like) as of the date hereof, provided that the Transferee shall have entered
into a Joinder Agreement in the form attached hereto as Exhibit A; provided,
further that such transfers in the aggregate do not exceed an aggregate of
fifteen percent (15%) of the outstanding shares of Common Stock held by such
parties (adjusted appropriately for stock splits, stock dividends,
recapitalizations and the like) as of the date hereof.

     Any permitted Transferee described in the preceding clauses (ii), (iii) and
(iv) shall be referred to herein as a "Stockholder Permitted Transferee."

     Notwithstanding anything to the contrary in this Agreement or any failure
by a Stockholder Permitted Transferee to execute a Joinder Agreement, a
Stockholder Permitted Transferee shall take any Shares so Transferred subject to
all provisions of this Agreement as if such Shares were still held by the
Stockholder making such Transfer, whether or not they so agree in writing.

          (b) Each Investor agrees that such Investor will not, without the
prior written consent of the Company, Transfer any portion of the Shares or
Warrants (or any shares acquired upon exercise of Warrants) now owned or
hereafter acquired by such Investor on or prior to August 30, 2002, except in
connection with, and strictly in compliance with the following Transfers by such
Investor:

               (i) Transfers effected pursuant to Section 2.3 or Section 2.4, in
each case made in accordance with the procedures set forth therein;

               (ii) Transfers effected pursuant to any event described in
Section B.3 of the Company's Amended and Restated Certificate of Incorporation;

               (iii) Transfers to and among its Affiliates;

               (iv) Transfers to any current or retired partner, member or
employee of such Investor or a general partner or managing member of such
Investor;

               (v) Transfers to a liquidating trust established for the benefit
of any current or retired partners or members of such Investor; or

               (vi) Transfers to any investment fund or other entity controlled
or managed by an Affiliate of such Investor;

provided that, in each case, the Transferee shall have executed a Joinder
Agreement in the form of Exhibit B attached hereto; provided, further, each
Investor agrees that it will not, without the prior written consent of the
Company, Transfer any Shares or Warrants now owned or hereafter acquired to any
customer, competitor or supplier of the Company.

     Any permitted Transferee described in the preceding clauses (iii), (iv),
(v) and (vi) shall be referred to herein as an "Investor Permitted Transferee"
and shall be entitled to assignment of the transferor's rights under the
Transaction Documents. Notwithstanding anything to the contrary in this
Agreement or any failure by an Investor Permitted Transferee to execute a
Joinder Agreement, an Investor Permitted Transferee shall take any Shares or
Warrants so Transferred subject to all provisions of this Agreement as if the
relevant securities were still held by the Investor making such Transfer,
whether or not they so agree in writing

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          (c) After August 30, 2002, in addition to the rights of Transfer under
Section 2.2(b) of this Agreement, any Investor may Transfer any Shares or
Warrants (or shares acquired upon exercise thereof) that it holds at the time of
such Transfer to any Person; provided, however, that none of such Investor's
rights under any of the Transaction Documents with respect to any such Transfers
may be transferred to such Transferee unless such Investor, when aggregated with
transfers by any of its Affiliates that are also Investors, transfers more than
100,000 Shares (as adjusted for stock splits, stock dividends and the like) to
such Person ;provided further, that any such Transfer of Shares and related
assignment of rights under the Transaction Documents shall involve not less than
100,000 Shares (as adjusted for stock splits, stock dividends and the like).

     Section 2.2 Right of Last Refusal. In the event that any of the
Stockholders, including any of their Stockholder Permitted Transferees, receives
a bona fide offer to purchase all or any portion of the shares held by such
Stockholder or Stockholder Preferred Transferee (a "Transaction Offer") from any
other Person (the "Buyer"), and the Transaction Offer is for less than a
majority of the then outstanding Shares of Common Stock (on an as-converted
basis), such Stockholder or Stockholder Permitted Transferee (a "Transferring
Stockholder") may, subject to the provisions of Section 2.3 hereof, Transfer
such Shares pursuant to and in accordance with the following provisions of this
Section 2.2:

          (a) Such Transferring Stockholder shall cause the Transaction Offer
and all of the terms thereof to be reduced to writing and shall promptly notify
the Company and each of the Investors of such Transferring Stockholder's desire
to effect the Transaction Offer and otherwise comply with the provisions of this
Section 2.2 and, if applicable, Section 2.3 (such notice, the "Offer Notice").
The Transferring Stockholder's Offer Notice shall constitute an irrevocable
offer to sell all of the Shares which are the subject of the Transaction Offer
(the "Offered Shares") to the Company and the Investors or their Transferees, on
the basis described below, at a purchase price equal to the price contained in,
and on the same terms and conditions of, the Transaction Offer. The Offer Notice
shall be accompanied by a true copy of the Transaction Offer (which shall
identify the Buyer and all relevant information in connection therewith).

          (b) Company Option. The Company shall have the first option to
purchase all but not less than all of the Offered Shares. At any time within
twenty (20) days after receipt by the Company of the Offer Notice (the "Company
Option Period"), the Company may elect to accept the offer to purchase with
respect to all of the Offered Shares and shall give written notice of such
election (the "Company Acceptance Notice") to the Transferring Stockholder
within the Company Option Period. The Company Acceptance Notice shall constitute
a valid, legally binding and enforceable agreement for the sale and purchase of
all of the Offered Shares covered by the Company Acceptance Notice. If the
Company accepts the offer to purchase all of the Offered Shares, the closing for
such purchase of the Offered Shares by the Company (the "Company Purchase")
under this Section 2.2(b) shall take place within thirty (30) days following the
expiration of the Company Option Period, at the offices of the Company or on
such other date or at such other place as may be agreed to by the Transferring
Stockholder and the Company. If the Company does not elect to purchase all of
the Offered Shares by exercising its option under this Section 2.2(b) within the
Company Option Period, the Transferring Stockholder shall so notify the
Investors promptly (the "Investor Offer Notice"). The Offered Shares shall then
be subject to the option granted to the Investors pursuant to Section 2.2(c)
below.

          (c) Investors' Option. If the Company does not elect to purchase all
of the Offered Shares in accordance with Section 2.2(b) above, each Investor may
elect at any time within thirty (30) days after receipt by the Investors of the
Investor Offer Notice (the "Investor Option Period"), to

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accept the offer to purchase with respect to all but not less than all of the
Offered Shares and shall give written notice of such election (the "Investor
Acceptance Notice") to the Transferring Stockholder within the Investor Option
Period, which notice shall indicate the maximum number of Offered Shares that
such Investor is willing to purchase, including the number of Offered Shares it
would purchase if one or more other Investors do not elect to purchase their Pro
Rata Fractions (as defined in paragraph (d) below). The Investor Acceptance
Notice shall constitute a valid, legally binding and enforceable agreement for
the sale and purchase of the Remaining Offered Shares covered by the Investor
Acceptance Notice. The closing for any purchase of Offered Shares by the
Investors under this Section 2.2(c) shall take place within thirty (30) days
following the expiration of Investor Option Period, at the offices of the
Company or on such other date or at such other place as may be agreed to by the
Transferring Stockholder and the Investors purchasing hereunder. The
Transferring Stockholder shall notify the Investors promptly if any Investor
fails to offer to purchase all of its Pro Rata Fraction.

          (d) Allocation of Shares among Investors. Upon the expiration of the
Investor Option Period, the number of Offered Shares to be purchased by each
Investor shall be determined as follows: (i) first, there shall be allocated to
each Investor electing to purchase, a number of Offered Shares equal to the
lesser of (A) the number of Offered Shares as to which such Investor accepted as
set forth in its respective Investor Acceptance Notice or (B) such Investor's
Pro Rata Fraction (as defined below), and (ii) second, the balance, if any, not
allocated under clause (i) above, shall be allocated to those Investors who
within the Investor Option Period delivered an Investor Acceptance Notice that
set forth a number of Offered Shares that exceeded their respective Pro Rata
Fractions, in each case on a pro rata basis in proportion to the number of
Shares held by each such Investor up to the amount of such excess. An Investor's
Pro Rata Fraction shall be equal to the product obtained by multiplying the
total number of Offered Shares by a fraction, the numerator of which is the
total number of Shares owned by such Investor, and the denominator of which is
the total number of Shares held by all Investors, in each case as of the date of
the Investor Offer Notice.

          (e) Valuation of Property. In the event that the price set forth in
the Offer Notice is stated in consideration other than cash or cash equivalents,
the Transferring Stockholder, the Company and a Majority Interest shall mutually
determine the fair market value of such consideration, reasonably and in good
faith, and the Company and/or the Investors, as the case may be, may effect
their purchase under this Section 2.2 by payment of such fair market value in
cash or cash equivalents.

          (f) Sale to Third Party. In the event that the Company and the
Investors do not elect to exercise the rights to purchase under this Section 2.2
with respect to all of the Offered Shares proposed to be sold, the Transferring
Stockholder may sell all such Offered Shares to the Buyer, subject to the
provisions of Section 2.3. If the Transferring Stockholder's sale to a Buyer is
not consummated in accordance with the terms of the Transaction Offer on or
before sixty (60) days after the latest of: (i) the expiration of the Company
Option Period, (ii) the expiration of the Investor Option Period, (iii) the
expiration of the Co-Sale Election Period set forth in Section 2.3 below, if
applicable, and (iv) the satisfaction of all governmental approval or filing
requirements, the Transaction Offer shall be deemed to lapse, and any Transfers
of Offered Shares pursuant to such Transaction Offer shall be in violation of
the provisions of this Agreement unless the Transferring Stockholder sends a new
Offer Notice and once again complies with the provisions of this Section 2.2
with respect to such Transaction Offer.

     Section 2.3 Co-Sale Option of Investors. In the event that any Transferring
Stockholder desires to sell all or any portion of the Shares held by such person
to a Buyer and either (i) Section 2.2 is not applicable or (ii)

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the right to purchase under Section 2.2 is exercised by the Company or is not
exercised by Company or the Investors or their Transferees with respect to
Shares proposed to be so Transferred, such Transferring Stockholder may Transfer
such Shares only pursuant to and in accordance with the following provisions of
this Section 2.3:

          (a) As soon as practicable following the expiration of either the
Investor Notice Period or the Company Option Period, and in no event later than
five (5) days after the expiration of the later of the Investor Notice Period or
the Company Option Period, as applicable, the Transferring Stockholder shall
provide notice to each of the Investors (the "Co-Sale Notice") of its right to
participate in the Transaction Offer or of the Company Acceptance Notice with
respect to any Shares subject thereto which were not purchased or with respect
to any Shares which were purchased by the Company pursuant to Section 2.2 (the
"Co-Sale Option"). Each of the Investors shall have the right to exercise its
Co-Sale Option by giving written notice of such intent to participate (the
"Co-Sale Acceptance Notice") to the Transferring Stockholder within ten (10)
days after receipt by such Investor of the Co-Sale Notice (the "Co-Sale Election
Period"). Each Co-Sale Acceptance Notice shall indicate the maximum number of
Shares subject thereto which the Investor wishes to sell including the number of
Shares it would sell if one or more other Investors do not elect to participate
in the sale on the terms and conditions stated in the Offer Notice. Any Investor
holding Convertible Preferred Stock shall be permitted to sell to the relevant
Buyer or the Company, if applicable, in connection with any exercise of the
Co-Sale Option, at its option, (i) shares of Common Stock acquired upon
conversion of Convertible Preferred Stock, or (ii) subject to Section 2.3(d),
shares of Convertible Preferred Stock.

          (b) Each Investor shall have the right to sell a portion of its Shares
pursuant to the Transaction Offer or the Company Acceptance Notice, as
applicable, which is equal to or less than the product obtained by multiplying
(i) the total number of Shares available for sale to the Buyer or the Company
subject to the Transaction Offer or the Company Acceptance Notice, as
applicable, by (ii) a fraction, the numerator of which is the total number of
Shares owned by such Investor and the denominator of which is the total number
of Shares held by all Investors and the Transferring Stockholder (including any
of such Transferring Stockholder's Stockholder Permitted Transferees), in each
case as of the date of the Offer Notice or Company Acceptance Notice, as
applicable, and as determined in accordance with Section 1.3 hereof, subject to
increase as hereinafter provided. In the event an Investor does not elect to
sell the full amount of such Shares which such Investor is entitled to sell
pursuant to this Section 2.3, then any Investors who have elected to sell Shares
shall have the right to sell, on a pro-rata basis with any other Investors and
up to the maximum number of Shares stated in each such Investor's Co-Sale
Acceptance Notice, any Shares not elected to be sold by such Investor.

          (c) Within ten (10) calendar days after the end of the Co-Sale
Election Period, the Transferring Stockholder shall promptly notify each
participating Investor of the number of Shares held by such Investor that will
be included in the sale and the date on which the Transaction Offer or Company
Purchase, as applicable, will be consummated.

          (d) Each participating Investor may effect its participation in any
Transaction Offer or Company Purchase, as applicable, hereunder by delivery to
the Buyer or the Company, or to the Transferring Stockholder for delivery to the
Buyer or the Company, of one or more instruments or certificates, properly
endorsed for transfer, representing the Shares it elects to sell pursuant
thereto and executing and delivering purchase and sale documentation comparable
to that required by the Buyer from the Transferring Stockholder, provided that
no Investor shall be required to make any representations or warranties or to
provide any indemnities in connection

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therewith other than with respect to title to the Shares being conveyed. At the
time of consummation of the Transaction Offer, the Buyer or the Company shall
remit directly to each participating Investor that portion of the sale proceeds
to which the participating Investor is entitled by reason of its participation
with respect thereto, together with, in the case of any sale of Preferred Stock,
an amount equal to the Series B Participation Amount, as provided in the Amended
and Restated Articles of Incorporation. No Shares may be purchased by the Buyer
or the Company from the Transferring Stockholder or any of such Transferring
Stockholder's Stockholder Permitted Transferees unless the Buyer or the Company
simultaneously purchases from the participating Investors all of the Shares that
they have elected to sell pursuant to Section 2.3(b).

          (e) Any Shares held by a Transferring Stockholder which are the
subject of the Transaction Offer that the Transferring Stockholder desires to
Transfer following compliance with Section 2.2 and this Section 2.3 may be sold
to the Buyer or the Company only during the period specified in Section 2.3(c)
and only on terms no more favorable to the Transferring Stockholder than those
contained in the Offer Notice or the Company Acceptance Notice, if applicable.
Promptly after such Transfer, the Transferring Stockholder shall notify the
Company, which in turn shall promptly notify the Investors, of the consummation
thereof and shall furnish such evidence of the completion and time of completion
of the Transfer and of the terms thereof as may reasonably be requested by a
Majority Interest of the Investors. Prior to the effectiveness of any Transfer
to a Buyer or the Company hereunder, such Buyer shall have entered into a
Joinder Agreement in the form attached hereto as Exhibit A, and such Buyer shall
have all the rights and obligations hereunder as if such Buyer were a Founder.

     Section 2.4 Drag Along Right. In the event that the Founders and Fibre
Devices (the "Drag Along Parties") entertain a bona fide arms' length offer to
purchase all or at least seventy five percent (75%) of the Shares held by the
Drag Along Parties (a "Buyout Offer") from a Buyer, each Investor hereby agrees,
if requested by the Drag Along Parties in connection with the Drag Along
Parties' acceptance of the Buyout Offer, to transfer for value to such Buyer a
number of the Shares and Warrants (or shares acquired upon exercise thereof)
held by such Investor in the manner and on the terms set forth in this Section
2.4 (a "Drag Along Sale"); provided, however, that the Drag Along Parties shall
not be entitled to require any Investor to participate in a Drag-Along Sale
pursuant to this Section 2.4 unless all other Investors are required to
participate in such Drag Along Sale and each Investor holding Preferred Stock
receives an amount per Share (giving effect to the provisions of Section B.3 of
the Company's Amended and Restated Certificate of Incorporation) equal to at
least (a) $40.00 per share, in the case of an offering which closes on or prior
to December 31, 2000, (b) $43.75 per share, in the case of an offering which
closes from January 1, 2001 to March 31, 2001, (c) $50.00 per share, in the case
of an offering which closes from April 1, 2001 to December 31, 2001, (d) $56.25
per share, in the case of an offering which closes from January 1, 2002 to
August 31, 2002 or (e) $62.50 per share, in the case of an offering which closes
after August 31, 2002 (in each case appropriately adjusted for any stock split,
stock dividend, combination, recapitalization and the like). Subject to the
foregoing, the number of Shares to be sold by each Investor shall be equal to
the number of Shares held by such Investor multiplied by a fraction, the
numerator of which is the aggregate number of Shares held by the Drag Along
Parties which the Drag Along Parties propose to sell in such Buyout Offer and
the denominator of which is the aggregate number of Shares held by the Drag
Along Parties; Warrant sales shall be made on a proportionate basis.

          (a) Drag Along Notice. The Drag Along Parties shall cause the Buyout
Offer and all of the terms thereof to be reduced to writing and shall promptly
notify the Stockholders, the Investors and the Company as to whether or not the
Drag Along Parties intend to effect the Drag Along Sale (such

                                        8

<PAGE>

notice, the "Drag Along Notice"). The Drag Along Notice shall be accompanied by
a true copy of the Buyout Offer (which shall identify the Buyer and all relevant
information in connection therewith). If the Drag Along Parties effect the Drag
Along Sale referred to in the Drag Along Notice on substantially the terms set
forth in such notice, each of the Investors shall be bound and obligated to
transfer the number of Shares subject to such Drag Along Sale as calculated in
accordance with this Section 2.4 on terms and conditions no less favorable than
those applicable to the Drag Along Parties with respect to each type of Share or
other securities sold.

          (b) Drag Along Sale Closing. Within twenty-five (25) calendar days
after the date of the Drag Along Notice, the Drag Along Parties shall promptly
notify each Stockholder and Investor of the number of Shares and other
securities held by such Stockholder and Investor that will be included in the
Drag Along Sale, and of the date on which the Drag Along Sale will be
consummated, which date shall be no later than the later of (i) ninety (90)
calendar days after the date of the Drag Along Notice and (ii) the satisfaction
of any governmental approval or filing requirements, if any. Each Stockholder
and Investor may effect its participation in such Drag Along Sale hereunder by
delivery to the Buyer, or to the Drag Along Parties for delivery to the Buyer,
of one or more instruments or certificates, properly endorsed for transfer,
representing the securities it is obligated to sell pursuant hereto. At the time
of consummation of the Drag Along Sale, the Buyer shall remit directly to the
Drag Along Parties and each participating Stockholder and Investor that portion
of the sale proceeds to which each such Person is entitled by reason of its
participation with respect thereto.

          (c) Failure to Consummate. In the event that the Drag Along Sale is
not consummated or the Buyer fails timely to remit to each participating
Stockholder or Investor its respective portion of the sale proceeds, the Buyout
Offer shall be deemed to lapse, and any Transfer pursuant to such Buyout Offer
shall be in violation of the provisions of this Agreement unless the Drag Along
Parties sends a new Drag Along Notice and once again complies with the
provisions of this Section 2.4 with respect to such Buyout Offer.

          (d) Status of Buyer. A Buyer shall take the Shares or other securities
transferred pursuant to a Drag Along Sale free and clear of any further
restrictions of this Section 2.

     Section 2.5 Contemporaneous Transfers. If two or more Stockholders (or
their Stockholder Permitted Transferees) propose concurrent Transfers which are
subject to this Article II, then the relevant provisions of Section 2.2 and
Section 2.3, as applicable, shall apply separately to each such proposed
Transfer.

     Section 2.6 Assignment. Each Investor shall have the right to assign its
rights to any Transferee of such Investor's Shares to the extent contemplated
under Sections 2.1(b) and 2.1(c) hereof, and shall further have the right to
assign and transfer such Investor's right to accept particular Transaction
Offers as contemplated by this Article II, and any such Transferee shall be
deemed within the definition of an "Investor" for purposes of this Article II.

     Section 2.7 Prohibited Transfers. If any Transfer is made or attempted
contrary to the provisions of this Agreement, such purported Transfer shall be
void ab initio; the Company and the other parties hereto shall have, in addition
to any other legal or equitable remedies which they may have, the right to
enforce the provisions of this Agreement by actions for specific performance (to
the extent permitted by law); and the Company shall have the right to refuse to
recognize any Transferee as one of its stockholders for any purpose.

                                        9

<PAGE>

     Section 2.8 Procedures for Transferring. Upon request by the Company, any
Investor delivering an Investor Acceptance Notice or Co-Sale Acceptance Notice
shall deliver a written opinion of counsel for such Investor, addressed to the
Company, stating that in the opinion of such counsel (which opinion and counsel
shall be reasonably satisfactory to the Company), the proposed transfer that is
the subject of such notice does not involve a transaction requiring registration
or qualification of such Shares under the Securities Act of 1933, as amended or
the securities or "blue sky" laws of any state of the United States. Subject to
Article II, such Investor shall be entitled to transfer such Shares in
accordance with the terms of the such offer delivered to the Company, if the
Company does not reasonably object to such Transfer and request such opinion
within fifteen (15) days after delivery of such notice, or, if it requests such
opinion, after it has received such opinion. Subject to Section 4.13, each
certificate or other instrument evidencing the securities issued upon the
Transfer of any Shares (and each certificate or other instrument evidencing any
untransferred balance of such Shares) shall bear the legends set forth in
Section 4.2.

ARTICLE III RIGHTS TO PURCHASE

     Notwithstanding anything herein to the contrary, the following provisions
of this Article III shall terminate immediately prior to the closing of a
Qualified Public Offering and shall not apply with respect to any Qualified
Public Offering.

     Section 3.1 Right to Participate in Certain Sales of Additional Securities.
The Company agrees that, without the approval of a Majority Interest, it will
not sell or issue (a) any shares of capital stock of the Company, (b) securities
convertible into or exercisable or exchangeable for capital stock of the Company
or (c) options, warrants or rights carrying any rights to purchase capital stock
of the Company, unless the Company first submits a written notice to each
Investor identifying the terms of the proposed sale (including price, number or
aggregate principal amount of securities and all other material terms), and
offers to each Investor the opportunity to purchase its Pro Rata Allotment (as
hereinafter defined) of the securities (subject to increase for over-allotment
if some Investors do not fully exercise their rights) on terms and conditions,
including price, not less favorable than those on which the Company proposes to
sell such securities to a third party or parties. Each Investor's Pro Rata
Allotment of such securities shall be based on the ratio which the number of
Shares owned by such Investor (as determined in accordance with Section 1.3
hereof) bears to all of the issued and outstanding shares of Common Stock
(including all shares of Common Stock then issuable upon conversion of (i) the
Preferred Stock, (ii) other securities of the Company that are convertible into
Common Stock pursuant to then exercisable rights of conversion, and (iii)
options and warrants to purchase Common Stock of the Company which are
exercisable, in each case as of the date of such written offer.) The Company's
offer pursuant to this Section 3.1 shall remain open and irrevocable for a
period of thirty (30) calendar days following receipt by the Investors of such
written notice, and each Investor shall elect to purchase the securities so
offered by giving written notice thereof to the Company within such 30-day
period, including therein the maximum number of shares of capital stock or other
securities of the Company which the Investor wishes to purchase, including the
number of such shares it would purchase if one or more other Investors do not
elect to purchase, with the rights of electing Investors to purchase such
additional shares to be based upon the relative holdings of Shares of the
electing Investors in the case of over-subscription. Any securities so offered
which are not purchased by the Investors pursuant to such offer may be sold by
the Company, but only on the terms and conditions set forth in the initial
offer, at any time within 120 calendar days following the termination of the
above-referenced 30-day period, but may not be sold to any other Person or on
terms and conditions, including price, that are more favorable to the purchaser
than those set forth in such offer or after such 120-day period

                                       10

<PAGE>

without renewed compliance with this Section 3.1. In no event shall the
Investor's right to purchase pursuant to this Section 3.1 permit them to acquire
more than 2% of the Company's issued and outstanding shares of common stock on a
fully diluted basis at the time of such issuance (including all convertible
securities and outstanding option) and in the event of purchases of pro-rata
fractions as provided above would result in aggregate purchases in excess of
such amount the amounts to be purchased by the Purchasers shall be reduced on a
pro-rata basis.

     Notwithstanding the foregoing, the right to purchase granted under this
Article III shall be inapplicable with respect to (i) the issuance of up to an
aggregate of 3,750,000 shares of Common Stock (as appropriately adjusted for any
stock split, combination, reorganization, recapitalization, reclassification,
stock distribution, stock dividend or similar event) issued or issuable in
connection with, or upon the exercise of, options or other awards granted or to
be granted to employees, officers, directors or consultants of the Company
pursuant to the Company's 2000 Incentive Compensation Plan, in connection with
their service as directors of the Company, their employment by the Company or
their retention as consultants by the Company, in each case authorized by the
Board of Directors and issued pursuant to the Company's 2000 Incentive
Compensation Plan or any other equity incentive plan approved by a Majority
Interest ("Excluded Shares"), plus such number of Excluded Shares that are
repurchased by the Company from such Persons after August 30, 2000 in accordance
with the Company's Amended and Restated Certificate of Incorporation, pursuant
to contractual rights held by the Company and at repurchase prices not exceeding
the respective original purchase prices (appropriately adjusted to reflect the
occurrence of any event described in Section A.7(b) of the Company's Amended and
Restated Certificate of Incorporation) paid by such Persons to the Company
therefore, (ii) securities issued as a result of any stock split, stock
dividend, reclassification or reorganization or similar event with respect to
the Shares, (iii) securities issued pursuant to the anti-dilution rights of any
holder of equity securities or securities exercisable for or exchangeable or
convertible into equity securities of the Company; (iv) securities issued
pursuant to the closing of a Qualified Public Offering; (v) securities issued
prior to August 30, 2001 solely in connection with a strategic alliance or other
corporate partnering transaction; (vi) securities issued in exchange for the
stock or assets of another company in connection with the acquisition of or
merger into such company; provided, that such actions shall have been approved
by a majority of the members of the Board of Directors, which approval shall
include that of the Series B Director Designee; (vii) warrants to purchase
Common Stock or Convertible Preferred Stock outstanding as of August 30, 2000;
(viii) ) shares of Common Stock issued upon exercise of the Warrants; and (ix)
shares of Common Stock issued upon conversion of, or as a dividend on, the
Convertible Preferred Stock and the Series A Convertible Preferred Stock, par
value $.0001, of the Company (the "Series A Preferred"). For purposes of this
paragraph, the term Common Stock shall include all common stock of the Company.

     Section 3.2 Assignment of Rights. Subject to Sections 2.1(b) and 4.11
hereof, the rights of the Investors set forth in this Article III are
transferable to any Transferee of Shares by Investors as contemplated by
Sections 2.1(b) and 2.1(c) hereof.

     Section 3.3 Committees of the Board. The Company, the Investors and the
Stockholders agree to cause the Board of Directors to establish a Compensation
Committee (which shall be charged with the exclusive authority over the granting
of stock options and those matters set forth in Section 6.10 of the Purchase
Agreement which it is there granted exclusive authority over) and an Audit
Committee (which shall be charged with reviewing the Company's financial
statements and accounting practices).

                                       11

<PAGE>

ARTICLE IV MISCELLANEOUS PROVISIONS

     Section 4.1 Survival of Covenants. Each of the parties hereto agrees that
each covenant and agreement made by it in this Agreement or in any certificate,
instrument or other document delivered pursuant to this Agreement is material,
shall be deemed to have been relied upon by the other parties and shall remain
operative and in full force and effect after the date hereof regardless of any
investigation. This Agreement shall not be construed so as to confer any right
or benefit upon any Person other than the parties hereto and their respective
successors and permitted assigns to the extent contemplated herein.

     Section 4.2 Legend on Securities. The Company, the Investors and the
Stockholders acknowledge and agree that the following legend shall be typed on
each certificate evidencing any of the securities issued hereunder held at any
time by any of the Stockholders or their Stockholder Permitted Transferees or
the Investors or their Investor Permitted Transferees:

     THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT"), OR ANY STATE SECURITIES OR BLUE SKY LAWS AND
MAY NOT BE OFFERED, SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT
(1) PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH
IS EFFECTIVE UNDER THE ACT OR (2) PURSUANT TO AN AVAILABLE EXEMPTION FROM
REGISTRATION UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES AND (3) IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES AND BLUE SKY LAWS.

     THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF A
CERTAIN STOCKHOLDERS AGREEMENT, DATED AS OF AUGUST 30, 2000, INCLUDING CERTAIN
RESTRICTIONS ON TRANSFER SET FORTH THEREIN. A COMPLETE AND CORRECT COPY OF SUCH
AGREEMENT IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY AND
WILL BE FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE.

     Section 4.3 Amendment and Waiver; Actions of the Board. Any party may waive
any provision hereof intended for its benefit in writing. No failure or delay on
the part of any party hereto in exercising any right, power or remedy hereunder
shall operate as a waiver thereof. The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to any
party hereto at law or in equity or otherwise. This Agreement may be amended
with the prior written consent of the Company, the Majority Stockholders and a
Majority Interest of the Investors; provided, however, that any amendment to
Article III hereof shall require only the prior written consent of the Company
and a Majority Interest of the Investors. Any consent given as provided in the
preceding sentence shall be binding on all Stockholders and Stockholder
Permitted Transferees and all Investors, respectively, and no Stockholder,
Stockholder Permitted Transferee or Investor shall have any cause of action
against any other Person for any action taken by such Person in reliance upon
such consent. All actions by the Company hereunder shall be taken by or upon the
direction of a majority of the members of the Board of Directors of the Company.

     Section 4.4 Notices. All notices and other communications provided for
herein shall be in writing and shall be deemed to have been duly given,
delivered and received (a) if delivered personally or (b) if sent by facsimile,
registered or certified mail (return receipt requested) postage prepaid, or by
courier guaranteeing next day delivery, in each case to the party to whom it is
directed at the following addresses (or at such other address for any party as
shall be specified by notice given in accordance with the provisions hereof,
provided that notices of a change of address shall be effective only upon
receipt thereof). Notices delivered personally shall be effective on the day so
delivered, notices sent by registered or certified mail shall be effective five
days after mailing, notices sent by facsimile shall be effective when receipt is
acknowledged, and notices sent by courier

                                       12

<PAGE>

guaranteeing next day delivery shall be effective on the earlier of the second
business day after timely delivery to the courier or the day of actual delivery
by the courier:

     If to the Company or the Principal Stockholders:

     IPG Photonics Corporation.
     660 Main Street
     P.O. Box 519 Sturbridge, MA 01566
     Facsimile: (508) 347-6838
     Attn: Valentin P. Gapontsev

     With a copy to:

     Winston & Strawn
     1400 L Street, N.W.
     Washington, D.C. 20005
     Facsimile: (202) 371-5950
     Attn: Barry Hart

     If to the Investors:

     c/o TA Associates, Inc.
     70 Willow Road, Suite 100
     Menlo Park, CA 94025
     Facsimile: (650) 326-4933
     Attn: Michael C. Child

     With a copy to:

     Goodwin, Procter & Hoar  LLP
     Exchange Place
     Boston, MA 02109
     Facsimile: (617) 523-1231
     Attn: John R. LeClaire, P.C.

     If to any Other Stockholder:

     At such Person's address for notice as set forth in the books and records
of the Company.

     Section 4.5 Headings. The Article and Section headings used or contained in
this Agreement are for convenience of reference only and shall not affect the
construction of this Agreement. The parties have participated jointly in the
negotiation and drafting of this Agreement and the other agreements, documents
and instruments executed and delivered in connection herewith with counsel
sophisticated in investment transactions. In the event an ambiguity or question
of intent or interpretation arises, this Agreement and the agreements, documents
and instruments executed and delivered in connection herewith shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any
provisions of this Agreement and the agreements, documents and instruments
executed and delivered in connection herewith.

     Section 4.6 Counterparts. This Agreement may be executed in one or more
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which together
shall be deemed to constitute one and the same agreement.

                                       13

<PAGE>

     Section 4.7 Remedies; Severability. It is specifically understood and
agreed that any breach of the provisions of this Agreement by any Person subject
hereto will result in irreparable injury to the other parties hereto, that the
remedy at law alone will be an inadequate remedy for such breach, and that, in
addition to any other legal or equitable remedies which they may have, such
other parties may enforce their respective rights by actions for specific
performance (to the extent permitted by law) and the Company may refuse to
recognize any unauthorized Transferee as one of its stockholders for any
purpose, including, without limitation, for purposes of dividend and voting
rights, until the relevant party or parties have complied with all applicable
provisions of this Agreement.

     In the event that any one or more of the provisions contained herein, or
the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be in any way impaired thereby, it being
intended that all of the rights and privileges of the parties hereto shall be
enforceable to the fullest extent permitted by law.

     Section 4.8 Entire Agreement. This Agreement, together with the Purchase
Agreement and any other agreements specifically contemplated hereby and thereby,
is intended by the parties as a final expression of their agreement and intended
to be complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein.
This Agreement (including the exhibits hereto) supersedes all prior agreements
and understandings between the parties with respect to such subject matter.

     Section 4.9 Adjustments. All references to share prices and amounts herein
shall be equitably adjusted to reflect stock splits, stock dividends,
recapitalizations and similar changes affecting the capital stock of the
Company.

     Section 4.10 Law Governing; Jurisdiction. This Agreement shall be construed
and enforced in accordance with and governed by the laws of the State of New
York (without giving effect to principles of conflicts of law). This Agreement
shall be construed and enforced in accordance with and governed by the laws of
the State of New York (without giving effect to principles of conflicts of law).
All actions and proceedings arising out of or relative to this Agreement shall
be heard and determined in a Massachusetts state or federal court sitting in the
City of Boston. The parties hereby irrevocably submit to the exclusive
jurisdiction of any Massachusetts state or federal court sitting in the City of
Boston in any action or proceeding arising out of or relating to this Agreement,
and hereby irrevocably agree that all claims in respect of such action or
proceeding may be heard and determined in such Massachusetts state or federal
court. The parties hereby irrevocably waive, to the fullest extent they may
effectively do so, the defense of an inconvenient forum to the maintenance of
such action or proceeding. The parties agree that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law. TO
THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, EACH PARTY
HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF,
DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF
ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING OUT OF OR PASSED
UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, WHETHER NOW EXISTING OR
HEREAFTER ARISING AND WHETHER SOUNDING IN TORT OR CONTRACT OR OTHERWISE.

     Section 4.11 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the respective successors and permitted assigns of
the parties hereto as contemplated herein, and any successor to the Company by
way of merger or otherwise shall specifically

                                       14

<PAGE>

agree to be bound by the terms hereof as a condition of such successor. The
rights of the Investors hereunder shall be assignable to Transferees of their
Shares as contemplated herein. This Agreement may not be assigned by any
Stockholder except as provided herein without the prior written consent of a
Majority Interest of the Investors, and without such prior written consent any
attempted Transfer shall be null and void.

     Section 4.12 Lock-up Agreement. In the event that the Company files a
registration statement pursuant to the demand registration rights of the
Investors under the Securities Act with the Commission covering a firm
commitment public offering at a time when any of the Investors hold Registrable
Securities (as defined in the Registration Rights Agreement), each of the
Stockholders agrees (and all Stockholder Permitted Transferees shall agree) to
enter into an agreement with the underwriter(s) to the effect that such Person
will not offer, sell, contract to sell or otherwise dispose of any shares of
Common Stock or any Convertible Securities for the period of time following the
date of the final prospectus, such period of time to be reasonably determined by
the managing underwriter(s) of such offering.

     Section 4.13 Term. This Agreement shall remain in effect until the closing
of a Qualified Public Offering, provided that Article IV shall terminate in any
event on the tenth anniversary of this Agreement if not earlier terminated, and
provided, further, that Section 4.14 shall survive and remain in full force and
effect for so long as any Investor holds any Shares.

     Section 4.14 Representations and Warranties. Each Party represents and
warrants that (a) this Agreement has been duly authorized, executed and
delivered by such Party and constitutes the valid and binding obligation of such
Party, enforceable in accordance with its terms, and (b) each Party has not
granted and is not a party to any proxy, voting trust or other agreement which
is inconsistent with, conflicts with or violates any provision of this
Agreement. No holder of shares shall grant any proxy or become party to any
voting trust or other agreement which is inconsistent with, conflicts or
violates any provision of this Agreement.

     Section 4.15 Asset Transfer. Fibre Devices agrees to transfer as soon as
possible after the date hereof all of the assets that it holds other than Shares
to the Company on terms and conditions reasonably satisfactory to the Investors.

                            [SIGNATURE PAGE FOLLOWS]

                                       15

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Stockholders
Agreement to be duly executed as of the date first set forth above.

THE COMPANY:                            IPG PHOTONICS CORPORATION

                                        By: /s/ Peter Verghese Mammen
                                            ------------------------------------
                                        Name: Peter Verghese Mammen
                                        Title: Treasurer

FOUNDERS:

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

                                        /s/ Denis V. Gapontsev
                                        ----------------------------------------
                                        Denis V. Gapontsev

                                        /s/ Igor Samartsev
                                        ----------------------------------------
                                        Igor Samartsev

                                        /s/ Eugene Shcherbakov
                                        ----------------------------------------
                                        Eugene Shcherbakov

                                        /s/ Nikolai Platanov
                                        ----------------------------------------
                                        Nikolai Platanov

                                        /s/ Valentin Fomine
                                        ----------------------------------------
                                        Valentin Fomine

                                       16

<PAGE>

                                        IPG FIBRE DEVICES, LTD.

                                        By: /s/ Timothy P.V. Mammen
                                            ------------------------------------
                                        Name: Timothy P.V. Mammen
                                        Title: Company Secretary

                                       17

<PAGE>

INVESTORS:                              TA IX, L.P.

                                        By: TA Associates IX LLC, its General
                                            Partner

                                        By: TA Associates, Inc., its Manager

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

                                        TA/ADVENT VIII L.P.

                                        By: TA Associates VIII LLC, its General
                                            Partner

                                        By: TA Associates, Inc., its General
                                            Partner

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

                                        TA/ATLANTIC AND PACIFIC IV L.P.

                                        By: TA Associates AP IV L.P., its
                                            General Partner

                                        By: TA Associates, Inc., its General
                                            Partner

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

                                        TA EXECUTIVES FUND LLC

                                        By: TA Associates, Inc., its Manager

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

                                        TA INVESTORS LLC

                                        By: TA Associates, Inc., its Manager

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

                                        /s/ Kenneth T. Schiciano
                                        ----------------------------------------
                                        Name: Kenneth T. Schiciano
                                        Title: Authorized Signatory

                                       18

<PAGE>

As of August 31, 2000                   MERRILL LYNCH KECALP L.P. 1999

                                        By: KECALP Inc., its General Partner

                                        By: /s/ Margaret T. Monaco
                                            ------------------------------------
                                        Name: Margaret T. Monaco
                                        Title: Vice President

                                        KECALP INC.

                                        By: /s/ Margaret T. Monaco
                                            ------------------------------------
                                        Name: Margaret T. Monaco
                                        Title: Vice President

                                        KECALP INC., as Nominee for Merrill
                                        Lynch KECALP International L.P. 1999

                                        By: /s/ Margaret T. Monaco
                                            ------------------------------------
                                        Name: Margaret T. Monaco
                                        Title: Vice President

                                        ML IBK POSITIONS, INC.

                                        By: /s/ Joseph S. Valenti
                                            ------------------------------------
                                        Name: Joseph S. Valenti
                                        Title: Vice President

                                       19

<PAGE>

As of August 31, 2000                   THE SOG FUND, LP
                                        By: The Special Opportunities Group LLC,
                                            its General Partner

                                        By: /s/ Christopher G. Miller
                                            ------------------------------------
                                        Name: Christopher G. Miller
                                        Title: Chief Executive Officer

                                       20

<PAGE>

As of August 31, 2000                   THE SOG FUND, II LP
                                        By: The Special Opportunities Group LLC,
                                            its General Partner

                                        By: /s/ Christopher G. Miller
                                            ------------------------------------
                                        Name: Christopher G. Miller
                                        Title: Chief Executive Officer

                                       21

<PAGE>

As of August 31, 2000                   WINSTON/THAYER PARTNERS, L.P.

                                        By: /s/ A. Scott Andrews
                                            ------------------------------------
                                        Name: A. Scott Andrews
                                        Title: Managing Partner

                                       22

<PAGE>

As of October 6, 2000                   APAX EUROPE IV - A, L.P.

                                        By: APAX Europe IV GP, L.P., its
                                            Managing General Partner

                                        By: APAX Europe IV GP Co. Limited, its
                                            Managing General Partner

                                        By: /s/ C.A.E. Helyar
                                            ------------------------------------
                                        Name: C.A.E. Helyar
                                        Title: Director

                                        By: /s/ D.J. Banks
                                            ------------------------------------
                                        Name: D.J. Banks
                                        Title: For and on behalf of
                                               International Private Equity
                                               Services Limited as Secretary

                                        APAX EUROPE IV - B, L.P.

                                        By: APAX Europe IV GP, L.P., its
                                            Managing General Partner

                                        By: APAX Europe IV GP Co. Limited, its
                                            Managing General Partner

                                        By: /s/ C.A.E. Helyar
                                            ------------------------------------
                                        Name: C.A.E. Helyar
                                        Title: Director

                                        By: /s/ D.J. Banks
                                            ------------------------------------
                                        Name: D.J. Banks
                                        Title: For and on behalf of
                                               International Private Equity
                                               Services Limited as Secretary

                                        APAX EUROPE IV - C GMBH & CO., KG

                                        By: APAX Europe IV GP, L.P., its
                                            Managing General Partner

                                        By: APAX Europe IV GP Co. Limited, its
                                            Managing General Partner

                                        By: /s/ C.A.E. Helyar
                                            ------------------------------------
                                        Name: C.A.E. Helyar
                                        Title: Director

                                        By: /s/ D.J. Banks
                                            ------------------------------------
                                        Name: D.J. Banks
                                        Title: For and on behalf of
                                               International Private Equity
                                               Services Limited as Secretary

                                       23

<PAGE>

                                        APAX EUROPE IV - D, L.P.

                                        By: APAX Europe IV GP, L.P., its
                                            Managing General Partner

                                        By: APAX Europe IV GP Co. Limited, its
                                            Managing General Partner

                                        By: /s/ C.A.E. Helyar
                                            ------------------------------------
                                        Name: C.A.E. Helyar
                                        Title: Director

                                        By: /s/ D.J. Banks
                                            ------------------------------------
                                        Name: D.J. Banks
                                        Title: For and on behalf of
                                               International Private Equity
                                               Services Limited as Secretary

                                        APAX EUROPE IV - E, L.P.

                                        By: APAX Europe IV GP, L.P., its
                                            Managing General Partner

                                        By: APAX Europe IV GP Co. Limited, its
                                            Managing General Partner

                                        By: /s/ C.A.E. Helyar
                                            ------------------------------------
                                        Name: C.A.E. Helyar
                                        Title: Director

                                        By: /s/ D.J. Banks
                                            ------------------------------------
                                        Name: D.J. Banks
                                        Title: For and on behalf of
                                               International Private Equity
                                               Services Limited as Secretary

                                        APAX EUROPE IV - F, C.V.

                                        By: APAX Europe IV GP, L.P., it Managing
                                            General Partner

                                        By: APAX Europe IV GP Co. Limited, its
                                            Managing General Partner

                                        By: /s/ C.A.E. Helyar
                                            ------------------------------------
                                        Name: C.A.E. Helyar
                                        Title: Director

                                        By: /s/ D.J. Banks
                                            ------------------------------------
                                        Name: D.J. Banks
                                        Title: For and on behalf of
                                               International Private Equity
                                               Services Limited as Secretary

                                       24

<PAGE>

                                        APAX EUROPE IV - G, C.V.

                                        By: APAX Europe IV GP, L.P., its
                                           Managing General Partner

                                        By: APAX Europe IV GP Co. Limited, its
                                            Managing General Partner

                                        By: /s/ C.A.E. Helyar
                                            ------------------------------------
                                        Name: C.A.E. Helyar
                                        Title: Director

                                        By: /s/ D.J. Banks
                                            ------------------------------------
                                        Name: D.J. Banks
                                        Title: For and on behalf of
                                               International Private Equity
                                               Services Limited as Secretary

                                        APAX EUROPE IV -H GMBH & CO. K.G.

                                        By: APAX Europe IV GP, L.P., its
                                            attorney

                                        By: APAX Europe IV GP Co. Limited, its
                                            Managing General Partner

                                        By: /s/ C.A.E. Helyar
                                            ------------------------------------
                                        Name: C.A.E. Helyar
                                        Title: Director

                                        By: /s/ D.J. Banks
                                            ------------------------------------
                                        Name: D.J. Banks
                                        Title: For and on behalf of
                                               International Private Equity

                                       25

<PAGE>

As of December 6, 2000                  MARCONI CAPITAL LIMITED

                                        By: /s/ Mark Aslett
                                            ------------------------------------
                                        Name: Mark Aslett
                                        Title: Managing Partner

                                       26
<PAGE>

                                    EXHIBIT A

                            Form of Joinder Agreement

     The undersigned hereby agrees, effective as of the date hereof, to become a
party to that certain Stockholders Agreement (the "Agreement") dated as of
__________, 2000, by and among IPG Photonics Corporation (the "Company") and the
parties named therein and for all purposes of the Agreement, the undersigned
shall be included within the term "Stockholder" (as defined in the Agreement).
The address and facsimile number to which notices may be sent to the undersigned
is as follows:

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

Facsimile No.____________________.

                                        ----------------------------------------
                                        [NAME OF UNDERSIGNED]

                                       27

<PAGE>

AMENDMENT TO STOCKHOLDERS AGREEMENT, dated as of August 13, 2003 (this
"Amendment"), is made and entered into by and among IPG Photonics Corporation, a
Delaware corporation (the "Company"), the stockholders of the Company identified
as such on the signature pages hereto (the "Founders"), IP Fibre Devices Ltd., a
U.K. company ("Fibre Devices"), the persons identified on the signature pages to
the Series B Preferred Stockholders Agreement (as defined below) as the
Investors and any assignees or transferees thereof. Capitalized terms used
herein but otherwise not defined shall have the meaning given to such terms in
the Series B Preferred Stockholders Agreement.

     WHEREAS, the Stockholders, the Investors and the Company have entered into
that certain Stockholders Agreement, dated as of August 30, 2000 (the "Series B
Preferred Stockholders Agreement"); and

     WHEREAS, the Company is issuing shares of Series D Preferred Stock, par
value $.0001 per share, of the Company (the "Series D Preferred Stock") to
stockholders identified in the Series D Preferred Stockholders Agreement (the
"Series D Preferred Stockholders Agreement") between the Company and such
stockholders (the "Series D Preferred Stockholders"); and

     WHEREAS, the Company, the Investors and the Stockholders have agreed to
grant certain rights under the Series B Preferred Stockholders Agreement to the
Series D Preferred Stockholders, and the parties desire to amend certain
provisions of the Series B Preferred Stockholders Agreement to grant such
rights.

     NOW, THEREFORE, in consideration of the mutual agreements contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:

     1. New Section 2.9. Section 2 of the Series B Preferred Stockholders
Agreement shall be amended by adding a new Section 2.9 which shall provide:

          Section 2.9. Notwithstanding anything to the contrary, solely for the
          purposes of Sections 2.3 and 2.4 hereof (i) the term "Investor" shall
          include Series D Preferred Stockholders and its permitted transferees
          under the Series D Preferred Stockholders Agreement provided such
          transferee becomes party to this Agreement by executing a joinder
          agreement, (ii) the term "Preferred Stock" shall also include the
          Series D Preferred Stock, and (iii) the term "Convertible Preferred
          Stock" shall also include the Series D Preferred Stock; provided in
          each case that such Series D Preferred Stockholder executes and
          delivers to the Company a counterpart signature to this Agreement
          agreeing to be bound by the terms of Sections 2.3, 2.4, 2.8, 4.1 to
          4.11, 4.13 and 4.14 of this Agreement; and provided further that
          Series D Preferred Stockholders shall be entitled to exercise their
          rights under Section 2.3 only if any of the Series B Preferred
          Stockholders shall exercise their rights under such Section.

     2. Amendment to Section 2.3(b). Section 2.3(b) of the Series B Preferred
Stockholders Agreement shall be amended in its entirety by replacing it with the
following:

          Each Investor shall have the right to sell a portion of its Shares
          pursuant to the Transaction Offer or the Company Acceptance Notice, as
          applicable, which is equal to or less than the product obtained by
          multiplying (i) the total number of Shares available for sale to the
          Buyer or the Company subject to the

<PAGE>

          Transaction Offer or the Company Acceptance Notice, as applicable, by
          (ii) the product of (Y) a fraction, the numerator of which is the
          total number of Shares owned by all Investors participating in the
          transaction and the denominator of which is the total number of Shares
          held by all Investors and the Transferring Stockholder (including any
          of such Transferring Stockholder's Stockholder Permitted Transferees),
          multiplied by (Z) a fraction, the numerator of which is the amount
          invested or deemed invested in the Company as represented by the
          liquidation preference value for the Shares owned or previously owned
          (as a result of conversion of convertible shares, but excluding shares
          previously sold) by the Investor and the denominator of which is the
          amount invested or deemed invested in the Company as represented by
          total liquidation preference value for the Shares owned or previously
          owned (as a result of conversion of convertible shares, but excluding
          shares previously sold) by all Investors participating in the
          transaction; in each case as of the date of the Offer Notice or
          Company Acceptance Notice, as applicable, and as determined in
          accordance with Section 1.3 hereof, subject to increase as hereinafter
          provided. In the event an Investor does not elect to sell the full
          amount of such Shares which such Investor is entitled to sell pursuant
          to this Section 2.3, then any Investors who have elected to sell
          Shares shall have the right to sell, on a pro-rata basis with any
          other Investors and up to the maximum number of Shares stated in each
          such Investor's Co-Sale Acceptance Notice, any Shares not elected to
          be sold by such Investor.

     3. Amendment to Section 2.4. Section 2.4 of the Series B Preferred
Stockholders Agreement shall be amended by deleting the proviso in the first
sentence thereof and replacing it with the following:

          provided, however, that the Drag Along Parties shall not be entitled
          to require any Investor to participate in a Drag-Along Sale pursuant
          to this Section 2.4 unless all other Investors are required to
          participate in such Drag Along Sale and (i) each Investor holding
          Series B Convertible Participating Preferred Stock receives an amount
          per Share (giving effect to the provisions of Section B.3 of the
          Company's Amended and Restated Certificate of Incorporation) equal to
          at least $62.50 per share, in the case of an offering which closes
          after August 31, 2002 or such lower amount approved by the Majority
          Interest (in each case appropriately adjusted for any stock split,
          stock dividend, combination, recapitalization and the like), and (ii)
          each Investor holding Series D Preferred Stock receives an amount per
          Share equal to at least $1.90 per share (in each case appropriately
          adjusted for any stock split, stock dividend, combination,
          recapitalization and the like).

     4. Amendment to Section 3.1. The second paragraph of Section 3.1 of the
Series B Stockholders Agreement shall be amended by inserting a new clause (x)
before the "." in the first sentence as follows:

          and (x) Series D Convertible Preferred Stock, par value $.0001, of the
          Company (the "Series D Preferred Stock") issued by the Company, a
          Convertible Promissory Note in

                                        2

<PAGE>

          the aggregate principal amount of $5,100,000 convertible into shares
          of Series D Preferred Stock issued pursuant to JDS Uniphase
          Corporation pursuant to a settlement agreement, and the shares of
          Common Stock and Series D Preferred Stock issuable upon conversion of
          the Preferred Stock and the Convertible Promissory Note.

     5. Amendment to Section 4.15. Section 4.15 of the Series B Preferred
Stockholders Agreement shall be amended in its entirety by replacing it with the
following:

          Section 4.15 Asset Transfer. Fibre Devices agrees to transfer to the
          Company as soon as possible after the date hereof all of the
          intellectual property assets that it holds on terms and conditions
          reasonably satisfactory to the Investors and, that $1,600,000
          principal amount of a loan to the Company from Fibre Devices
          outstanding as of August 1, 2003, shall not be repaid to Fibre Devices
          until the earlier of (i) the capital invested in the Company by the
          holders of the Convertible Preferred Stock shall be returned to them
          and then such loan from Fibre Devices may be repaid only pro rata with
          the return of capital to such Investors, (ii) the Convertible
          Preferred Stock shall be converted into Common Stock, or (iii) a
          majority of the Convertible Preferred Stock shall be sold or
          transferred to third parties which are not Affiliates of the
          Investors.

     6. New Section 4.16. Section 4 of the Series B Preferred Stockholders
Agreement shall be amended by adding a new Section 4.16 which shall provide:

          Section 4.16. Settlement Agreement. In consideration for the granting
          of the consents required to give effect to the transactions
          contemplated by the Settlement Agreement dated June 25, 2003 between
          the Company and JDSU Uniphase Corporation (the "Settlement Agreement")
          (i) the Company shall not, except with the affirmative vote or prior
          written consent of holders of the Majority Interest of Convertible
          Preferred Stock, authorize or issue, or obligate itself to issue, (a)
          any equity security ranking pari passu to the Series B Preferred Stock
          having (I) a preference or similar right in connection with any
          Liquidation Event or transaction that could be deemed a Liquidation
          Event (as described in Article Fourth, Section B.3.3 of the Company's
          Amended and Restated Certificate of Incorporation) or (II) a
          redemption price, in either case exceeding the amount paid for such
          security plus unpaid dividends (not in excess of 12% per annum) to
          which it shall be entitled; or (b) any convertible debt or other debt
          with any equity participation ranking junior or pari passu to the
          Convertible Preferred Stock as to liquidation, sale or merger
          preferences, conversion, redemption or dividend rights or with any
          special voting rights in an aggregate amount exceeding $25 million
          outstanding at any one time (excluding the Convertible Promissory Note
          issued pursuant to the Settlement Agreement) (it being agreed for
          purposes of greater clarity that Article Fourth, Section B.8.2 of the
          Company's Amended and Restated Certificate of Incorporation shall be
          interpreted to prohibit the Company from issuing (I) any convertible
          debt or other debt with any equity participation only if the equity
          participation of such

                                        3

<PAGE>

          convertible debt or other debt, or (II) other equity security if such
          equity security, in case of either clause (I) or (II) shall rank
          senior to the Convertible Preferred Stock as to liquidation, sale or
          merger preferences, conversion, redemption or dividend rights or with
          any special voting rights), and (ii) the Company shall pay the legal
          fees of the Series B Preferred Stockholders in connection with the
          review and negotiation of the documents necessary to effect such
          Settlement Agreement.

     7. No Waiver; Representations. Nothing in this Amendment shall constitute a
waiver by the Investors or the Company of any breach or default on the part of
the other party to the Series B Preferred Stockholders Agreement. Each of the
Investors and the Company represent and warrant that the execution, delivery and
performance of this Amendment has been duly authorized by all necessary
corporate or other action, and do not contravene any of their governing or
organizational documents or any material contracts to which they are a party.

     8. Governing Law. The validity, construction and enforceability of this
Amendment shall be governed in all respects by the internal laws (as opposed to
conflict provisions) of the State of New York.

     9. No Other Agreements. This Amendment constitutes the entire agreement of
the parties with respect to the subject matter hereof and supersedes and
preempts all prior agreements, understandings or representations, both written
and oral, between the parties with respect to the subject matter hereof.

     10. Effect. Except as amended hereby, the Series B Preferred Stockholders
Agreement shall remain in full force and effect in accordance with its terms.

     11. Counterparts. The parties may execute multiple counterparts of this
Amendment. Each executed counterpart shall be deemed an original, but all of
them together represent one and the same agreement.

     IN WITNESS WHEREOF, the parties hereto caused this Amendment to
Stockholders Agreement to be duly executed as of the date first written above.

                                        COMPANY:

                                        IPG PHOTONICS CORPORATION

                                        By: /s/ Valentin P. Gapontsev
                                            ------------------------------------
                                        Name: Valentin P. Gapontsev
                                        Title: Chairman & CEO

                                        FOUNDERS:

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

                                        /s/ Denis V. Gapontsev
                                        ----------------------------------------
                                        Denis V. Gapontsev

                                        4

<PAGE>

                                        /s/ Igor Samartsev
                                        ----------------------------------------
                                        Igor Samartsev

                                        /s/ Eugene Shcherbakov
                                        ----------------------------------------
                                        Eugene Scherbakov

                                        /s/ Nikolai Platanov
                                        ----------------------------------------
                                        Nikolai Platanov

                                        /s/ Valentin Fomine
                                        ----------------------------------------
                                        Valentin Fomine

                                        IP FIBRE DEVICES, LTD.

                                        By: /s/ Valentin P. Gapontsev
                                            ------------------------------------
                                        Name: Valentin P. Gapontsev
                                        Title: Managing Director

     The undersigned hereby agrees, effective as of the date hereof, to become a
party to Sections 2.3, 2.4, 2.8, 4.1 to 4.11, 4.13 and 4.14 of that certain
Stockholders Agreement (the "Agreement") dated as of August 30, 2000, by and
among IPG Photonics Corporation (the "Company") and the parties named therein
and for all purposes of the Agreement, the undersigned shall be included within
the term "Investor" (as defined in the Agreement) for such Sections. The address
and facsimile number to which notices may be sent to the undersigned is as
follows:

                                        JDS Uniphase Corporation
                                        1768 Automation Parkway
                                        San Jose, California 95131
                                        Attention: General Counsel
                                        Facsimile No.: (408) 546-4350

                                        JDS UNIPHASE CORPORATION

                                        By: /s/ Christopher Dewees
                                            ------------------------------------
                                        Name: Christopher Dewees
                                        Title: Senior VP

                                        5

<PAGE>

                                        HOLDERS:

                                        TA IX, L.P.

                                        By: TA Associates IX LLC, Its General
                                            Partner

                                        By: TA Associates, Inc., its Manager

                                        By: /s/ Michael C. Child
                                            ------------------------------------
                                        Name: Michael C. Child
                                        Title: Managing Director

                                        TA/ADVENT VIII L.P.

                                        By: TA Associates VIII LLC, Its General
                                            Partner

                                        By: TA Associates, Inc., its Manager

                                        By: /s/ Michael C. Child
                                            ------------------------------------
                                        Name: Michael C. Child
                                        Title: Managing Director

                                        TA/ATLANTIC AND PACIFIC IV L.P.

                                        By: TA Associates AP IV L.P., Its
                                            General Partner

                                        By: /s/ Michael C. Child
                                            ------------------------------------
                                        Name: Michael C. Child
                                        Title: Managing Director

                                        TA EXECUTIVES FUND LLC

                                        By: TA Associates, Inc., its Manager

                                        By: /s/ Michael C. Child
                                            ------------------------------------
                                        Name: Michael C. Child
                                        Title: Managing Director

                                        TA INVESTORS LLC

                                        By: TA Associates, Inc., its Manager

                                        By: /s/ Michael C. Child
                                            ------------------------------------
                                        Name: Michael C. Child
                                        Title: Authorized Signatory

                                        6

<PAGE>

                                        Merrill Lynch Ventures L.P. 2001

                                        By: Merrill Lynch Ventures LLC, its
                                            General Partner

                                        By: /s/ Mandakini Puri
                                            ------------------------------------
                                        Name: Mandakini Puri
                                        Title: Executive Vice President

                                        ML IBK Positions Inc.

                                        By: /s/ Mandakini Puri
                                            ------------------------------------
                                        Name: Mandakini Puri
                                        Title: Executive Vice President

                                        Merrill Lynch KECALP L.P. 1999

                                        By: KECALP Inc., its General Partner

                                        By: /s/ Mandakini Puri
                                            ------------------------------------
                                        Name: Mandakini Puri
                                        Title: Executive Vice President

                                        KECALP Inc., as nominee for
                                        Merrill Lynch KECALP International L.P.
                                        1999

                                        By: /s/ Mandakini Puri
                                            ------------------------------------
                                        Name: Mandakini Puri
                                        Title: Executive Vice President

                                        Merrill Lynch Taurus 2000 Fund, L.P.

                                        By: ML Taurus, Inc., its General Partner

                                        By: /s/ Mandakini Puri
                                            ------------------------------------
                                        Name: Mandakini Puri
                                        Title: Executive Vice President

                                        7

<PAGE>

                                        APAX WW NOMINEES LTD A/C ACU
                                        APAX EUROPE IV GP CO. LIMITED

                                        By: /s/ S.N. Green
                                            ------------------------------------
                                        Name: S.N. Green
                                        Title: Director

                                        By: /s/ P.A. Beecroft
                                            ------------------------------------
                                        Name: P.A. Beecroft
                                        Title: Director

                                        8

<PAGE>

                                        WINSTON/THAYER PARTNERS, L.P.

                                        By: /s/ A. Scott Andrews
                                            ------------------------------------
                                        Name: A. Scott Andrews
                                        Title: Managing Partner

                                        9

<PAGE>

                                        MARCONI CAPITAL LIMITED

                                        By: /s/ Craig George Donaldson
                                            ------------------------------------
                                        Name: Craig George Donaldson
                                        Title: Director

                                       10

<PAGE>

AMENDMENT TO STOCKHOLDERS AGREEMENT, dated as of December 21, 2005 (this
"Amendment"), is made and entered into by and among IPG Photonics Corporation, a
Delaware corporation (the "Company"), the stockholders of the Company identified
as such on the signature pages hereto (the "Founders"), IP Fibre Devices Ltd., a
U.K. company ("Fibre Devices"), the persons identified on the signature pages to
the Series B Preferred Stockholders Agreement (as defined below) as the
Investors and any assignees or transferees thereof. Capitalized terms used
herein but otherwise not defined shall have the meaning given to such terms in
the Series B Preferred Stockholders Agreement.

     WHEREAS, the Stockholders, the Investors and the Company have entered into
that certain Stockholders Agreement, dated as of August 30, 2000, and amended
such agreement on August 13, 2003 (as amended, the "Series B Preferred
Stockholders Agreement"); and

     WHEREAS, the Company and the Investors have negotiated certain changes to
the rights of the Investors in connection with amendments to the Company's
Certificate of Incorporation and the Warrants held by the Investors; and

     WHEREAS, the Investors and the Investors have agreed to amend certain
provisions of the Series B Preferred Stockholders Agreement to allow repayments
of loans from Fibre Devices provides that certain conditions are met.

     NOW, THEREFORE, in consideration of the mutual agreements contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:

     1. Amendment to Section 4.15. Section 4.15 of the Series B Preferred
Stockholders Agreement shall be amended in its entirety by replacing it with the
following:

          Section 4.15 Asset Transfer. Fibre Devices agrees to transfer to the
          Company as soon as possible after the date hereof all of the
          intellectual property assets that it holds on terms and conditions
          reasonably satisfactory to the Investors and, that $1,600,000
          principal amount of a loan to the Company from Fibre Devices
          outstanding as of August 1, 2003, shall not be repaid to Fibre Devices
          until the earlier of (i) the capital invested in the Company by the
          holders of the Convertible Preferred Stock shall be returned to them
          and then such loan from Fibre Devices may be repaid only pro rata with
          the return of capital to such Investors, (ii) the Convertible
          Preferred Stock shall be converted into Common Stock, or (iii) a
          majority of the Convertible Preferred Stock shall be sold or
          transferred to third parties which are not Affiliates of the
          Investors; provided that the Company, at any time, may repay the
          entire amount of the loan due to Fibre Devices outstanding on December
          21, 2005, plus interest, pursuant to an exchange in which the Company
          assigns to Fibre Devices a promissory note, plus interest, made by
          Valentin P. Gapontsev payable to the Company in an amount not less
          than the amount of the loan due to Fibre Devices.

     2. No Waiver; Representations. Nothing in this Amendment shall constitute a
waiver by the Investors or the Company of any breach or default on the part of
the other party to the Series B Preferred Stockholders Agreement. Each of the
Investors and the Company represent and warrant that the execution, delivery and
performance of this Amendment has been duly authorized by all

<PAGE>

necessary corporate or other action, and do not contravene any of their
governing or organizational documents or any material contracts to which they
are a party.

     3. Governing Law. The validity, construction and enforceability of this
Amendment shall be governed in all respects by the internal laws (as opposed to
conflict provisions) of the State of New York.

     4. No Other Agreements. This Amendment constitutes the entire agreement of
the parties with respect to the subject matter hereof and supersedes and
preempts all prior agreements, understandings or representations, both written
and oral, between the parties with respect to the subject matter hereof.

     5. Effect. Except as amended hereby, the Series B Preferred Stockholders
Agreement shall remain in full force and effect in accordance with its terms.

     6. Counterparts. The parties may execute multiple counterparts of this
Amendment. Each executed counterpart shall be deemed an original, but all of
them together represent one and the same agreement.

          IN WITNESS WHEREOF, the parties hereto caused this Amendment to
Stockholders Agreement to be duly executed as of the date first written above.

                                        COMPANY:

                                        IPG PHOTONICS CORPORATION

                                        By: /s/ Valentin P. Gapontsev
                                            ------------------------------------
                                        Name: Valentin P. Gapontsev
                                        Title: Chairman & CEO

                                        FOUNDERS:

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

                                        /s/ Denis V. Gapontsev
                                        ----------------------------------------
                                        Denis V. Gapontsev

                                        /s/ Igor Samartsev
                                        ----------------------------------------
                                        Igor Samartsev

                                        /s/ Eugene Shcherbakov
                                        ----------------------------------------
                                        Eugene Scherbakov

                                        /s/ Nikolai Platanov
                                        ----------------------------------------
                                        Nikolai Platanov

                                        2

<PAGE>

                                        /s/ Valentin Fomine
                                        ----------------------------------------
                                        Valentin Fomine

                                        IP FIBRE DEVICES, LTD.

                                        By: /s/ Valentin P. Gapontsev
                                            ------------------------------------
                                        Name: Valentin P. Gapontsev
                                        Title: Managing Director

                                        3
<PAGE>

                                        HOLDERS:

                                        TA IX, L.P.
                                        By: TA Associates IX LLC, Its General
                                            Partner
                                        By: TA Associates, Inc., its Manager

                                        By: /s/ Michael Child
                                            ------------------------------------
                                        Name: Michael Child
                                        Title: Managing Director

                                        TA/ADVENT VIII L.P.
                                        By: TA Associates VIII LLC, Its General
                                            Partner
                                        By: TA Associates, Inc., its Manager

                                        By: /s/ Michael Child
                                            ------------------------------------
                                        Name: Michael Child
                                        Title: Managing Director

                                        TA/ATLANTIC AND PACIFIC IV L.P.
                                        By: TA Associates AP IV L.P., Its
                                            General Partner

                                        By: /s/ Michael Child
                                            ------------------------------------
                                        Name: Michael Child
                                        Title: Managing Director

                                        TA EXECUTIVES FUND LLC
                                        By: TA Associates, Inc., its Manager

                                        By: /s/ Michael Child
                                            ------------------------------------
                                        Name: Michael Child
                                        Title: Managing Director

                                        TA INVESTORS LLC
                                        By: TA Associates, Inc., its Manager

                                        By: /s/ Michael Child
                                            ------------------------------------
                                        Name: Michael Child
                                        Title: Authorized Signatory

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

                                        4

<PAGE>

                                        Merrill Lynch Ventures L.P. 2001
                                        By: Merrill Lynch Ventures LLC, its
                                        General Partner

                                        By: /s/ Nathan Thorne
                                            ------------------------------------
                                        Name: Nathan Thorne
                                        Title:
                                               ---------------------------------

                                        ML IBK Positions Inc.

                                        By: /s/ Nathan Thorne
                                            ------------------------------------
                                        Name: Nathan Thorne
                                        Title:
                                               ---------------------------------

                                        Merrill Lynch KECALP L.P. 1999
                                        By: KECALP Inc., its General Partner

                                        By: /s/ Nathan Thorne
                                            ------------------------------------
                                        Name: Nathan Thorne
                                        Title:
                                               ---------------------------------

                                        KECALP Inc., as nominee for Merrill
                                        Lynch KECALP International L.P. 1999

                                        By: /s/ Nathan Thorne
                                            ------------------------------------
                                        Name: Nathan Thorne
                                        Title:
                                               ---------------------------------

                                        Merrill Lynch Taurus 2000 Fund, L.P.
                                        By: ML Taurus, Inc., its General Partner

                                        By: /s/ Nathan Thorne
                                            ------------------------------------
                                        Name: Nathan Thorne
                                        Title:
                                               ---------------------------------

                                        5

<PAGE>

                                        APAX EUROPE IV - A, L.P.
                                        By: APAX Europe IV GP, L.P., its
                                            Managing General Partner
                                        By: APAX Europe IV GP Co. Limited, its
                                            Managing General Partner

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

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

                                        APAX EUROPE IV - B, L.P.

                                        By: APAX Europe IV GP, L.P., its
                                            Managing General Partner
                                        By: APAX Europe IV GP Co. Limited, its
                                            Managing General Partner

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

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

                                        APAX EUROPE IV - C GMBH & CO., KG
                                        By: APAX Europe IV GP, L.P., its
                                            Managing General Partner
                                        By: APAX Europe IV GP Co. Limited, its
                                            Managing General Partner

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

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

                                        6

<PAGE>

                                        APAX EUROPE IV - D, L.P.

                                        By: APAX Europe IV GP, L.P., its
                                            Managing General Partner

                                        By: APAX Europe IV GP Co. Limited, its
                                            Managing General Partner

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

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

                                        APAX EUROPE IV - E, L.P.

                                        By: APAX Europe IV GP, L.P., its
                                            Managing General Partner

                                        By: APAX Europe IV GP Co. Limited, its
                                            Managing General Partner

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

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

                                        APAX EUROPE IV - F, C.V.

                                        By: APAX Europe IV GP, L.P., its
                                            Managing General Partner

                                        By: APAX Europe IV GP Co. Limited, its
                                            Managing General Partner

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

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

                                        7

<PAGE>

                                        APAX EUROPE IV - G, C.V.

                                        By: APAX Europe IV GP, L.P., its
                                            Managing General Partner

                                        By: APAX Europe IV GP Co. Limited, its
                                            Managing General Partner

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

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

                                        APAX EUROPE IV - H GMBH & CO., KG

                                        By: APAX Europe IV GP, L.P., its
                                            attorney

                                        By: APAX Europe IV GP Co. Limited, its
                                            Managing General Partner

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

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

                                        8

<PAGE>

                                        BAYVIEW 2000, LP

                                        By: Bayview 2000 GP, LLC, its General
                                            Partner

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

                                        THE SOG FUND, LP

                                        By: The Special Opportunities Group LLC,
                                            its General Partner

                                        By: /s/ Christopher B. Miller
                                            ------------------------------------
                                        Name: Christopher B. Miller
                                        Title: CEO

                                        THE SOG FUND II, LP

                                        By: The Special Opportunities Group LLC,
                                            its General Partner

                                        By: /s/ Christopher B. Miller
                                            ------------------------------------
                                        Name: Christopher B. Miller
                                        Title: CEO

                                        WINSTON/THAYER PARTNERS, L.P.

                                        By: /s/ Michael A. Bluestein
                                            ------------------------------------
                                        Name: Michael A. Bluestein
                                        Title: Principal

                                        MARCONI CAPITAL LIMITED

                                        By: /s/ Kevin David Smith
                                            ------------------------------------
                                        Name: Kevin David Smith
                                        Title: Director

                                        9

<PAGE>

AMENDMENT TO STOCKHOLDERS AGREEMENT, dated as of July 31, 2006 (this
"Amendment"), is made and entered into by and among IPG Photonics Corporation, a
Delaware corporation (the "Company"), the stockholders of the Company identified
as such on the signature pages hereto (the "Founders"), IP Fibre Devices Ltd., a
U.K. company ("Fibre Devices"), the persons identified on the signature pages to
the Series B Preferred Stockholders Agreement (as defined below) as the
Investors and any assignees or transferees thereof. Capitalized terms used
herein but otherwise not defined shall have the meaning given to such terms in
the Series B Preferred Stockholders Agreement.

     WHEREAS, the Stockholders, the Investors and the Company have entered into
that certain Stockholders Agreement, dated as of August 30, 2000, amended such
agreement on August 13, 2003, and amended further on December 21, 2005 (as
amended, the "Series B Preferred Stockholders Agreement"); and

     WHEREAS, the Company and the Investors have negotiated certain changes to
the rights of the Investors in connection with amendments to the Company's
Certificate of Incorporation and the Warrants held by the Investors; and

     WHEREAS, the Investors and the Investors have agreed to amend certain
provisions of the Series B Preferred Stockholders Agreement to allow repayments
of loans from Fibre Devices provides that certain conditions are met.

     NOW, THEREFORE, in consideration of the mutual agreements contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:

     1. Amendment to Section 1.4 The definition of "Qualified Public Offering"
in Section 1.4 of the Series B Preferred Stockholders Agreement shall be amended
in its entirety by replacing it with the following:

          "QPO" or "Qualified Public Offering" shall mean an underwritten public
          offering to the public by the Company that would constitute a QPO or
          Qualified Public Offering as defined in Article Fourth, Section B.6.2
          of the Certificate of Incorporation of the Company, as amended from
          time to time.

     2 Amendment to Section 3.1. The second paragraph of Section 3.1 of the
Series B Stockholders Agreement shall be amended by amending clause (i) in the
first sentence as follows:

          (i) the issuance of up to an aggregate of shares of Common Stock (as
          appropriately adjusted for any stock split, combination,
          reorganization, recapitalization, stock distribution, stock dividend
          or similar event issued or issuable in connection with, or upon the
          exercise of, options or other awards granted or to be granted to
          employees, officers, directors or consultants of the Company pursuant
          to the following plans: (A) the Company's 2000 Incentive Compensation
          Plan up to 8,750,000 shares, (B) the Company's 2006 Incentive
          Compensation Plan up to 6,000,0000 shares and (C) the Company's
          Non-Employee Directors Stock Plan up to 250,000 shares (collectively,
          the "Plans"), each in connection with their service as directors of
          the Company, their employment by the Company or their retention as
          consultants by the Company, in each case authorized by the Board of
          Directors and issued pursuant to any of such Plans or any other equity
          incentive plan approved by a Majority Interest ("Excluded Shares"),
          plus such number of Excluded Shares that are repurchased by the
          Company from such Persons after August 30, 2000

<PAGE>

          in accordance with the Company's Amended and Restated Certificate of
          Incorporation, as amended from time to time, pursuant to contractual
          rights held by the Company and at repurchase prices not exceeding the
          respective original purchase prices (appropriately adjusted to reflect
          the occurrence of any event described in Section A.7(b) of the
          Company's Amended and Restated Certificate of Incorporation) paid to
          such Persons to the Company therefore,

     3. Amendment to Section 4.15. Section 4.15 of the Series B Preferred
Stockholders Agreement shall be amended in its entirety by replacing it with the
following:

          Section 4.15 Asset Transfer. Fibre Devices agrees to transfer to the
          Company as soon as possible after the date hereof all of the
          intellectual property assets that it holds on terms and conditions
          reasonably satisfactory to the Investors and, that $1,600,000
          principal amount of a loan to the Company from Fibre Devices
          outstanding as of August 1, 2003, shall not be repaid to Fibre Devices
          until the earlier of (i) the capital invested in the Company by the
          holders of the Convertible Preferred Stock shall be returned to them
          and then such loan from Fibre Devices may be repaid only pro rata with
          the return of capital to such Investors, (ii) the Convertible
          Preferred Stock shall be converted into Common Stock, or (iii) a
          majority of the Convertible Preferred Stock shall be sold or
          transferred to third parties which are not Affiliates of the
          Investors; provided that the Company, at any time, may repay the
          entire amount of the loan due to Fibre Devices outstanding, plus
          interest, (the "IPFD Loan") pursuant to an exchange in which the
          Company exchanges a promissory note, plus interest, made by Valentin
          P. Gapontsev payable to the Company (the "Gapontsev Note") with
          Valentin P. Gapontsev for (A) the IPFD Loan and (B) cash in an amount
          equal to principal and interest owing under Gapontsev Note less the
          principal and interest owing under IPFD Loan as of the date of the
          exchange..

     4. No Waiver; Representations. Nothing in this Amendment shall constitute a
waiver by the Investors or the Company of any breach or default on the part of
the other party to the Series B Preferred Stockholders Agreement. Each of the
Investors and the Company represent and warrant that the execution, delivery and
performance of this Amendment has been duly authorized by all necessary
corporate or other action, and do not contravene any of their governing or
organizational documents or any material contracts to which they are a party.

     5. Governing Law. The validity, construction and enforceability of this
Amendment shall be governed in all respects by the internal laws (as opposed to
conflict provisions) of the State of New York.

     6. No Other Agreements. This Amendment constitutes the entire agreement of
the parties with respect to the subject matter hereof and supersedes and
preempts all prior agreements, understandings or representations, both written
and oral, between the parties with respect to the subject matter hereof.

     7. Effect. Except as amended hereby, the Series B Preferred Stockholders
Agreement shall remain in full force and effect in accordance with its terms.

                                        2

<PAGE>

     8. Counterparts. The parties may execute multiple counterparts of this
Amendment. Each executed counterpart shall be deemed an original, but all of
them together represent one and the same agreement.

                            [Signature Page Follows]

                                        3

<PAGE>

     IN WITNESS WHEREOF, the parties hereto caused this Amendment to
Stockholders Agreement to be duly executed as of the date first written above.

                                        COMPANY:

                                        By: /s/ Valentin P. Gapontsev
                                            ------------------------------------
                                        Name: Valentin P. Gapontsev
                                        Title: Chairman & CEO

                                        FOUNDERS:

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

                                        /s/ Denis V. Gapontsev
                                        ----------------------------------------
                                        Denis V. Gapontsev

                                        /s/ Igor Samartsev
                                        ----------------------------------------
                                        Igor Samartsev

                                        /s/ Eugene Shcherbakov
                                        ----------------------------------------
                                        Eugene Scherbakov

                                        /s/ Nikolai Platanov
                                        ----------------------------------------
                                        Nikolai Platanov

                                        /s/ Valentin Fomine
                                        ----------------------------------------
                                        Valentin Fomine

                                        IP FIBRE DEVICES, LTD.

                                        By: /s/ Valentin P. Gapontsev
                                            ------------------------------------
                                        Name: Valentin P. Gapontsev
                                        Title: Managing Director

                                        4

<PAGE>

                                        HOLDERS:

                                        TA IX, L.P.
                                        By: TA Associates IX LLC, Its General
                                            Partner

                                        By: TA Associates, Inc., its Manager

                                        By: /s/ Michael C. Child
                                            ------------------------------------
                                        Name: Michael C. Child
                                        Title: Managing Director

                                        TA/ADVENT VIII L.P.
                                        By: TA Associates VIII LLC, Its General
                                            Partner

                                        By: TA Associates, Inc., its Manager

                                        By: /s/ Michael C. Child
                                            ------------------------------------
                                        Name: Michael C. Child
                                        Title: Managing Director

                                        TA/ATLANTIC AND PACIFIC IV L.P.
                                        By: TA Associates AP IV L.P., Its
                                            General Partner

                                        By: /s/ Michael C. Child
                                            ------------------------------------
                                        Name: Michael C. Child
                                        Title: Managing Director

                                        TA EXECUTIVES FUND LLC
                                        By: TA Associates, Inc., its Manager

                                        By: /s/ Michael C. Child
                                            ------------------------------------
                                        Name: Michael C. Child
                                        Title: Managing Director

                                        TA INVESTORS LLC
                                        By: TA Associates, Inc., its Manager

                                        By: /s/ Michael C. Child
                                            ------------------------------------
                                        Name: Michael C. Child
                                        Title: Managing Director

                                        5

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