Document:

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                                                                     EXHIBIT 4.4

                         REGISTRATION RIGHTS AGREEMENT
                         -----------------------------

     This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is dated as of the
30th day of August, 2000 by and among IPG Photonics Corporation., a Delaware
corporation (the "Company"), and the persons designated as Investors on the
signature pages hereto and any assignees or transferees thereof (each, an
"Investor" and collectively, the "Investors").

     WHEREAS, the parties to this Agreement have entered into a certain Stock
Purchase Agreement, dated as of August 30, 2000  (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 ("Series B Convertible Preferred Stock"), which shares are
convertible into shares of Common Stock, $.0001 par value per share, of the
Company ("Common Stock") and warrants to purchase Common Stock as described in
the Purchase Agreement ("Warrants"); and

     WHEREAS, the execution of this Agreement is an inducement and a condition
to the purchase by the Investors of the Series B Convertible Preferred Stock and
the Warrants under the Purchase Agreement.

     NOW, THEREFORE, in consideration of the foregoing and the mutual promises
of the parties herein contained, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the Company and the
Investors hereby covenant and agree with each other as follows:

     1.   Certain Definitions.  As used in this Agreement, the following terms
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shall have the following respective meanings:

          "Board of Directors" means the Board of Directors of the Company.
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          "Commission" shall mean the United States Securities and Exchange
           ----------
Commission, or any other federal agency at the time administering the Securities
Act and the Exchange Act.

          "Common Stock" shall mean the Common Stock 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, recapitalization, merger,
consideration or other corporate reorganization).

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

          "Exchange Act" shall mean the Securities Exchange Act of 1934, as
           ------------
amended, or any similar successor federal statute, and the rules and regulations
of the Commission thereunder, all as the same shall be in effect at the time.

          "Majority Interest" means the Investors holding not less than a
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majority in interest of the Registrable Securities held by all Investors
(provided, however, that prior to any
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IPO (as defined hereinafter), a Majority Interest shall mean Investors holding
not less than a Majority of the Registrable Securities referred to in clause
(i)(X) of the definition thereof.

          "Person" shall mean 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.

          "Registrable Securities" shall mean (i) any shares of Common Stock
           ----------------------
held by the Investors or their transferees, or subject to acquisition by any
Investor or their transferees upon (X) conversion of the Series B Convertible
Preferred Stock or (Y) exercise of the Warrants, (it being understood that for
purposes of this Agreement, a Person will be deemed to be a holder of
Registrable Securities whenever such Person has the right to then acquire or
obtain from the Company any Registrable Securities, whether or not such
acquisition has actually been effected) and (ii) any other securities issued or
issuable with respect to any such shares described in clause (i) by way of a
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization; provided,
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however, that notwithstanding anything to the contrary contained herein,
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"Registrable Securities" shall not at any time include any securities (i)
registered and sold pursuant to the Securities Act, (ii) sold to the public
pursuant to Rule 144 promulgated under the Securities Act or (iii) which could
then be sold in their entirety pursuant to Rule 144(k) promulgated under the
Securities Act without limitation or restriction.

          "Registration Expenses" shall mean the expenses so described in
           ---------------------
Section 6 hereof.

          "Securities Act" shall mean the Securities Act of 1933, as amended, or
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any similar successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.

     2.   Demand Registrations.
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          (a)  At any time after the earlier of (i) the 3rd anniversary of the
date hereof or (ii) the date of the Company's initial public offering of its
Common Stock pursuant to an effective registration under the Securities Act (the
"IPO"), a Majority Interest of the Investors may notify the Company that they
intend to offer or cause to be offered for public sale, and request that the
Company register under the Securities Act for public sale, all or any portion of
the Registrable Securities held by the Investors in the manner specified in such
notice; provided, however, that in the case of such a request pursuant to clause
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(ii) above, such registration may not become effective prior to the date which
is the earlier of six (6) months after the date of the Company's IPO and the
date that any applicable Holdback Period (as defined hereinafter) or other
lockup period applicable to such IPO expires.  Upon receipt of such request, the
Company shall promptly deliver notice of such request to all Persons holding
Registrable Securities who shall then have thirty (30) days to notify the
Company in writing of their desire to have Registrable Securities held by them
included in such registration (which response shall specify the number of
Registrable Securities proposed to be included in such registration).  If the
request for registration contemplates an underwritten public offering, the
Company shall state such in the written notice and in such event the right of
any Person to include Registrable Securities in such

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registration shall be conditioned upon such Person's participation in such
underwritten public offering and the inclusion of such Person's Registrable
Securities in the underwritten public offering to the extent provided herein.
The Company will use its commercially reasonable best efforts to expeditiously
effect the registration under the Securities Act of all Registrable Securities
of each holder who requested inclusion of such holders Registrable Securities in
such registration and to qualify such Registrable Securities for sale under any
state blue sky law; provided, however, that the Company shall not be required to
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effect more than two (2) registrations pursuant to requests under this Section
2(a).  Notwithstanding anything to the contrary contained herein, no request may
be made under this Section 2 within sixty (60) days after the effective date of
a registration statement filed by the Company covering a firm commitment
underwritten public offering.  The Company may postpone the filing or the
effectiveness of any registration statement required to be filed pursuant to
this Section 2 for a reasonable time period, provided that such postponements
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shall not exceed sixty (60) days in the aggregate during any twelve (12) month
period, if (i) the Company has been advised by legal counsel that such filing or
effectiveness would require disclosure of a material financing, acquisition or
other corporate transaction, and the Board of Directors determines in good faith
that such disclosure is not in the best interests of the Company and its
stockholders or (ii) the Company is then in possession of material non-public
information the disclosure of which the Board of Directors has determined would
have a material adverse effect upon the Company or its then current business
plans.  A registration will not count as a requested registration under this
Section 2(a) unless and until the registration statement relating to such
registration has been declared effective by the Commission at the request of the
initiating holders; provided, however, that a majority in interest of the
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participating holders of Registrable Securities may request, in writing, that
the Company withdraw a registration statement which has been filed under this
Section 2(a) but not yet been declared effective, and a majority in interest of
such holders may thereafter request the Company to reinstate such Registration
Statement, if permitted under the Securities Act, or to file another
registration statement, in accordance with the procedures set forth herein and
without reduction in the number of demand registrations permitted under this
Section 2(a);

          (b)  If a requested registration involves an underwritten public
offering and the managing underwriter of such offering determines in good faith
that the number of securities sought to be offered should be limited due to
market conditions, then the number of securities to be included in such
underwritten public offering shall be reduced to a number, reasonably deemed
satisfactory by such managing underwriter, provided that the securities to be
                                           --------
excluded shall be determined in the following sequence:  (i) first, securities
held by any other Persons (other than Persons holding Registrable Securities)
having contractual, incidental or "piggy-back" registration rights, (ii) second,
securities sought to be registered by the Company and (iii) third, Registrable
Securities held by the Investors, it being understood that no shares shall be
registered for the account of the Company or any shareholder other than the
Investors unless all Registrable Securities for which Investors have requested
registration have been registered.  If there is a reduction in the number of
shares of Common Stock or Registrable Securities to be registered pursuant to
clauses (i), (ii) or (iii) above, such reduction shall be made within each
tranche on a pro rata basis (based upon the aggregate number of shares of Common
Stock or Registrable Securities held by the holders in each such tranche and
subject to the priorities set forth in the preceding sentence).

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          (c)  With respect to a request for registration pursuant to Section
2(a) which is for an underwritten public offering, the managing underwriter
shall be chosen by the Company, subject to the Investors' consent, which consent
shall not be unreasonably withheld.  The Company may not cause any other
registration of securities for sale for its own account (other than a
registration effected solely to implement an employee benefit plan or a
transaction to which Rule 145 of the Securities Act is applicable) to become
effective within one hundred eighty (180) days following the effective date of
any registration required pursuant to this Section 2.

     3.   Form S-3. After the first public offering of its securities registered
          --------
under the Securities Act, the Company shall use its best efforts to qualify and
remain qualified to register securities on Form S-3 (or any successor form)
under the Securities Act.  An Investor or Investors holding Registrable
Securities anticipated to have an aggregate sale price (net of underwriting
discounts and commissions, if any) in excess of $500,000 shall have the right,
on one or more occasions, to request registration on Form S-3 (or any successor
form) for the Registrable Securities held by such requesting Investor or
Investors.  Such requests shall be in writing and shall state the number of
shares of Registrable Securities to be disposed of and the intended method of
disposition of such securities by such holder or holders.  The Company shall
give notice to all other holders of Registrable Securities of the receipt of a
request for registration pursuant to this Section 3, and such other holders of
Registrable Securities shall then have thirty (30) days to notify the Company in
writing of their desire to participate in the registration, subject to the
limitations set forth in Section 4.  The Company may postpone the filing or the
effectiveness of any registration statement pursuant to this Section 3 for a
reasonable period of time, provided that such postponements shall not exceed
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forty-five (45) days in the aggregate during any twelve (12) month period, if
(a) the Company has been advised by legal counsel that such filing or
effectiveness would require disclosure of a material financing, acquisition or
other corporate transaction, and the Board of Directors of the Company
determines in good faith that such disclosure is not in the best interests of
the Company and its stockholders,  (b) the Company is then in possession of
material non-public information the disclosure of which the Board of Directors
has determined would have a material adverse effect upon the Company or its then
current business plans, (c) the managing underwriter determines in good faith
that an audit (other than the Company's regular year-end audit) would be
required to successfully market such offering, and (d) the Company's President
certifies in writing that the Company is then currently engaged in discussions
with its managing underwriter concerning a registration statement that would be
subject to Section 4 hereof.

     4.   Piggy-Back Registration.  If the Company at any time proposes to
          -----------------------
register any of its Common Stock under the Securities Act for sale to the public
either for its own account or for the account of another Person other than the
Investors (except pursuant to a demand by the Investors under Section 2 hereof,
which demand registration shall be governed by the terms of said Section 2, and
except with respect to registration statements on Forms S-4, S-8 or any other
form not available for registering the Registrable Securities for sale to the
public), each such time it will promptly give written notice to each holder of
Registrable Securities of its intention to effect such registration.  Upon the
written request of any such holder of Registrable Securities given within thirty
(30) days after receipt by such holder of such notice, the Company will, subject
to the limits contained in this Section 4, use its commercially reasonable best
efforts to cause all Registrable Securities of such holder that such holder so
requests to be registered under

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the Securities Act and qualified for sale under any state blue sky law, all to
the extent required to permit such sale or other disposition of said Registrable
Securities; provided, however, that if the Company is advised in writing in good
faith by the managing underwriter of the Company's securities being offered in
an underwritten public offering pursuant to such registration statement that the
amount to be sold by Persons other than the Company (collectively, "Selling
Stockholders") is greater than the amount which can be offered without adversely
affecting the marketability of the offering, the Company may reduce the amount
offered for the accounts of Selling Stockholders (including any holders of
Registrable Securities) to a number reasonably deemed satisfactory by such
managing underwriter; and provided, further, that the securities to be excluded
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shall be determined in the following sequence: (i) first, securities held by any
Persons not having any contractual, incidental or "Piggy-Back" registration
rights, (ii) second, securities held by any Persons having contractual,
incidental or "Piggy-Back" registration rights pursuant to an agreement which is
not this Agreement and Registrable Securities held by the Investors and (iii)
securities sought to be registered by the Company. If there is a reduction in
the number of shares of Common Stock or Registrable Securities to be registered
pursuant to clauses (i) or (ii) above, such reduction shall be made within each
tranche on a pro rata basis (based upon the aggregate number of shares of Common
Stock or Registrable Securities held by the holders in each such tranche and
subject to the priorities set forth in the preceding sentence).

     5.   Registration Procedures.  If and whenever the Company is required by
          -----------------------
the provisions of this Agreement to effect the registration of any of its
securities under the Securities Act, the Company will, as expeditiously as
possible:

          (a) use its commercially reasonable best efforts diligently to prepare
and file with the Commission a registration statement on the appropriate form
under the Securities Act with respect to such securities, which form shall
comply as to form in all material respects with the requirements of the
applicable form and include all financial statements required by the Commission
to be filed therewith, and use its reasonable best efforts to cause such
registration statement to become and remain effective until completion of the
proposed offering (but not for more than one hundred eighty (180) days);

          (b) use its commercially reasonable best efforts to prepare and file
with the Commission such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary to
keep such registration statement effective until the completion of the offering
(but not for more than one hundred eighty (180) days) and to comply with the
provisions of the Securities Act with respect to the sale or other disposition
of all securities covered by such registration statement whenever the seller or
sellers of such securities shall desire to sell or otherwise dispose of the
same, but only to the extent provided in this Agreement;

          (c) furnish to each selling holder and the underwriters, if any, such
number of copies of such registration statement, any amendments thereto, any
documents incorporated by reference therein, the prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as such selling holder may reasonably request in
order to facilitate the public sale or other disposition of the securities owned
by such selling holder;

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          (d) use its commercially reasonable best efforts to register or
qualify the securities covered by such registration statement under and to the
extent required by such other securities or state blue sky laws of such
jurisdictions as each selling holder shall reasonably request, and do any and
all other acts and things which may be necessary under such securities or blue
sky laws to enable such selling holder to consummate the public sale or other
disposition in such jurisdictions of the securities owned by such selling
holder, except that the Company shall not for any such purpose be required to
qualify to do business as a foreign corporation in any jurisdiction wherein it
is not so qualified;

          (e) within a reasonable time before each filing of the registration
statement or prospectus or amendments or supplements thereto with the
Commission, furnish to counsel selected by the holders of Registrable Securities
copies of such documents proposed to be filed, which documents shall be subject
to the reasonable approval of such counsel;

          (f) promptly notify each selling holder of Registrable Securities,
such selling holders' counsel and any underwriter and (if requested by any such
Person) confirm such notice in writing, of the happening of any event which
makes any statement made in the registration statement or related prospectus
untrue or which requires the making of any changes in such registration
statement or prospectus so that they will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein in the light of the circumstances
under which they were made not misleading; and, as promptly as practicable
thereafter, prepare and file with the Commission and furnish a supplement or
amendment to such prospectus so that, as thereafter deliverable to the
purchasers of such Registrable Securities, such prospectus will not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading;

          (g) use its commercially reasonable best efforts to prevent the
issuance of any order suspending the effectiveness of a registration statement,
and if one is issued use its commercially reasonable best efforts to obtain the
withdrawal of any order suspending the effectiveness of a registration statement
at the earliest possible moment;

          (h) if requested by the managing underwriter or underwriters (if any),
any selling holder, or such selling holder's counsel, promptly incorporate in a
prospectus supplement or post-effective amendment such information as such
Person requests to be included therein with respect to the selling holder or the
securities being sold, including, without limitation, with respect to the
securities being sold by such selling holder to such underwriter or
underwriters, the purchase price being paid therefor by such underwriter or
underwriters and with respect to any other terms of an underwritten offering of
the securities to be sold in such offering, and promptly make all required
filings of such prospectus supplement or post-effective amendment;

          (i) make available to each selling holder, any underwriter
participating in any disposition pursuant to a registration statement, and any
attorney, accountant or other agent or representative retained by any such
selling holder or underwriter (collectively, the "Inspectors"), all financial
and other records, pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably necessary to enable them
to exercise their due diligence responsibility, and cause the Company's
officers, directors and employees to

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supply all information requested by any such Inspector in connection with such
registration statement subject, in each case, to such confidentiality agreements
as the Company shall reasonably request;

          (j) enter into any reasonable underwriting agreement required by the
proposed underwriter(s) for the selling holders, if any, and use its reasonable
best efforts to facilitate the public offering of the securities;

          (k) request that each prospective selling holder be furnished a signed
counterpart, addressed to the prospective selling holder, of (i) an opinion of
counsel for the Company, dated the effective date of the registration statement,
and (ii) if and to the extent permitted by applicable professional standards, a
"comfort" letter signed by the independent public accountants who have certified
the Company's financial statements included in the registration statement,
covering substantially the same matters with respect to the registration
statement (and the prospectus included therein) and (in the case of the
accountants' letter) with respect to events subsequent to the date of the
financial statements, as are customarily covered (at the time of such
registration) in opinions of the Company's counsel and in accountants' letters
delivered to the underwriters in underwritten public offerings of securities;

          (l) use its commercially reasonable best efforts to cause the
securities covered by such registration statement to be listed on the securities
exchange or quoted on the quotation system on which the Common Stock is then
listed or quoted (or, if the Common Stock is not yet listed or quoted, then on
such exchange or quotation system as the selling holders of Registrable
Securities and the Company shall determine);

          (m) otherwise use its commercially reasonable best efforts to comply
with all applicable rules and regulations of the Commission and make generally
available to its security holders, in each case as soon as reasonably
practicable, an earnings statement of the Company (which need not be audited)
which will satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder (or any comparable successor provisions); and

          (n) otherwise cooperate with the underwriter(s), the Commission and
other regulatory agencies and take all reasonable actions and execute and
deliver or cause to be executed and delivered all documents reasonably necessary
to effect the registration of any securities under this Agreement.

     6.   Expenses.  All reasonable expenses incurred by the Company and the
          --------
Investors in effecting the registrations provided for in Section 2, Section 3
and Section 4, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company and one
counsel for the Investors as a group (selected by a majority in interest of the
Investors who participate in the registration), underwriting expenses (other
than commissions or discounts), expenses of any audits incident to or required
by any such registration and expenses of complying with the securities or blue
sky laws of any jurisdiction pursuant to Section 5(d) hereof (all of such
expenses referred to as "Registration Expenses"), shall be paid by the Company.

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     7.   Indemnification.
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          (a) The Company shall indemnify and hold harmless the selling holder
of Registrable Securities, each underwriter (as defined in the Securities Act),
and each other Person who participates in the offering of such securities and
each other Person, if any, who controls (within the meaning of the Securities
Act) such seller, underwriter or participating Person (individually and
collectively, the "Indemnified Person") against any losses, claims, damages or
liabilities (collectively, the "liability"), joint or several, to which such
Indemnified Person may become subject under the Securities Act or any other
statute or at common law, insofar as such liability (or actions in respect
thereof) arises out of or is based upon (i) any untrue statement or alleged
untrue statement of any material fact contained, on the effective date thereof,
in any registration statement under which such securities were registered under
the Securities Act, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, (ii) any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iii) any violation
by the Company of the Securities Act, any state securities or "blue sky" laws or
any rule or regulation thereunder in connection with such registration;
provided, however, that the Company shall not be liable to any Indemnified
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Person in any such case to the extent that any such liability arises out of or
is based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, preliminary or final
prospectus, or amendment or supplement thereto in reliance upon and in
conformity with information furnished in writing to the Company by such
Indemnified Person specifically for use therein provided, further, that the
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foregoing indemnity shall not inure to the benefit of any underwriter, with
respect to any preliminary prospectus, from whom the person asserting any
losses, claims, damages and liabilities and judgments purchased Registrable
Securities or any Person controlling such underwriter, if a copy of the
prospectus (as then amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) was not sent or given by or on behalf of
such underwriter to such Person, if required by law so to have been delivered,
or prior to a written confirmation of the sale of the Registrable Securities to
such Person, and if the prospectus (as so amended and supplemented) would have
cured the defect giving rise to such liability, unless such failure to deliver
the prospectus (as so amended and supplemented) was a result of noncompliance by
the Company with Section 5(c) hereof.  The Company shall reimburse each such
Indemnified Person in connection with investigating or defending any such
liability as expenses in connection with the same are incurred.

          (b) Each selling holder of any securities included in such
registration being effected shall indemnify and hold harmless each other selling
holder of any securities, the Company, its directors and officers, each
underwriter and each other Person, if any, who controls the Company or such
underwriter (individually and collectively also the "Indemnified Person"),
against any liability, joint or several, to which any such Indemnified Person
may become subject under the Securities Act or any other statute or at common
law, insofar as such liability (or actions in respect thereof) arises out of or
is based upon (i) any untrue statement or alleged untrue statement of any
material fact contained, on the effective date thereof, in any registration
statement under which securities were registered under the Securities Act at the
request of such selling holder, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto, or (ii) any omission
or alleged omission by such selling holder to state therein a material fact
required to be stated therein or necessary to make the

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statements therein not misleading, in the case of (i) and (ii) to the extent,
but only to the extent, that such untrue statement or alleged untrue statement
or omission or alleged omission was made in such registration statement,
preliminary or final prospectus, amendment or supplement thereto in reliance
upon and in conformity with information furnished in writing to the Company by
such selling holder specifically for use therein. Such selling holder shall
reimburse any Indemnified Person for any fees incurred in investigating or
defending any such liability; provided, however, that such selling holder's
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obligations hereunder shall be limited to an amount equal to the proceeds to
such selling holder of the securities sold in any such registration.

          (c) Indemnification similar to that specified in Section 7(a) and
Section 7(b) shall be given by the Company and each selling holder (with such
modifications as may be appropriate) with respect to any required registration
or other qualification of their securities under any federal or state law or
regulation of governmental authority other than the Securities Act.

          (d) If the indemnification provided for in this Section 7 for any
reason is held by a court of competent jurisdiction to be unavailable to an
Indemnified Person in respect of any losses, claims, damages, expenses or
liabilities referred to therein, then each Indemnifying Party under this Section
7, in lieu of indemnifying such Indemnified Person thereunder, shall contribute
to the amount paid or payable by such indemnified party as a result of such
losses, claims, damages, expenses or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, the
selling holders and the underwriters from the offering of the Registrable
Securities or (ii) if the allocation provided By clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above, but also the
relative fault of the Company, the other selling holders and the underwriters in
connection with the statements or omissions which resulted in such losses,
claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations.  The relative benefits received by the Company, the
selling holders and the underwriters shall be deemed to be in the same
respective proportions that the net proceeds from the offering (before deducting
expenses) received by the Company and the selling holders and the underwriting
discount received by the underwriters, in each case as set forth in the table on
the cover page of the applicable prospectus, bear to the aggregate public
offering price of the Registrable Securities.  The relative fault of the
Company, the selling holders and the underwriters shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, the selling holders or the
underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.

          The Company, the selling holders and the underwriters agree that it
would not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata or per capita allocation or by any other method of
allocation which does not take into account the equitable considerations
referred to in the immediately preceding paragraph.  In no event, however, shall
a selling holder be required to contribute any amount under this Section 7(d) in
excess of the lesser of (i) that proportion of the total of such losses, claims,
damages or liabilities indemnified against equal to the proportion of the total
Registrable Securities sold under such registration statement which are being
sold by such selling holder or (ii) the net proceeds

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received by such selling holder from its sale of Registrable Securities under
such registration statement. No person found guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not found guilty of
such fraudulent misrepresentation.

          (e) Promptly after receipt by an Indemnified Person of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of this Section, such indemnified Person will, if a claim in respect
thereof is made against an indemnifying party, give written notice to the latter
of the commencement of such action.

          (f) The indemnification provided for under this Agreement will remain
in full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person or any officer, director or controlling person of such
Indemnified Person and will survive the transfer of securities.

     8.   Holdback Agreement. If the Company shall consummate a Qualified Public
          ------------------
Offering (as defined in the Shareholder Agreement) and the managing underwriter
for such registration shall request, the Investors shall not sell, make any
short sale of, grant any option for the purchase of, or otherwise dispose of any
Registrable Securities (other than those shares of Common Stock included in such
registration) without the prior written consent of the Company for a period
designated by the Company in writing to the Investors, which period shall not
begin more than ten (10) days prior to the effectiveness of the registration
statement pursuant to which such public offering shall be made and shall not
last more than one hundred eighty (180) days after the effective date of such
registration statement (the "Holdback Period"); provided that the Investors
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shall be bound by this provision only if, and to the extent, the executive
officers of the Company owning Common Stock shall be bound by the same
provision; provided, further, that if any executive officer is permitted to sell
           --------  -------
any shares of Common Stock prior to the expiration of the Holdback Period, then
the Investors shall also be permitted to do so.

     9.   Underwriting Agreement.  Notwithstanding the provisions of Sections 5,
          ----------------------
8 and 13, to the extent that the Company and the Investors selling Registrable
Securities in a proposed registration shall enter into an underwriting or
similar agreement, which agreement contains provisions covering one or more
issues addressed in such Sections, the provisions contained in such Sections
addressing such issue or issues shall be superseded with respect to such
registration by such other agreement.

     10.  Compliance with Rule 144.  In the event that the Company (i) registers
          ------------------------
a class of securities under Section 12 of the Exchange Act or (ii) shall
commence to file reports under Section 13 or 15(d) of the Exchange Act, the
Company will use its best efforts thereafter to file with the Commission such
information as is required under the Exchange Act for so long as there are
holders of Registrable Securities; and in such event, the Company shall use its
best efforts to take all action as may be required as a condition to the
availability of Rule 144 under the Securities Act (or any comparable successor
rules).  After the occurrence of the first underwritten public offering of
Common Stock pursuant to an offering registered under the Securities Act on Form
S-1 or Form SA-1 (or any comparable successor forms), subject to the limitations
on transfers imposed by this Agreement, the Company shall use its reasonable
best efforts to facilitate and expedite transfers of Registrable Securities
pursuant to Rule 144 under

                                       10
<PAGE>

the Securities Act, which efforts shall include timely notice to its transfer
agent to expedite such transfers of Registrable Securities.

     11.  Amendments.  The provisions of this Agreement may be amended, and the
          ----------
Company may take any action herein prohibited or omit to perform any act herein
required to be performed by it, only with the written consent of the Company and
a Majority Interest of the Investors.

     12.  Transferability of Registration Rights.  The registration rights set
          --------------------------------------
forth in this Agreement are transferable to each permitted transferee of
Registrable Securities provided, however, that the Company is given notice by
                       --------  -------
the Investor at the time of or within a reasonable time after the transfer,
stating the name and address of the transferee and identifying the securities
with respect to which such registration rights are being assigned.  Subject to
the foregoing provision, this Agreement shall be binding upon, and inure to the
benefit of, the parties hereto and their respective successors and assigns;
provided, further, that the registration rights granted in this Agreement shall
--------  -------
not be transferred to Persons who received Registrable Securities pursuant to a
registration statement under the Securities Act or pursuant to a transaction
under Rule 144 or any successor provision thereto.  Each subsequent holder of
Registrable Securities must consent in writing to be bound by the terms and
conditions of this Agreement in order to acquire the rights granted pursuant to
this Agreement.

     13.  Rights Which May Be Granted to Subsequent Investors.  Other than
          ---------------------------------------------------
transferees of Registrable Securities under Section 10 hereof, the Company shall
not, without the prior written consent of a Majority Interest of the Investors,
allow purchasers of the Company's securities to become a party to this Agreement
or grant any other registration rights to any third parties which are superior
to those registration rights granted to the Investors in this Agreement.

     14.  Damages.  The Company recognizes and agrees that each holder of
          -------
Registrable Securities will not have an adequate remedy if the Company fails to
comply with the terms and provisions of this Agreement and that damages will not
be readily ascertainable, and the Company expressly agrees that, in the event of
such failure, it shall not oppose an application by any holder of Registrable
Securities or any other Person entitled to the benefits of this Agreement
requiring specific performance of any and all provisions hereof or enjoining the
Company from continuing to commit any such breach of this Agreement.

     15.  Information by Holder.  Each Investor selling Registrable Securities
          ---------------------
in a proposed registration shall furnish to the Company such written information
regarding such holder and the distribution proposed by such Investor as the
Company may reasonably request in writing and as shall be reasonably required in
connection with any registration, qualification or compliance referred to in
this Agreement.

                                       11
<PAGE>

     16.  Miscellaneous.
          -------------

          (a) This Agreement shall bind and inure to the benefit of the Company
and the Investors and their respective successors and assigns.

          (b) This Agreement shall terminate and be of no further force or
effect upon the date on which there remains no Registrable Securities
outstanding.  The indemnification provisions of Section 7 shall survive the
termination of this Agreement.

          (c) This Agreement contains the entire agreement among the parties
with respect to the subject matter hereof and supersedes all prior arrangements
or understandings with respect hereto.

          (d) All notices, requests, demands and other communications provided
for hereunder shall be in writing and mailed (by first class registered or
certified mail, postage prepaid), telegraphed, sent by express overnight courier
service or electronic facsimile transmission (with a copy by mail), or delivered
to the applicable party at the addresses indicated below:

     If to the Company:       IPG Photonics Corporation
                              660 Main Street; P.O. Box 519
                              Sturbridge, MA 01566
                              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 02025
                              Facsimile:  (617) 523-1231
                              Attn:  John R. LeClaire, P.C.

     If to any other holder of Registrable Securities:

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

                                       12
<PAGE>

or, as to each of the foregoing, at such other address as shall be designated by
such Person in a written notice to other parties complying as to delivery with
the terms of this subsection (a).  All such notices, requests, demands and other
communications shall, when mailed, telegraphed or sent, respectively, be
effective (i) two days after being deposited in the mails or (ii) one day after
being delivered to the telegraph company, deposited with the express overnight
courier service or sent by electronic facsimile transmission, respectively,
addressed as aforesaid.

     (e)  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.

     (f)  It is specifically understood and agreed that any breach of the
provisions of this Agreement by any party 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.

          (f)  This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

          (g)  If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this Agreement, and
this Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.

                                       13
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
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

                Signature page to Registration Rights Agreement

<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

                Signature page to Registration Rights Agreement

<PAGE>

                              MERRILL LYNCH KECALP L.P. 1999

                              By:  KECALP Inc., its General Partner

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

                              KECALP INC.

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

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

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

                              ML IBK POSITIONS, INC.

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

                Signature page to Registration Rights Agreement

<PAGE>

As of August 31, 2000         BAYVIEW 2000, LP

                              By: Bayview 2000, GP, LLC, its General Partner

                              By: /s/ Dana Welch
                                  --------------
                                  Name:  Dana Welch
                                  Title: Authorized Signatory

                Signature page to Registration Rights Agreement

<PAGE>

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

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

                Signature page to Registration Rights Agreement

<PAGE>

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

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

                Signature page to Registration Rights Agreement

<PAGE>

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

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

                Signature page to Registration Rights Agreement

<PAGE>

As of Oct 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

                Signature page to Registration Rights Agreement

<PAGE>

                              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

                              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

                Signature page to Registration Rights Agreement

<PAGE>

                              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., 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

                Signature page to Registration Rights Agreement

<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 SERVICES LIMITED AS
                                     SECRETARY

                Signature page to Registration Rights Agreement

<PAGE>

As of December 6, 2000            MARCONI CAPITAL LIMITED

                              By: /s/ M. Ablett
                                  ------------------------------------
                                  Name: Mark Ablett
                                  Title: Managing Partner

                              Address: c/o Marconi Ventures
                              890 Winter Street, Suite 310
                              Waltham, MA 02454-1204
                              Fax: 781-522-7477
                              Attn: Jim Goren<PAGE>

                                                                    Exhibit 10.1
                                  IPG PHOTONICS

                        2000 INCENTIVE COMPENSATION PLAN

1.   DEFINITIONS

     The following terms shall have the following meanings unless the context
     indicates otherwise:

     1.1. "Affiliate" shall mean a corporation which, for purposes of Section
          422 of the Code, is a Parent or Subsidiary of the Company within the
          meaning of Sections 424(e) and 424(f) of the Code

     1.2. "Award" shall mean a Stock Option, a SAR, a Stock Award, a Stock Unit,
          a Performance Share, a Performance Unit, or a Cash Award.

     1.3. "Award Agreement" shall mean a written agreement between the Company
          and a Participant that establishes the terms, conditions, restrictions
          and/or limitations applicable to an Award, in addition to those
          established by the Plan and by the Committee.

     1.4. "Board" shall mean the Board of Directors of the Company.

     1.5. "Cash Award" shall mean a grant by the Committee to a Participant of
          an award of cash as described in Section 11 below.

     1.6. "Cause" shall include, but may not be limited to any termination by
          the Company or by an Affiliate or Group Company for willful breach of
          duty in the course of employment or habitual neglect of duty or
          continued incapacity to perform such duty, and also misconduct
          (whether or not in the course of employment) deemed by the Board to be
          detrimental to the Company, an Affiliate or a Group Company or to the
          reputation of such entities, whether or not such misconduct is
          criminal in nature.

     1.7. "Change in Control of the Company" shall occur when following (a) an
          IPO, or (b) a merger with or acquisition by a company, any person
          becomes the beneficial owner, directly or indirectly, in the aggregate
          of securities of the Company representing more than fifty percent
          (50%) of the total combined voting power of all classes of the
          Company's then outstanding securities and who did not at the time of
          such IPO or merger or acquisition have such beneficial ownership.

     1.8. "Code" shall mean the Internal Revenue Code of 1986, as amended from
          time to time.
<PAGE>

     1.9. "Committee" shall mean (i) the Board or (ii) a committee or
          subcommittee of the Board appointed by the Board from among its
          members. The Committee may be the Board's Compensation Committee.
          Unless the Board determines otherwise, the Committee shall be
          comprised solely of not less than two members who each shall qualify
          as:

          (a)  a "Non-Employee Director" within the meaning of Rule 16b-3(b)(3)
               (or any successor rule) under the Exchange Act, and

          (b)  an "outside director" within the meaning of Code Section 162(m)
               and the Treasury Regulations thereunder.

     1.10. "Common Stock" shall mean the voting, common stock, $0.0001 par value
           per share, of the Company.

     1.11. "Company" shall mean IPG Photonics Corporation USA, a Delaware
           corporation.

     1.12. "Disability" means the total and permanent disability of a
           Participant (incurred while in the active service of the Company, an
           Affiliate or a Group Company) based on proof satisfactory to the
           Committee. Total and permanent disability shall be as defined in the
           Company's long-term disability plan, if any, or as otherwise provided
           by the Company.

     1.13. "Dividend Equivalent Right" shall mean the right to receive an amount
           equal to the amount of any dividend paid with respect to a share of
           Common Stock multiplied by the number of shares of Common Stock
           underlying or with respect to a Stock Option, a SAR, a Stock Unit or
           a Performance Unit, and which shall be payable in cash, in Common
           Stock, in the form of Stock Units or Performance Units, or a
           combination of any or all of the foregoing.

     1.14. "Effective Date" shall mean the date on which the Plan is adopted by
           the Board.

     1.15. "Employee" shall mean an employee of the Company or any Affiliate, as
           described in Treasury Regulation Section 1.421-7(h).

     1.16. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
           amended from time to time, including applicable regulations
           thereunder.

     1.17. "Fair Market Value of the Common Stock" shall mean:

          (a)  if the Common Stock is readily tradeable on a national securities
               exchange or other market system, the closing price of the Common
               Stock on the date of calculation (or on the last preceding
               trading date if Common Stock was not traded on such date), or

                                      -2-
<PAGE>

          (b)  if the Common Stock is not readily tradeable on a national
               securities exchange or other market system, the value as
               determined in good faith by the Board.

     1.18. "Group Company" shall mean any business entity deemed by the Board to
           be a member of the IPG Group, including, but not limited to, any
           business entity that has a significant financial interest in the
           Company and any business entity in which the Company has a
           significant financial interest, such entities to be referred to
           collectively as the "Group Companies".

     1.19. "Group Employee" shall mean any employee of a Group Company who is
           not an Employee.

     1.20. "Independent Contractor" shall mean a person (other than a person who
           is an Employee, Group Employee or a Nonemployee Director) or an
           entity that renders services to the Company, an Affiliate or a Group
           Company.

     1.21. "IPO" shall mean the first date that the Common Stock is registered
           under the Securities Act of 1934 and offered for sale to the public.

     1.22. "ISO" shall mean an "incentive stock option" as such term is used in
           Section 422 of the Code.

     1.23. "Nonemployee Director" shall mean a member of the Board who is not an
           Employee.

     1.24. "Nonqualified Stock Option" shall mean a Stock Option that does not
           qualify as an ISO.

     1.25. "Nonvoting Stock" shall mean the capital stock of any class or
           classes having no voting power to elect the directors of a
           corporation.

     1.26. "Parent" shall mean a corporation or any other business entity which
           directly or indirectly has an ownership interest of 50 percent or
           more of the Voting Stock of the Company.

     1.27. "Participant" shall mean any Employee, Group Employee, Nonemployee
           Director or Independent Contractor to whom an Award has been granted
           by the Committee under the Plan.

     1.28. "Performance-Based Award" shall mean an Award subject to the
           achievement of certain performance goals as described in Section 12
           below.

     1.29. "Performance Share" shall mean the grant by the Committee to a
           Participant of an Award as described in Section 10.1 below.

                                      -3-
<PAGE>

     1.30. "Performance Unit" shall mean the grant by the Committee to a
           Participant of an Award as described in Section 10.2 below.

     1.31. "Plan" shall mean the IPG Photonics 2000 Incentive Compensation Plan.

     1.32. "Recapitalization" shall mean any stock split, stock dividend,
           recapitalization, combination of shares, exchange of shares or other
           change affecting the Company's outstanding shares of capital stock as
           a class without the Company's receipt of consideration.

     1.33. "Reorganization" shall mean any of the following: (a) a merger or
           consolidation in which the Company is not the surviving entity; (b) a
           sale, transfer or other disposition of all or substantially all of
           the Company's assets; (c) a reverse merger in which the Company is
           the surviving entity but in which the Company's outstanding voting
           securities are transferred in whole or in part to a person or persons
           different from the persons holding those securities immediately prior
           to the merger; or (d) any transaction effected primarily to change
           the state in which the Company is incorporated or to create a holding
           company structure.

     1.34. "Retirement" means retirement from active employment or other service
           with the Company pursuant to the normal or early retirement policy
           and procedures of the Company.

     1.35. "SAR" shall mean a grant by the Committee to a Participant of a stock
           appreciation right as described in Section 8 below.

     1.36. "Stock" shall mean the shares of capital stock of the Company.

     1.37. "Stock Award" shall mean a grant by the Committee to a Participant of
           an Award of Common Stock as described in Section 9.1 below.

     1.38. "Stock Option" shall mean a grant by the Committee to a Participant
           of an option to purchase Common Stock as described in Section 7
           below.

     1.39. "Stock Unit" shall mean a grant by the Committee to a Participant of
           an Award as described in Section 9.2 below.

     1.40. "Subsidiary" shall mean a corporation of which the Company directly
           or indirectly owns 50 percent or more of the Voting Stock or any
           other business entity in which the Company directly or indirectly has
           an ownership interest of 50 percent or more.

     1.41. "Treasury Regulations" shall mean the regulations promulgated under
           the Code by the United States Department of the Treasury, as amended
           from time to time.

     1.42. "Vest" shall mean:

                                      -4-
<PAGE>

          (a)  with respect to Stock Options and SARs, when the Stock Option or
               SAR (or a portion of such Stock Option or SAR) first becomes
               exercisable and remains exercisable subject to the terms and
               conditions of such Stock Option or SAR; or

          (b)  with respect to Awards other than Stock Options and SARs, when
               the Participant has:

               (i)  an unrestricted right, title and interest to receive the
                    compensation (whether payable in Common Stock, cash or a
                    combination of both) attributable to an Award (or a portion
                    of such Award) or to otherwise enjoy the benefits underlying
                    such Award; and

               (ii) a right to transfer an Award subject to no Company-imposed
                    restrictions or limitations other than restrictions and/or
                    limitations imposed by Section 14 below.

     1.43. "Vesting Date" shall mean the date or dates on which an Award Vests.

     1.44. "Voting Stock" shall mean the capital stock of any class or classes
           having general voting power under ordinary circumstances, in the
           absence of contingencies, to elect the directors of a corporation.

2.   PURPOSE AND TERM OF PLAN

     2.1.  Purpose. The purpose of the Plan is to motivate certain Employees,
           Group Employees, Nonemployee Directors and Independent Contractors to
           put forth maximum efforts toward the growth, profitability, and
           success of the Company, Affiliates and Group Companies by providing
           incentives to such Employees, Group Employees, Nonemployee Directors
           and Independent Contractors through cash payments and/or through the
           ownership and performance of the Common Stock. In addition, the Plan
           is intended to provide incentives which will attract and retain
           highly qualified individuals as Employees, Group Employees and
           Nonemployee Directors and to assist in aligning the interests of such
           Employees, Group Employees and Nonemployee Directors with those of
           the Company's stockholders.

     2.2.  Term. The Plan shall be effective as of the Effective Date; provided,
           however, that the Plan shall be approved by the stockholders of the
           Company at an annual meeting or any special meeting of stockholders
           of the Company within 12 months before or after the Effective Date,
           and such approval by the stockholders of the Company shall be a
           condition to the right of each Participant to receive Awards
           hereunder. Any Award granted under the Plan prior to the approval by
           the stockholders of the Company shall be effective as of the date of
           grant (unless the Committee specifies otherwise at the time of
           grant), but no such Award may Vest,

                                      -5-
<PAGE>

          be paid out, or otherwise be disposed of prior to such stockholder
          approval. If the stockholders of the Company fail to approve the Plan
          in accordance with this Section 2.2, any Award granted under the Plan
          shall be cancelled. The Plan shall terminate on the 10th anniversary
          of the Effective Date, unless sooner terminated by the Board under
          Section 16.1 below.

3.   ELIGIBILITY AND PARTICIPATION

     3.1. Eligibility. All Employees, Group Employees, Nonemployee Directors and
          Independent Contractors shall be eligible to participate in the Plan
          and to receive Awards.

     3.2. Participation. Participants shall consist of such Employees, Group
          Employees, Nonemployee Directors and Independent Contractors as the
          Committee in its sole discretion designates to receive Awards under
          the Plan. Awards under the Plan shall be made on a one time basis for
          Participants and designation of a Participant in any year shall not
          require the Committee to designate such person or entity to receive an
          Award in any other year or, once designated, to receive the same type
          or amount of Award as granted to the Participant in any other year.
          The Committee shall consider such factors as it deems pertinent in
          selecting Participants and in determining the type and amount of their
          respective Awards.

4.   ADMINISTRATION

     4.1. Responsibility. The Committee shall have the responsibility, in its
          sole discretion, to control, operate, manage and administer the Plan
          in accordance with its terms.

     4.2. Award Agreement. Each Award granted under the Plan shall be evidenced
          by an Award Agreement which shall be signed by the Committee and the
          Participant; provided, however, that in the event of any conflict
          between a provision of the Plan and any provision of an Award
          Agreement, the provision of the Plan shall prevail.

     4.3. Authority of the Committee. The Committee shall have all the
          discretionary authority that may be necessary or desirable to enable
          it to discharge its responsibilities with respect to the Plan,
          including but not limited to the following:

          (a)  to determine eligibility for participation in the Plan;

          (b)  to determine eligibility for and the type and size of an Award
               granted under the Plan;

                                      -6-
<PAGE>

          (c)  to supply any omission, correct any defect, or reconcile any
               inconsistency in the Plan in such manner and to such extent as it
               shall deem appropriate in its sole discretion to carry the same
               into effect;

          (d)  to issue administrative guidelines as an aid to administer the
               Plan and make changes in such guidelines as it, from time to
               time, deems proper;

          (e)  to make rules for carrying out and administering the Plan and
               make changes in such rules as it, from time to time, deems
               proper;

          (f)  to the extent permitted under the Plan, grant waivers of Plan
               terms, conditions, restrictions, and limitations;

          (g)  to accelerate the Vesting of any Award when such action or
               actions would be in the best interest of the Company;

          (h)  to grant an Award in replacement of Awards previously granted
               under this Plan or any other executive compensation plan of the
               Company; and

          (i)  to take any and all other actions it deems necessary or desirable
               for the proper operation or administration of the Plan.

     4.4. Action by the Committee. The Committee may act only by a majority of
          its members. A determination of the Committee may be made, without a
          meeting, by a writing signed by all members of the Committee. In
          addition, the Committee may authorize any one or more of its members
          to execute and deliver documents on behalf of the Committee. Meetings
          of the Committee may be held telephonically or via video conference,
          and participation via telephone or video conference shall have the
          same force and effect as physical presence at any Committee meeting.

     4.5. Delegation of Authority. The Committee may delegate to one or more of
          its members, or to one or more agents, such administrative duties as
          it may deem advisable; provided, however, that any such delegation
          shall be in writing. In addition, the Committee, or any person to whom
          it has delegated duties under this Section 4.5, may employ one or more
          persons to render advice with respect to any responsibility the
          Committee or such person may have under the Plan. The Committee may
          employ such legal or other counsel, consultants and agents as it may
          deem desirable for the administration of the Plan and may rely upon
          any opinion or computation received from any such counsel, consultant
          or agent. Expenses incurred by the Committee in the engagement of such
          counsel, consultant or agent shall be paid by the Company, or the
          Affiliate or Group Company whose employees have benefited from the
          Plan, as determined by the Committee.

                                      -7-
<PAGE>

     4.6. Determinations and Interpretations by the Committee. All
          determinations and interpretations made by the Committee shall be
          binding and conclusive on all Participants and their heirs,
          successors, and legal representatives.

     4.7. Liability. No member of the Board, no member of the Committee and no
          Employee or Group Employee shall be liable for any act or failure to
          act hereunder, except in circumstances involving his or her bad faith,
          gross negligence or willful misconduct, or for any act or failure to
          act hereunder by any other member or employee or by any agent to whom
          duties in connection with the administration of the Plan have been
          delegated.

     4.8. Indemnification. The Company shall indemnify members of the Committee
          and any agent of the Committee who is an Employee or Group Employee,
          against any and all liabilities or expenses to which they may be
          subjected by reason of any act or failure to act with respect to their
          duties on behalf of the Plan, except in circumstances involving such
          person's bad faith, gross negligence or willful misconduct.

5.   SHARES SUBJECT TO PLAN

     5.1. Available Shares. The aggregate number of shares of Common Stock which
          shall be available under the Plan during its term shall be 7,500,000
          shares, subject to any adjustments made in accordance with Section 5.2
          below. Such shares of Common Stock may be either authorized but
          unissued shares, shares of issued stock held in the Company's
          treasury, or a combination of both, at the discretion of the Company.
          Any shares of Common Stock underlying an Award which terminate by
          expiration, forfeiture, cancellation or otherwise without the issuance
          of such shares shall again be available under the Plan. Awards that
          are payable only in cash are not subject to this Section 5.1.

     5.2. Adjustment to Shares. If there is any change in the Common Stock of
          the Company, through merger, consolidation, Reorganization,
          recapitalization, stock dividend, stock split, reverse stock split,
          split-up, split-off, spin-off, combination of shares, exchange of
          shares, dividend in kind or other like change in capital structure or
          distribution (other than normal cash dividends) to stockholders of the
          Company, an adjustment shall be made to each outstanding Award so that
          each such Award shall thereafter be with respect to or exercisable for
          such securities, cash and/or other property as would have been
          received in respect of the Common Stock subject to such Award had such
          Award been paid, distributed or exercised in full immediately prior to
          such change or distribution. Such adjustment shall be made
          successively each time any such change or distribution shall occur. In
          addition, in the event of any such change or distribution, in order to
          prevent dilution or enlargement of Participants' rights under the
          Plan, the Committee shall have the authority to adjust, in an
          equitable manner, the number and kind of shares that may be issued
          under the Plan, the number and kind of shares subject to

                                      -8-
<PAGE>

          outstanding Awards, the exercise price applicable to outstanding Stock
          Options, and the Fair Market Value of the Common Stock and other value
          determinations applicable to outstanding Awards. Appropriate
          adjustments may also be made by the Committee in the terms of any
          Awards granted under the Plan to reflect such changes or distributions
          and to modify any other terms of outstanding Awards on an equitable
          basis, including modifications of performance goals and changes in the
          length of performance periods; provided, however, that any such
          modifications and/or changes to Performance-Based Awards does not
          disqualify compensation attributable to such Awards as "performance-
          based compensation" under Code Section 162(m). In addition, the
          Committee is authorized to make adjustments to the terms and
          conditions of, and the criteria included in, Awards in recognition of
          unusual or nonrecurring events affecting the Company or the financial
          statements of the Company, or in response to changes in applicable
          laws, regulations, or accounting principles. Notwithstanding anything
          contained in the Plan, any adjustment with respect to an ISO due to a
          change or distribution described in this Section 5.2 shall comply with
          the rules of Code Section 424(a), and in no event shall any adjustment
          be made which would render any ISO granted hereunder to be
          disqualified as an incentive stock option for purposes of Code Section
          422.

6.   MAXIMUM INDIVIDUAL AWARDS

     6.1. Maximum Aggregate Number of Shares Underlying Stock-Based Awards
          Granted Under the Plan to Any Single Participant in Any Calendar Year.
          The maximum aggregate number of shares of Common Stock underlying all
          Awards measured in shares of Common Stock (whether payable in Common
          Stock, cash or a combination of both) that may be granted to any
          single Participant in any calendar year shall be 2,000,000 shares,
          subject to adjustment as provided in Section 5.2 above. For purposes
          of the preceding sentence, such Awards that are cancelled or repriced
          shall continue to be counted in determining such maximum aggregate
          number of shares of Common Stock that may be granted to any single
          Participant in any calendar year.

7.   STOCK OPTIONS

     7.1. In General. The Committee may, in its sole discretion, grant Stock
          Options to Employees, Group Employees, Nonemployee Directors and/or
          Independent Contractors on or after the Effective Date. The Committee
          shall, in its sole discretion, determine the Employees, Group
          Employees, Nonemployee Directors and Independent Contractors who will
          receive Stock Options and the number of shares of Common Stock
          underlying each Stock Option. With respect to Employees who become
          Participants, the Committee may grant such Participants ISOs or
          Nonqualified Stock Options or a combination of both. With respect to
          Group Employees, Nonemployee Directors and Independent Contractors who

                                      -9-
<PAGE>

         become Participants, the Committee may grant such Participants only
         Nonqualified Stock Options. Each Stock Option shall be subject to such
         terms and conditions consistent with the Plan as the Committee may
         impose from time to time. In addition, each Stock Option shall be
         subject to the terms and conditions set forth in Sections 7.2 through
         7.8 below.

    7.2. Exercise Price. The Committee shall specify the exercise price of each
         Stock Option in the Award Agreement; provided, however, that (i) the
         exercise price of an ISO shall not be less than 100 percent of the Fair
         Market Value of the Common Stock on the date of grant, and (ii) the
         exercise price of a Nonqualified Stock Option shall not be less than
         100 percent of the Fair Market Value of the Common Stock on the date of
         grant unless the Committee in its sole discretion and due to special
         circumstances determines otherwise on the date of grant.

    7.3. Term of Stock Option. The Committee shall specify the term of each
         Stock Option in the Award Agreement; provided, however, that (i) no ISO
         shall be exercisable after the 10th anniversary of the date of grant of
         such ISO and (ii) no Nonqualified Stock Option shall be exercisable
         after the 10th anniversary of the date of grant of such Nonqualified
         Stock Option. Each Stock Option shall terminate at such earlier times
         and upon such conditions or circumstances as the Committee shall, in
         its sole discretion, set forth in the Award Agreement on the date of
         grant.

    7.4. Vesting Date. The Committee shall specify in the Award Agreement the
         Vesting Date for each Stock Option. The Committee may grant Stock
         Options that are Vested, either in whole or in part, on the date of
         grant. If the Committee fails to specify a Vesting Date in the Award
         Agreement, 25 percent of such Stock Option shall become exercisable on
         each of the first 4 anniversaries of the date of grant and shall remain
         exercisable following such anniversary date until the Stock Option
         expires in accordance with its terms under the Award Agreement or under
         the terms of the Plan. The Vesting of a Stock Option may be subject to
         such other terms and conditions as shall be determined by the
         Committee, including, without limitation, accelerating the Vesting if
         certain performance goals are achieved.

    7.5. Exercise of Stock Options. The Stock Option exercise price may be paid
         in cash or, in the sole discretion of the Committee, by delivery to the
         Company of shares of Common Stock then owned by the Participant, or by
         the Company's withholding a portion of the shares of Common Stock for
         which the Stock Option is exercisable, or by a combination of these
         methods. If the Common Stock is readily tradeable on a national
         securities exchange or other market system, payment may also be made by
         delivering a properly executed exercise notice to the Company and
         delivering a copy of irrevocable instructions to a broker directing the
         broker to promptly deliver to the Company the amount of sale or loan
         proceeds to pay the exercise price. To facilitate the foregoing, the
         Company may enter into agreements for coordinated procedures with one
         or more brokerage

                                     -10-
<PAGE>

        firms. The Committee may prescribe any other method of paying the
        exercise price that it determines to be consistent with applicable law
        and the purpose of the Plan, including, without limitation, in lieu of
        the delivery to the Company of shares of Common Stock then owned by the
        Participant, providing the Company with a notarized statement attesting
        to the number of shares owned by the Participant, where, upon
        verification by the Company, the Company would issue to the Participant
        only the number of incremental shares to which the Participant is
        entitled upon exercise of the Stock Option. In determining which methods
        a Participant may utilize to pay the exercise price, the Committee may
        consider such factors as it determines are appropriate; provided,
        however, that with respect to ISOs, all such discretionary
        determinations shall be made by the Committee at the time of grant and
        specified in the Award Agreement.

   7.6. Restrictions Relating to ISOs. In addition to being subject to the terms
        and conditions of this Section 7, ISOs shall comply with all other
        requirements under Code Section 422. Accordingly, ISOs may be granted
        only to Participants who are employees (as described in Treasury
        Regulation Section 1.421-7(h)) of the Company or of any "Parent
        Corporation" (as defined in Code Section 424(e)) or of any "Subsidiary
        Corporation" (as defined in Code Section 424(f)) on the date of grant.
        The aggregate market value (determined as of the time the ISO is
        granted) of the Common Stock with respect to which ISOs (under all
        option plans of the Company and of any Parent Corporation and of any
        Subsidiary Corporation) are exercisable for the first time by a
        Participant during any calendar year shall not exceed $100,000. For
        purposes of the preceding sentence, (i) ISOs shall be taken into account
        in the order in which they are granted and (ii) ISOs granted before 1987
        shall not be taken into account. ISOs shall not be transferable by the
        Participant other than by will or the laws of descent and distribution
        and shall be exercisable, during the Participant's lifetime, only by
        such Participant. The Committee shall not grant ISOs to any Employee
        who, at the time the ISO is granted, owns stock possessing (after the
        application of the attribution rules of Code Section 424(d)) more than
        10 percent of the total combined voting power of all classes of stock of
        the Company or of any Parent Corporation or of any Subsidiary
        Corporation unless the exercise price of the ISO is fixed at not less
        than 110 percent of the Fair Market Value of the Common Stock on the
        date of grant and the exercise of such ISO is prohibited by its terms
        after the 5th anniversary of the ISO's date of grant. In addition, no
        ISO shall be issued to a Participant in tandem with a Nonqualified Stock
        Option issued to such Participant in accordance with Treasury Regulation
        Section 14a.422A-1, Q/A-39.

   7.7. Additional Terms and Conditions. The Committee may, by way of the Award
        Agreements or otherwise, establish such other terms, conditions,
        restrictions and/or limitations, if any, of any Stock Option, provided
        they are not inconsistent with the Plan, including, without limitation,
        the requirement that the Participant not engage in competition with the
        Company, an Affiliate or a Group Company.

                                     -11-
<PAGE>

   7.8. Conversion Stock Options. The Committee may, in its sole discretion,
        grant a Stock Option to any holder of an option (hereinafter referred to
        as an "Original Option") to purchase shares of the stock of any
        corporation:

       (a)  the stock or assets of which were acquired, directly or indirectly,
            by the Company, an Affiliate or Group Company, or

       (b)  which was merged with and into the Company, an Affiliate or Group
            Company,

       so that the Original Option is converted into a Stock Option (hereinafter
       referred to as a "Conversion Stock Option"); provided, however, that such
       Conversion Stock Option as of the date of its grant (the "Conversion
       Stock Option Grant Date") shall have the same economic value as the
       Original Option as of the Conversion Stock Option Grant Date. In
       addition, unless the Committee, in its sole discretion determines
       otherwise, a Conversion Stock Option which is converting an Original
       Option intended to qualify as an ISO shall have the same terms and
       conditions as applicable to the Original Option in accordance with Code
       Section 424 and the Treasury Regulations thereunder so that the
       conversion (x) is treated as the issuance or assumption of a stock option
       under Code Section 424(a) and (y) is not treated as a modification,
       extension or renewal of a stock option under Code Section 424(h).

  7.9. Right to Call Options or Stock. Notwithstanding any other provision of
       this Plan and without regard to the completion of an IPO, any Stock
       Option granted under this Plan or any Stock received as a result of the
       exercise of Stock Options under this Plan, may be subject to a right of
       call by the Committee in the event of termination of the Plan due to
       merger or acquisition of the Company, or prior to an IPO, upon the
       occurrence of Change in Control, whether or not the Plan is terminated.
       If the right to call the Stock is exercised by the Committee, the shares
       of Stock must be returned to the Company within seven (7) days of the
       call notice.

          (i)  Upon the call of Stock, the owner of Stock shall, unless
               otherwise determined by the Committee pursuant to subsection (ii)
               below, be entitled to receive from the Company an amount equal to
               the Fair Market Value of the returned Stock. Upon the call of a
               Stock Option, the Committee shall determine, in good faith, the
               price to be paid to the optionee.

          (ii) The Company shall have the right to defer payment of the proceeds
               under this Section 7.9, and make such payment in the form of
               single lump sum or in installments over such periods as the
               Committee may determine in its discretion.

                                     -12-
<PAGE>

8.   SARS

     8.1. In General. The Committee may, in its sole discretion, grant SARs to
          Employees, Group Employees, Nonemployee Directors, and/or Independent
          Contractors. A SAR is a right to receive a payment in cash, Common
          Stock or a combination of both, in an amount equal to the excess of
          (x) the Fair Market Value of the Common Stock, or other specified
          valuation, of a specified number of shares of Common Stock on the date
          the SAR is exercised over (y) the Fair Market Value of the Common
          Stock, or other specified valuation (which shall be no less than the
          Fair Market Value of the Common Stock), of such shares of Common Stock
          on the date the SAR is granted, all as determined by the Committee;
          provided, however, that if a SAR is granted retroactively in tandem
          with or in substitution for a Stock Option, the designated Fair Market
          Value of the Common Stock in the Award Agreement may be the Fair
          Market Value of the Common Stock on the date such Stock Option was
          granted. Each SAR shall be subject to such terms and conditions,
          including, but not limited to, a provision that automatically converts
          a SAR into a Stock Option on a conversion date specified at the time
          of grant, as the Committee shall impose from time to time in its sole
          discretion and subject to the terms of the Plan.

9.   STOCK AWARDS AND STOCK UNITS

     9.1. Stock Awards. The Committee may, in its sole discretion, grant Stock
          Awards to Employees, Group Employees, Nonemployee Directors, and/or
          Independent Contractors as additional compensation or in lieu of other
          compensation for services to the Company, an Affiliate or a Group
          Company. A Stock Award shall consist of shares of Common Stock which
          shall be subject to such terms and conditions as the Committee in its
          sole discretion determines appropriate including, without limitation,
          restrictions on the sale or other disposition of such shares, the
          Vesting Date with respect to such shares, and the right of the Company
          to reacquire such shares for no consideration upon termination of the
          Participant's employment within specified periods. The Committee may
          require the Participant to deliver a duly signed stock power, endorsed
          in blank, relating to the Common Stock covered by such Stock Award
          and/or that the stock certificates evidencing such shares be held in
          custody or bear restrictive legends until the restrictions thereon
          shall have lapsed. With respect to shares of Common Stock subject to a
          Stock Award, the Participant shall have all of the rights of a holder
          of shares of Common Stock, including the right to receive dividends
          and to vote the shares, unless the Committee determines otherwise on
          the date of grant.

     9.2. Stock Units. The Committee may, in its sole discretion, grant Stock
          Units to Employees, Group Employees, Nonemployee Directors, and
          Independent Contractors as additional compensation or in lieu of other
          compensation for services to the Company, an Affiliate or a Group
          Company. A Stock Unit is a

                                     -13-
<PAGE>

         hypothetical share of Common Stock represented by a notional account
         established and maintained (or caused to be established or maintained)
         by the Company for such Participant who receives a grant of Stock
         Units. Stock Units shall be subject to such terms and conditions as the
         Committee, in its sole discretion, determines appropriate including,
         without limitation, determinations of the Vesting Date with respect to
         such Stock Units and the criteria for the Vesting of such Stock Units.
         Subject to Section 9.3, a Stock Unit granted by the Committee shall
         provide for payment in shares of Common Stock at such time or times as
         the Award Agreement shall specify. The Committee shall determine
         whether a Participant who has been granted a Stock Unit shall also be
         entitled to a Dividend Equivalent Right.

    9.3. Payout of Stock Units. Subject to a Participant's election to defer in
         accordance with Section 17.3 below, upon the Vesting of a Stock Unit,
         the shares of Common Stock representing the Stock Unit shall be
         distributed to the Participant, unless the Committee, in its sole
         discretion, provides for the payment of the Stock Unit in cash (or
         partly in cash and partly in shares of Common Stock) equal to the value
         of the shares of Common Stock which would otherwise be distributed to
         the Participant.

10.  PERFORMANCE SHARES AND PERFORMANCE UNITS

   10.1. Performance Shares. The Committee may, in its sole discretion, grant
         Performance Shares to Employees, Group Employees, Nonemployee
         Directors, and/or Independent Contractors as additional compensation or
         in lieu of other compensation for services to the Company, an Affiliate
         or a Group Company. A Performance Share shall consist of a share or
         shares of Common Stock which shall be subject to such terms and
         conditions as the Committee, in its sole discretion, determines
         appropriate including, without limitation, determining the performance
         goal or goals which, depending on the extent to which such goals are
         met, will determine the number and/or value of the Performance Shares
         that will be paid out or distributed to the Participant granted
         Performance Shares. Performance goals may be based on, without
         limitation, Company-wide, divisional and/or individual performance, as
         the Committee, in its sole discretion, may determine, and may be based
         on the performance measures listed in Section 12.3 below.

   10.2. Performance Units. The Committee may, in its sole discretion, grant
         Performance Units to Employees, Group Employees, Nonemployee Directors,
         and/or Independent Contractors as additional compensation or in lieu of
         other compensation for services to the Company, an Affiliate or Group
         Company. A Performance Unit is a hypothetical share of the value of the
         Company, represented by a notional account which shall be established
         and maintained (or caused to be established or maintained) by the
         Company for such Participant who

                                     -14-
<PAGE>

           receives a grant of Performance Units. Performance Units shall be
           subject to such terms and conditions as the Committee, in its sole
           discretion, determines appropriate including, without limitation,
           determining the performance goal or goals which, depending on the
           extent to which such goals are met, will determine the number and/or
           value of the Performance Units that will accrue to the Participant
           who has been granted Performance Units. Performance goals may be
           based on, without limitation, Company-wide, divisional and/or
           individual performance, as the Committee, in its sole discretion, may
           determine, and may be based on the performance measures listed in
           Section 12.3 below.

     10.3. Adjustment of Performance Goals. With respect to any Performance
           Shares or Performance Units that are not intended to qualify as
           Performance-Based Awards (as described in Section 12 below), the
           Committee shall have the authority at any time to adjust, as it deems
           necessary or desirable, the performance goals for any outstanding
           Performance Shares or Performance Units unless, at the time of
           establishment of such performance goals, the Committee precludes its
           authority to make such adjustments.

     10.4. Payout of Performance Shares or Performance Units. Subject to a
           Participant's election to defer distribution in accordance with
           Section 17.3 below, upon the Vesting of a Performance Share or a
           Performance Unit, the shares of Common Stock representing the
           Performance Share or the cash value of the Performance Unit shall be
           distributed to the Participant, unless the Committee, in its sole
           discretion, determines to make the payment for the Performance Share
           in cash, or the Performance Unit in shares of Common Stock (or partly
           in cash and partly in shares of Common Stock) equal to the value of
           the shares of Common Stock or cash which would otherwise be
           distributed to the Participant.

11.  CASH AWARDS

     11.1. In General. The Committee may, in its sole discretion, grant Cash
           Awards to Employees, Group Employees, Nonemployee Directors, and/or
           Independent Contractors as additional compensation or in lieu of
           other compensation for services to the Company, an Affiliate or Group
           Company. A Cash Award shall be subject to such terms and conditions
           as the Committee, in its sole discretion, determines appropriate
           including, without limitation, determining the Vesting Date with
           respect to such Cash Award, the criteria for the Vesting of such Cash
           Award, and the right of the Company to require the Participant to
           repay the Cash Award (with or without interest) upon termination of
           the Participant's employment within specified periods.

                                     -15-
<PAGE>

12.  PERFORMANCE-BASED AWARDS

     12.1. In General. The Committee, in its sole discretion, may designate
           Awards granted under the Plan as Performance-Based Awards (as defined
           below) if it determines that such compensation might not be tax
           deductible by the Company due to the deduction limitation imposed by
           Code Section 162(m). Accordingly, an Award granted under the Plan may
           be granted in such a manner that the compensation attributable to
           such Award is intended by the Committee to qualify as "performance-
           based compensation" (as such term is used in Code Section 162(m) and
           the Treasury Regulations thereunder) and thus be exempt from the
           deduction limitation imposed by Code Section 162(m) ("Performance-
           Based Awards").

     12.2. Qualification of Performance-Based Awards. Awards shall qualify as
           Performance-Based Awards under the Plan only if:

           (a)  at the time of grant the Committee is comprised solely of two or
                more "outside directors" (as such term is used in Code Section
                162(m) and the Treasury Regulations thereunder);

           (b)  with respect to either the granting or Vesting of an Award
                (other than (i) a Nonqualified Stock Option or (ii) a SAR, which
                are granted with an exercise price at or above the Fair Market
                Value of the Common Stock on the date of grant), such Award is
                subject to the achievement of a performance goal or goals based
                on one or more of the performance measures specified in Section
                12.3 below;

           (c)  the Committee establishes in writing (i) the objective
                performance-based goals applicable to a given performance
                period, and (ii) the individual employees or class of employees
                to which such performance-based goals apply no later than 90
                days after the commencement of such performance period (but in
                no event after 25 percent of such performance period has
                elapsed);

           (d)  no compensation attributable to a Performance-Based Award will
                be paid to or otherwise received by a Participant until the
                Committee certifies in writing that the performance goal or
                goals (and any other material terms) applicable to such
                performance period have been satisfied; and

           (e)  after the establishment of a performance goal, the Committee
                shall not revise such performance goal (unless such revision
                will not disqualify compensation attributable to the Award as
                "performance-based compensation" under Code Section 162(m)) or
                increase the amount of compensation payable with respect to such
                Award upon the attainment of such performance goal.

                                      -16-
<PAGE>

     12.3. Performance Measures. The Committee may use the following performance
           measures (either individually or in any combination) to set
           performance goals with respect to Awards intended to qualify as
           Performance-Based Awards: net sales; pretax income before allocation
           of corporate overhead and bonus; budget; cash flow; earnings per
           share; net income; division, group or corporate financial goals;
           return on stockholders' equity; return on assets; attainment of
           strategic and operational initiatives; appreciation in and/or
           maintenance of the price of the Common Stock or any other publicly-
           traded securities of the Company; market share; gross profits;
           earnings before interest and taxes; earnings before interest, taxes,
           depreciation and amortization; economic value-added models;
           comparisons with various stock market indices; increase in number of
           customers; and/or reductions in costs.

     12.4. Stockholder Reapproval. As required by Treasury Regulation Section
           1.162-27(e)(vi), the material terms of performance goals as described
           in this Section 12 shall be disclosed to and reapproved by the
           Company's stockholders no later than the first stockholder meeting
           that occurs in the 5th year following the year in which the Company's
           stockholders previously approved such performance goals.

13.  CHANGE IN CONTROL

     13.1. Accelerated Vesting. Notwithstanding any other provision of this Plan
           to the contrary, if there is a Change in Control of the Company, the
           Committee, in its sole discretion, may take such actions as it deems
           appropriate with respect to outstanding Awards, including, without
           limitation, accelerating the Vesting Date and/or payout of such
           Awards; provided, however, that such action shall not conflict with
           any provision contained in an Award Agreement unless such provision
           is amended in accordance with Section 16.3 below.

     13.2. Cashout. The Committee, in its sole discretion, may determine that,
           upon the occurrence of a Change in Control of the Company, all or a
           portion of certain outstanding Awards shall terminate within a
           specified number of days after notice to the holders, and each such
           holder shall receive an amount equal to the value of such Award on
           the date of the Change in Control, and with respect to each share of
           Common Stock subject to a Stock Option or SAR, an amount equal to the
           excess of the Fair Market Value of such shares of Common Stock
           immediately prior to the occurrence of such Change in Control of the
           Company over the exercise price per share of such Stock Option or
           SAR. Such amount shall be payable in cash, in one or more kinds of
           property (including the property, if any, payable in the transaction)
           or in a combination thereof, as the Committee, in its sole
           discretion, shall determine.

     13.3. Assumption or Substitution of Awards. Notwithstanding anything
           contained in the Plan to the contrary, the Committee may, in its sole
           discretion, provide that an

                                      -17-
<PAGE>

           Award may be assumed by any entity which acquires control of the
           Company or may be substituted by a similar award under such entity's
           compensation plans.

14.  TERMINATION OF EMPLOYMENT

     14.1. Termination of Employment Due to Death or Disability. Subject to any
           written agreement between the Company, an Affiliate or a Group
           Company and a Participant, if a Participant's employment is
           terminated due to death or disability:

           (a)  all non-Vested portions of Awards held by the Participant on the
                date of the Participant's death or the date of the termination
                of his or her employment, as the case may be, shall immediately
                become vested; and

           (b)  all Vested portions of Stock Options and SARs held by the
                Participant on the date of the Participant's death or the date
                of the termination of his or her employment, as the case may be,
                shall remain exercisable until the earlier of:

                (i)  the end of the 12-month period following the date of the
                     Participant's death or the date of the termination of his
                     or her employment, as the case may be, or

                (ii) the date the Stock Option or SAR would otherwise expire.

     14.2. Termination of Employment for Cause. Subject to any written agreement
           between the Company, an Affiliate or Group Company and a Participant,
           if a Participant's employment is terminated by the Company, the
           Affiliate or the Group Company, as the case may be, for Cause, all
           Awards held by the Participant on the date of the termination of
           employment, whether Vested or non-Vested, shall immediately be
           forfeited by the Participant as of such date, and, in the event a
           Participant's employment is terminated by the Company, an Affiliate
           or Group Company for Cause prior to an IPO, the Company shall have
           the right to call any Stock received by the Participant as a result
           of the exercise of Stock Options under the Plan and the Participant
           shall be entitled to receive from the Company an amount equal to the
           exercise price paid for such Stock.

     14.3. Other Terminations of Employment. Subject to any written agreement
           between the Company, an Affiliate or Group Company and a Participant,
           if a Participant's employment is terminated for any reason other than
           for Cause or other than due to death or disability:

           (a)  all non-Vested portions of Awards held by the Participant on the
                date of the termination of his or her employment shall
                immediately be forfeited by such Participant as of such date;
                and

                                      -18-
<PAGE>

           (b)  all Vested portions of Stock Options and/or SARs held by the
                Participant on the date of the termination of his or her
                employment shall remain exercisable until the earlier of (i) the
                end of the 90-day period following the date of the termination
                of the Participant's employment or (ii) the date the Stock
                Option or SAR would otherwise expire.

     14.4. ISOs. Notwithstanding anything contained in the Plan to the contrary,
           (i) the provisions contained in this Section 14 shall be applied to
           an ISO only if the application of such provision maintains the
           treatment of such ISO as an ISO and (ii) the exercise period of an
           ISO in the event of a termination of the Participant's employment due
           to disability provided in Section 14.1 above shall be applied only if
           the Participant is "permanently and totally disabled" (as such term
           is defined in Code Section 22(e)(3)).

15.  TAXES

     15.1. Withholding Taxes. With respect to Employees and Group Employees, the
           Company, or the applicable Affiliate or Group Company, may require a
           Participant who has become vested in his or her Stock Award, Stock
           Unit, Performance Share or Performance Unit granted hereunder, or who
           exercises a Stock Option or SAR granted hereunder, to reimburse the
           corporation which employs such Employee or Group Employee for any
           taxes required by any governmental regulatory authority to be
           withheld or otherwise deducted and paid by such corporation or entity
           in respect of the issuance or disposition of such shares or the
           payment of any amounts. In lieu thereof, the corporation which
           employs such Employee or Group Employee shall have the right to
           withhold the amount of such taxes from any other sums due or to
           become due from such corporation to the Employee or Group Employee
           upon such terms and conditions as the Committee shall prescribe. The
           corporation that employs the Employee or Group Employee may, in its
           discretion, hold the stock certificate to which such Employee or
           Group Employee is entitled upon the vesting of a Stock Award, Stock
           Unit, Performance Share or Performance Unit or the exercise of a
           Stock Option or SAR as security for the payment of such withholding
           tax liability, until cash sufficient to pay that liability has been
           accumulated.

     15.2. Use of Common Stock to Satisfy Withholding Obligation. With respect
           to Employees and Group Employees, at any time that the Company or an
           Affiliate or Group Company that employs such Employee or Group
           Employee becomes subject to a withholding obligation under applicable
           law with respect to the vesting of a Stock Award, Stock Unit,
           Performance Share or Performance Unit or the exercise of a
           Nonqualified Stock Option (the "Tax Date"), except as set forth
           below, a holder of such Award may elect to satisfy, in whole or in
           part, the holder's related personal tax liabilities (an "Election")
           by (i) directing the Company, the Affiliate or the Group Company that
           employs such Employee or

                                      -19-
<PAGE>

           Group Employee to withhold from shares issuable in the related
           vesting or exercise either a specified number of shares, or shares of
           Common Stock having a specified value (in each case equal to the
           related minimum statutory personal withholding tax liabilities with
           respect to the applicable taxing jurisdiction in order to comply with
           the requirements for a "fixed plan" under Accounting Principles Board
           Opinion No. 25), (ii) tendering shares of Common Stock previously
           issued pursuant to the exercise of a Stock Option or other shares of
           the Common Stock owned by the holder, or (iii) combining any or all
           of the foregoing Elections in any fashion. An Election shall be
           irrevocable. The withheld shares and other shares of Common Stock
           tendered in payment shall be valued at their Fair Market Value of the
           Common Stock on the Tax Date. The Committee may disapprove any
           Election, suspend or terminate the right to make Elections or provide
           that the right to make Elections shall not apply to particular shares
           or exercises. The Committee may impose any additional conditions or
           restrictions on the right to make an Election as it shall deem
           appropriate, including conditions or restrictions with respect to
           Section 16 of the Exchange Act.

     15.3. No Guarantee of Tax Consequences. No person connected with the Plan
           in any capacity, including, but not limited to, the Company, an
           Affiliate or a Group Company and their directors, officers, agents
           and employees makes any representation, commitment, or guarantee that
           any tax treatment, including, but not limited to, federal, state and
           local income, estate and gift tax treatment, will be applicable with
           respect to amounts deferred under the Plan, or paid to or for the
           benefit of a Participant under the Plan, or that such tax treatment
           will apply to or be available to a Participant on account of
           participation in the Plan.

16.  AMENDMENT AND TERMINATION

     16.1. Termination of Plan. The Board may suspend or terminate the Plan at
           any time with or without prior notice; provided, however, that no
           action authorized by this Section 16.1 shall reduce the amount of any
           outstanding Award or change the terms and conditions thereof without
           the Participants' consent.

     16.2. Amendment of Plan. The Board may amend the Plan at any time with or
           without prior notice; provided, however, that no action authorized by
           this Section 16.2 shall reduce the amount of any outstanding Award or
           change the terms and conditions thereof without the Participants'
           consent. No amendment of the Plan shall, without the approval of the
           stockholders of the Company:

           (a)  increase the total number of shares which may be issued under
                the Plan;

           (b)  increase the maximum number of shares with respect to all Awards
                measured in Common Stock that may be granted to any individual
                under the Plan;

                                      -20-
<PAGE>

           (c)  increase the maximum dollar amount that may be paid with respect
                to all Awards measured in cash; or

           (d)  modify the requirements as to eligibility for Awards under the
                Plan.

           In addition, the Plan shall not be amended without the approval of
           such amendment by the Company's stockholders if such amendment (i) is
           required under the rules and regulations of the stock exchange or
           national market system on which the Common Stock is listed or (ii)
           will disqualify any ISO granted hereunder.

     16.3. Amendment or Cancellation of Award Agreements. The Committee may
           amend or modify any Award Agreement at any time by mutual agreement
           between the Committee and the Participant or such other persons as
           may then have an interest therein. In addition, by mutual agreement
           between the Committee and a Participant or such other persons as may
           then have an interest therein, Awards may be granted to an Employee,
           Group Employee, Nonemployee Director or Independent Contractor in
           substitution and exchange for, and in cancellation of, any Awards
           previously granted to such Employee, Group Employee, Nonemployee
           Director or Independent Contractor under the Plan, or any award
           previously granted to such Employee, Group Employee, Nonemployee
           Director or Independent Contractor under any other present or future
           plan of the Company or any present or future plan of an entity which
           (i) is purchased by the Company, (ii) purchases the Company, or (iii)
           merges into or with the Company.

17.  MISCELLANEOUS

     17.1. Other Provisions. Awards granted under the Plan may also be subject
           to such other provisions (whether or not applicable to an Award
           granted to any other Participant) as the Committee determines on the
           date of grant to be appropriate, including, without limitation, for
           the installment purchase of Common Stock under Stock Options, to
           assist the Participant in financing the acquisition of Common Stock,
           for the forfeiture of, or restrictions on resale or other disposition
           of, Common Stock acquired under any Stock Option, for the
           acceleration of Vesting of Awards in the event of a Change in Control
           of the Company, for the payment of the value of Awards to
           Participants in the event of a Change in Control of the Company, or
           to comply with federal and state securities laws, or understandings
           or conditions as to the Participant's employment in addition to those
           specifically provided for under the Plan.

     17.2. Transferability. Each Award granted under the Plan to a Participant
           shall not be transferable otherwise than by will or the laws of
           descent and distribution, and Stock Options and SARs shall be
           exercisable, during the Participant's lifetime, only by the
           Participant. In the event of the death of a Participant, each Stock
           Option or SAR theretofore granted to him or her shall be exercisable
           during such

                                      -21-
<PAGE>

           period after his or her death as the Committee shall, in its sole
           discretion, set forth in the Award Agreement on the date of grant and
           then only by the executor or administrator of the estate of the
           deceased Participant or the person or persons to whom the deceased
           Participant's rights under the Stock Option or SAR shall pass by will
           or the laws of descent and distribution. Notwithstanding the
           foregoing, the Committee, in its sole discretion, may permit the
           transferability of a Stock Option (other than an ISO) by a
           Participant solely to members of the Participant's immediate family
           or trusts or family partnerships or other similar entities for the
           benefit of such persons, and subject to such terms, conditions,
           restrictions and/or limitations, if any, as the Committee may
           establish and include in the Award Agreement.

     17.3. Election to Defer Compensation Attributable to Award. The Committee
           may, in its sole discretion, allow a Participant to elect to defer
           the receipt of any compensation attributable to an Award under
           guidelines and procedures to be established by the Committee after
           taking into account the advice of the Company's tax counsel.

     17.4. Listing of Shares and Related Matters. If at any time the Committee
           shall determine that the listing, registration or qualification of
           the shares of Common Stock subject to an Award on any securities
           exchange or under any applicable law, or the consent or approval of
           any governmental regulatory authority, is necessary or desirable as a
           condition of, or in connection with, the granting of an Award or the
           issuance of shares of Common Stock thereunder, such Award may not be
           exercised, distributed or paid out, as the case may be, in whole or
           in part, unless such listing, registration, qualification, consent or
           approval shall have been effected or obtained free of any conditions
           not acceptable to the Committee.

     17.5. No Right, Title, or Interest in Company Assets. Participants shall
           have no right, title, or interest whatsoever in or to any investments
           which the Company may make to aid it in meeting its obligations under
           the Plan. Nothing contained in the Plan, and no action taken pursuant
           to its provisions, shall create or be construed to create a trust of
           any kind, or a fiduciary relationship between the Company and any
           Participant, beneficiary, legal representative or any other person.
           To the extent that any person acquires a right to receive payments
           from the Company under the Plan, such right shall be no greater than
           the right of an unsecured general creditor of the Company. All
           payments to be made hereunder shall be paid from the general funds of
           the Company and no special or separate fund shall be established and
           no segregation of assets shall be made to assure payment of such
           amounts except as expressly set forth in the Plan. The Plan is not
           intended to be subject to the Employee Retirement Income Security Act
           of 1974, as amended.

     17.6. No Right to Continued Employment or Service or to Grants. A
           Participant's rights, if any, to continue to serve the Company, an
           Affiliate or a Group Company

                                      -22-
<PAGE>

           as a director, officer, employee, independent contractor or
           otherwise, shall not be enlarged or otherwise affected by his or her
           designation as a Participant under the Plan, and the Company, the
           Affiliate and the Group Company reserve the right to terminate the
           employment of any Employee or Group Employee or the services of any
           Independent Contractor or director at any time. The adoption of the
           Plan shall not be deemed to give any Employee, Group Employee,
           Nonemployee Director, Independent Contractor or any other individual
           any right to be selected as a Participant or to be granted an Award.

     17.7. Awards Subject to Foreign Laws. The Committee may grant Awards to
           individual Participants who are subject to the tax laws of nations
           other than the United States, and such Awards may have terms and
           conditions as determined by the Committee as necessary to comply with
           applicable foreign laws. The Committee may take any action which it
           deems advisable to obtain approval of such Awards by the appropriate
           foreign governmental entity; provided, however, that no such Awards
           may be granted pursuant to this Section 17.7 and no action may be
           taken which would result in a violation of the Exchange Act or any
           other applicable law.

     17.8. Governing Law. The Plan, all Awards granted hereunder, and all
           actions taken in connection herewith shall be governed by and
           construed in accordance with the laws of the State of Delaware
           without reference to principles of conflict of laws, except as
           superseded by applicable federal law.

     17.9. Other Benefits. No Award granted under the Plan shall be considered
           compensation for purposes of computing benefits under any retirement
           plan of the Company, an Affiliate or a Group Company nor affect any
           benefits or compensation under any other benefit or compensation plan
           of the Company, and Affiliate or a Group Company, now or subsequently
           in effect.

    17.10. No Fractional Shares. No fractional shares of Common Stock shall be
           issued or delivered pursuant to the Plan or any Award. The Committee
           shall determine whether cash, Common Stock, Stock Options, or other
           property shall be issued or paid in lieu of fractional shares or
           whether such fractional shares or any rights thereto shall be
           forfeited or otherwise eliminated.

                                      -23-

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