Document:

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                                                                   EXHIBIT 10.18

                           CONSTRUCTION LOAN AGREEMENT

     This AGREEMENT made as of the 28th day of April, 2000 by and between IPG
PHOTONICS CORPORATION, a Delaware corporation with its principal place of
business at 660 Main Street, Sturbridge, Massachusetts 01566 (the "Borrower")
and FAMILY BANK, FSB, a federal savings bank, at its office at 370 Main Street,
Worcester, Massachusetts 01608 (the "Lender").

                                   WITNESSETH:

     In consideration of the mutual covenants herein contained and other good
and valuable consideration, receipt whereof is hereby acknowledged, the parties
hereto hereby agree as follows:

1.   RECITALS

     1.1 Borrower owns certain real estate located on Old Webster Road, Oxford,
Massachusetts (hereinafter referred to as the "Premises") and more particularly
described in Exhibit A annexed hereto, and proposes to incur certain costs and
expenses in connection with the construction of two office/assembly buildings on
the Premises (hereinafter called the "Improvements") in accordance with (i) the
plans, drawings, and specifications described in Exhibit B annexed hereto, and
(ii) plans, drawings and specifications to be developed and prepared after the
date hereof which future plans, drawings and specifications and all amendments
must be approved in writing by Lender prior to the use thereof by Borrower (all
such existing and future plans, drawings and specifications being hereinafter
collectively referred to as the "Plans"); and

     1.2 Borrower simultaneously herewith is executing or causing to be executed
and delivering to Lender:

          1.2.1 a Promissory Note dated of even date herewith by Borrower in the
principal amount of $6,500,000.00 (the "Note");

          1.2.2 a Mortgage and Security Agreement dated of even date herewith by
Borrower with respect to the Premises (the "Mortgage");

          1.2.3 a Collateral Assignment of Construction Contract dated of even
date herewith by Borrower (the "Construction Assignment");

          1.2.4 a Collateral Assignment of Architect's Contract and Plans and
Specifications dated of even date herewith by Borrower (the "Architect and Plans
and Specifications Assignment");

          1.2.5 a Collateral Assignment of Licenses, Permits and Agreements
dated of even date herewith by Borrower (the "Permits Assignment");

          1.2.6 UCC Financing Statements against Borrower to be filed with the
Massachusetts Secretary of State, the Clerks of the Towns of Oxford and
Sturbridge, and the Worcester District Registry of Deeds (the "Financing
Statements");

          1.2.7 Unlimited Guaranty dated of even date herewith with respect to
the obligations of Borrower to Lender by IP Fibre Devices (UK) Limited (the

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"Corporate Guaranty");

          1.2.8 Unlimited Guaranty dated of even date herewith with respect to
the obligations of Borrower to Lender by Valentin P. Gapontsev (the "Individual
Guaranty"); and

          1.2.9 an Assignment of Life Insurance Policy as Collateral with
respect to a life insurance policy on the life of Valentin P. Gapontsev in the
minimum amount of $3,000,000.00 (the "Life Insurance Assignment").

(The Note, the Mortgage, the Construction Assignment, the Architect and Plans
and Specifications Assignment, the Permits Assignment, the Financing Statements,
the Corporate Guaranty, the Individual Guaranty and the Life Insurance
Assignment are hereinafter collectively referred to as the "Security
Instruments".)

     1.3 Borrower has entered into an agreement dated March 10, 2000
(hereinafter referred to as the "Construction Contract") with Aho Construction,
Inc. (hereinafter referred to as the "Contractor") to construct the Improvements
(including all development and site work) on the Premises; and

     1.4 Lender is willing to lend to Borrower sums of money to be evidenced by
the Note of Borrower (the "Loan") upon the terms and covenants and subject to
the conditions hereinafter set forth.

2.   AGREEMENTS

     2.1 Lender's Agreement to Advance Proceeds

          Lender agrees (provided the terms, conditions, covenants and
agreements hereof shall be observed and performed, and subject to the conditions
hereinafter set forth) to make advances to Borrower of the proceeds of the Note
from time to time up to a total amount not exceeding the principal amount
thereof, such proceeds being hereinafter referred to as the "Loan Proceeds." The
Loan Proceeds shall be advanced to finance construction of the Improvements.

     2.2 Conditions Precedent

          As conditions precedent to Lender's obligation to make advances from
time to time of the Loan Proceeds, Borrower shall, at the time of the advance in
question:

          2.2.1 hold marketable title to the Premises in fee simple and full
possession thereof, free and clear of all liens and encumbrances except such as
are approved by Lender in writing and except such permitted exceptions as are
set forth in Exhibit C annexed hereto;

          2.2.2 have granted to Lender a fully perfected first mortgage on the
Premises and Improvements, a fully perfected first security interest in
accordance with the Uniform Commercial Code in the accounts receivable and
inventory of the Borrower and the fixtures of the Borrower located or to be
located on the Premises, an assignment of licenses, permits, agreement, plans
and specifications pertaining to the Improvements and an assignment of leases
and rents with respect to the Premises to secure the Note of Borrower and the
obligations of Borrower under this Agreement;

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          2.2.3 have delivered to Lender a mortgagee's title insurance policy in
the face amount of Six Million Five Hundred Thousand and 00/100 Dollars
($6,500,000.00) issued by First American Title Insurance Company (hereinafter
referred to as the "Title Insurance Company") in the form of the American Land
Title Association's standard form of mortgagee title insurance policy (or in
such other form as may be required by statute); said policy to show no prior
liens or encumbrances except and particularly approved in writing by Lender; to
contain only standard exceptions, excluding, without limitation, any exceptions
for lack of a survey or mechanics' and materialmen's liens, and to be in all
respects satisfactory to Lender;

          2.2.4 have entered into and delivered to Lender a written Construction
Contract with Contractor, which Contract and Contractor first shall have been
approved in writing by Lender, a collateral assignment of the Construction
Contract in a form acceptable to Lender, and a performance bond issued by a
surety acceptable to Lender and naming Lender as loss payee, securing
performance of the Construction Contract;

          2.2.5 have delivered to Lender evidence in form and substance
satisfactory to Lender, that all public utilities necessary for the construction
and operation of the Improvements upon the Premises for their intended purposes
are available at the boundaries of the Premises and there is no impediment or
restriction to connecting any of such facilities to the Improvements;

          2.2.6 have delivered to Lender a certified survey showing the location
and dimensions of the proposed Improvements, utilities, parking areas,
rights-of-way and all easements affecting the Premises, and the points of access
to the main road upon which the Premises front and including a certification
that all proposed Improvements, if constructed in accordance with the Plans,
will be in full compliance with all zoning laws and regulations applicable
thereto;

          2.2.7 have delivered to Lender an opinion of Borrower's counsel, in
form and substance satisfactory to Lender, that the Loan has been duly
authorized by Borrower; that the Note and the Security Instruments are binding
obligations of Borrower or the guarantors, as applicable; that construction and
operation of the Improvements, as contemplated hereunder, will not violate any
applicable zoning or building code, law, ordinance or other governmental
regulation; that all necessary action required by federal, state and/or local
law to be taken pursuant to the construction and completion of the Improvements
has been taken; and containing such other opinions as Lender may request;

          2.2.8 have delivered to Lender written assurances satisfactory to
Lender from Borrower's engineer, and Contractor that Lender shall have the same
rights as Borrower to the continued use of the Plans and all services related
thereto for the construction of the Improvements;

          2.2.9 not be in default with respect to any of the provisions of this
Agreement to be performed or observed;

          2.2.10 have submitted to Lender all subcontractors' subcontracts
requested by Lender; Lender reserving the right at any time to require
submission of subcontracts from (i) each and every subcontractor and material
supplier whose bid represents ten percent (10%) or more of the total
construction costs and (ii) a sufficient number of subcontractors and material
suppliers whose bids collectively represent not less than seventy percent (70%)
of the total costs of construction, and Lender reserving the right to approve or

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disapprove of each such subcontractor and subcontract;

          2.2.11 have qualified for a first advance hereunder within thirty (30)
days from the date hereof or such other date as may be agreed upon in writing by
the parties hereto; and

          2.2.12 have delivered to Lender copies of all partial waiver and
subordination forms, releases, notices of contract, notices of identification,
statements of account, statements of claim and other documents relating to the
Improvements or the Premises by whomsoever filed.

     2.3 Representations of Borrower

          Borrower represents and warrants to Lender:

          2.3.1 that at least one copy of the Plans has been deposited with
Lender;

          2.3.2 that the Plans have been filed with all governmental authorities
having jurisdiction, that it has obtained all necessary approvals thereof and
all necessary building, zoning, parking, street opening, access, and other
permits from said authorities, and that construction and operation of the
Improvements on the Premises will not violate (i) any zoning, building code,
subdivision, or land use ordinance, regulation or law promulgated by any
governmental agency, department or subdivision, including without limiting the
generality of the foregoing, the United States Environmental Protection Agency
and the Massachusetts Department of Environmental Protection or (ii) any
restrictions of any kind affecting the Premises;

          2.3.3 that all utilities and services necessary for the operation of
the Improvements for their intended purpose (including, without limitation,
water, gas, electricity, telephone, and storm and sanitary sewer facilities) are
available at the boundary of the Premises, can be tapped into or installed by
Borrower, and are of sufficient capacity to adequately meet all needs and
requirements necessary for the operation of the Improvements for their intended
purposes;

          2.3.4 that there is unrestricted access for the passage of motor
vehicles to and from the Premises to and from the main road upon which the
Premises fronts and all required curb cut or access permits (if any) have been
obtained;

          2.3.5 that no part of the Premises is located in a designated flood
hazard area (as defined in the Flood Disaster Protection Act of 1973, as amended
by the National Flood Insurance Reform Act of 1994);

          2.3.6 that all test borings and other engineering studies normally
performed by prudent developers of similar projects on similar type land have
been performed and have yielded results normally considered favorable to permit
the utilization and development of the Premises for the purpose herein referred
to;

          2.3.7 that there are no easements across or affecting the Premises
which will have any adverse effect upon the operation of the Improvements for
their intended purpose, nor which will in any way interfere with the
construction of the Improvements on the Premises;

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          2.3.8 that Borrower is the true, sole and lawful owner of the
Premises, is lawfully seized and possessed of the same in fee simple, and has
good right, full power and lawful authority to mortgage, grant, bargain, sell
and convey the same and the Security Instruments, when properly filed and
recorded, will all create valid liens on the Premises;

          2.3.9 that the execution and delivery of, and the performance by
Borrower of its obligations under this Agreement, the Note, and the Security
Instruments have been authorized by all appropriate action; and that said
instruments, upon delivery, will be the valid and binding obligations of
Borrower, enforceable in accordance with their respective terms, and will not
violate or conflict with any other agreements or instruments to which Borrower
is a party or by which Borrower is bound;

          2.3.10 that no litigation or proceedings are pending or threatened
against Borrower or the Premises, or any properties adjacent to the Premises,
which would or might affect the validity or priority of the lien of the Mortgage
or other security for the Note on the Premises or which could or might
materially affect Borrower's ability to perform this Agreement;

          2.3.11 that the making of the Loan or Lender's acquisition of the Note
or any of the Security Instruments will not subject Lender to any claim for a
brokerage commission;

          2.3.12 that all financial statements and other information furnished
to the Lender by the Borrower and the guarantors in connection with the Loan,
the Premises and the Improvements are true, accurate and complete in all
material respects and fairly present the financial condition of the Borrower and
the guarantors as of the respective dates of such statements;

          2.3.13 that neither the Borrower nor any of the guarantors is subject
to any contingent liabilities or obligations (whether for taxes, long-term
commitments or otherwise) which are not accurately reflected in financial
information furnished to the Lender in connection with the Loan; and

          2.3.14 that each Borrower and guarantor has filed all required tax
returns and paid all applicable federal, state and local taxes.

     Each of the foregoing representations and warranties shall survive the
making of the Loan and each advance of the Loan Proceeds hereunder, and Borrower
shall indemnify and hold harmless Lender from and against any loss, damage or
liability attributable to the breach thereof, including all fees and expenses
incurred in the defense or settlement of any claim arising therefrom against
Lender.

     2.4 Covenants of Borrower

          Until payment in full of the Note and all other sums required to be
paid by Borrower under the Security Instruments and this Agreement, Borrower
shall:

          2.4.1 cause the Improvements to be constructed, equipped and
completed, diligently and continuously and with all reasonable dispatch, in
accordance with all laws, rules, regulations and requirements of all
governmental authorities having jurisdiction with respect to the Improvements,
the appropriate Board of Fire Underwriters, and the Plans and any modifications
and additions to the Plans which may be deemed necessary or desirable by Lender

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and/or Lender's construction representative, which modifications and additions
to the Plans, Borrower agrees to provide within ten (10) days after Lender's
request therefor;

          2.4.2 in any event, cause the Improvements to be completed and ready
for operation and occupancy on or before April 28, 2001 (the "Construction
Completion Date");

          2.4.3 make no material changes or amendments to the Plans and make no
change orders without the prior written approval of Lender;

          2.4.4 with respect to any amendments or supplements to the Plans, to
which Lender shall have given its prior written approval, file all such
amendments and supplements with, and obtain all necessary approvals from, all
governmental authorities having jurisdiction thereof and promptly deliver true
copies thereof to Lender;

          2.4.5 permit Lender and its representatives to enter upon the Premises
and inspect the Improvements at all times during normal business hours and
examine all detailed plans, shop drawings, specifications and other books and
records relating to the Premises and the Improvements;

          2.4.6 not enter into any lease with respect to the Premises (excepting
equipment leases) without first having submitted to the Lender a copy of said
lease together with a duly executed subordination of lease agreement;

          2.4.7 within five (5) days after construction of the foundation has
been completed, deliver a certificate from an engineer or surveyor satisfactory
to Lender to the effect that no part of the foundation or Improvements
encroaches on any adjoining parcel of land, that the foundation is located on
the Premises in accordance with the Plans, and that all Improvements then
constructed are contained within the boundaries of the Premises and are in
compliance with all applicable setback (front, side, and rear) requirements;

          2.4.8 permit Lender to erect an appropriate sign on the Premises at
such location as Lender, in its discretion, may determine, indicating that the
Improvements are being financed by Lender;

          2.4.9 furnish or cause to be furnished to Lender:

               2.4.9.1 as soon as available, but in any event upon filing with
applicable taxing authorities, a copy of each federal and state tax return of
Borrower and any guarantors;

               2.4.9.2 as soon as available, but in any event within fifteen
(15) days after the close of each fiscal month: (a) a statement of stockholders'
equity and a statement of changes in cash flow of Borrower for such fiscal
month; (b) income statement of Borrower for such fiscal month; and (c) balance
sheets of Borrower as of the end of such fiscal month-all such statements to be
in reasonable detail, including all supporting schedules and comments and any
management letters issued with respect to Borrower; the statements and balance
sheets to be certified as accurate and complete by the President or chief
financial officer of Borrower and acceptable to Lender in accordance with
generally accepted accounting principles, such statement to present fairly the
financial position and results of operations of Borrower;

               2.4.9.3 as soon as available, but in any event within forty-

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five (45) days after the close of each fiscal quarter: (a) a statement of
stockholders' equity and a statement of changes in cash flow of IP Fibre Devices
(UK) Limited for such fiscal quarter; (b) income statement of 113 Fibre Devices
(UK) Limited for such fiscal quarter; and (c) balance sheets of IP Fibre Devices
(CK) Limited as of the end of such fiscal quarter - all such statements to be in
reasonable detail, including all supporting schedules and comments and any
management letters issued with respect to IP Fibre Devices (UK) Limited; the
statements and balance sheets to be certified as accurate and complete by the
President or chief financial officer of IP Fibre Devices (UK) Limited and
acceptable to Lender in accordance with generally accepted accounting
principles, such statement to present fairly the financial position and results
of operations of IP Fibre Devices (UK) Limited and to be stated in United States
dollars;

               2.4.9.4 as soon as available, but in any event within ninety (90)
days after the close of each fiscal year: (a) a statement of stockholders'
equity and a statement of changes in cash flow of each of Borrower and IP Fibre
Devices (UK) Limited for such fiscal year: (b) income statement of each of
Borrower and IP Fibre Devices (UK) Limited for such fiscal year; and (c) balance
sheets of each of Borrower and IP Fibre Devices (UK) Limited as of the end of
such fiscal year-all such statements to be in reasonable detail, including all
supporting schedules and comments and any management letters issued with respect
to each of Borrower and IP Fibre Devices (UK) Limited; the statements and
balance sheets to be prepared upon audit by an independent certified public
accountant selected by each of Borrower and IP Fibre Devices (UK) Limited and
acceptable to Lender in accordance with generally accepted accounting
principles, such statement to present fairly the financial position and results
of operations of each of Borrower and IP Fibre Devices (UK) Limited and, in the
case of IP Fibre Devices (UK) Limited, to be stated in United States dollars;

               2.4.9.5 if Borrower becomes a public company, quarterly financial
statements required to be filed with the Securities and Exchange Commission in
lieu of the monthly statements required by Section 2.4.9.2 above and, promptly
after the sending or making available or filing of the same, copies of all
reports, proxy statements, and financial statements that Borrower sends or makes
available to its stockholders and all registration statements and reports that
the Borrower or any guarantor files with the Securities and Exchange Commission
or any regulatory agency; and

               2.4.9.6 as soon as available, but in any event within ninety (90)
days after the end of each calendar year, complete, accurate, signed personal
financial statements of Valentin P. Gapontsev, in form satisfactory to Lender;

          2.4.10 furnish Lender such budgets and revisions of budgets as Lender
may require in order to show the estimated cost of construction of Improvements
and the amount of funds required, at any given time, to pay for the completion
thereof;

          2.4.11 in the event that any of the Improvements shall be damaged or
destroyed by fire or any other casualty exceeding $250,000.00 as determined by
an independent insurance adjuster, and Lender shall have agreed in its business
judgment, after reviewing the delay, if any, caused by such casualty loss and
the impact upon Borrower's business plans and prospects and financial condition,
to make the proceeds of any fire insurance available, proceed with the
restoration thereof and diligently prosecute the work of restoration to
completion. No part of the cost of such restoration shall be made the basis of

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any application for advances of Loan Proceeds under this Agreement unless all
proceeds of insurance shall be first exhausted in the restoration of the damage
to the Improvements;

          2.4.12 cooperate fully with Lender with respect to any proceedings
before any court, board or governmental agency which may in any way affect the
rights of Lender hereunder or any rights obtained by Lender under any of the
Security Instruments and, in connection therewith, permit Lender, at its
election, to participate in any such proceedings;

          2.4.13 make no changes in ownership beyond those permitted by Section
2.4.18 below, or in the nature of business of the Borrower or the active
involvement of Valentin P. Gapontsev in the operations of the Borrower, without
the prior written consent of the Lender, which consent shall not be unreasonably
withheld or conditioned;

          2.4.14 maintain its principal depository accounts with the Lender;

          2.4.15 establish and maintain with the Lender a construction fund
account for all funds used by Borrower for construction of the Improvements,
including, without limitation, Loan Proceeds;

          2.4.16 establish and maintain with Lender a segregated account into
which shall be deposited all first round equity funds raised by Borrower through
private placements during the term of the Loan;

          2.4.17 maintain, at all times, a Debt Service Coverage Ratio of not
less than 1.20:1.00, to be tested as of the end of each fiscal year of Borrower.
For purposes of this Section 2.4.17, "Debt Service Coverage Ratio" means, for
any applicable fiscal period, the ratio equal to (i) net profit of Borrower plus
depreciation and amortization divided by (ii) (a) current maturities of long
term debt and capital leases, plus (b) interest expense of Borrower;

          2.4.18 not permit any transfer, sale, redemption, retirement, or other
change in the ownership of more than twenty percent (20%) of the outstanding
capital stock of Borrower, without Lender's prior written consent, which consent
shall not be unreasonably withheld or conditioned;

          2.4.19 permit the Lender to conduct quarterly field examination of
Borrower at Borrower's cost and expense not exceeding $1,000.00 per examination;
and

          2.4.20 pay, perform and observe all obligations now existing, or
arising in the future, to Massachusetts Capital Resource Company ("MCRC") or any
other subordinated lender pertaining to financing provided with respect to the
construction of the Improvements.

     2.5 Total Project Budget

          2.5.1 Borrower represents and warrants that Exhibit D attached hereto
contains a complete and full enumeration of all costs (hard, soft, and land
costs) which Borrower anticipates will be incurred in connection with the
construction and development of the Improvements and in connection with the
starting up of the operation of the Improvements; Exhibit D being hereinafter
referred to as the "Total Project Budget."

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          2.5.2 The Total Project Budget will be financed in accordance with
Exhibit D and this Agreement by:

               2.5.2.1 $5,500,000.00 in equity funds or subordinated debt from
MCRC, or binding commitments acceptable to Lender for equity injections or
subordinated debt from MCRC in such amounts, to be provided by Borrower; and

               2.5.2.2 the balance (not to exceed $6,500,000.00) from the Loan
Proceeds.

          2.5.3 It is understood and agreed that:

               2.5.3.1 initial equity funds required to be provided by Borrower
shall be fully expended in payment of items listed in the Total Project Budget
prior to the disbursement of any of the Loan Proceeds by Lender, and any
subordinated loans from MCRC shall be disbursed pari passu with Loan Proceeds
disbursed by Lender;

               2.5.3.2 the undistributed Loan Proceeds and subordinated loans to
be disbursed by MCRC at all times shall equal or exceed the amount necessary to
pay for the completion of the Improvements, including (i) all items set forth in
the Total Project Budget; (ii) all incurred cost overruns and incurred costs for
items not included in the Total Project Budget; and (iii) all cost overruns and
costs not included in the Total Project Budget which Lender deems likely to be
incurred;

               2.5.3.3 the undistributed portion of the Loan Proceeds allocated
to each item in the Total Project Budget at all times shall equal or exceed the
amount necessary to pay for such items;

               2.5.3.4 if for any reason the amount of such undistributed Loan
Proceeds with respect to the Improvements or any of the individually budgeted
items set forth in Exhibit D shall at any time be, or become, or in the judgment
of Lender appear reasonably likely to become, insufficient for the purpose
described in Subsections 2.5.3.2 or 2.5.3.3 (regardless of how such condition
may be caused), Borrower will, within five (5) days after written request by
Lender, deposit an amount equal to the deficiency with Lender, which deposit
first shall be exhausted before any further disbursement of the Loan Proceeds
shall be made; and

               2.5.3.5 the amount of the outstanding indebtedness of Borrower to
Lender shall not exceed 80% of the fair market value of the Premises as
determined from time to time by appraisals acceptable to Lender.

     2.6 Advances of Loan Proceeds

          2.6.1 Provided Borrower shall have first expended $2,500,000.00 of its
initial equity funds in the payment of hard costs listed in the Total Project
Budget as certified to by Lender's construction representative or in the payment
of soft costs listed in the Total Project Budget as verified by proof
satisfactory to Lender; provided Borrower shall not be in default under, and
there shall exist no event of default under, this Agreement or the Note, or any
of the Security Instruments, or any other agreement or instrument executed in
connection herewith, nor shall there exist any condition or event which, with
the giving of notice or lapse of time, or both, would constitute such an event
of default; provided Borrower shall have complied with the provisions of Section
2.2 hereof; and provided Borrower shall have paid all interest charges then due,

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and all fees of Lender's construction representative and legal fees incurred in
connection with the construction of the Improvements or the Note or the Loan
evidenced thereby, and subject to the provisions of Section 2.5 hereof, Lender,
upon written application by Borrower (made not less than seven (7) business days
prior to the date of the requested advance under this Section 2.6 and made not
more often than every thirty (30) days), shall make advances from the Loan
Proceeds pari passu with any subordinated loans from MCRC or equity funds in
excess of the first $2,500,000.00 of equity as hereinafter specified.

          2.6.2 The amount of each such advance, together with advances from
MCRC, shall represent:

               2.6.2.1 ninety-five percent (95%) of the total "hard costs"
incurred by Borrower (i.e., costs incurred under the Construction Contract) and
approved by Lender in conformance with the budgeted expenses enumerated in
Exhibit D in connection with the construction of the Improvements as of the date
of the advance application in excess of funds required to be provided and
expended by Borrower under the terms hereof as of the date of said advance
application, less any amounts previously advanced by Lender from the Loan
Proceeds but in no event more that the amount certified by Lender's construction
representative (whose costs and fees shall be borne by the Borrower) as then
being due and payable; and

               2.6.2.2 such portion of the "soft costs" enumerated in Exhibit D
incurred by Borrower in connection with the construction of the Improvements as
of the date of the advance application, as Lender in its uncontrolled discretion
shall deem reasonable in relation to the hard costs incurred as of the date of
the advance application, provided that the Lender agrees that it shall advance
Loan Proceeds to pay the architect's fees included in the Construction Contract.

          2.6.3 Each application for advances pursuant to this Section 2.6. must
be accompanied by the following:

               2.6.3.1 a completed itemized request for payment, signed by
Contractor and Borrower on a standard AIA Requisition Form or in such other form
approved by Lender;

               2.6.3.2 the written report of the Title Insurance Company as of
the date of the making of such advance, affirmatively insuring such advance and
that there are no liens or other encumbrances on the Premises (other than real
estate taxes for the then current year, payment of which is not in default, the
Security Instruments and such other liens and encumbrances as appeared in the
policy of title insurance delivered prior thereto to Lender) and no notice of
contract or other notice of intention to file liens thereon in any public
office; unless released, subordinated or waived as provided in subparagraph
2.6.3.4 of this Section 2.6;

               2.6.3.3 Lender's inspection and verification that, or (at
Lender's option) a certificate of the construction representative of Lender, as
selected by Lender in its sole discretion (who will make monthly inspections of
the Premises and Improvements on Lender's behalf, the cost of each such
inspection to be borne by Borrower), that all work performed at the site of
construction when the advance is requested has been performed in good and
workmanlike manner, that all materials and fixtures usually furnished and
installed at that time have been furnished and installed, all in accordance with
the Plans, and that sufficient hard cost Loan Proceeds remain undisbursed to
complete the Improvements in accordance with the Plans and the Total Project

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Budget set forth in Exhibit D;

               2.6.3.4 such fully executed lien releases, waivers, partial
waiver and subordination forms, and affidavits from, or the submission of other
appropriate forms by, Borrower, Contractor, subcontractors and materialmen as
Lender may require; and

               2.6.3.5 an affidavit of Borrower that as of the date of the
advance application, Borrower knows of no material or substantive fact which
will or could in any way impair completion of the Improvements in accordance
with the Plans or impair the timely repayment of the Loan or interfere with the
operation of the Improvements for their intended purpose.

          2.6.4 The making of any advance or any part of an advance shall not be
deemed an approval or acceptance by Lender of the work theretofore done or of
materials theretofore furnished.

          2.6.5 Advances of the Loan Proceeds made pursuant to this Section 2.6
shall, at the option of Lender, be made (i) directly to Borrower by check or
wire transfer, or by depositing same in Borrower's checking account with Lender,
(ii) by check payable to Borrower and Contractor jointly and delivered either to
Borrower or Contractor, (iii) by check or wire transfer payable to Contractor
or, after the occurrence of an Event of Default or if the Lender determines it
is necessary to protect its lien upon the Premises, directly to other
subcontractors, materialmen, and creditors of the Improvements, (iv) to the
Title Insurance Company by check or wire transfer for disbursement in accordance
with Lender's directions, or (v) by any combination of the above. Lender
reserves the right to condition each and every advance pursuant to this Section
2.6.5 upon Borrower's certification that such advance(s) has or have been made
within such time as necessary to grant and/or preserve the priority of Lender's
lien on the Premises.

          2.6.6 Lender shall advance to Borrower the balance of the funds to be
loaned hereunder for which Borrower has qualified (but not earlier than thirty
(30) days after the last advance of funds provided under this Section 2.6) as
soon as Borrower shall have delivered to Lender the following:

               2.6.6.1 a written certificate of the construction representative
selected by Lender, that the construction of the Improvements and the
installation of the equipment to be installed therein has been completed in a
good workmanlike manner in accordance with the Plans;

               2.6.6.2 a duly executed, notarized and recorded Notice of
Substantial Completion;

               2.6.6.3 a written report of the Title Insurance Company that
there are no liens or other encumbrances on the Premises (other than real estate
taxes for the then current year, payment of which is not in default, the
Mortgage and such other liens and encumbrances as appear in the policy of title
insurance delivered prior thereto to Lender) and no notices of contract or other
notice of intention to file liens thereon in any public office; if not
previously submitted to and accepted by Lender in a format acceptable to Lender,
a certificate by Borrower in form and substance satisfactory to Lender, listing
all categories of Improvements costs and the amount paid by Borrower with
respect to each;

                                       11

<PAGE>

               2.6.6.4 the written certificates of Borrower and the Contractor
that they, and each of them, have received no affidavits, notices of
identification, or other notices in connection with the obtaining of a
mechanic's lien by any contractor, subcontractor, subsubcontractor, materialman
or laborer;

               2.6.6.5 such lien releases, notices of dissolution of lien,
waivers, subordinations and affidavits from, or the submission of other
appropriate forms by Borrower, Contractor, any architect, subcontractors and
materialmen as Lender may require;

               2.6.6.6 an affidavit of Borrower that as of the date of the final
advance application Borrower knows of no material or substantive fact which will
or could in any way negatively impact the Improvements, repayment of the Loan,
or operation of the Premises for their intended purpose;

               2.6.6.7 a copy of the original permanent certificate of occupancy
and all other applicable certificates, licenses, consents and approvals issued
or required to be issued by the various governmental authorities having
jurisdiction with respect to the Improvements and by the appropriate Board of
Fire Underwriters, or other similar bodies; and

               2.6.6.8 true, correct and complete copies of "as built" plans
including the location of foundations, underground utilities, septic systems,
retention and detention ponds, irrigation wells, drains, and irrigation system
components.

          2.6.7 Lender, in its sole discretion, may advance parts or the whole
of any advances before the requirements in Section 2.6.3 or 2.6.6 are complied
with, and all such advances or payments shall be deemed to have been made
pursuant to this Agreement, provided Lender will consult with Borrower prior to
doing so except in cases of emergency.

          2.6.8 Borrower agrees that Lender shall assume no duty with respect to
disbursement of the Loan Proceeds and that any sums disbursed by Lender in good
faith and in reliance upon this Agreement, or the Security Instruments, shall be
secured by the lien of the Security Instruments, and that Lender, in its
discretion, may make such changes in the method of disbursing the Loan Proceeds
and the conditions precedent thereto as Lender may deem reasonable.

          2.6.9 With the exception of change orders of $10,000.00 or less in
each instance up to an aggregate sum of $100,000.00, at no time shall Lender be
under any obligation to make advances of the Loan Proceeds for any costs or
expenses not specifically provided for in the Total Project Budget or for any
costs or expenses in excess of the specific amount budgeted for such cost or
expense in the Total Project Budget, all of which costs and expenses shall be
promptly paid for by Borrower from Borrower's equity funds.

          2.6.10 All interest payments due under the Note shall be paid by
Borrower. Borrower shall not be reimbursed for interest payments allocable to
periods prior to the commencement of construction of the Improvements. After the
commencement of construction of the Improvements, advances from the Loan
Proceeds for reimbursement of interest paid under the Note and for payment of
other soft costs shall be made (i) only in conjunction with approved advances
for hard construction costs and shall not be the basis for separate advances,
(ii) only to the extent provided for in the Total Project Budget, and (iii) only

                                       12

<PAGE>

if agreed to by Lender in accordance with Section 2.6.2.2 hereof.

          2.6.11 Borrower shall promptly pay when due from Borrower's own funds,
any costs for which Lender makes no advance pursuant to the terms of this
Agreement.

          2.6.12 Any sum which, in accordance with any provision of this
Agreement, shall be payable by Borrower to Lender, at the election of Lender,
shall be deemed an advance by Lender to Borrower pursuant to the provisions of
this Agreement.

          2.6.13 If Borrower shall fail to promptly pay (i) any installment of
interest due under the Note, (ii) any construction supervisory fee incurred by
Lender pursuant to Section 2.6.3.3 hereof, (iii) any expenses incurred by Lender
as set forth in Section 2.10 hereof (including without limiting the generality
of the foregoing, legal fees) or (iv) any other sums due to Lender under the
Note, this Agreement or any of the Security Instruments, Lender shall be
authorized to charge Borrower's checking account with Lender for the amount so
due without the further approval of Borrower.

          2.6.14 Lender reserves the right to refuse to make any advance(s) of
the Loan (i) if, in Lender's sole determination, to do so would result in the
advance being made more than twenty-five (25) days after the last day of the
period stated in an accurate, duly executed partial waiver and subordination of
lien form in substantially the form provided by M.G.L. c.254, (S)32; (ii) if, in
Lender's sole determination, to do so would jeopardize the priority of the liens
granted to Lender pursuant to the Security Instruments; (iii) if, following
Lender's request, Borrower fails to record, or to cause to be recorded, a bond
pursuant to M.G.L. c.254, (S) 14 sufficient in form, substance and amount to
dissolve any lien which may encumber the Premises; or (iv) if, in Lender's
discretion, reasonably exercised, the Borrower's ability to repay the Loan is
impaired; or (v) if there shall have been filed or recorded documents claiming a
lien pursuant to M.G.L. c.254, (S)4, which lien or claim of lien is not
dissolved or waived prior to or contemporaneously with said advance.

     2.7 Insurance

          Borrower shall maintain insurance at its own expense in the form, type
(including without limitation, fire, extended coverage, liability, builder's
risk. collapse, earthquake and workers' compensation) and amounts reasonably
required by Lender, which insurance shall name Lender as an additional insured
party and loss payee and shall (to the extent obtainable) provide that (i) such
insurance may not be cancelled or amended without at least thirty (30) days
prior written notice to Lender, and (ii) no act or omission or negligence of
Borrower, its agents or employees, shall in any way affect the validity of such
insurance insofar as Lender is concerned. Borrower has the right of free choice
in the selection of the agent and insurer through or by which insurance required
hereunder is to be placed; provided, however, that all such insurance coverage
shall be written by a company with a general policyholder's rating of A or A+ in
Best's latest Rating Guide. Certificates evidencing such insurance coverage
shall be promptly delivered to Lender. If Borrower shall fail to provide the
insurance herein required, Lender may procure same at Borrower's expense, and
such expenditure shall be secured by the Security Instruments and be considered
an advance by Lender to Borrower pursuant to the provisions of this Agreement.

                                       13

<PAGE>

     2.8 Events of Default

          The occurrence of any one of the following events shall constitute an
Event of Default under this Agreement:

          2.8.1 if Borrower fails to pay any principal, interest or late charge
under the Note within ten (10) days of the date due or at stated maturity or by
acceleration or pursuant to any prepayment requirements;

          2.8.2 if Borrower fails to observe or perform any other covenant,
condition or agreement on its part to be observed or performed under the
provisions of the Note, this Agreement or any of the Security Instruments within
thirty (30) days after the earlier of (a) the date of written notice of default
to Borrower from Lender, or (b) the date on which Borrower knew or should have
known of the existence of such failure;

          2.8.3 if Borrower fails to pay any amount of money within ten (10)
days of the date any such sum becomes due or fails to observe or perform any
other covenant, condition or agreement which is the obligation of Borrower to
the Lender under any other existing or future note, mortgage, agreement or
obligation within thirty (30) days after the earlier of (a) the date of written
notice of default to Borrower from Lender, or (b) the date on which Borrower
knew or should have known of the existence of such failure;

          2.8.4 if Borrower is unable to pay its debts generally as they become
due; an involuntary petition against (if the same is not removed within thirty
(30) days), or a voluntary petition by, Borrower under any bankruptcy,
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or insolvency law; if the Borrower makes any general assignment for the benefit
of creditors; or if any trustee, custodian, receiver or liquidator appointed for
the Borrower or of all or any part of the Premises or any or all of the rents or
income thereof and such appointment remains in effect for more than thirty (30)
days;

          2.8.5 if at any time title to the Premises and the Improvements is not
satisfactory to Lender by reason of any lien, charge, encumbrance, title
condition, or exception (other than exceptions contained in the said title
insurance policy to be issued to Lender);

          2.8.6 if the Title Insurance Company shall refuse to insure any
advance made hereunder to be secured by the Mortgage as a valid second priority
lien on the Premises and the Improvements (to the extent constructed and
equipped);

          2.8.7 if Borrower assigns or attempts to assign this Agreement, or any
advance made or to be made hereunder, or any interest herein or therein, or if
the Premises are conveyed or encumbered (except for the execution of leases
consented to by Lender), in any way without the written consent of Lender;

          2.8.8 if any survey, report, or examination, discloses that the
Improvements, or any portion thereof, encroach upon or project over a street, or
upon or over adjoining property, or violate any setback or other restriction,
however created, or any zoning regulations, or any building restriction of any
governmental authority having jurisdiction;

          2.8.9 if, for any reason, construction of the Improvements had not
been commenced within thirty (30) days of the date of this Agreement;

                                       14

<PAGE>

          2.8.10 if the Improvements are materially damaged or destroyed by fire
or otherwise in an amount exceeding $250,000.00 as determined by an independent
insurance adjuster acceptable to Lender, and adequate insurance is not available
to restore such damage within thirty (30) days of the occurrence of such damage
or destruction (as a result of a determination of Lender pursuant to Section
2.4.11 not to make insurance proceeds available or for any other reason);

          2.8.11 if Borrower or Contractor does not construct any of the
Improvements substantially in accordance with the Plans previously furnished to
and approved in writing by Lender, as the same may be amended and supplemented
with the approval of Lender, and which have been. filed with and approved by all
governmental authorities having jurisdiction with respect to the Premises;

          2.8.12 if any representation or warranty herein, or in any report,
certificate, financial statement, or other instrument furnished in connection
with this Agreement or the advances made hereunder by or on behalf of Borrower
shall prove to be false, misleading, or incomplete in any material respect;

          2.8.13 if any mechanics', laborers', materialmen's, or similar
statutory liens or any notice thereof shall be filed against the Premises and/or
the Improvements and shall not be discharged, subordinated or dissolved within
twenty (20) days of such filing;

          2.8.14 if Borrower shall default in the due observance or performance
of any covenant, condition or agreement contained in this Agreement on its part
to be paid. performed, or observed beyond any applicable grace or cure period;

          2.8.15 if any Event of Default described in the Note or any of the
Security Instruments shall occur or any breach or default in the observance or
performance of any condition, term, agreement, or covenant contained in the Note
or the Security Instruments, or any of them, or any other instrument securing
the Note after giving effect to any grace or cure period contained therein shall
occur;

          2.8.16 if any voucher is submitted at any time which Borrower knows or
has reason to know has not been earned by the payee for services performed or
for materials used in or furnished with respect to the Improvements;

          2.8.17 if any cessation occurs at any time in construction of the
Improvements for more than two (2) weeks except for strikes, riots, or other
causes beyond Borrower's control, or if any substantial change is made in the
schedule for the construction thereof from that provided in the Plans or this
Agreement;

          2.8.18 if the cost to complete the Improvements, as estimated by
Lender in good faith, at any time appears likely to exceed the balance of funds
retained by Lender after deducting from the amount hereof the total of unpaid
vouchers outstanding, and Borrower fails to pay the deficiency as required by
Section 2.5.3.4 hereof;

          2.8.19 if Borrower requests a termination of the Loan or confesses
inability to continue performance in accordance with this Agreement; or

                                       15

<PAGE>

          2.8.20 if at any time Borrower permits any transfer, sale, redemption,
retirement, or other change in the ownership of more than forty-nine percent
(49%) of the outstanding voting stock of Borrower.

          2.8.21 if IP Fibre Devices (UK) Limited defaults on its obligations
under, or terminates or attempts to terminate, the Corporate Guaranty;

          2.8.22 if Dr. Valentin P. Gapontsev defaults on his obligations under,
or terminates or attempts to terminate, the Individual Guaranty; or

          2.8.23 the occurrence of a default or event of default under any of
the Security Instruments beyond any applicable grace period.

     2.9 Lender's Rights and Remedies Upon Default

          2.9.1 Upon the occurrence of any Event of Default as hereinabove
referred to in Section 2.8, all obligations on the part of Lender to make
advances under this Agreement, if Lender so elects, shall cease and terminate,
and, at the option of Lender, the Note shall become immediately due and payable,
and Lender shall thereupon be authorized and empowered to exercise any rights of
foreclosure or as otherwise provided for the realization of any security for the
Note covered by any of the Security Instruments; but Lender may make any
advances or portions of advances, after the occurrence of any such Event of
Default, without thereby waiving its right to demand payment of Borrower's
indebtedness evidenced by the Note and secured by the Security Instruments, and
without becoming liable to make any other or further advances as hereinabove
contemplated by this Agreement.

          2.9.2 In addition to the remedies hereinabove provided, upon the
occurrence of any one or more of the Events of Default, Lender shall be
authorized and empowered, at its election, (i) to enter upon the Premises and
construct, equip and/or complete the Improvements in accordance with the Plans,
with such changes therein as Lender may from time to time, in its sole
discretion, deem appropriate, and to appoint watchmen to protect the
Improvements, all at the risk, cost and expense of Borrower; (ii) to
discontinue, at any time, any work with respect to the Improvements commenced by
it or change any course of action undertaken by it in connection therewith, and
shall not be bound by any limitations or requirements of time, whether set forth
herein or otherwise; and/or (iii) to assume any construction contract or related
agreement made by Borrower in any way pertaining to the Improvements and to take
over and use all or any part or parts of the labor, materials, supplies, and
equipment contracted for by Borrower, whether or not previously incorporated
into the Improvements, all in the sole discretion of Lender.

          2.9.3 In connection with any construction, equipping, and/or
completion of the Improvements undertaken by Lender pursuant to the provisions
of Subsection 2.9.2 (but without intending hereby to limit the powers and
discretions conferred by said subsection), Lender may engage builders,
contractors, architects, engineers, and others for the purpose of furnishing
labor, materials, and equipment for the Improvements; pay, settle, or compromise
all bills or claims which may become liens against the Improvements and the
Premises or which have been or shall be incurred in any manner in connection
with such construction, equipping, and/or completion of the Improvements; and
take such action or refrain from acting hereunder as Lender may, in its sole
discretion, from time to time determine, without limitation, to carry out the
intent of this Section 2.9.

                                       16

<PAGE>

          2.9.4 Borrower shall be liable to Lender for all costs paid or
incurred for the construction, completion, and/or equipping of the Improvements,
whether the same shall be paid or incurred pursuant to the provisions of
Subsections 2.9.2 or 2.9.3, or otherwise, and all payments made or liabilities
incurred by Lender hereunder of any kind whatsoever shall be paid by Borrower to
Lender on demand, with interest to the date of payment at the rate set forth in
the Note and shall be secured by the Security Instruments.

          2.9.5 Upon the occurrence of any of the Events of Default, the rights,
powers, and privileges provided in this Section 2.9 and all other remedies
available to Lender under this Agreement or at law or in equity may be exercised
by Lender at any time and from time to time, whether or not the indebtedness
evidenced and secured by the Note and the Security Instruments shall be due and
payable, and whether or not Lender shall have instituted any foreclosure
proceedings or other action for the enforcement of its rights under the Note or
any of the Security Instruments.

          2.9.6 For the purpose of carrying out the provisions and exercising
the rights, powers and privileges granted by this Section 2.9, Borrower hereby
irrevocably constitutes and appoints Lender its true and lawful
attorney-in-fact, and with full power of substitution, to execute, acknowledge,
and deliver any instruments, and do and perform any acts which are referred to
in this Section 2.9 in the name and behalf of Borrower. The power vested in said
attorney-in-fact is, and shall be deemed to be, coupled with an interest and
cannot be revoked.

     2.10 Expenses of Lender

          Borrower shall pay Lender, on demand, any and all expenses incurred or
paid by Lender which relates to this loan transaction, this Agreement, the Note,
and any Security Instruments, including (without limitation) the examination of
title to the Premises, the cost of title insurance, charges for examining public
records in connection with advances from the Loan Proceeds, inspections, drawing
of papers, recording and filing fees, revenue stamps, if any, and the reasonable
fees and disbursements of counsel and Lender's construction representative. At
Lender's election all of such fees or expenses may be paid from the Loan
Proceeds hereunder and in such event, shall constitute additional indebtedness
of Borrower evidenced by the Note and secured by the Security Instruments.

     2.11 Assignment of This Agreement

          Lender may assign, negotiate, or pledge all or any portion of its
rights under this Agreement or any of its rights or security with respect to the
Note and the Security Instruments, and, in case of such assignment, Borrower
shall accord full recognition thereto. Borrower shall not assign or attempt to
assign directly or indirectly, any of its rights under this Agreement or under
any instrument referred to herein without the prior written consent of Lender.

     2.12 General Provisions

          2.12.1 The captions in this instrument are for convenience and
reference only and do not define, limit, or describe the scope of the provisions
hereof.

          2.12.2 The terms, covenants, agreements, and conditions contained
herein shall extend to, include and inure to the benefit of, and be binding upon
Borrower and Lender and their respective heirs, executors, administrators,

                                       17

<PAGE>

successors and assigns, and may not be terminated, changed, or amended orally.

          2.12.3 Any notice, demand, request, instruction, document, or other
communication to be given hereunder or in connection herewith shall be in
writing and sent by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:

          If to Lender:     FAMILY BANK, FSB
                            370 Main Street
                            Worcester, MA 01608
                            Attention: Senior Commercial Loan Officer

          with a copy to:   George W. Tetler III, Esquire
                            Bowditch & Dewey, LLP
                            311 Main Street
                            Worcester, MA 01608

          If to Borrower:   IPG PHOTONICS CORPORATION
                            660 Main Street
                            Sturbridge Business Park
                            P.O. Box 519
                            Sturbridge, MA 01566
                            Attention: Controller

          with a copy to:   Joel P. Greene, Esquire
                            Lane, Greene, Murtha & Edwards, LLP
                            446 Main Street, Suite 1500
                            Worcester, MA 01608

Any party may change the address to which notices are to be sent to it by giving
written notice of such change of address to the other party in the manner herein
provided for giving notice. Any such notice, demand, request, or other
communication shall be deemed given when mailed as aforesaid.

          2.12.4 BORROWER AND LENDER MUTUALLY WAIVE ANY RIGHTS TO A TRIAL BY
JURY, WITH RESPECT TO ANY SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR
COUNTERCLAIM, BROUGHT OR INSTITUTED BY ANY PARTY TO THIS AGREEMENT OR ANY OF
THEIR SUCCESSORS AND ASSIGNS, WHICH RELATES DIRECTLY OR INDIRECTLY TO THIS
AGREEMENT, THE SECURITY INSTRUMENTS, THE OBLIGATIONS, OR THE RELATIONSHIP BY AND
AMONG BORROWER, ANY CO-OBLIGOR OR GUARANTOR, LENDER AND/OR ANY OR ALL OF THEM.

          2.12.5 This Agreement has been made in the Commonwealth of
Massachusetts, and the provisions thereof shall be governed by and construed and
interpreted in accordance with the laws of the Commonwealth of Massachusetts.

               IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as a sealed instrument as of the day and year first above
written.

                                        FAMILY BANK, FSB

                                        By /s/ Douglas J. G. MacLean
-------------------------------------      -------------------------------------
Witness                                    Douglas J. G. MacLean, Vice President

                                       18

<PAGE>

                                        IPG PHOTONICS CORPORATION

/s/ Joel P. Greene                      By /s/ Valentin P. Gapontsev
-------------------------------------      -------------------------------------
Witness                                    Valentin P. Gapontsev, Its President

                                       19

<PAGE>

                                    EXHIBIT A

The land in Oxford, Worcester County, Massachusetts situated on the easterly
side of Old Webster Road and being shown as two (2) parcels of land on a plan
entitled "Boundary Plan prepared to Elmar Realty Trust, by CME Associates, Inc.,
Engineers & Planners, Southbridge, Massachusetts, Scale 1" = 100, dated October
1, 1999", recorded with the Worcester Registry of Deeds in Plan Book 748, Plan
89, and shown as "N/F Elmar Realty Trust, area = 2.4 acres" and "N/F Elmar
Realty Trust, area = 34.0 Acres, more or less".

Together with all rights of the Borrower, if any, in and to the French River.

BEING the same premises conveyed to the Borrower by deed of Elmar Realty Trust
dated November 11, 1999 and recorded with the Worcester Registry of Deeds in
Book 22042, Page 324.

                                       20

<PAGE>

                                    EXHIBIT B

                            PLANS AND SPECIFICATIONS

                        DELIVERED DIRECTLY TO THE LENDER

                                       21

<PAGE>

                                    EXHIBIT C

                              PERMITTED EXCEPTIONS

                                      NONE

                                       22

<PAGE>

                                    EXHIBIT D

                              TOTAL PROJECT BUDGET

                        DELIVERED DIRECTLY TO THE LENDER

                                       23<PAGE>

                                                                   EXHIBIT 10.19

                           LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT, dated as of November 15, 2004 is by and
between IPG PHOTONICS CORPORATION, a Delaware corporation with a principal place
of business at 50 Old Webster Road, Oxford, Massachusetts 01540 (the "Borrower")
and BANKNORTH, N.A., a national banking association with its principal office at
370 Main Street, Worcester, Massachusetts 01608 (the "Lender").

                                   WITNESSETH:

BACKGROUND. The Borrower has requested the Lender to lend it up to the sum of
$3,000,000.00 on a revolving line of credit basis (the "Loan"), and the Lender
is willing to do so upon the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the premises herein contained, and each
intending to be legally bound hereby, the parties agree as follows:

ARTICLE 1.0 DEFINITIONS

As used herein:

"Accounts", "Chattel Paper", "Collateral", "Commercial Tort Claims",
"Contracts", "Deposit Accounts", "Documents", "Electronic Chattel Paper",
"Equipment", "Financial Assets", "Fixtures", "General Intangibles", "Goods",
"Instruments", "Inventory", "Investment Property", "Letter-of-Credit-Rights",
"Payment Intangibles", "Promissory Notes", "Supporting Obligations" and
"Tangible Chattel Paper" shall have the same respective meanings as are given to
those terms in the Uniform Commercial Code as presently in effect in The
Commonwealth of Massachusetts, if not otherwise defined in this Agreement.

"Affiliate" means, as to any Person, each other Person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
under common control with, such Person.

"Agreement" means this Loan and Security Agreement (together with any and all
schedules and exhibits attached from time to time hereto), as the same may from
time to time be amended, modified or supplemented.

"Blocked Account Deposit Agreement" means the Blocked Account Deposit Agreement
dated as of January 16, 2002 between the Borrower and the Lender with respect to
the Blocked Account, as amended by a First Amendment to and Ratification of
Blocked Account Deposit Agreement dated as of even date herewith in the form
attached hereto as Exhibit 1.01(A).

"Blocked Account" means Money Market Deposit Account No. 8720483150, IPG
PHOTONICS CORPORATION for the benefit of Banknorth, N.A., Blocked Account.

"Borrowing Base" means, at any time, the amount computed on the Borrowing Base
Certificate most recently delivered to, and accepted by, the Lender in
accordance with this Agreement and equal to the lesser of:

     (A) $3,000,000.00; or

     (B) Seventy-five percent (75%) of the Eligible Accounts of the Borrower.

<PAGE>

"Borrowing Base Certificate" means a fully completed certificate in the form of
Exhibit 1.01(B) to this Agreement, and to include the worksheets, supporting
documentation and schedules as may be required by the Lender, certified by the
chief financial officer or chief accounting officer of the Borrower to be
correct and delivered to, and accepted by, the Lender pursuant to Section
3.01(Q) or Section 6.01(B)(7).

"Business Day" means a day other than a Saturday, a Sunday, or a day on which
commercial banks in Worcester, Massachusetts are authorized to close.

"Change in Control" means any circumstance by which forty-nine percent (49%) or
more of the aggregate voting power of the Borrower's voting stock is directly or
indirectly transferred from the current ownership of such voting power of the
voting stock of the Borrower.

"Closing" has the meaning given to such term in Section 3.01.

"Collateral" has the meaning given to such term in Section 4.01.

"Current Assets" means, at any time, all assets that, in accordance with GAAP,
should be classified as current assets on a balance sheet of the Borrower and
its Subsidiaries.

"Demand Note" means the Demand Note referred to in Section 2.03.

"Eligible Account" means, at any time, an Account that the Lender in its sole
discretion, determines is eligible for inclusion in the Borrowing Base and that
conforms and continues to conform to each of the following conditions:

     (A) The Account arose from a bona fide outright sale of Goods by the
Borrower or from services performed by the Borrower, and such Goods have been
shipped to the appropriate account debtors or their designees (or the sale has
otherwise been consummated), or the services have been performed for the
appropriate account debtors;

     (B) The Account is based upon an enforceable order or contract, written or
oral, for Goods shipped or held or for services performed, and the same were
shipped, held, or performed in accordance with such order or contract;

     (C) The title of the Borrower to the Account and, except as to the account
debtor, to any Goods is absolute and is not subject to any prior assignment,
claim, lien, or security interest, except Permitted Liens;

     (D) The amount shown on the books of the Borrower and on any invoice or
statement delivered to the Lender is owing to the Borrower, less any partial
payment that has been made thereon by anyone;

     (E) The Account is not subject to any claim of reduction, counterclaim,
set-off, recoupment, or any claim for credits, allowances, or adjustments by the
account debtor because of returned, inferior, or damaged Goods or unsatisfactory
services, or for any other reason, except for customary discounts not to exceed
two percent (2%) allowed for prompt payment;

     (F) The account debtor has not returned or refused to retain, or otherwise
notified the Borrower of any dispute concerning, or claimed nonconformity of,
any of the Goods or services from the sale of which the Account arose;

     (G) The Account is due and payable not more than sixty (60) days from the
date of the invoice therefor;

                                       2

<PAGE>

     (H) The Account is not more than sixty (60) days past due nor outstanding
more than ninety (90) days from the date of the invoice therefor;

     (I) The Account is not with an account debtor which has outstanding, at any
time, fifty percent (50%) or more of its accounts on an aggregate basis for a
period of ninety (90) days from the date of the invoice therefor;

     (J) The Account does not arise out of a contract with, or order from, an
account debtor that, by its terms, forbids or makes void or unenforceable the
assignment by the Borrower to the Lender of the Account arising with respect
thereto;

     (K) The Borrower has not received any note, trade acceptance, draft, or
other Instrument with respect to, or in payment of, the Account, nor any Chattel
Paper with respect to the Goods giving rise to the Account, unless, if any such
Instrument or Chattel Paper has been received, the Borrower immediately notifies
the Lender and, at the latter's request, endorses or assigns and delivers the
same to the Lender and the Lender accepts same;

     (L) The Borrower has not received any notice of the death of the account
debtor or a partner thereof; nor of the dissolution, termination of existence,
insolvency, business failure, appointment of a receiver for any part of the
property of, assignment for the benefit of creditors by, or the filing of a
petition in bankruptcy or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against, the account debtor. Upon the
receipt by the Borrower of any such notice, it will immediately give the Lender
written advice thereof;

     (M) The account debtor is not an officer, agent, employee, shareholder
(other than JDS Uniphase), director, Subsidiary or other Affiliate of, or a
sales representative for, the Borrower; and

     (N) The Lender has not deemed such Account ineligible because of
uncertainty about the creditworthiness of the account debtor or because the
Lender determines, in the exercise of its business judgment, otherwise
reasonably considers the collateral value thereof to the Lender to be impaired
or its ability to realize such value to be insecure.

     In addition to the foregoing, Eligible Account shall mean any amount
receivable by the Borrower under any insurance policy covering Goods which have,
within the preceding forty-five (45) days, been damaged or destroyed by fire or
other direct casualty loss, provided that a claim therefor has been made in
compliance with such insurance policy, to the extent that such claim has not
been in any way denied or contested by the insurer and provided that such
insurer, if such insurer were an account debtor of the Borrower, would be a
qualified account debtor under this Section.

     The enumeration of the aforementioned conditions shall not in any way alter
the right of the Lender, in its sole discretion, to exclude any Account from
being an Eligible Account for any purposes hereunder.

     In the event of any dispute under the foregoing criteria as to whether an
Account is or has ceased to be an Eligible Account, the decision of the Lender
shall control.

"Event of Default" has the meaning provided in Section 7.01.

"Financial Statements" means those financial statements presented to the Lender
by the Borrower in connection with the underwriting of the Loan as more
particularly described in Exhibit 1.01(C) attached hereto.

                                       3

<PAGE>

"Financing Statements" means those certain Uniform Commercial Code Financing
Statements duly authorized and authenticated by the Borrower and duly filed or
recorded for the benefit of the Lender, as from time to time supplemented or
amended.

"Fixed Assets" means, at any time, all assets (other than Current Assets) that
should, in accordance with GAAP, be classified as assets on a balance sheet of
the Borrower and its Subsidiaries.

"GAAP" means generally accepted accounting principles applied consistently, with
such changes or modifications thereto as may be approved in writing by the
Lender.

"Guarantor" means Valentin P. Gapontsev.

"Guaranty" means with respect to the Guarantor, a duly authorized and executed
Limited Guaranty dated as of even date herewith in the form attached hereto as
Exhibit 1.01(D), as may be ratified or amended from time to time.

"Indebtedness" means, as to the Borrower or any Subsidiary, all items of
indebtedness, obligation or liability whether joint or several, matured or
unmatured, liquidated or unliquidated, direct or contingent, including without
limitation:

     (A) All indebtedness guarantied, directly or indirectly, in any manner, or
endorsed (other than for collection or deposit in the ordinary course of
business) or discounted with recourse;

     (B) All indebtedness in effect guarantied, directly or indirectly, through
agreements, contingent or otherwise: (1) to purchase such indebtedness; or (2)
to purchase, sell, or lease (as lessee or lessor) property, products, materials,
or supplies or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such indebtedness or to insure the owner
of the indebtedness against loss; or (3) to supply funds to, or in any other
manner invest in, the debtor;

     (C) All indebtedness secured by (or for which the holder of such
indebtedness has a right, contingent or otherwise, to be secured by) any
mortgage, deed of trust, pledge, lien, security interest, or other charge or
encumbrance upon property owned or acquired subject thereto, whether or not the
liabilities secured thereby have been assumed; and

     (D) All indebtedness incurred as the lessee of goods or services under
leases that, in accordance with GAAP, should not be reflected on the lessee's
balance sheet.

"Intellectual Property" means trademarks, service marks, trade names, trade
styles, logos, goodwill, trade secrets, patents, applications, and licenses
acquired under any statutory, common law or registration process in any state or
nation at any time, or under any agreement executed with any person or entity at
any time. The term "license" refers not only to rights granted by agreement from
the owner of patents, trade marks, service marks and the like, but also to
rights granted by a franchisor under a franchise or similar agreement. The
foregoing enumeration is not intended as a limitation of the meaning of the word
"license".

"Intercreditor Agreement" means that certain Intercreditor Agreement dated as of
November 15, 2004 by and between the Lender and JDS Uniphase, as from time to
time amended.

                                       4

<PAGE>

"IP Fibre Devices" means IP Fibre Devices (UK) Limited, a company registered in
England and Wales with Company Number 2989622, whose registered office is at
Stuart House, 59 Catherine Place, London.

"IP Fibre Devices Subordination Agreement" means that certain Subordination
Agreement by and between IP Fibre Devices and the Lender dated as of November
15, 2004, as from time to time amended.

"JDS Uniphase" means JDS Uniphase Corporation, a Delaware corporation.

"JDS Uniphase Subordination Agreement" means that certain Subordination
Agreement by and between JDS Uniphase and the Lender dated as of November 15,
2004, as from time to time amended.

"Laws" means all ordinances, statutes, rules, regulations, orders, injunctions,
writs, or decrees of any government or political subdivision or agency thereof,
or of any court or similar entity established by any thereof.

"Liabilities" means all Indebtedness that, in accordance with GAAP, should be
classified as liabilities on a balance sheet of the Borrower and its
Subsidiaries.

"Loan Documents" includes the Notes, the Guaranty, the Blocked Account Deposit
Agreement, the Mortgage and the documents, whether deliverable at or after the
Closing, required under Article 4.0.

"Mortgage" means that certain Mortgage and Security Agreement dated as of April
28, 2000 and recorded with the Worcester District Registry of Deeds (the
"Registry") in Book 22541, Page 78 as amended by First Amendment to Mortgage and
Security Agreement dated as of April 10, 2001 and recorded with the Registry in
Book 23885, Page 74, and by Second Amendment to Mortgage and Security Agreement
dated as of even date herewith, to be recorded with the Registry, in the form
attached hereto as Exhibit 1.01(E), as from time to time supplemented or
amended.

"Mortgage Note" means that certain Promissory Note dated April 10, 2001 in the
face amount of $8,560,000.00 issued by the Borrower to the Lender.

"Mortgaged Property" means the property owned by the Borrower and located on Old
Webster Road, Oxford, Massachusetts, as such term is defined in the Mortgage.

"Notes" means the Demand Note and the Mortgage Note, individually and
collectively.

"Obligations" is intended to be used in its most comprehensive sense and means
the obligation of the Borrower to the Lender of whatever kind and description,
whether direct or indirect, absolute or contingent, primary or secondary, joint
or several, due or to become due, or held or to be held by, the Lender for its
own account or as agent for another or others, whether created directly or
acquired by assignment or otherwise and howsoever evidenced, whether now
existing or hereafter incurred or acquired and whether by way of loan, guaranty,
discount, letter of credit, lease or otherwise, including without limitation,
the following obligations:

     (A) To pay the principal of, and interest on, the Notes in accordance with
the terms thereof and to satisfy all other liabilities to the Lender, whether
hereunder or otherwise, whether now existing or hereafter incurred, matured or
unmatured, direct or contingent, joint or several, including any extensions,
modifications, renewals thereof and substitutions therefor.

                                       5

<PAGE>

     (B) To repay to the Lender all amounts advanced by the Lender hereunder or
otherwise on behalf of the Borrower, including, but without limitation, advances
for principal or interest payments to prior secured parties, mortgagees, or
lienors, or for taxes, levies, insurance, rent, or repairs to, or maintenance or
storage of, any of the Collateral;

     (C) To perform and observe all covenants, agreements and undertakings of
the Borrower pursuant to the terms and conditions of this Agreement, the Notes,
the Loan Documents or any other agreement or instrument now or hereafter
delivered to the Lender by the Borrower;

     (D) All obligations under any interest rate swap agreement, foreign
exchange contract, any cap, floor or hedging agreement or other similar
agreement, or other financial agreement or arrangement designed to protect the
Borrower against fluctuations in any interest rate charged by the Lender under
the Notes or otherwise, including any obligations of the Borrower arising out of
or in connection with any Automated Clearing House ("ACH") Agreement relating to
the processing of ACH transactions, together with all fees, expenses, charges
and other amounts owing by or chargeable to the Borrower under any ACH
Agreement;

     (E) All obligations to reimburse the Lender, on demand, in connection with
overdrafts and other amounts due to the Lender under any existing or future
agreements relating to cash management services; and

     (F) All obligations to reimburse the Lender, on demand, for all of the
Lender's expenses and costs, including without limitation the reasonable fees
and expenses of its counsel, in connection with the preparation, administration,
amendment, modification, or enforcement of this Agreement and the documents
required hereunder or related hereto, including, without limitation, any
proceeding brought, or threatened, to enforce payment of any of the obligations
referred to in the foregoing Paragraphs (A) through (E).

"Perfection Certificate" means a duly authorized and executed Perfection
Certificate from the Borrower in the form of Exhibit 1.01(F) to this Agreement.

"Permitted Investments" means: (a) direct obligations of, or obligations the
principal of and interest on which are unconditionally guaranteed by, the United
States of America (or by any agency thereof to the extent such obligations are
backed by the full faith and credit of the United States of America), in each
case maturing within one year from the date of acquisition thereof; (b) without
limiting the provisions of paragraph (d) below, investments in commercial paper
maturing within one year from the date of acquisition thereof and having, at
such date of acquisition, a rating of at least "A-2" or the equivalent thereof
from Standard & Poor's Corporation or of at least "P-2" or the equivalent
thereof from Moody's Investors Service, Inc.; (c) investments in certificates of
deposit, bankers' acceptances and time deposits (including Eurodollar time
deposits) maturing within one year from the date of acquisition thereof issued
or guaranteed by or placed with (i) the Lender or (ii) any domestic office of
any other commercial bank of recognized standing organized under the laws of the
United States of America or any State thereof that has a combined capital and
surplus and undivided profits of not less than $250,000,000 and is the principal
banking Subsidiary of a bank holding company having a long-term unsecured debt
rating of at least "A-2" or the equivalent thereof from Standard & Poor's
Corporation or at least "P-2" or the equivalent thereof from Moody's Investors
Service, Inc.; (d) investments in commercial paper maturing within one year from
the date of acquisition thereof and issued by (i) the holding company of the
Lender or (ii) the holding company of any other commercial bank of recognized
standing organized under the laws of the United States of America or any State
thereof that has

                                       6

<PAGE>

(A) a combined capital and surplus in excess of $250,000,000 and (B) commercial
paper rated at least "A-2" or the equivalent thereof from Standard & Poor's
Corporation or of at least "P-2" or the equivalent thereof from Moody's
Investors Service, Inc.; (e) investments in repurchase obligations with a term
of not more than seven days for underlying securities of the types described in
clause (a) above entered into with any office of a bank or trust company meeting
the qualifications specified in clause (c) above; (f) investments in money
markets funds substantially all the assets of which are comprised of securities
of the types described in clauses (a) through (e) above.

"Permitted Liens" means:

     (A) Liens for taxes, assessments, or similar charges, incurred in the
ordinary course of business, that are not yet due and payable;

     (B) Pledges or deposits made in the ordinary course of business to secure
payment of worker's compensation, or to participate in any fund in connection
with worker's compensation, unemployment insurance, old-age pensions, or other
social security programs;

     (C) Liens of mechanics, materialmen, repairmen, warehousemen, carriers, or
other like liens, securing obligations incurred in the ordinary course of
business that are not yet due and payable;

     (D) Good faith pledges or deposits not exceeding an aggregate amount of
$150,000.00 made in the ordinary course of business to secure performance of
bids, tenders, contracts (other than for the repayment of borrowed money) or
leases, not in excess of thirty percent (30%) of the aggregate amount due
thereunder, or to secure statutory obligations, or surety, appeal, indemnity,
performance, or other similar bonds required in the ordinary course of business;

     (E) Encumbrances consisting of zoning restrictions, easements, or other
restrictions on the use of real property, none of which materially impairs the
use of such property by the Borrower in the operation of its business, and none
of which is violated in any material respect by existing or proposed structures
or land use;

     (F) Liens in favor of the Lender;

     (G) Existing liens set forth or described on Exhibit 1.01(G), attached
hereto and made a part hereof;

     (H) Purchase money security interests granted to secure not more than
seventy-five percent (75%) of the purchase price of assets, the purchase of
which does not violate this Agreement or any instrument required hereunder; and

     (I) Liens securing Indebtedness permitted by Section 6.02(K) of this
Agreement;

     (J) The following, if the validity or amount thereof is being contested in
good faith by appropriate and lawful proceedings, so long as levy and execution
thereon have been stayed and continue to be stayed and they do not, in the
aggregate, materially detract from the value of the property of the Borrower or
any Subsidiary, or materially impair the use thereof in the operation of its
business:

          (1) Claims or liens for taxes, assessments, or charges due and payable
and subject to interest or penalty;

                                       7

<PAGE>

          (2) Claims, liens and encumbrances upon, and defects of title to, real
or personal property, including any attachment of personal or real property or
other legal process prior to adjudication of a dispute on the merits;

          (3) Claims or liens of mechanics, materialmen, warehousemen, carriers,
or other like liens; and

          (4) Adverse judgments on appeal.

"Person" means any individual, corporation, limited liability company,
partnership, association, joint-stock company, trust, unincorporated
organization, joint venture, court, or government or political subdivision or
agency thereof.

"Records" means correspondence, memoranda, tapes, discs, papers, books and other
documents, or transcribed information of any type, whether expressed in ordinary
or machine readable language.

"Stockholders' Equity" means, at any time the aggregate of Subordinated
Indebtedness, plus the sum of the following accounts set forth on a balance
sheet of the Borrower and its Subsidiaries prepared in accordance with GAAP: (A)
the par or stated value of all outstanding capital stock; (B) capital surplus;
and (C) retained earnings.

"Subordinated Indebtedness" means all Indebtedness incurred at any time by the
Borrower or any Subsidiary, the repayment of which is subordinated to the Loan
in form and manner satisfactory to the Lender. All currently existing
Subordinated Indebtedness is so specified in Exhibit 1.01(H).

"Subordination Agreements" means each and every of the Intercreditor Agreement,
the JDS Uniphase Subordination Agreement and the IP Fibre Devices Subordination
Agreement.

"Subsidiary" means any Affiliate organized in any state or territory of the
United States of America that is directly, or indirectly through one or more
intermediaries, controlled by the Borrower or not less than 50% of the voting
interest of which is owned, directly or through one or more intermediaries, by
the Borrower.

1.02 Accounting.

     Accounting terms used and not otherwise defined in this Agreement have the
meanings determined by, and all calculations with respect to accounting or
financial matters unless otherwise provided herein shall be computed in
accordance with, GAAP.

ARTICLE 2.0 THE LOAN

2.01 Disbursement of the Loan.

     The Lender will credit the proceeds of the Loan to the Borrower's deposit
account with the Lender.

2.02 General Terms.

     Subject to the terms hereof, the Lender will lend the Borrower, from time
to time until the earlier of the date the Lender makes demand on the Demand Note
or the occurrence of an Event of Default, such sums as the Borrower may request
by reasonable same day notice to the Lender, received by

                                       8

<PAGE>

the Lender not later than 11:00 A.M. of such day, but which shall not exceed, in
the aggregate principal amount at any one time outstanding, the lesser of the
then existing Borrowing Base or $3,000,000.00 (the "Line of Credit Commitment").
The Borrower may borrow, repay without penalty or premium and reborrow
hereunder, from the date of this Agreement until the earlier the date the Lender
makes demand on the Demand Note or the occurrence of an Event of Default, the
lesser of the then existing Borrowing Base or the Line of Credit Commitment in
integral multiples of $50,000.00. It is the intention of the parties that the
outstanding principal amount of the Loan shall at no time exceed the amount of
the then existing Borrowing Base, and if, at any time, an excess shall for any
reason exist, the full amount of such excess, together with accrued and unpaid
interest thereon as herein provided, shall be immediately due and payable in
full.

2.03 The Demand Note.

     The Line of Credit Commitment shall be evidenced by a note, payable on
demand, in the form attached hereto as Exhibit 2.03.

2.04 Interest Rate and Payments of Interest.

     (A) Interest shall be paid as follows:

          (1) Except as otherwise provided under Section 2.04(B), interest on
the principal balance of the Loan from time to time outstanding will be payable
at the rate(s) of interest and in the manner set forth in the Notes.

          (2) Interest shall be calculated on the basis of a 360-day year,
counting the actual number of days elapsed, and shall be payable monthly in
arrears on the first day of each month and at maturity, whether by acceleration
or otherwise.

     (B) All agreements between or among the Borrower, the Guarantor and the
Lender are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of maturity of the indebtedness
evidenced by the Notes, this Agreement, or otherwise, shall the amount paid or
agreed to be paid to the Lender for the use or the forbearance of the
indebtedness evidenced by the Notes, this Agreement, or otherwise, exceed the
maximum permissible under applicable law. As used herein, the term "applicable
law" shall mean the law in effect as of the date hereof provided, however that
in the event there is a change in the law which results in a higher permissible
rate of interest, then the Notes shall be governed by such new law as of its
effective date. In this regard, it is expressly agreed that it is the intent of
the Borrower and the Lender in the execution, delivery and acceptance of the
Notes and this Agreement to contract in strict compliance with the laws of The
Commonwealth of Massachusetts from time to time in effect. If, under or from any
circumstances whatsoever, fulfillment of any provision hereof or of the Notes or
any of the Loan Documents or other financing instruments executed in connection
herewith at the time of performance of such provision shall be due, shall
involve transcending the limit of such validity prescribed by applicable law,
then the obligation to be fulfilled shall automatically be reduced to the limits
of such validity, and if under or from circumstances whatsoever the Lender
should ever receive as interest an amount which would exceed the highest lawful
rate, such amount which would be excessive interest shall be applied to the
reduction of the principal balance evidenced by the Notes and not to the payment
of interest.

                                       9

<PAGE>

This provision shall control every other provision of all agreements between or
among the Borrower, the Guarantor and the Lender.

2.05 Payment to the Lender.

     The Lender shall send the Borrower statements of all amounts due hereunder,
which statements shall be considered correct and conclusively binding on the
Borrower absent manifest error unless the Borrower notifies the Lender to the
contrary within thirty (30) days of its receipt of any statement that it deems
to be incorrect. Alternatively, at its sole discretion, the Lender may charge
against any deposit account of the Borrower all or any part of any amount due
hereunder.

ARTICLE 3.0 CONDITIONS PRECEDENT

The obligation of the Lender to make the Loan is subject to the following
conditions precedent:

3.01 Documents Required for the Closing.

     The Borrower shall have delivered to the Lender, prior to the initial
disbursement of the Loan (the "Closing"), the following:

     (A) The Demand Note duly executed by the Borrower, in the form attached
hereto as Exhibit 2.03;

     (B) A duly executed Second Amendment to Mortgage and Security Agreement
from the Borrower in the form attached hereto as Exhibit 1.01(E);

     (C) the duly executed Subordination Agreements;

     (D) A duly executed Perfection Certificate from the Borrower in the form
attached hereto as Exhibit 1.01(F);

     (E) The Guaranty duly executed by the Guarantor in the form attached hereto
as Exhibit 1.01(D);

     (F) A First Amendment to and Ratification of Blocked Account Deposit
Agreement duly executed by the Borrower in the form attached hereto as Exhibit
1.01(A);

     (G) The Financing Statements and other instruments required by Article 4.0;

     (H) A copy, certified as of the date of the Closing, of resolutions of the
board of directors of the Borrower, authorizing the execution, delivery, and
performance of this Agreement, the Demand Note, the Loan Documents, and each
other document to be delivered pursuant hereto;

     (I) A copy, certified as of the date of the Closing, of the bylaws of the
Borrower;

     (J) A certificate (dated the date of the Closing) of the corporate
secretary or assistant secretary of the Borrower as to the incumbency and
signatures of the officers of the Borrower signing this Agreement, the Demand
Note, the Loan Documents, and each other document to be delivered pursuant
hereto;

     (K) A copy, certified as of the most recent date practicable by the
Secretary of the State of Delaware, of the Articles of Incorporation of the
Borrower, and all amendments thereto, together with a certificate (dated the

                                       10

<PAGE>

date of the Closing) of the corporate secretary or assistant secretary of the
Borrower to the effect that such Articles of Incorporation have not been further
amended since the date of the aforesaid certification of the Secretary of the
State of Delaware;

     (L) Certificates of tax and corporate good standing dated as of the most
recent date practicable, issued by the Commissioner of the Department of Revenue
and the Secretary of State of the State of Delaware as to the tax good standing
and the legal existence and good legal standing, respectively, of the Borrower;

     (M) Certificates, as of the most recent dates practicable, of the Secretary
of The Commonwealth of Massachusetts and of the secretary of state of each other
state in which the Borrower is qualified as a foreign corporation and, if
applicable, of the department of revenue or taxation of each of the foregoing
states, as to the good standing of the Borrower;

     (N) A written opinion of legal counsel to the Borrower dated the date of
the Closing and addressed to the Lender, in form satisfactory to the Lender and
its counsel;

     (O) A certificate, dated the date of the Closing, signed by the chief
executive officer, the president or a vice president of the Borrower and to the
effect that:

          (1) The representations and warranties set forth in Section 5.01 are
true as of the date of the Closing; and

          (2) No Event of Default hereunder, and no event which, with the giving
of notice or passage of time or both, would become such an Event of Default, has
occurred as of such date;

     (P) Copies of all documents evidencing the terms and conditions of any debt
specified as Subordinated Indebtedness on Exhibit 1.01(H); and

     (Q) A duly executed Borrowing Base Certificate as of a date not more than
one (1) day prior to the Closing, acceptable to the Lender and certifying a
Borrowing Base of not less than $3,057,559.62.

3.02 Documents Required for Subsequent Disbursements.

     At the time of, and as a condition to, any disbursement of any part of the
Loan to be made by the Lender subsequent to the Closing, the Lender may require
the Borrower to deliver to the Lender a certificate, dated the date on which any
such disbursement is to be made, signed by the chief executive officer, the
president or a vice president of the Borrower, and to the effect that:

     (A) As of the date thereof, no Event of Default has occurred and is
continuing, and no event has occurred and is continuing that, but for the giving
of notice or passage of time or both, would be an Event of Default;

     (B) No material adverse change has occurred in the financial condition or
results of operations of the Borrower or any Subsidiary, considered as a whole,
since the date of the Financial Statements; and

     (C) Each of the representations and warranties contained in Section 5.01 is
true and correct in all material respects as if made on and as of the date of
such disbursement (except for such representations and warranties made as of a
particular date).

                                       11

<PAGE>

3.03 Certain Events.

     At the time of, and as a condition to, the Closing and each disbursement of
any part of the Loan to be made by the Lender at or subsequent to the Closing:

     (A) No Event of Default shall have occurred and be continuing, and no event
shall have occurred and be continuing that, with the giving of notice or passage
of time or both, would be an Event of Default;

     (B) No material adverse change shall have occurred in the financial
condition or results of operations of the Borrower or any Subsidiary, considered
as a whole, since the dates of the Financial Statements; and

     (C) All of the Loan Documents shall have remained in full force and effect.

3.04 Legal Matters.

     At the time of the Closing and, at the discretion of the Lender, at the
time of each subsequent disbursement, all legal matters incidental thereto shall
be satisfactory to Bowditch & Dewey, LLP, legal counsel to the Lender.

ARTICLE 4.0 COLLATERAL SECURITY

4.01 Composition of the Collateral.

     The property in which a security interest is granted pursuant to the
provisions of Sections 4.02 and 4.03 and pursuant to the Loan Documents is
herein collectively called the "Collateral". The Collateral, together with all
other property of the Borrower of any kind held by the Lender, shall stand as
one general, continuing collateral security for all Obligations and may be
retained by the Lender until all Obligations have been satisfied in full, but
subject to Section 4.07 hereof.

4.02 Rights in Property Held by the Lender.

     As security for the prompt satisfaction of all Obligations, the Borrower
hereby assigns, transfers, and sets over to the Lender all of its right, title,
and interest in and to, and grants the Lender a lien on and a security interest
in, all amounts that may be owing, from time to time, by the Lender to the
Borrower in any capacity, including, but without limitation, any balance or
share belonging to the Borrower, or any deposit or other account with the
Lender, which lien and security interest shall be independent of, and in
addition to, any right of set-off that the Lender has under Section 8.06 or
otherwise. The Lender's security interest in the Blocked Account shall be
subject to the provisions of the Blocked Account Agreement.

4.03 Rights in Property Held Either by the Borrower or by the Lender.

     As further security for the prompt satisfaction of all of the Obligations,
the Borrower hereby assigns to the Lender all of its right, title and interest
in and to, and grants the Lender a lien upon and a continuing security interest
in all assets of every type and description, wherever located, whether now owned
or hereafter acquired, together with all substitutions and replacements
therefor, accessions thereto, and proceeds (including, but without limitation,
insurance proceeds) and products thereof, including, without limitation, the
following:

     (A) All Inventory;

                                       12

<PAGE>

     (B) All Accounts, Deposit Accounts, Contracts, accounts receivable,
contract rights, and Chattel Paper, regardless whether they constitute proceeds
of other Collateral;

     (C) All Investment Property, securities entitlements and Financial Assets,
and all General Intangibles (including Payment Intangibles), regardless whether
they constitute proceeds of other Collateral, including, without limitation, all
the Borrower's rights (which the Lender may exercise or not as it in its sole
discretion may determine) to acquire or obtain Goods and/or services with
respect to the manufacture, processing, storage, sale, shipment, delivery or
installation of any of the Borrower's Inventory or other Collateral; all Payment
Intangibles; and including any and all right, title and interest of the Borrower
in, to or under any and all licenses, franchises, permits and approvals obtained
or required in connection with Borrower's business operations;

     (D) All rights to payment of any insurance proceeds or awards for damages
in connection with any condemnations or takings of any interest in and to any
real or personal property, wherever located, or any conveyance in lieu thereof;

     (E) All products of and accessions to any of the Collateral;

     (F) All liens, guaranties, securities, rights, remedies and privileges
pertaining to any of the Collateral, including the right of stoppage in transit;

     (G) All obligations owing to the Borrower of every kind and nature, and all
choses in action, all Commercial Tort Claims, all Letter-of-Credit Rights and
all Supporting Obligations;

     (H) All tax refunds of every kind and nature to which the Borrower is now
or hereafter may become entitled no matter however arising, including, without
limitation, loss carry back refunds;

     (I) All Intellectual Property, goodwill, trade secrets, computer programs,
source codes, licenses, customer lists, trade names, copyrights, trademarks and
patents, all domain names, internet web sites and other rights;

     (J) All Chattel Paper (including Electronic Chattel Paper and Tangible
Chattel Paper), Documents and Instruments, including Promissory Notes (whether
negotiable or non-negotiable, and regardless of their being attached to Chattel
Paper) and all money, cash and coins;

     (K) All Equipment, including without limitation machinery, furniture, motor
vehicles, Fixtures and all other goods used in the conduct of the business of
the Borrower;

     (L) All insurance policies and all proceeds of Collateral of every kind and
nature and in whatever form, including without limitation both cash and non-cash
proceeds resulting or arising from the rendering of services by the Borrower or
the sale or other disposition by the Borrower of the Inventory or other
Collateral and including all insurance proceeds;

     (M) All books and records, magnetic tapes, electronic data, computer
records and discs relating to the conduct of the Borrower's business including,
without in any way limiting the generality of the foregoing, those relating to
its Accounts;

                                       13

<PAGE>

     (N) All Deposit Accounts maintained by the Borrower with any bank, trust
company, credit union, investment firm or fund, or any similar institution or
organization; and

     (O) All property of the Borrower in the possession of the Lender, including
without limitation, all sums in the Blocked Account.

4.04 Priority of Liens.

     The foregoing liens shall be first and prior liens except for Permitted
Liens.

4.05 Financing Statements and Certificates of Title.

     (A) The Borrower will:

          (1) Execute or authenticate and deliver to the Lender any writings and
do all things necessary, effectual or reasonably requested by the Lender to
carry into effect the provisions and intent of this Agreement, or to vest more
fully in or assure to the Lender (including without limitation, all steps to
create and perfect) the security interest in the Collateral granted to the
Lender by this Agreement or to comply with applicable statute or law and to
facilitate the collection of the Collateral, including the furnishing at the
Borrower's cost and expense, at such intervals as the Lender may establish from
time to time, of reports, financial data and analyses satisfactory to the
Lender. The Borrower hereby authorizes the filing of any financing statements or
continuation statement, and amendments to financing statements, in any
jurisdiction and with any filing offices as are necessary or desirable to
perfect the security interests granted to the Lender pursuant to this Agreement,
and the Borrower hereby appoints the Lender as its attorney-in-fact (without
requiring the Lender to act as such) to perform all other acts that the Lender
deems appropriate to protect and preserve the Collateral;

          (2) Pay, or reimburse the Lender for paying, all costs and taxes of
filing or recording the same in all offices and registries in which it is
necessary to file or record such financing statements so as to perfect the
Lender's security interest in and lien on all Collateral; and

          (3) Take such other steps as the Lender, from time to time, may
direct, including the noting of the Lender's lien on the Collateral and, to the
extent a motor vehicle is not subject to a Permitted Lien, on any Certificates
of Title therefor, all to perfect to the satisfaction of the Lender the Lender's
interest in the Collateral.

     (B) In addition to the foregoing, and not in limitation thereof, to the
extent lawful, the Borrower hereby appoints the Lender as its attorney-in-fact
(without requiring the Lender to act as such) (i) to execute, authenticate,
amend, file, record and/or register any financing statement in the name of the
Borrower, and to perform all other acts that the Lender deems appropriate to
perfect and continue its security interest in and lien on, and to protect or
preserve, the Collateral; (ii) to enter into a control agreement or other
agreement for the purpose of perfecting or maintaining the perfection of the
security interests in and liens upon the Collateral; and (iii) to take any other
action deemed necessary or prudent by the Lender, in the sole exercise of its
discretion, to effect, perfect, continue or maintain the security interests in
and liens upon any Collateral as contemplated by this Agreement or the Loan
Documents.

                                       14
<PAGE>

4.06 Mortgagees', Landlords', and Warehousemen's Waivers.

     The Borrower will, within thirty (30) days after any request of the Lender,
cause any mortgagee of real estate owned by the Borrower, any landlord of
premises leased by the Borrower, and any warehouseman or other bailee on whose
premises any of the Collateral with a value in excess of $100,000 may be located
to execute and deliver to the Lender instruments, in form and substance
satisfactory to the Lender, by which such mortgagee, landlord or warehouseman or
other bailee waives its rights, if any, in and to all Goods composing a part of
the Collateral.

4.07 Termination.

     When all indebtedness under the Demand Note has been fully, finally and
indefeasibly paid and the Borrower acknowledges in writing that (a) Lender has
no further obligations to make advances thereunder and (b) the Borrower has no
claims, causes of action, demands or rights of setoff against the Lender under
this Agreement or the Notes, then, provided no Event of Default exists
hereunder, the Lender shall provide the Borrower with a written acknowledgment
that the security interests granted by the Borrower to the Lender under this
Article 4 have been terminated. In addition, upon receipt of a written
acknowledgement from each counterparty to the Subordination Agreements or from
the Guarantor, as applicable, that they have no claims, causes of action or
rights of setoff against the Lender arising out of the applicable Subordination
Agreement or the Guaranty, the Lender shall acknowledge that the Subordination
Agreements or the Guaranty, as applicable, have been terminated.

ARTICLE 5.0 REPRESENTATIONS AND WARRANTIES

5.01 Original.

     To induce the Lender to enter into this Agreement, the Borrower represents
and warrants to the Lender as follows:

     (A) The Borrower is a corporation duly organized, validly existing, and in
good standing under the Laws of the State of Delaware; the Borrower has no
Subsidiaries other than the Subsidiaries named in Exhibit 5.01(A); each
Subsidiary is a corporation duly organized, validly existing, and in good
standing under the Laws of its state of incorporation, all as set forth in
Exhibit 5.01(A); the Borrower and Subsidiaries have the lawful power to own
their properties and to engage in the businesses they conduct, and each is duly
qualified and in good standing as a foreign corporation in Massachusetts and
such other jurisdictions wherein the nature of the business transacted by it or
property owned by it makes such qualification necessary; the states in which the
Borrower and each Subsidiary are qualified to do business are set forth in
Exhibit 5.01(A) or otherwise disclosed to the Lender in writing; the percentage
of the Borrower's ownership of the outstanding stock of each Subsidiary is as
listed in Exhibit 5.01(A); the identity of each shareholder of the Borrower and
the number of shares owned by each is as listed on Exhibit 5.01(A); the
addresses of all places of business of the Borrower and its Subsidiaries are as
set forth in Exhibit 5.01(A) or otherwise disclosed to the Lender in writing;
neither the Borrower nor any Subsidiary has changed its name, been the surviving
corporation in a merger, acquired any business, or changed its principal
executive office within five (5) years and one (1) month prior to the date
hereof except as set forth in Exhibit 5.01(A); and all of the authorized,
issued, and outstanding shares of capital stock of each Subsidiary are owned by
the Borrower;

     (B) Neither the Borrower nor any Subsidiary is directly or indirectly
controlled by, or acting on behalf of, any Person which is an "Investment

                                       15

<PAGE>

Company", within the meaning of the Investment Company Act of 1940, as amended;

     (C) Neither the Borrower nor any Subsidiary is in default with respect to
any of its existing Indebtedness beyond any applicable grace or cure period (or,
in the case of trade Indebtedness, is not more than ninety (90) days past due),
and the making and performance of this Agreement, the Notes, and the other Loan
Documents will not (immediately or with the passage of time, the giving of
notice, or both):

          (1) Violate the charter or by-laws of the Borrower or any Subsidiary,
or violate any Laws or result in a default under any contract, agreement, or
instrument to which the Borrower or any Subsidiary is a party or by which the
Borrower or any Subsidiary or its property is bound; or

          (2) Result in the creation or imposition of any security interest in,
or lien or encumbrance upon, any of the assets of the Borrower or any Subsidiary
except in favor of the Lender;

     (D) The Borrower and the Guarantor, to the extent applicable to it or to
him, has the power and authority to enter into and perform this Agreement, the
Notes, and the other Loan Documents, and to incur the obligations herein and
therein provided for, and has taken all actions necessary to authorize the
execution, delivery, and performance of this Agreement, the Notes, and the other
Loan Documents;

     (E) This Agreement, the Notes, and the other Loan Documents are, or when
delivered will be, valid, binding, and enforceable in accordance with their
respective terms;

     (F) Except as disclosed in Exhibit 5.01(F) hereto, there is no pending
order, notice, claim, litigation, proceeding, or investigation known to the
Borrower against or affecting the Borrower or any Subsidiary, whether or not
covered by insurance, that would in the aggregate involve the payment of
$50,000.00 or more or would otherwise materially or adversely affect the
financial condition or business prospects of the Borrower or any Subsidiary,
considered as a whole, if adversely determined;

     (G) The Borrower and its Subsidiaries have good and marketable title to all
of their assets, none of which is subject to any security interest, encumbrance
or lien, or claim of any third Person except for Permitted Liens;

     (H) The Financial Statements, including any schedules and notes pertaining
thereto, have been prepared in accordance with GAAP, and fully and fairly
present the financial condition of the Borrower and its Subsidiaries at the
dates thereof and the results of operations for the periods covered thereby, and
there have been no material adverse changes in the financial condition or
business of the Borrower and its Subsidiaries, considered as a whole, from
December 31, 2003 to the date hereof;

     (I) As of the date hereof, the Borrower and its Subsidiaries have no
material Indebtedness of any nature, including, but without limitation,
liabilities for taxes and any interest or penalties relating thereto except to
the extent reflected (in a footnote or otherwise) and reserved against in the
balance sheet dated December 31, 2003 included in the Financial Statements or as
disclosed in, or permitted by, this Agreement; and the Borrower does not know or
have reasonable ground to know of any basis for the assertion against it or any
Subsidiary of any such claim or litigation based upon such Indebtedness as of
the date of the Closing except as disclosed on Exhibit 5.01(F) or otherwise
disclosed to the Lender in writing;

                                       16

<PAGE>

     (J) Except as otherwise permitted herein, the Borrower has filed all
federal, state, and local tax returns and other reports required by any
applicable Laws to have been filed prior to the date hereof, has paid or caused
to be paid all taxes, assessments, and other governmental charges that are due
and payable prior to the date hereof, and has made adequate provision for the
payment of such taxes, assessments, or other charges accruing but not yet
payable; the Borrower has no knowledge of any deficiency or additional
assessment in a materially important amount in connection with any taxes,
assessments, or charges not provided for on its books;

     (K) Except to the extent that the failure to comply would not materially
interfere with the conduct of the business of the Borrower or any Subsidiary,
considered as a whole, the Borrower and its Subsidiaries have each complied with
all applicable Laws with respect to (1) any restrictions, specifications, or
other requirements pertaining to products that it manufactures or sells or to
the services it performs; (2) the conduct of its business; and (3) the use,
maintenance, and operation of the real and personal properties owned or leased
by it in the conduct of its business;

     (L) No representation or warranty by or with respect to the Borrower or any
Subsidiary contained herein or in any certificate or other document furnished by
the Borrower or any Subsidiary pursuant hereto contains any untrue statement of
a material fact or omits to state a material fact necessary to make such
representation or warranty not misleading in light of the circumstances under
which it was made;

     (M) Each consent, approval or authorization of, or filing, registration or
qualification with, any Person required to be obtained or effected by the
Borrower, any Subsidiary, or the Guarantor in connection with the execution and
delivery of this Agreement, the Demand Note, and the Loan Documents or the
undertaking or performance of any obligation hereunder or thereunder has been
duly obtained or effected;

     (N) All existing Indebtedness of the Borrower or any Subsidiary: (1) for
money borrowed, or (2) under any security agreement, mortgage or agreement
covering the lease by the Borrower or any Subsidiary as lessee of real or
personal property is described in Exhibit 5.01(N);

     (O) Except as described in Exhibit 5.01(O), attached hereto, or otherwise
disclosed to the Lender in writing, (a) neither the Borrower nor any Subsidiary
has any material leases, contracts, or commitments of any kind (including,
without limitation, employment agreements; collective bargaining agreements;
powers of attorney; distribution arrangements; licenses, patents or license
agreements; contracts for future purchase or delivery of goods or rendering of
services; bonuses, pension, and retirement plans; or accrued vacation pay,
insurance, and welfare agreements); (b) to the best of Borrower's knowledge, all
parties to all such material leases, contracts, and other commitments to which
the Borrower or any Subsidiary is a party have complied in all material respects
with the provisions of such leases, contracts, and other commitments; and (c) to
the best of Borrower's knowledge, no party is in default under any thereof and
no event has occurred which, but for the giving of notice or the passage of
time, or both, would constitute a default, which default might have a materially
adverse effect upon the business or financial condition of the Borrower or, as
applicable, any Subsidiary, considered as a whole;

     (P) All registered patents, trademarks and copyrights of the Borrower or
any Subsidiary, all pending applications of the Borrower or any Subsidiary for
registration of any patents, trademarks or copyrights, and all licenses or
agreements in connection with any Intellectual Property of the Borrower or any
Subsidiary are described in Exhibit 5.01(P) attached hereto;

                                       17

<PAGE>

     (Q) The Borrower has not made any agreement or taken any action which may
cause anyone to become entitled to a commission or finder's fee as a result of
or in connection with the making of the Loan;

     (R) The Borrower's federal tax returns for all years of operation,
including the year ended December 31, 2003, have been filed with the Internal
Revenue Service and have not been challenged;

     (S) Any Employee Pension Benefit Plans, as defined in the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), of the Borrower
and each Subsidiary meet, as of the date hereof, the minimum funding standards
of 29 U.S.C.A. 1082 (Section 302 of ERISA), and no Reportable Event or
Prohibited Transaction, as defined in ERISA, has occurred with respect to any
Employee Benefit Plans, as defined in ERISA, of the Borrower or any Subsidiary;
and

     (T) The liens and security interests created pursuant to Sections 4.02 and
4.03 are in all cases first and prior liens except for Permitted Liens.

5.02 Survival.

     All of the representations and warranties set forth in Section 5.01 shall
survive until there remain no outstanding commitments hereunder.

ARTICLE 6.0 COVENANTS OF THE BORROWER

6.01 Affirmative Covenants.

     The Borrower does hereby covenant and agree with the Lender that, so long
as any of the Obligations remain unsatisfied or any commitments hereunder remain
outstanding, it will comply, or if appropriate cause its Subsidiaries to comply,
at all times with the following affirmative covenants:

     (A) The Borrower will use the proceeds of the Loan only for the purposes
set forth in Exhibit 6.01(A), and will furnish the Lender such evidence as it
may reasonably require with respect to such use;

     (B) The Borrower will furnish the Lender:

          (1) As soon as available, but in any event within forty-five (45) days
after the close of each calendar month in each fiscal year: (a) a statement of
changes in cash flow of the Borrower and its Subsidiaries for such month; (b)
income statements of the Borrower and its Subsidiaries for such month; and (c)
balance sheets of the Borrower and its Subsidiaries as of the end of such
month-all prepared by management on a consolidated basis in reasonable detail,
subject to normal year-end audit adjustments and certified by the Borrower's
chief executive officer, president, chief financial officer or chief accounting
officer to have been prepared in accordance with GAAP;

          (2) As soon as available, but in any event within one hundred twenty
(120) days after the close of each fiscal year: (a) a statement of stockholders'
equity and a statement of changes in cash flow of the Borrower and its
Subsidiaries for such fiscal year; (b) income statements of the Borrower and its
Subsidiaries for such fiscal year; and (c) balance sheets of the Borrower and
its Subsidiaries as of the end of such fiscal year-all such statements to be
prepared on a consolidated basis, together with other subsidiaries of the
Borrower, in reasonable detail, including all supporting schedules, comments,
footnotes and related management letters; the statements and balance sheets to
be audited by Deloitte & Touche or another independent certified public
accountant selected by Borrower and acceptable to the Lender,

                                       18

<PAGE>

and certified by such accountants to have been prepared in accordance with GAAP
and to present fairly the financial position and results of operations of the
Borrower and its Subsidiaries, together with other subsidiaries of the Borrower;
the Lender shall have the right, from time to time to discuss the affairs of the
Borrower directly with such independent certified public accountants after
notice to the Borrower and opportunity of the Borrower to be represented at any
such discussions.

          (3) Upon request by the Lender, for the most recent fiscal quarter of
IP Fibre Devices (a) an income statement of IP Fibre Devices for such fiscal
quarter; and (b) a balance sheet of IP Fibre Devices as of the end of such
fiscal quarter - all prepared in reasonable detail, subject to normal year-end
audit adjustments and certified as accurate and complete by the chief executive
officer, president or chief financial officer of IP Fibre Devices and acceptable
to Lender in accordance with generally accepted accounting principles applicable
in the United Kingdom and presented in United Kingdom pounds sterling, such
statements to present fairly the financial position and results of operations of
IP Fibre Devices (UK) Limited and to be stated in United Kingdom pounds
sterling;

          (4) Contemporaneously with the monthly financial report in conjunction
with the end of each fiscal quarter and the year-end financial report required
by the foregoing paragraphs (1) and (2), a certificate of the chief executive
officer, president, chief financial officer or chief accounting officer of the
Borrower stating that he has individually reviewed the provisions of this
Agreement and that a review of the activities of the Borrower during such year
or monthly period, as the case may be, has been made by him or under his
supervision, with a view to determining whether the Borrower has fulfilled all
its obligations under this Agreement, and that, to the best of his knowledge,
the Borrower has observed and performed each undertaking contained in this
Agreement and is not in default in the observance or performance of any of the
provisions hereof in any material respect or, if the Borrower shall be so in
default, specifying all such defaults and events of which he may have knowledge;

          (5) Promptly after the sending or making available or filing of the
same, copies of all reports, proxy statements, and financial statements that the
Borrower sends or makes available to its stockholders and all registration
statements and reports that the Borrower files with the Securities and Exchange
Commission or any successor Person;

          (6) Within fifteen (15) days after the end of each calendar month, in
such form and detail as shall be satisfactory to the Lender, an aging, as of the
end of such month, of (a) the then Eligible Accounts, (b) all other Accounts of
the Borrower certified by the chief executive officer, president, chief
financial officer or chief accounting officer of the Borrower to be complete and
correct;

          (7) Within fifteen (15) days after the end of each calendar month (and
at any additional time in the discretion of the Lender or if any material
deterioration in the Borrowing Base would be disclosed thereby) a Borrowing Base
Certificate as of the end of such month (or as of a date not more than three (3)
days prior to the date of any such additional Borrowing Base Certificate). Each
Borrowing Base Certificate shall be effective only as accepted by the Lender
(and with such revisions, if any, as the Lender may require as a condition to
such acceptance), such acceptance to be presumed after receipt of such Borrowing
Base Certificate unless the Lender otherwise

                                       19

<PAGE>

notifies the Borrower, whether thereafter, theretofore, or contemporaneously
therewith; and

          (8) Upon the Lender's request, from time to time, copies of any or all
agreements, contracts, or commitments referred to in Section 5.01(O) hereof;

     (C) The Borrower will maintain its Inventory, Equipment, the Mortgaged
Property and its other real estate, and other properties in good condition and
repair (normal wear and tear excepted), and will pay and discharge or cause to
be paid and discharged, when due, the cost of repairs to, or maintenance of, the
same, and will pay or cause to be paid in a timely manner all rental or mortgage
payments due on such real estate. The Borrower hereby agrees that, in the event
it fails to pay or cause to be paid any such payment, it will promptly notify
the Lender thereof, and the Lender may, in its discretion, do so and on demand
be reimbursed therefor by the Borrower;

     (D) The Borrower and its Subsidiaries will maintain, or cause to be
maintained, public liability insurance (subject to such deductibles for each
entity as are acceptable to the Lender in its discretion) and fire and extended
coverage insurance on all assets that are of a character usually insured by
businesses engaged in the same or similar operations, all in form and amount
sufficient to indemnify the Borrower or Subsidiary for 100% of the appraised
value of any such asset lost or damaged (subject to any deductible customary in
the Borrower's or Subsidiary's industry) or in an amount consistent with the
amount of insurance generally carried on comparable assets within the industry
and with such insurers as may be satisfactory to the Lender. The Borrower and
its Subsidiaries will cause all such insurance policies to contain a standard
mortgage clause and to be payable to the Lender as its interest may appear, to
cause the Lender to be named as an additional insured on all such liability
policies, to deliver the policies of insurance to the Lender, and, in the case
of all policies of insurance carried for the benefit of the Borrower or any
Subsidiary by any lessee, sublessee, subtenant, or other party having rights to
occupy or use the mortgaged property or any part thereof or interest therein
under any lease, sublease, or other agreement (whether oral, written, or
otherwise evidenced), to cause all such policies to be payable to the Lender as
its interest may appear. Such policies shall contain a provision whereby they
cannot be cancelled except after thirty (30) days' written notice to the Lender.
The Borrower will furnish to the Lender such evidence of insurance as the Lender
may reasonably require. The Borrower hereby agrees that, in the event it or any
Subsidiary fails to pay or cause to be paid the premium on any such insurance
when due, the Lender, in its discretion, may do so and be reimbursed by the
Borrower therefor. The Borrower and each Subsidiary hereby assign to the Lender
any returned or unearned premiums that may be due the Borrower or any Subsidiary
upon cancellation by the insurer of any such policy for any reason whatsoever
and direct any such insurer to pay the Lender any amounts so due. provided,
however, that the Lender will pay to the Borrower or the appropriate Subsidiary
any such returned or unearned premiums within five (5) days after the receipt
thereof if there has not occurred and be continuing an Event of Default
hereunder. The Lender is hereby appointed the attorney-in-fact of the Borrower
and each Subsidiary (without requiring the Lender to act as such), effective
after demand upon the Demand Note or during the continuance of an Event of
Default, to endorse any check which may be payable to the Borrower or any
Subsidiary to collect any premiums or the proceeds of such insurance (other than
proceeds of public liability insurance), and any amount so collected may be
applied by the Lender toward satisfaction of the Loan and any other Obligations.
If the Lender receives any proceeds from insurance in the absence of an Event of
Default, it shall remit such proceeds to the Borrower or such Subsidiary within
three (3) Business Days after the Lender's receipt of such proceeds, provided
that immediately prior to any such remittance the

                                       20

<PAGE>

Lender is provided with a Borrowing Base Certificate reflecting a current
Borrowing Base not less than the amount of the Loan then outstanding without
first providing the Lender with thirty (30) days advance written notice of its
intention to do so;

     (E) The Borrower and its Subsidiaries will each pay or cause to be paid
when due, all taxes, assessments, and charges or levies imposed upon it or on
any of its property or which it is required to withhold and pay except where
contested in good faith by appropriate proceedings with adequate reserves
therefor having been set aside on its books; provided, however, that the
Borrower and each Subsidiary shall pay or cause to be paid all such taxes,
assessments, charges or levies forthwith whenever foreclosure on any lien that
may have attached (or security therefor) appears imminent;

     (F) The Borrower will maintain a Borrowing Base such that the amount of the
Borrower's outstanding Loan will not, at any time, exceed its Borrowing Base;

     (G) The Borrower and its Subsidiaries will each, when requested to do so,
make available for inspection by duly authorized representatives of the Lender
any of its books and records and will furnish the Lender any information
regarding its business affairs and financial condition within a reasonable time
after written request therefor;

     (H) The Borrower and its Subsidiaries will each take all necessary steps to
preserve its corporate existence and franchises and comply in all material
respects with all present and future Laws applicable to it in the operation of
its business, and all material agreements to which it is subject;

     (I) The Borrower and its Subsidiaries will each collect its Accounts and
sell its Inventory only in the ordinary course of business;

     (J) The Borrower and its Subsidiaries will each keep accurate and complete
Records of its Accounts, Inventory, and Equipment consistent with sound business
practices;

     (K) The Borrower and its Subsidiaries will each give immediate notice to
the Lender of (1) any litigation or proceeding in which it is a party if an
adverse decision therein would require it to pay more than $100,000.00 or
deliver assets the value of which exceeds such sum (except where the claim is
covered by insurance and the insurer has acknowledged coverage); and (2) the
institution of any other suit or proceeding involving it that might materially
and adversely affect its operations, financial condition or property of the
Borrower or its Subsidiaries, considered as a whole;

     (L) At the Lender's request, the Borrower will furnish the Lender with
true, correct and complete copies of federal income tax returns filed by the
Borrower, together with all schedules thereto. The Borrower will cause the full
amount of each federal and other income tax refund (including any interest
component thereof) received by the Borrower to be applied as an immediate
repayment or partial repayment of the Loan, but such repayment shall not of
itself reduce the Line of Credit Commitment;

     (M) The Borrower and its Subsidiaries will each pay when due (or within
applicable grace periods (or, in the case of trade indebtedness, no later than
ninety (90) days from the date incurred)) all of its other Indebtedness due
third Persons except when the amount thereof is being contested in good faith by
appropriate proceedings and with adequate reserves therefor being set aside on
its books; provided, however, that no payment shall be made in respect to
Subordinated Indebtedness except in strict compliance with all of the terms of
the Subordination Agreements or the terms

                                       21

<PAGE>

of such other applicable provisions of subordination theretofore approved in
writing by the Lender. If default be made by the Borrower or any Subsidiary in
the payment of any principal (or installment thereof) of, or interest on, any
such Indebtedness, the Lender shall have the right, in its discretion, to pay
such interest or principal for the account of the Borrower or such Subsidiary
and be reimbursed by the Borrower or such Subsidiary therefor;

     (N) The Borrower and its Subsidiaries will each notify the Lender
immediately if it becomes aware of the occurrence of any Event of Default or of
any fact, condition, or event that only with the giving of notice or passage of
time or both, could become an Event of Default or if it becomes aware of any
material adverse change in the financial condition (including, without
limitation, proceedings in bankruptcy, insolvency, reorganization, or the
appointment of a receiver or trustee), or results of operations of the Borrower,
a Subsidiary, or the Guarantor or of the failure of the Borrower or any
Subsidiary to observe any of their respective undertakings hereunder or under
the Loan Documents;

     (O) The Borrower and its Subsidiaries will each notify the Lender thirty
(30) days in advance of any change in the location of any of its places of
business or of the establishment of any new, or the discontinuance of any
existing, place of business;

     (P) The Borrower and its Subsidiaries will each (1) fund any of its
Employee Pension Benefit Plans in accordance with no less than the minimum
funding standards of 29 U.S.C.A. 1082 (Section 302 of ERISA); (2) furnish the
Lender, promptly after a request for same by the Lender, with copies of any
reports or other statements filed with the United States Department of Labor or
the Internal Revenue Service with respect to any such Plan; and (3) promptly
advise the Lender of the occurrence of any Reportable Event or Prohibited
Transaction with respect to any Employee Benefit Plan;

     (Q) The Borrower will permit the Lender to conduct field audits
periodically, and at least annually, at reasonable times on any premises
occupied by the Borrower or on which any Collateral is located. The Borrower
shall pay to the Lender the Lender's reasonable costs and expenses related to
one such field audit in any calendar year, provided, however, that the Borrower
shall pay to the Lender the Lender's reasonable costs and expenses related to
any field audit conducted during the occurrence of an Event of Default; and

     (R) The Borrower will maintain the Blocked Account in accordance with the
provisions of the Blocked Account Agreement.

6.02 Negative Covenants.

     The Borrower does hereby covenant and agree with the Lender that, so long
as any of the Obligations remain unsatisfied or any commitments hereunder remain
outstanding, it will comply, or if appropriate cause its Subsidiaries to comply,
at all times with the following negative covenants, unless the Lender shall
otherwise have agreed in writing:

     (A) Neither the Borrower nor any Subsidiary will change its name, enter
into any merger or consolidation (other than with wholly owned subsidiaries
resulting in no change in the beneficial ownership of the Borrower);

     (B) Neither the Borrower nor any Subsidiary nor IPG Laser GmbH will sell,
transfer, lease, or otherwise dispose of all or (except in the ordinary course
of business) any material part of its assets, excluding (i) obsolete inventory
or equipment sold at depreciated book value or (ii) up to

                                       22

<PAGE>

$100,000.00 in assets in any one transaction or series of related transaction,
provided the aggregate cumulative amount of such transactions shall not exceed
$1,000,000.00;

     (C) Neither the Borrower nor any Subsidiary will sell, lease, transfer,
assign, or otherwise dispose of any of the Collateral except in the ordinary
course of business or in the case of obsolete Inventory or Equipment, in sales
for amounts equal to or exceeding depreciated book value;

     (D) Neither the Borrower nor any Subsidiary will sell or otherwise dispose
of, or for any reason cease operating, any of its divisions, franchises, or
lines of business without first providing the Lender with thirty (30) days
advance written notice of its intention to do so;

     (E) Neither the Borrower nor any Subsidiary will mortgage, pledge, grant,
or permit to exist a security interest in, or a lien upon, any of its assets of
any kind, now owned or hereafter acquired, except for Permitted Liens, liens of
the Loan Documents, and existing liens listed on Exhibit 1.01(G) to the extent
shown on such Exhibit 1.01(G) to be permitted to exist after the Closing;

     (F) Neither the Borrower nor any Subsidiary will become liable, directly or
indirectly, as guarantor or otherwise for any obligation of any other Person
without notifying the Lender in writing in advance, except for (i) the
endorsement of commercial paper for deposit or collection in the ordinary course
of business, and (ii) unsecured guarantees of obligations of foreign
subsidiaries of the Borrower;

     (G) Neither the Borrower nor any Subsidiary will incur, create, assume, or
permit to exist any Indebtedness except: (1) the Loan; (2) existing Indebtedness
listed on Exhibit 5.01(N); (3) trade indebtedness incurred in the ordinary
course of business, (4) contingent Indebtedness permitted by Section 6.02(F);
(5) operating lease obligations permitted by Section 6.02(M); (6) Indebtedness
secured by Permitted Liens; (7) Subordinated Indebtedness; and (8) capital
leases or purchase money Indebtedness permitted by Section 6.02(K);

     (H) Neither the Borrower nor any Subsidiary (other than a wholly owned
Subsidiary of the Borrower) will declare or pay any dividends, or make any other
payment or distribution on account of its capital stock (other than shares of
stock of, or other instruments issued by, the Borrower convertible into stock of
the Borrower), nor make any assignment or transfer of Accounts, or, other than
in the ordinary course of business, of Inventory;

     (I) Neither the Borrower nor any Subsidiary will form any subsidiary, make
any investment in (including any assignment of Inventory or other property), or
make any loan in the nature of an investment to, any Person, other than
investments of the Borrower in the Subsidiaries listed on Exhibit 5.01(A)
without first providing the Lender within thirty (30) days advance written
notice of its intention to do so;

     (J) Neither the Borrower nor any Subsidiary will make any loan or advance
to any officer, shareholder, director, or employee of the Borrower or any
Subsidiary, except for (i) business travel, educational or relocation and
similar temporary advances in the ordinary course of business, or (ii) loans not
exceeding $100,000.00 to any one such individual up to $200,000.00 in the
aggregate at any one time outstanding;

     (K) Neither the Borrower nor any Subsidiary will make payments on account
of the purchase or lease of Fixed Assets that, in the aggregate, in any fiscal
year (commencing with the current fiscal year) will exceed the

                                       23

<PAGE>

lesser of 15% of the revenues of the Borrower for such fiscal year or
$6,000,000; as used in this paragraph, the term "lease" means a lease reflected
on a balance sheet of the Borrower and its Subsidiaries or a lease that should
be so reflected under GAAP;

     (L) INTENTIONALLY OMITTED;

     (M) Neither the Borrower nor any Subsidiary will pay or commit to pay, in
an aggregate amount for any fiscal quarter (commencing with the current fiscal
quarter), lease obligations in excess of $210,000.00 without obtaining the
Lender's prior written consent (as used in this paragraph, the term "lease"
means a lease that is not capitalized in a balance sheet of the Borrower and
should not be so capitalized under GAAP);

     (N) Neither the Borrower nor any Subsidiary will purchase or otherwise
invest in or hold securities, nonoperating real estate, or other nonoperating
assets except: (1) Permitted Investments; (2) the present investment in any such
assets held as of December 31, 2003 and reflected in the Financial Statements;
and (3) operating assets that hereafter become nonoperating assets;

     (O) Neither the Borrower nor any Subsidiary will permit any change in the
active involvement of Valentin P. Gapontsev in the operations of the Borrower,
without the prior written consent of the Lender, which consent shall not be
unreasonably withheld or conditioned;

     (P) Neither the Borrower nor any Subsidiary will prepay Indebtedness for
borrowed money except the Obligations, Indebtedness secured by any of its assets
(except the Obligations), or so-called "mandatory prepayments" of that
Indebtedness due to JDS Uniphase which is subject to the Intercreditor Agreement
(such prepayments to be in accordance with existing payment terms), or enter
into or modify any agreement as a result of which the terms of payment of any of
the foregoing Indebtedness are waived or modified;

     (Q) Neither the Borrower nor any Subsidiary will enter into any
sale-leaseback transaction without first providing the Lender with thirty (30)
days advance written notice of its intention to do so;

     (R) Neither the Borrower nor any Subsidiary will acquire or agree to
acquire any stock in, or all or substantially all of the assets of, any Person
without first providing the Lender with thirty (30) days advance written notice
of its intention to do so;

     (S) Neither the Borrower nor any Subsidiary will furnish the Lender any
certificate or other document that will contain any untrue statement of material
fact or that will omit to state a material fact necessary to make it not
misleading in light of the circumstances under which it was furnished;

     (T) Neither the Borrower nor any Subsidiary will directly or indirectly
apply any part of the proceeds of the Loan to the purchasing or carrying of any
"margin stock" within the meaning of Regulation U of the Board of Governors of
the Federal Reserve System, or any regulations, interpretations, or rulings
thereunder; and

     (U) Neither the Borrower nor any Subsidiary will make distributions,
directly or indirectly, to IP Fibre Devices except that the Borrower may make a
distribution of up to US$150,000 to IP Fibre Devices in the fiscal quarter
ending December 31, 2004 to be used to pay tax liabilities or for working
capital requirements of IP Fibre Devices for such fiscal quarter and,
thereafter, with the Lender's prior written approval, the Borrower may be

                                       24

<PAGE>

permitted to make additional distributions to IP Fibre Devices on a quarterly
basis as may be necessary to pay tax liabilities or for working capital
requirements of IP Fibre Device due and payable within such quarterly period.

ARTICLE 7.0 DEFAULT

7.01 Events of Default.

     The occurrence of any one or more of the following events shall constitute
an Event of Default hereunder:

     (A) The Borrower or the Guarantor shall fail to pay when due any of its
Obligations to the Lender within ten (10) days of the date due;

     (B) The Borrower or the Guarantor or any Subsidiary shall fail to observe
or perform any other obligation to be observed or performed by it hereunder or
under any of the Loan Documents, and such failure shall continue for fifteen
(15) days after (1) notice of such failure from the Lender; or (2) the Lender is
notified of such failure or should have been so notified pursuant to the
provisions of Section 6.01(N), whichever is earlier;

     (C) The Borrower or any Subsidiary shall fail to pay Indebtedness exceeding
$50,000.00 due any third Person, and such failure shall continue beyond any
applicable grace period (or, with respect to trade Indebtedness which is not
subject to a grace period, within ninety (90) days of the date such trade
Indebtedness is incurred), or the Borrower or any Subsidiary shall suffer to
exist any other event of default under any agreement binding the Borrower or any
Subsidiary;

     (D) Any financial statement, representation, warranty, or certificate made
or furnished by or with respect to the Borrower or the Guarantor or any
Subsidiary to the Lender in connection with this Agreement, or as inducement to
the Lender to enter into this Agreement, or in any separate statement or
document to be delivered to the Lender hereunder, shall be materially false or
incorrect when made;

     (E) The Borrower or the Guarantor or any Subsidiary shall admit its
inability to pay its debts as they mature or shall make an assignment for the
benefit of itself or any of its creditors;

     (F) Proceedings in bankruptcy, or for reorganization of the Borrower or any
Subsidiary, or for the readjustment of any of their respective debts under the
Bankruptcy Code, as amended, or any part thereof, or under any other Laws,
whether state or federal, for the relief of debtors, now or hereafter existing,
shall be commenced against or by the Borrower or the Guarantor or any Subsidiary
and, except with respect to any such proceedings instituted by the Borrower, the
Guarantor or a Subsidiary, shall not be discharged within sixty (60) days of
their commencement;

     (G) A receiver or trustee shall be appointed for the Borrower or the
Guarantor or any Subsidiary or for any substantial part of their respective
assets, or any proceedings shall be instituted for the dissolution or the full
or partial liquidation of the Borrower or the Guarantor or any Subsidiary, and
except with respect to any such appointments requested or instituted by the
Borrower, the Guarantor or any Subsidiary, such receiver or trustee shall not be
discharged within sixty (60) days of his appointment, and except with respect to
any such proceedings instituted by the Borrower, the Guarantor or any
Subsidiary, such proceedings shall not be discharged within sixty (60) days of
their commencement, or the Borrower or the Guarantor or any Subsidiary shall
discontinue business or materially change the nature of its business, or the
Collateral becomes, in the reasonable judgment of the Lender, insufficient

                                       25

<PAGE>

in value to satisfy the Obligations, or the Lender otherwise reasonably finds
itself insecure as to the prompt and punctual payment and discharge of the
Obligations;

     (H) The Borrower or the Guarantor or any Subsidiary shall suffer final
judgments (which are not covered by insurance where the insurer has acknowledged
coverage) for payment of money aggregating in excess of $100,000.00 and shall
not discharge the same within a period of thirty (30) days unless, pending
further proceedings, execution has not been commenced or, if commenced, has been
effectively stayed;

     (I) A judgment creditor of the Borrower or the Guarantor or any Subsidiary
shall obtain possession of any of the Collateral by any means, including
(without implied limitation) levy, distraint, replevin, or self-help;

     (J) An uninsured loss by fire or other casualty to any security for the
Loan exceeding $100,000.00 as determined by a public adjuster acceptable to the
Lender;

     (K) Failure by the Borrower or the Guarantor to pay any amount of money or
to observe or perform any other covenant, condition or agreement which is the
obligation of the Borrower or the Guarantor to the Lender under any other
existing or future note, mortgage or other document or instrument;

     (L) Any obligee of Subordinated Indebtedness shall fail to comply with the
subordination provisions of the instruments evidencing such Subordinated
Indebtedness; or

     (M) The Guarantor shall fail to comply fully with the requirements of the
Guaranty, or give notice of or assert the termination, discontinuance,
invalidity or unenforceability of the Guaranty; or

     (N) There occurs a Change in Control; or

     (O) There is a change in the current ownership of more than twenty percent
(20%) of the voting power of the capital stock of the Borrower, whether such
change occurs by sale, transfer, redemption, retirement or alteration of the
voting rights of existing capital stock of the Borrower or by the Borrower's
issuance of additional capital stock.

Notwithstanding the enumeration of the foregoing Events of Default, the Borrower
acknowledges and agrees that the Loan is a demand Obligation that is payable on
demand regardless of the occurrence or non-occurrence of an Event of Default.

7.02 Acceleration.

     At its option, and at any time, whether immediately or otherwise, the
Lender may, upon the occurrence of any Event of Default, declare all Obligations
immediately due and payable without further action of any kind including without
limitation, notice, demand or presentment.

ARTICLE 8.0 THE LENDER'S RIGHTS AND REMEDIES

8.01 Account Debtors

     Upon demand on the Demand Note or the occurrence of an Event of Default and
at any time thereafter, the Lender, without presentment, demand, notice, protest
or advertisement of any kind, may notify account debtors, at the Borrower's
expense, that the Collateral has been assigned to the Lender and

                                       26

<PAGE>

that payments shall be made directly to the Lender. Upon request of the Lender,
the Borrower will notify such account debtors that their accounts must be paid
to the Lender. Upon demand on the Demand Note or the occurrence of an Event of
Default and at all times thereafter, the Borrower will hold all checks, drafts,
cash and other remittances in trust for the Lender and deliver them in kind to
the Lender. The Lender shall have full power to collect, compromise, endorse,
sell or otherwise deal with the Collateral or proceeds thereof in its own name
or in the name of the Borrower.

8.02 Possession and Foreclosure of Collateral

     Upon demand on the Demand Note or the occurrence of an Event of Default and
at any time thereafter, to the extent that the Borrower could legally do so, the
Lender, without presentment, demand, notice, protest or advertisement of any
kind, may enter onto, occupy and use any premises owned by the Borrower or in
which the Borrower has any interest. The Lender may take possession of all
Collateral. In the Lender's sole discretion, the Lender may operate and use the
Borrower's equipment, complete work in process and sell inventory without being
liable to the Borrower on account of any losses, damage or depreciation that may
occur as a result thereof (so long as the Lender acts in good faith). The Lender
may lease or license the Collateral to any Person for such purposes. In any
event, the Lender may sell, lease, assign and deliver the whole or any part of
the Collateral, at public or private sale, for cash, upon credit or for future
delivery, at such prices and upon such terms as the Lender deems advisable. The
Lender may sell or lease Collateral alone or in conjunction with other property,
real or personal, and allocate the sale proceeds or leases among the items of
Collateral sold without the necessity of the Collateral being present at any
such sale, or in view of prospective purchasers thereof. If notice of sale is
legally required, the Borrower agrees that ten (10) days written notice shall be
deemed reasonable. Upon such sale, the Lender may become the purchaser of the
whole or any part of the Collateral sold, discharged from all claims and free
from any right of redemption. In case of any such sale by the Lender of all or
any of the Collateral on credit, or for future delivery, such Collateral so sold
may be retained by the Lender until the selling price is paid by the purchaser.
The Lender shall incur no liability in case of the failure of the purchaser to
take possession and pay for the Collateral so sold. In case of any such failure,
the said Collateral may be resold. Any Collateral remaining unsold after being
offered at public auction may be abandoned or disposed of for no consideration
in such manner as the Lender deems appropriate.

     In any event, at any time and from time to time the Lender may abandon the
Collateral or any part thereof. The Borrower agrees immediately upon demand to
take possession of any and all abandoned Collateral and to remove it from any
location in the possession of or under the control of the Lender.

8.03 INTENTIONALLY OMITTED;

8.04 Notification of Default to Third Parties

     The Lender may notify account debtors of the Borrowers to pay over to the
Lender for application against the Obligations any sums due from such account
debtors to the Borrowers. In addition, upon demand on the Demand Note or the
occurrence of an Event of Default and at any time thereafter, the Lender,
without presentment, demand, notice, protest or advertisement of any kind, may
notify the Borrowers' suppliers and other third parties of the default and of
any and all decisions made and actions taken by the Lender with respect to this
Agreement, the Obligations or the Collateral, without liability of any kind.

                                       27

<PAGE>

8.05 Assembly of Collateral

     Upon demand on the Demand Note or the occurrence of an Event of Default and
at any time thereafter, the Lender, without presentment, demand, notice, protest
or advertisement of any kind, may require the Borrower to assemble the
Collateral in a single location at a place to be designated by the Lender and
make the Collateral at all times secure and available to the Lender.

8.06 Right of Set-Off.

     The Lender may, and is hereby authorized by the Borrower, at any time and
from time to time, to the fullest extent permitted by applicable Laws, without
advance notice to the Borrower (any such notice being expressly waived by the
Borrower), set-off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and any other indebtedness at any
time owing by the Lender to, or for the credit or the account of, the Borrower
against any or all of the Obligations of the Borrower or the Guarantor, now or
hereafter existing, whether or not such Obligations have matured and
irrespective of whether the Lender has exercised any other rights that it has or
may have with respect to such Obligations, including without limitation any
acceleration rights. The Lender agrees promptly to notify the Borrower after any
such set-off and application, provided that the failure to give such notice
shall not affect the validity of such set-off and application. The rights of the
Lender under this Section 8.06 are in addition to the other rights and remedies
(including, without limitation, other rights of set-off) which the Lender may
have.

8.07 Exercise of Other Remedies

     Upon demand on the Demand Note or the occurrence of any Event of Default
and at any time thereafter, the Lender, without presentment, demand, notice,
protest or advertisement of any kind, may exercise the remedies of a secured
party afforded by the Uniform Commercial Code and other applicable law or by the
terms of any agreement between the Borrower and the Lender.

8.08 Cumulative Rights and Remedies

     All rights and remedies of the Lender, whether provided for herein or in
other agreements, instruments or documents or conferred by law, are cumulative
and may be exercised alone or simultaneously.

8.09 Additional Rights and Remedies

     (A) Upon demand on the Demand Note or the occurrence of an Event of
Default, all obligations on the part of the Lender to make advances on the
Demand Note, if the Lender so elects, shall cease and terminate, and, at the
option of the Lender, the Demand Note shall become immediately due and payable,
and the Lender shall thereupon be authorized and empowered to exercise any
rights of foreclosure or as otherwise provided for the realization of any
security for the Notes covered by any of the Loan Documents; but the Lender may,
at its sole discretion, make any advances or portions of advances, after demand
or the occurrence of any such Event of Default, without thereby waiving its
right to demand payment of the Borrower's indebtedness evidenced by the Notes
and secured by the Loan Documents, and without becoming liable to make any other
or further advances as hereinabove contemplated by this Agreement.

     (B) Upon demand on the Demand Note or the occurrence of any Event of
Default, the rights, powers, and privileges provided in this Section 8.09 and
all other remedies available to the Lender under this Agreement or at law or in
equity may be exercised by the Lender at any time and from time to time,

                                       28
<PAGE>

whether or not the indebtedness evidenced and secured by the Notes and the Loan
Documents shall be due and payable, and whether or not the Lender shall have
instituted any foreclosure proceedings or other action for the enforcement of
its rights under the Notes or any of the Loan Documents.

ARTICLE 9.0 ATTORNEY-IN-FACT

9.01 Attorney-In-Fact

     The Borrower hereby irrevocably appoints the Lender, or its designee, as
the Borrower's true and lawful attorney-in-fact, effective upon demand upon the
Demand Note or during the continuance of an Event of Default, with full power as
follows: (A) to endorse the name of the Borrower on any assignments, notes,
checks, drafts, money orders, or other instruments of payment for Collateral;
(B) to sign or endorse the name of the Borrower on any negotiable instrument,
invoice, freight or express bill, bill of lading, storage or warehouse receipts,
drafts, assignments, verifications and notices in connection with accounts; (C)
to obtain, adjust, settle and cancel, in the Borrower's name, insurance policies
as required by Section 6.01(D) and to sign the Borrower's name on settlement
checks or drafts; (D) in the Borrower's name, to do any act which this Agreement
requires Borrower to do, and, (E) to give notice to the United States Post
Office to effect changes of address so that mail addressed to the Borrower may
be delivered directly to the Lender. In exercising this power-of-attorney, the
Lender shall not be liable to the extent that it acts in good faith.

ARTICLE 10.0 MISCELLANEOUS

10.01 Construction.

     The provisions of this Agreement shall be in addition to those of any
guaranty, pledge or security agreement, note, or other evidence of liability now
or hereafter held by the Lender, all of which shall be construed as
complementary to each other. Nothing herein contained shall prevent the Lender
from enforcing any or all other guaranty, pledge or security agreements, notes,
or other evidences of liability in accordance with their respective terms.

10.02 Further Assurance.

     From time to time, the Borrower will execute and deliver to the Lender such
additional documents and will provide such additional information as the Lender
may reasonably require to carry out the terms of this Agreement and be informed
of the status and affairs of the Borrower.

10.03 Enforcement and Waiver by the Lender.

     The Lender shall have the right at all times to enforce the provisions of
this Agreement and the Loan Documents in strict accordance with the terms hereof
and thereof, notwithstanding any conduct or custom on the part of the Lender in
refraining from so doing at any time or times. The failure of the Lender at any
time or times to enforce its rights under such provisions, strictly in
accordance with the same, shall not be construed as having created a custom in
any way or manner contrary to specific provisions of this Agreement or as having
in any way or manner modified or waived the same. All rights and remedies of the
Lender are cumulative and concurrent and the exercise of one right or remedy
shall not be deemed a waiver or release of any other right or remedy.

                                       29

<PAGE>

10.04 Expenses of the Lender.

     The Borrower will, on demand, reimburse the Lender for all expenses,
including the reasonable fees and expenses of legal counsel for the Lender,
incurred by the Lender in connection with the preparation, administration,
amendment, modification, or enforcement of this Agreement and the Loan Documents
and the collection or attempted collection of any of the Obligations including
without limitation by reason of enumeration, all reasonable expenses and fees of
legal counsel for the Lender incurred in connection with any bankruptcy or
insolvency action of the Borrower or the Guarantor or any Subsidiary.

10.05 Notices.

     Any notices or consents required or permitted by this Agreement shall be in
writing and shall be deemed delivered if delivered in person or if sent by
certified mail, postage prepaid, return receipt requested, facsimile
transmission, as follows, unless such address is changed by written notice
hereunder:

     (A)   If to the Borrower: IPG Photonics Corporation
                               50 Old Webster Road
                               Oxford, MA 01540
                               Attention: Its Chief Executive Officer

           With a copy to:     IPG Photonics Corporation
                               50 Old Webster Road
                               Oxford, MA 01540
                               Attention: Chief Financial Officer and General
                               Counsel

     (B)   If to the Lender:   Banknorth, N.A.
                               370 Main Street
                               Worcester, Massachusetts 01608
                               Attention: Senior Commercial Loan Officer

           With a copy to:     George W. Tetler III, Esquire
                               Bowditch & Dewey, LLP
                               P.O. Box 15156
                               311 Main Street
                               Worcester, MA 01615-015

Any party may change the address to which notices are to be sent to it by giving
written notice of such change of address to the other party in the manner herein
provided for giving notice. Any such notice, demand, request, or other
communication shall be deemed given when mailed as aforesaid.

10.06 Waiver and Indemnification by the Borrower.

     To the maximum extent permitted by applicable Laws, the Borrower:

     (A) Waives (1) protest of all commercial paper at any time held by the
Lender on which the Borrower is in any way liable; (2) except as the same may
herein be specifically granted, notice of acceleration and of intention to
accelerate; and (3) notice and opportunity to be heard, after acceleration in
the manner provided in Section 7.02, before exercise by the Lender of the
remedies of self-help, set-off, or of other summary procedures permitted by any
applicable Laws or by any agreement with the Borrower, and, except where
required hereby or by any applicable Laws, notice of any other action taken by
the Lender; and

                                       30

<PAGE>

     (B) Defends, indemnifies and holds harmless the Lender and its officers,
attorneys, agents, and employees from all claims for loss or damage caused by
any act or omission on the part of any of them in connection with the
transactions contemplated by this Agreement or related to the banking
relationship between or among the Borrower, the Guarantor and the Lender,
excepting only the Lender's willful misconduct or gross negligence.

10.07 Participation/Pledge.

     Notwithstanding any other provision of this Agreement, the Borrower
understands that the Lender may at any time enter into participation agreements
with one or more participating banks whereby the Lender will allocate certain
percentages of its commitment to them. The Borrower acknowledges that, for the
convenience of all parties, this Agreement is being entered into with the Lender
only and that its obligations under this Agreement are undertaken for the
benefit of, and as an inducement to, any such participating bank as well as the
Lender, and the Borrower hereby grants to each such participating bank, to the
extent of its participation in the Loan, the right to set off deposit accounts
maintained by the Borrower with such bank. Notwithstanding the foregoing
provisions of this Section, any Lender may at any time pledge or assign all or
any portion of such Lender's rights under this Agreement, the Demand Note and
the Loan Documents to a Federal Reserve bank; provided, however, that no such
pledge or assignment shall release such Lender from such Lender's obligations
hereunder or under the Demand Note or any of the Loan Documents.

10.08 WAIVER OF JURY TRIAL.

     EACH OF THE LENDER AND THE BORROWER WAIVES ITS RIGHTS TO A TRIAL BY JURY
WITH RESPECT TO ANY SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR COUNTERCLAIM,
BROUGHT OR INSTITUTED BY ANY PARTY TO THIS AGREEMENT OR ANY OF THEIR SUCCESSORS
AND ASSIGNS, WHICH RELATES DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, THE LOAN,
THE LOAN DOCUMENTS OR THE RELATIONSHIP BETWEEN THE LENDER AND THE BORROWER.

10.09 Applicable Law.

     This Agreement is entered into and performable in The Commonwealth of
Massachusetts and shall be subject to and construed and enforced in accordance
with the laws of The Commonwealth of Massachusetts.

10.10 Binding Effect, Assignment, and Entire Agreement.

     This Agreement shall inure to the benefit of, and shall be binding upon,
the respective successors and permitted assigns of the parties hereto. The
Borrower has no right to assign any of its rights or obligations hereunder
without the prior written consent of the Lender. This Agreement, including the
Exhibits hereto, all of which are hereby incorporated herein by reference, and
the documents executed and delivered pursuant hereto, constitute the entire
agreement between the parties and may be amended only by a writing signed on
behalf of each party.

10.11 Severability.

     If any provision of this Agreement shall be held invalid under any
applicable Laws, such invalidity shall not affect any other provision of this
Agreement that can be given effect without the invalid provision, and, to this
end, the provisions hereof are severable.

                                       31

<PAGE>

10.12 Counterparts.

     This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
but one and the same instrument.

10.13 Integration Clause

     This Agreement is intended by the parties as the final, complete and
exclusive statement of the transactions evidenced by this Agreement. All prior
or contemporaneous promises, agreements and understandings, whether oral or
written, are deemed to be superceded by this Agreement, and no party is relying
on any promise, agreement or understanding not set forth in this Agreement. This
Agreement may not be amended or modified except by written instrument describing
such amendment or modification executed by the Borrower and the Lender.

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

                                        IPG PHOTONICS CORPORATION

                                        By: /s/ Valentin P. Gapontsev
-------------------------------------       ------------------------------------
Witness                                     Valentin P. Gapontsev,
                                            Chief Executive Officer

                                        BANKNORTH, N.A.

                                        By: /s/ Douglas J.G. MacLean
-------------------------------------       ------------------------------------
Witness                                     Douglas J.G. MacLean,
                                        Its Senior Vice President

                                       32
<PAGE>

                 FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT

         THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT, dated as of August
9, 2006 (the "First Amendment") is by and between IPG PHOTONICS CORPORATION, a
Delaware corporation with a principal place of business at 50 Old Webster Road,
Oxford, Massachusetts 01540 (the "Borrower") and TD BANKNORTH, N.A., a national
banking association with its principal office at 370 Main Street, Worcester,
Massachusetts 01608 (the "Lender"), formerly known as Banknorth, N.A.

                              W I T N E S S E T H:

         WHEREAS, the Borrower and Banknorth, N.A. entered into a Loan and
Security Agreement dated as of November 15, 2004 (the "Agreement"); and

         WHEREAS, the Borrower has requested an increase in its borrowing
availability and certain other modifications to the Agreement; and

         WHEREAS, the Lender is agreeable to such modifications, subject to the
terms and conditions set forth in this First Amendment.

         NOW, THEREFORE, in consideration of the mutual promises contained
herein and other valuable consideration, the parties do hereby agree as follows:

         A. The Borrower acknowledges that TD Banknorth, N.A. is the holder of
the Agreement and that all references to the Lender and Banknorth, N.A. in the
Agreement shall henceforth mean and refer to TD Banknorth, N.A., with notices to
be sent to TD Banknorth, N.A. at 370 Main Street, Worcester, Massachusetts
01608, Attention: Senior Commercial Loan Officer.

         B. Amendments to the Agreement.

                  1. All references to the "Loan" and the "Line of Credit
                  Commitment" in the Agreement, including without limitation the
                  definition of "Line of Credit Commitment" in Section 2.02 of
                  the Agreement, shall henceforth mean a revolving line of
                  credit facility up to $7,000,000.00 to be furnished by the
                  Lender to the Borrower.

                  2. Definitions.

                           a. The definition of "Demand Note" is hereby deleted
                  from Article 1.0 of the Agreement and a definition of
                  "Revolving Credit Note" substituted therefor to read as
                  follows:

                           ""Revolving Credit Note" means the Revolving Credit
                           Note referred to in Section 2.03."

                           b. The definitions of "Borrowing Base", "Guarantor",
                  "Guaranty" and "Notes" set forth in Article 1.0 of the
                  Agreement are hereby amended and restated to read as follows:

                           ""Borrowing Base" means, at any time, the amount
                           computed on the Borrowing Base Certificate most
                           recently delivered to, and accepted by, the Lender in
                           accordance with this Agreement and equal to the
                           lesser of:

                           (A) $7,000,000.00; or

<PAGE>

                           (B) Eighty percent (80%) of the Eligible Accounts of
                  the Borrower."

                           ""Guarantor" or "Guarantors" means each and both of
                           Valentin P. Gapontsev and IP Fibre Devices (UK)
                           Limited.

                           "Guaranty" or "Guaranties" means (A) with respect to
                           Valentin P. Gapontsev, a duly executed Limited
                           Guaranty in the form attached hereto as Exhibit
                           1.01(D)-1, as may be ratified or amended from time to
                           time and (B) with respect to IP Fibre Devices (UK)
                           Limited, a duly authorized and executed Unlimited
                           Guaranty dated as of May 3, 2005 in the form attached
                           hereto as Exhibit 1.01(D-2), as may be ratified or
                           amended from time to time."

                           ""Notes" means the Revolving Credit Note and the
                           Mortgage Note, individually and collectively."

                           c. Definitions of "Current Liabilities", "Current
                  Ratio", "Debt Service Coverage Ratio", "IPO", "Leverage
                  Ratio", "Life Insurance Assignment", "Tangible Net Worth" and
                  "Total Liabilities" are added to Article 1.0 of the Agreement,
                  to read as follows:

                           ""Current Liabilities" means at any time all
                           Liabilities that, in accordance with GAAP, should be
                           classified as current liabilities on a balance sheet
                           of the Borrower and its Subsidiaries.

                           "Current Ratio" means the ratio of (A) Current Assets
                           to (B) Current Liabilities.

                           "Debt Service Coverage Ratio" means at any time the
                           ratio of (A) the Borrower's cash available for debt
                           service to (B) the Borrower's debt service
                           requirements, such ratio to be calculated in
                           accordance with the sample Covenant Compliance
                           Calculation attached hereto as Exhibit 1.01(I).

                           "IPO" means an initial public offering by the
                           Borrower of its common stock pursuant to which at
                           least $100,000,000.00 of equity funding is raised by
                           the Borrower.

                           "Leverage Ratio" means at any time the ratio of (A)
                           Total Liabilities to (B) Tangible Net Worth.

                           "Life Insurance Assignment" means a Collateral
                           Assignment of Life Insurance Policy dated July 27,
                           2001 with respect to life insurance policy number
                           AUACOO1242 owned by the Borrower and issued by Valley
                           Forge Life Insurance Company on the life of Valentin
                           P. Gapontsev in the minimum amount of $3,000,000.00,
                           acknowledged by Valley Forge Life Insurance Company
                           on September 10, 2001.

                           "Tangible Net Worth" means, at any time,
                           Stockholders' Equity, less the sum of:

                                    (A) Any surplus resulting from any write-up
                           of assets subsequent to December 31, 2005;

                                    (B) Goodwill, including any amounts, however
                           designated on a balance sheet of the Borrower and its

                                       2

<PAGE>

                           Subsidiaries, representing the excess of the purchase
                           price paid for assets or stock acquired over the
                           value assigned thereto on the books of the Borrower;

                                    (C) Patents, trademarks, trade names,
                           copyrights and licenses;

                                    (D) Any amount at which shares of capital
                           stock of the Borrower appear as an asset on the
                           Borrower's balance sheet;

                                    (E) Loans and advances to stockholders,
                           directors, officers, or employees and any loans,
                           advances or payables owing to any Affiliate;

                                    (F) Deferred expenses; and

                                    (G) Any other amount in respect of an
                           intangible that should be classified as an asset on a
                           balance sheet of the Borrower in accordance with
                           GAAP.

                           "Total Liabilities" means all Indebtedness that, in
                           accordance with GAAP, should be classified as
                           liabilities on a balance sheet of the Borrower and
                           any Subsidiaries."

                  3. General Terms.

                           a. Section 2.02 of the Agreement is restated in its
                  entirety to read as follows:

                           "2.02 General Terms.

                                    Subject to the terms hereof, the Lender will
                           lend the Borrower, from time to time until the
                           earlier of June 30, 2008 (the "Line of Credit
                           Termination Date") or the occurrence of an Event of
                           Default, such sums as the Borrower may request by
                           reasonable same day notice to the Lender, received by
                           the Lender not later than 11:00 A.M. of such day, but
                           which shall not exceed, in the aggregate principal
                           amount at any one time outstanding, the lesser of the
                           then existing Borrowing Base or $7,000,000.00 (the
                           "Line of Credit Commitment"). The Borrower may
                           borrow, repay without penalty or premium and reborrow
                           hereunder, from the date of this Agreement until the
                           occurrence of an Event of Default, the lesser of the
                           then existing Borrowing Base or the Line of Credit
                           Commitment in integral multiples of $50,000.00. It is
                           the intention of the parties that the outstanding
                           principal amount of the Loan shall at no time exceed
                           the amount of the then existing Borrowing Base, and
                           if, at any time, an excess shall for any reason
                           exist, the full amount of such excess, together with
                           accrued and unpaid interest thereon as herein
                           provided, shall be immediately due and payable in
                           full."

                           b. Section 2.03 of the Agreement is restated in its
                  entirety to read as follows:

                           "2.03  The Revolving Credit Note.

                                       3

<PAGE>

                                    The Line of Credit Commitment shall be
                           evidenced by a revolving credit note in the form
                           attached hereto as Exhibit 2.03."

                           c. A new Section 2.06 is added to the Agreement to
                  read as follows:

                           "2.06    The Commitment Fee.

                                    The Borrower shall pay a commitment fee of
                           one-quarter of one percent (0.25%) per annum on the
                           average daily undisbursed amount of the Line of
                           Credit Commitment during each quarterly period or
                           portion thereof. This commitment fee shall be payable
                           quarterly in arrears, on the last day of each June,
                           September, December and March of each year,
                           commencing September 30, 2006."

                  4. Affirmative Covenants. Section 6.01 of the Agreement is
         amended by adding Sections 6.01(S) and 6.01(T) as follows:

                                    "(S) The Borrower shall maintain (1) a Debt
                           Service Coverage Ratio at all times equal to or
                           greater than 1.20:1.00, to be tested on a rolling
                           four fiscal quarter basis at the close of each fiscal
                           quarter beginning with the fiscal quarter ending on
                           September 30, 2006;

                                    (T) Upon successful completion of the IPO,
                           the Borrower shall maintain at all times:

                                             (1) a Current Ratio equal to or
                                    greater than 2.50:1.00, tested quarterly as
                                    of the end of each fiscal quarter, and

                                            (2) a Leverage Ratio equal to or
                                    less than 2.01:1.00, tested quarterly as of
                                    the end of each fiscal quarter."

                  5. Negative Covenants.

                           a. Section 6.02(K) of the Agreement is hereby
                  intentionally deleted.

                           b. Section 6.02(M) of the Agreement is hereby amended
                  by striking "$210,000.00" and inserting "$500,000.00" in its
                  place.

                  6. Events of Default. The last non-lettered paragraph is
         deleted from the end of Section 7.01 of the Agreement.

                  7. Certain Additional Amendments. The phrase "after demand
         upon the Demand Note or" is deleted from Section 6.01(D) of the
         Agreement, the phrase "demand on the Demand Note or" is deleted from
         each of Sections 8.01, 8.02, 8.05, 8.07, 8.09 and 9.01 of the Agreement
         and the phrase "demand upon the Demand Note or" is deleted from Section
         9.01 of the Agreement.

                  8. Exhibits. Exhibit 1.01(B), Exhibit 1.01(D-1), Exhibit
         1.01(D-2), Exhibit 1.01(I) and Exhibit 2.03, as attached to this First
         Amendment, are hereby added to the Agreement.

         C. Representations and Warranties. The Borrower hereby represents and
warrants that:

                                       4

<PAGE>

                  1. no Event of Default pursuant to the Agreement has occurred
         and is continuing, and no event has occurred and is continuing that,
         but for the giving of notice or the passage of time or both, would
         constitute an Event of Default; and

                  2. except as set forth on Exhibit C.2. attached hereto, each
         of the representations and warranties contained in Section 5.01 of the
         Agreement is true and correct in all material respects as if made on
         and as of the date hereof except to the extent any such representation
         and warranty pertains to a specific date other than the date hereof.

         D. Ratification of Obligations. All Obligations of the Borrower to the
Lender are hereby ratified and confirmed.

         E. Bringdown. The Borrower hereby certifies to the Lender that:

                  1. since November 15, 2004 (the "Date of Closing") to and
         including the date hereof, there have been no amendments to or changes
         in the Articles of Organization or By-Laws of the Borrower as delivered
         to the Lender as of the Date of Closing;

                  2. nothing has occurred which would lead the Secretary of
         State of the State of Delaware to refuse to issue a Certificate of
         Legal Existence and Good Corporate and Tax Standing as of the date of
         this First Amendment or which would lead the Secretary of State of the
         Commonwealth of Massachusetts to refuse to issue a Certificate of Legal
         Existence and Good Standing as of the date of this First Amendment;

                  3. all taxes required to be paid or withheld and deposited by
         the Borrower as of the date of this First Amendment have been paid or
         withheld;

                  4. except as set forth on Exhibit E.4. attached hereto, there
         has been no change in the officers, directors or shareholders (or their
         holdings) of the Borrower since the Date of Closing to and including
         the date of this First Amendment; and

                  5. the resolutions adopted by the Borrower and attached to a
         Certificate dated as of and delivered to the Lender on or about the
         Date of Closing have not been rescinded or amended and remain in full
         force and effect.

         F. Acknowledgements. The Borrower hereby acknowledges and agrees that
it has no claim, cause of action, defense, right of setoff of recoupment or
counterclaim against the Lender with respect to the Agreement, the Obligations,
or any related loan documents as of the date hereof.

         G. Commitment Fee. In consideration of the increase by the Lender to
the Borrower's borrowing availability, the Borrower agrees to pay the Lender,
contemporaneously with the execution of this First Amendment, a non-refundable
fee in the amount of $10,000.00.

         H. Capitalized Terms. All capitalized terms not otherwise defined
herein shall have the same meanings set forth in the Agreement.

         I. Entire Agreement. The Agreement, as hereby amended, shall remain in
full force and effect pursuant to its terms and provisions as set forth herein.

                                       5

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have duly executed this First
Amendment to Loan and Security Agreement as a sealed instrument as of the day
and year first above written.

                                          IPG PHOTONICS CORPORATION

/s/ Dallas Moody                          By:   /s/ Timothy P.V. Mammen
------------------------------                  ----------------------------
Witness                                         Timothy P.V. Mammen,
                                                Chief Financial Officer

                                          TD BANKNORTH, N.A.

/s/ George W. Tetler                      By:   /s/ Mark D. Fellion
------------------------------                  ----------------------------
Witness                                         Mark D. Fellion,
                                                Its Vice President

                        THE COMMONWEALTH OF MASSACHUSETTS

Worcester, ss.

         On this 9th day of August, 2006, before me, the undersigned notary
public, personally appeared Timothy P.V. Mammen, Chief Financial Officer of IPG
Photonics Corporation, proved to me through satisfactory evidence of
identification, which was / / photographic identification with signature issued
by a federal or state governmental agency, / / oath or affirmation of a credible
witness, / / personal knowledge of the undersigned, to be the person whose name
is signed on the preceding document, and acknowledged to me that he signed it
voluntarily for its stated purpose as Chief Financial Officer of IPG Photonics
Corporation.

                                      /s/ Angelo P. Lopresti
                                    ------------------------------------------
                                    Notary Public, Angelo P. Lopresti
                                    My Commission Expires:  November 13, 2009

                                        6

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