Document:

<PAGE>

                                                                    EXHIBIT 10.4

                          PURCHASE AND SALES AGREEMENT

     This Agreement is made this 6th day of October, 1999.

DANIEL PROUTY and MELVYN GLICKMAN, as Trustees of Elmar Realty Trust, 11 Harvard
Street, Worcester, MA 01609, hereinafter referred to as "Seller", agrees to
sell, and IPG PHOTONICS CORPORATION, of Box 519, 660 Main Street, Sturbridge, MA
01566, hereinafter referred to as "Buyer", agrees to purchase, upon the terms
and conditions hereinafter set forth, the following described premises:

                  44 + - ACRES OF LAND ON THE EASTERLY SIDE OF
                          OLD WEBSTER ROAD, OXFORD, MA

     Being shown on a plan of land entitled "Mortgage Inspection Plan in Oxford,
     Mass.  for Eleanor Glickman and Marilyn Prouty, Trustees of the Elmar
     Realty Trust" dated August 21, 1995 by Para Land Surveying, Inc. 349
     Ashland Avenue, Southbridge, Mass 01550, and being identified on Town of
     Oxford Assessors Map No.  58 as Parcels B1 and B3.  Notwithstanding the
     foregoing description,*

1.  BUILDINGS, STRUCTURES, IMPROVEMENTS, FIXTURES
    ---------------------------------------------

     This is vacant land.

2.  TITLE DEED
    ----------

     Said premises are to be conveyed by a good and sufficient quitclaim deed
running to the Buyer, or to the nominee designated by the Buyer, by written
notice to the Seller at least seven (7) days before the deed is to be delivered
as herein provided; said deed shall convey a good and clear record, and
marketable title thereto, free from encumbrances, except:

A.   Provisions of existing building and zoning laws;

B.   Such taxes for the then current fiscal year as are not due and payable on
     the date of the delivery of such deed;

C.   Any liens for municipal betterments assessed after the date of this
     Agreement;

D.   All easements, restrictions, and rights of way, if any, of record, to the
     extent the same are now in force and applicable, provided that they do not
     interfere with the use of the premises for Buyer's Proposed Use, as
     hereinafter defined.

____________________
*Buyer may complete a survey of the premises and, at Buyer's request, Seller
shall describe and convey the premises according to said survey.
<PAGE>

3.  PLANS
    -----

     If said deed refers to a plan necessary to be recorded therewith, the
Seller shall deliver such plan with the deed, in form adequate for recording or
registering.

5.  PURCHASE PRICE
    --------------

     The agreed purchase price for said premises is EIGHT HUNDRED THOUSAND
DOLLARS, of which

<TABLE>
<S>                  <C>
     $20,000.00      have been paid prior to this day in accordance with Option
                     Agreement, which is superseded by this Purchase and Sale
                     Agreement.
      60,000.00      are to be paid at the time of signing this Agreement;
     120,000.00      plus or minus adjustments, at the time of delivery of deed
                     by certified, cashier's, treasurer's, or bank check; and
     600,000.00      by a promissory note (to be guaranteed by Valentin
                                                               --------
                     Gapontsev) and mortgage from Buyer to Seller, principal,
                     ---------
                     plus any accrued interest due thereon, payable 2 years from
                     the date of transfer, with interest at the annual rate of
                     10%,* interest only payments due monthly during said term,
                     the first such interest payment being due ** from transfer
                     date. Payment of obligation in full prior to due date may
                     be made without a pre-payment penalty.

                     *commencing January 1, 2000       **February 1, 2000

_______________
    $800,000.00      TOTAL
</TABLE>

6.  TIME FOR PERFORMANCE; DELIVERY OF DEED
    --------------------------------------

     Such deed is to be delivered at 10:00 o'clock a.m.  on the 1st day of
November, 1999, at the Worcester District Registry of Deeds, unless otherwise
agreed upon in writing.

7.  POSSESSION AND CONDITION OF PREMISES
    ------------------------------------

     Full possession of said premises, free of all tenants and occupants, except
as herein provided, is to be delivered at the time of the delivery of the deed,
said premises to be then (a) in the same condition as they are now are,
reasonable use and wear thereof excepted, (b) not in violation of any building
or zoning laws, and (c) in compliance with the provisions of any instrument
referred to in clause 2 hereof.

8.  EXTENSION TO PERFECT TITLE OR MAKE PREMISES CONFORM
    ---------------------------------------------------

     If the Seller shall be unable to give title, make conveyance, or deliver
possession of the premises, all as herein stipulated, or if at the time of the
delivery of the deed the premises do not conform with the provisions hereof,
then the Seller shall use reasonable efforts to remove any

                                       2
<PAGE>

defects in the title to deliver possession as provided herein, or make the
premises conform to the provisions hereof, as the case may be, in which event
the time for performance hereof shall be extended for a period of thirty (30)
days.

9.   FAILURE TO PERFECT TITLE OR MAKE PREMISES CONFORM
     -------------------------------------------------

      If at the expiration of the extended time the Seller shall have failed so
to remove any defects in title, deliver possession, or make the premises
conform, as the case may be, all as herein agreed, then any payments made under
this Agreement shall be forthwith refunded, and all other obligations of the
parties hereto shall cease, and this Agreement shall be void, without recourse
to the parties hereto.

10.  BUYER'S ELECTION TO ACCEPT TITLE
     --------------------------------

      The Buyer shall have the election, at either the original or any extended
time for performance, to accept such title as the Seller can deliver to the
premises in their then condition, and to pay therefor the purchase price,
without deduction, in which case, the Seller shall convey such title.

11.  ACCEPTANCE OF THE DEED
     ----------------------

      The acceptance of a deed by the Buyer, or Buyer's nominee, as the case may
be, shall be deemed to be a full performance and discharge of every agreement
and obligation herein contained or expressed, except such as are, by the terms
hereof, to be performed after the delivery of the deed.

12.  USE OF PURCHASE MONEY TO CLEAR TITLE
     ------------------------------------

      To enable the Seller to make conveyance as herein provided, the Seller
may, at the time of delivery of the deed, use the purchase money, or any portion
thereof, to clear the title of any or all encumbrances or interests, provided
that all instruments so procured are recorded within a reasonable time after the
delivery of the deed and that provisions reasonably satisfactory to Buyer or its
counsel are made to insure receipt of such instruments.

13.  ADJUSTMENTS
     -----------

      Taxes for the then current fiscal year shall be apportioned as of the day
of performance of this Agreement, and the net amount thereof shall be added to
or deducted from, as the case may be, the purchase price payable by the Buyer at
the time of delivery of the deed.

      In the event the subject property is not separately identified by the
municipality for tax purposes on the day of closing, the parties agree that
Buyer shall reimburse Seller for Buyer's proportionate share of taxes due on the
property, and Seller shall pay for such taxes until the property is so
separately identified.  This paragraph shall survive the closing.

                                       3
<PAGE>

14.  ADJUSTMENT OF UNASSESSED AND ABATED TAXES
     -----------------------------------------

      If the amount of the taxes is not known at the time of the delivery of the
deed, they shall be apportioned on the basis of the taxes assessed for the
preceding year, with a reapportionment as soon as the new tax rate and valuation
can be ascertained.  If the taxes which are to be apportioned shall thereafter
be reduced by abatement, the amount of such abatement, less the reasonable cost
of obtaining same, shall be apportioned between the parties, provided that
neither party shall be obligated to institute or prosecute proceedings for an
abatement unless herein otherwise agreed.  This paragraph shall survive the
closing.

15.  BROKER'S FEE
     ------------

      The Seller and Buyer agree that no broker is involved in this
sale/purchase.

16.  DEPOSIT
     -------

      All deposits made hereunder shall be held in escrow by the Seller's
attorney, Melvyn Glickman, Esquire, in a non-interest bearing account, subject
to the terms of this Agreement, and shall be duly accounted for at the time for
performance of this Agreement.

17.  BUYER' S DEFAULT; DAMAGES
     -------------------------

      If the Buyer shall fail to fulfill the Buyer's agreements herein, all
deposits made hereunder by the Buyer shall be retained by Seller as liquidated
damages, and this shall be the Seller's sole remedy at law and in equity.

18.  LIABILITY OF TRUSTEE SHAREHOLDER, BENEFICIARY
     ---------------------------------------------

      If the Seller or Buyer execute this Agreement in a representative or
fiduciary capacity, only the principal or the estate represented shall be bound,
and neither the Seller nor the Buyer who so executes, nor any shareholder or
beneficiary of any trust, shall be personally liable for any obligation, express
or implied, hereunder.

19.  WARRANTIES AND REPRESENTATIONS
     ------------------------------

      The Buyer acknowledges that the Buyer has not been influenced to enter
into this transaction, nor has Buyer relied upon any warranties or
representations not set forth or incorporated herein, or previously or hereafter
made orally or in writing, except for the following additional warranties and
representations, if any, made by either the Seller or the Broker(s). NONE.

20.  CONSTRUCTION OF AGREEMENT
     -------------------------

      This instrument, executed in duplicate, is to be construed as a
Massachusetts contract, is to take effect as a sealed instrument, sets forth the
entire contract between the parties, is binding upon and inures to the benefit
of the parties hereto, their respective heirs, devisees, executors,
administrators, successors and assigns, and may be canceled, modified, or
amended only by a written instrument executed by both the Seller and the Buyer.
If two or more persons are named

                                       4
<PAGE>

herein as Buyer, their obligations hereunder shall be joint and several. The
captions and marginal notes are used only as a matter of convenience, and are
not to be considered a part of this Agreement, or used in determining the intent
of the parties to it.

21.  TITLE EXPENSES
     --------------

      Buyer shall pay for all title expenses, including certificate of title,
title insurance, and recording expenses.  Prior Title Reference: Bay State
Abstract Company, Order #4528.

22.  MORTGAGE CONTINGENCY
     --------------------

      Not Applicable

23.  ADDITIONAL PROVISIONS
     ---------------------

      Seller makes no representations to Buyer concerning buildability of the
demised premises including, but not limited to, building permits, wetlands,
driveway or other matters.  Seller makes no representation to Buyer concerning
percolation or deep hole testing of the property.  Seller makes no
representations regarding any zoning matters relating to the premises.  Buyer is
responsible for and hereby acknowledges responsibility for all matters referred
to in this paragraph.  This paragraph shall survive the closing.

ELMAR REALTY TRUST (Seller)

BY /s/ Daniel Prouty
   -----------------
   DANIEL PROUTY, TRUSTEE

BY /s/ Melvyn Glickman
   -------------------
   MELVYN GLICKMAN, TRUSTEE

IPG PHOTONICS CORPORATION (Buyer)

BY /s/ Valentin Gapontsev
   ----------------------

                                       5
<PAGE>

             ADDENDUM TO PURCHASE AND SALE AGREEMENT BY AND BETWEEN

               DANIEL PROUTY and MELVYN GLICKMAN, AS TRUSTEES OF
                        ELMAR REALTY TRUST (SELLER) and
                       IPG PHOTONICS CORPORATION (BUYER)
                            DATED October 6th, 1999

     The following additional provisions are made a part of the Agreement and,
where they conflict with any other provision of the Agreement, they shall
govern.

     24.  Buyer's obligations hereunder are contingent upon the availability (at
normal premium rates) of an owner's and lender's title insurance policies
without exceptions other than those matters permitted by Section 2 of this
agreement.

     25. Seller agrees at the closing to execute a statement under oath to any
title insurance company issuing a policy to Buyer and/or Buyer's mortgagee to
the effect that: (1) there are no tenants, leases or parties in possession of
the premises, if at all, and (2) Seller has no knowledge of any work having been
done to the premises which would entitle anyone now or hereafter to claim a
mechanic's or materialmen's lien on the premises.

     26. Without limiting the requirement that Seller convey a good and clear
record and marketable title as set forth in Section 2 herein, title to the
premises shall not be deemed to conform with the requirements herein unless: (i)
no structures on abutting properties encroach upon the premises; and (ii) the
premises are not in a flood hazard area as defined by the United States
Department of Housing and Urban Development and are not in a state or local
flood plain zone (including the Floodway District under the Oxford Zoning By-
Law).

     27. The Seller hereby warrants and represents to the Buyer that the Seller
has no actual knowledge of, and has received no notice of, the existence of any
asbestos, oil or hazardous materials or any underground storage tanks on the
premises. For purposes of this clause, "hazardous materials" shall mean any
material which may be dangerous to health or to the environment, including
without limitation all "hazardous materials," "hazardous substances," "hazardous
waste" and "oil" as defined in any applicable federal or state statutes and
their implementing regulations. The foregoing warranty and representations shall
survive delivery of a deed hereunder.

     28. The Seller (or, if applicable, the Seller's beneficiaries) hereby
certifies that its taxpayer ID number is as set forth below. The Seller
certifies that it is not subject to back up withholding by the Internal Revenue
Service. The Seller further certifies that it is either exempt from, or this
transaction is not subject to, the provisions of 26 USCA 1445 regarding the
withholding tax on disposition of real property interests by foreign persons and
foreign corporations. The information furnished under the provisions of this
paragraph is made under the penalties of perjury. The Seller also certifies that
its address is as set forth on the first page of this Agreement.

                                       1
<PAGE>

   Taxpayer ID #: 04-6648227                      for  Elmar Realty Trust
                 -----------                           ------------------

   Taxpayer ID #:___________                      for____________________

     29.  From and after the date hereof and until the date for performance and
delivery of the deed hereunder, the Buyer, its agents and employees, including,
without limitation, contractors, prospective mortgage lenders, architects,
engineers, inspectors, insurance agents and appraisers shall have the right to
enter upon the premises at any reasonable time and on reasonable notice to the
Seller, and may, at the Buyer's expense, inspect the premises and conduct such
tests and surveys as the Buyer may reasonably deem necessary to determine that
the premises satisfy the terms and conditions of this Agreement.  The Buyer
shall hold harmless and indemnify the Seller from and against any and all damage
to property or personal injury resulting from the actions of the Buyer or its
agents in performing any such inspections, tests or surveys and the Buyer shall
promptly repair any damage to the premises caused by any such tests.

     30.  Buyer may obtain at its sole expense a written report or reports (the
"Report") from an environmental engineering firm regarding the presence or risk
of presence of Hazardous Materials, if any, on the Premises.  "Hazardous
Materials" means any asbestos, urea formaldehyde foam insulation, radon, or
"oil" or "hazardous material" as defined in the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C (S)9601, and the
Massachusetts Oil and Hazardous Material Release, Prevention and Response Act,
M.G.L.  c.  21E, as such acts may be amended, or in regulations adopted under
such acts.  If the Reports disclose the presence or risk of presence of any
Hazardous Materials on the Premises or is otherwise not satisfactory to Buyer or
its lender, Buyer may terminate this Agreement by giving notice to Seller on or
before October 15, 1999.  In such event the deposit shall be immediately
refunded, and this Agreement shall be terminated without recourse to the parties
hereto.  If Seller is not so notified, this contingency shall be deemed waived
by the Buyer.

     31.  Buyer's obligation to purchase the premises are subject to Buyer
obtaining at least fifteen (15) days prior to the date for performance all
permits and approvals necessary for the construction of two to four buildings on
the Premises for Buyer's administrative, research and development, and assembly
(including accessory manufacturing activities) facilities and all necessary
accessory and ancillary uses, including without limitation, parking and access
roads (all of the foregoing referred to herein as "Buyer's Proposed Use"),
including, without limitation, a site plan approval, variance, or special permit
(but not including a building permit), an approved on-site sewage disposal
permit and any other zoning or regulatory approvals of the Town of Oxford
required for Buyer's Proposed Use. The Buyer agrees that it will expeditiously
file and prosecute such applications. Buyer shall be deemed to have obtained any
permit or approval necessary upon the expiration of any appeal period after a
favorable vote or other action granting the permit or approval.

     32.  Buyer's obligation to purchase the Premises are subject to Buyer or
Buyer's counsel determining that the Premises are properly zoned for Buyer's
Proposed Use and that upon completion of Buyer's Proposed Use the Premises will
be in compliance with all zoning and land use laws and regulations of the Town
of Oxford or other entities having jurisdiction

                                       2
<PAGE>

thereover and that the Buyer's Proposed Use will not require the filing of an
Environmental Notification Form under the Massachusetts Environmental Policy Act
or its applicable regulations. If Buyer shall not have made such determinations
before October 15, 1999, Buyer may terminate this Agreement by giving notice to
Seller on or before October 15, 1999. In such event the deposit shall be
immediately refunded, and this Agreement shall be terminated without recourse to
the parties hereto. If Seller is not so notified, this contingency shall be
deemed waived by the Buyer.

     33. Buyer's obligation to Purchase the Premises are subject to Buyer
obtaining a Tax Increment Financing (TIF) agreement in amount and form
satisfactory to Buyer. If said TIF agreement has not been approved by all
parties before October 15, 1999, Buyer may terminate this Agreement by giving
notice to Seller on or before October 15, 1999. In such event the deposit shall
be immediately refunded, and this Agreement shall be terminated without recourse
to the parties hereto. If Seller is not so notified, this contingency shall be
deemed waived by the Buyer.

     34. Buyer's obligation to Purchase the Premises are subject to Buyer
obtaining a contract with the Massachusetts American Water Company for the
installation of a water line to the premises, said agreement in amount and form
satisfactory to Buyer.

     35. Notwithstanding Section 6, if Buyer has not obtained all permits and
approvals referred to in Section 31 and has done all things reasonably necessary
to obtain them and failure to obtain the same is the failure of a board or
regulatory official to complete its hearings and/or issue a decision, then
Buyer, at its option, shall, upon notice to Seller, have the right to extend the
closing date for successive periods of thirty (30) days in order to obtain said
permits and approvals. In no event shall the closing be extended beyond December
31, 1999, unless agreed to by both parties.

     36. All notices required to be given under this Agreement shall be by hand
delivery; or mailed, postage prepaid, certified mail return receipt requested;
or sent by facsimile to:

          Seller at:          Melvyn Glickman, Esquire
                              Glickman, Sugarman, Kneeland & Gribouski
                              11 Harvard Street
                              P.O. Box 2917
                              Worcester, MA 01613
                              Facsimile: (508) 831-0443

          Buyer at:           IPG Photonics Corporation
                              Attention: Paul Sinni
                              660 Main Street
                              P.O. Box 519
                              Sturbridge, MA 01566
                              Facsimile: (508) 347-1628

                              with a copy to Buyer's counsel:

                                       3
<PAGE>

                                 Joel P. Greene
                                 Lane, Greene, Murtha & Edwards
                                 446 Main Street, Suite 1500
                                 Worcester, MA 01608
                                 Facsimile: (508) 752-9106

Any such notice may be given directly to counsel for either party without a copy
to the party.

   Executed under seal as of the date above.

                                      ELMAR REALTY TRUST, Seller

                                      By: /s/ Daniel Prouty
                                          -------------------------------
                                          Daniel Prouty, Trustee

                                      By: /s/ Melvyn Glickman
                                          -------------------------------
                                          Melvyn Glickman, Trustee

                                      IPG PHOTONICS CORPORATION,
                                      Buyer

                                      By: /s/ Valentin Gapontsev
                                          -------------------------------

                                       4
<PAGE>

VIA FIRST CLASS MAIL & FACSIMILE (831-0443)
--------------------------------

Melvyn Glickman, Esquire
Glickman, Sugarman, Kneeland & Gribouski
11 Harvard Street
P.O. Box 2917
Worcester, MA 01613

Re:  Elmar Realty Trust to IPG Photonics Corporation
     Old Webster Road, Oxford, MA

Dear Mel:

    This letter will confirm the agreement of the parties that the Purchase and
Sale Agreement dated October 6, 1999, and as amended October 14, 1999, is
further amended as follows:

     1.  The dates under Sections 30 (environmental report), 32 (proper zoning)
and 33 (TIF agreement) are extended from October 26, 1999, until November 8,
1999.

     2.  The deadline for Buyer obtaining all permits and approvals provided in
Section 31 is extended from October 26, 1999, until November 8, 1999, and the
Buyer's right to give notice to extend the closing as provided in Section 35 may
be exercised to and including November 8, 1999.

     3.  The Closing Date provided in Section 6 is extended to November 12,
1999.

     4.  The Buyer's October 26, 1999, notice of unsatisfied contingencies is
withdrawn (subject to the new deadlines).

     Please signify the Seller's assent by signing and returning a copy of this
letter to the undersigned.  If you have any questions, please do not hesitate to
call me.

                                                     Sincerely yours,

                                                     /s/  Joel Greene

                                                     Joel P. Greene
                                                     Attorney for Buyer

The above amendments are agreed to

/s/  Melvyn Glickman
------------------------------------
Melvyn Glickman, Attorney for Seller<PAGE>

                                                                    EXHIBIT 10.5

                             EMPLOYMENT AGREEMENT
                             --------------------

     This EMPLOYMENT AGREEMENT is made and entered into as of the 19th day of
June, 2000, by and between IPG Photonics Corporation USA, a Delaware corporation
having an office at Sturbridge Business Park Sturbridge, Massachusetts (the
"Corporation") and John Geagea of VIA MILLY, 13 MILAN ITALY ("Employee").

WITNESSETH

     WHEREAS, the Corporation desires to employ Employee as Chief Operating
Officer of IPG Photonics Corporation USA (the "Position") on the terms and
conditions hereinafter set forth; and

     WHEREAS, Employee is desirous of accepting said employment;

     NOW, THEREFORE, in consideration of the employment of Employee, the mutual
terms and conditions set forth below, and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties agree
as follows:

     1.   Employment. Subject to the terms and conditions of this Agreement, the
          ----------
Corporation agrees to employ Employee in a full-time capacity to serve in the
Position, and Employee agrees to serve in the Position.  Employee will report to
the Corporation's President and Chief Executive Officer.  Employee's primary
responsibility will be day-to-day management of the Corporation.  Employee will
carry out such other duties and have such other responsibilities as would
normally be carried out in the Position or such other duties as shall be
assigned from time to time by the President and Chief Executive Officer or the
Corporation's Board of Directors.  Employee shall devote Employee's best
efforts, energies and abilities and Employee's full business time, skill and
attention to the business and affairs of the Corporation, and shall act at all
times according to the highest professional standards, for the purpose of
advancing the business of the Corporation.

     2.   Term. The Term of this Agreement shall commence retroactively as of
          ----
June 1, 2000 and shall continue through and until June 1, 2002 (the "Initial
Employment Period"), provided that the term of this Agreement shall
automatically be renewed for successive one-year periods (each, a "Renewal
Period") unless either party shall give the other notice of non-renewal at least
thirty (30) days prior to the expiration of the then-current Initial Employment
Period or Renewal Period, as the case may be. Nothing in this Section 2 shall
alter the parties' rights to terminate their relationship as set forth in
Sections 8 and 9 below.

     3.   Compensation. The Corporation shall pay Employee on a salary basis at
          ------------
an annual rate of Dollars two hundred thousand ($200,000) (the "Base Salary"),
to be paid in equal installments every two weeks. The annual salary may, at the
sole discretion of the Corporation, be subject to an annual increase.

     4.   Benefits.  Employee shall be eligible to participate in a manner
          --------
commensurate with other executive and senior management employees of the
Corporation in benefits, such as paid holidays, life insurance, disability
insurance, health insurance (including dental care) and
<PAGE>

participation to the Corporation's 401K plan, or other programs available, but
shall in any event be entitled to three (3) weeks paid vacation leave per year.

     5.   Performance-Related Compensation. For each calendar year during which
          --------------------------------
he is employed, Employee will be eligible to receive additional compensation
based on Employee's and the Corporation's achievement of performance-related
objectives, the details of which shall be discussed by the parties and agreed to
at the beginning of each calendar year.

     6.   Stock Option. Pursuant to a form of option agreement to be executed by
          ------------
the parties, the Corporation will grant Employee options to acquire shares of
400,000 common stock of the Corporation, subject to the conditions as set forth
hereunder. Such options shall vest over a four (4) year period, in increments of
one-fourth of the total 400,000 shares granted of the issued common stock of the
Corporation on each of June 1, 2001, June 1, 2002, June 1, 2003 and June 1,
2004, provided that Employee remains employed by the Corporation on each such
vesting date. All such options shall be exercisable upon vesting at their fair
market value as of the date of grant, provided that not more than one-fourth of
the 400,000 shares of the Corporation's issued stock may be exercised in any one
calendar year during the years 2001, 2002, 2003 and 2004.

     7.   Other Activities. The employment of Employee shall be on a full-time
          ----------------
basis, but Employee may be an investor or otherwise have an interest in other
businesses, partnerships and entities so long as the other activities of
Employee do not interfere with the performance of his duties hereunder, and so
long as such other activities do not cause Employee to violate the restrictive
covenants set forth in Section 12 of this Agreement, and so long as Employee
discloses all such activities to the President and Chief Executive Officer of
the Corporation. In the event that the Corporation determines, in its sole
discretion, that Employee's continuing interest in other entities interferes
with the performance of his duties hereunder, Employee shall divest such
interest or cease any active role in such interest, as required by the
Corporation.

     8.   Termination (by the Corporation). In addition to the non-renewal
          -------------------------------
rights set forth in Section 2 hereof and notwithstanding the notice period set
forth therein, the Corporation may terminate this Agreement (and, consequently,
Employee's employment under this Agreement) for any reason other than for
"Cause", as that term is defined in this Section 8, by giving Employee one
hundred and eighty days (180) days' prior written notice or, in lieu of such
notice, the equivalent of 180 days' salary and benefits continuation. The
Corporation may terminate this Agreement (and, consequently, Employee's
employment under this Agreement) at any time, with or without notice, for Cause.
"Cause" as used herein means the occurrence of any of the following events:

          a.   the willful failure of Employee to perform or gross negligence of
       Employee in performing Employee's duties or failure of Employee to comply
       with reasonable directions of the Corporation that continues for thirty
       (30) days after the Corporation has given written notice to Employee
       specifying in reasonable detail the manner in which Employee has failed
       to perform such duties or comply with such directions;

                                      -2-
<PAGE>

          b.   the determination by the Corporation in the exercise of its
       reasonable judgment that Employee has committed an act or acts
       constituting (i) dishonesty or disloyalty with respect to the
       Corporation, or (ii) fraud;

          c.   conviction of (i) a felony or (ii) any crime involving moral
       turpitude;

          d.   a material breach by Employee of any of the Restrictive Covenants
       contained in Section 12; or

          e.   a material breach by Employee of any of the terms of conditions
       of this Agreement (other than the Restrictive Covenants) that continues
       for thirty (30) days after the Corporation has given written notice to
       Employee specifying in reasonable detail the manner in which Employee has
       breached the Agreement.

     9.   Termination (by Employee). In addition to the non-renewal rights set
          ------------------------
forth in Section 2 hereof and notwithstanding the notice period set forth
therein, Employee may terminate this Agreement (and, consequently, Employee's
employment under this Agreement) for any reason other than for "Good Reason", as
that term is defined in this Section 9, by giving the Corporation one hundred
and eighty (180) days' prior written notice. Employee may terminate this
Agreement (and, consequently, Employee's employment under this Agreement) at any
time, with or without notice, for Good Reason. "Good Reason", as used herein,
means the occurrence of any of the following events without Employee's express
written consent:

          a.   the assignment to Employee of any duties inconsistent (except in
       the nature of a promotion) with the position in the Corporation that he
       held immediately prior to the date of this Agreement or a substantial
       adverse alteration in the nature or status of his position or
       responsibilities or the conditions of his employment from those in effect
       immediately prior to the date of this Agreement; or

          b.   a reduction by the Corporation in Employee's annual base salary.

     10.  Automatic Termination.  This Agreement and Employee's employment shall
          ---------------------
automatically terminate upon Employee's death or Disability.  Employee shall be
deemed to have a "Disability" for purposes of this Agreement if Employee is
unable to perform, by reason of physical or mental incapacity, Employee's duties
or obligations under this Agreement, with or without reasonable accommodation as
defined in the Americans with Disabilities Act, 42 U.S.C.  (S) 12110(9) and the
regulations promulgated thereunder, for a total period of ninety (90) days in
any 260-day period.  The Corporation shall determine, according to the facts
then available, whether and when the Disability of Employee has occurred.  Such
determination shall be made by the Corporation in the exercise of reasonable
discretion.

     11.  Effect of Termination for Cause, Death or Disability.  In the event
          ----------------------------------------------------
Employee's employment is terminated by the Corporation for Cause as defined in
Section 8, or pursuant to Section 10, the Corporation shall pay to the Employee
the compensation and benefits otherwise payable to Employee under Section 3
through the last day of his actual employment by the Corporation.

                                      -3-
<PAGE>

     12.  Restrictive Covenants.
          ---------------------

          a.   Confidential Information. Employee recognizes and acknowledges
               ------------------------
       that Employee has had and will have access to certain highly sensitive,
       special, unique information of the Corporation that is confidential or
       proprietary. Employee hereby covenants and agrees not to use or disclose
       any Confidential Information (as hereinafter defined) except to
       authorized representatives of the Corporation or except as required by
       any governmental or judicial authority.

               i.   Confidential Information. For the purposes of this
                    ------------------------
          Agreement, "Confidential Information" means any data or information
          with respect to the business conducted by the Corporation that is
          material to the Corporation and not generally known by the public. To
          the extent consistent with the foregoing definition, Confidential
          Information includes without limitation: (A) reports, pricing, sales
          manuals and training manuals, selling and pricing procedures, and
          financing methods of the Corporation, together with any techniques
          utilized by the Corporation in designing, developing, manufacturing,
          testing or marketing its products or in performing services for
          clients, customers and accounts of the Corporation; and (B) the
          business plans and financial statements, reports and projections of
          the Corporation.

               ii.  Return of Property. Employee acknowledges that all
                    ------------------
          Confidential Information is and shall remain the sole, exclusive and
          valuable property of the Corporation and that Employee has and shall
          acquire no right, title or interest therein. Any and all printed,
          typed, written or other material which Employee may have or obtain
          (including, without limitation, all copyrights therein) shall be and
          remain the exclusive property of the Corporation, and any and all
          material (including any copies) shall, upon request of the Corporation
          be promptly delivered by Employee to the Corporation.

          b.   During Employee's employment and extending for a period of one
       (1) year after the termination of Employee's employment, regardless of
       the reason for such termination, Employee shall not enter into or in any
       business activity that is competitive with any business activity in which
       the Corporation is engaged.

          c.   No Interference with Employees. Employee agrees that for a period
       of two (2) years after the termination of Employee's employment,
       regardless of the reason for such termination, Employee will not,
       directly or indirectly, request or induce any other employee of the
       Corporation to (i) terminate employment with the Corporation, or (ii)
       accept employment with another business entity, or (iii) become engaged
       in a business activity that is competitive with any business activity in
       which the Corporation is engaged.

          d.   Validity of Covenants. Employee agrees that the restrictive
       covenants contained in this Agreement are reasonably necessary to protect
       the legitimate

                                      -4-
<PAGE>

       business and other interests of the Corporation, are reasonable with
       respect to time and territory, and do not interfere with the interests of
       the public.

          e.   Specific Performance. Employee agrees that a breach or violation
       of any of the covenants under this Agreement will result in immediate and
       irreparable harm to the Corporation in an amount which will be impossible
       to ascertain at the time of the breach or violation and that the award of
       monetary damages will not be adequate relief to the Corporation.
       Therefore, the failure on the part of Employee to perform all of the
       covenants established by this Agreement shall give rise to a right of the
       Corporation to obtain enforcement of this Agreement in a court of equity
       by a decree of specific performance or other injunctive relief. This,
       however, shall be cumulative and in addition to any other remedy the
       Corporation might have.

     13.  Notices. Any and all notices, designations, consents, offers,
          -------
acceptances or any other communications provided for herein shall be given in
writing and shall be deemed to be given three (3) days after the date postmarked
if sent by first class, United States mail or by registered or certified mail,
return receipt requested; or on the date actually received if sent by express
mail or similar overnight delivery or if hand delivered, which shall he
addressed to the Corporation at its principal office and to Employee at
Employee's last address as shown on the records of the Corporation.

     14.  Governing Law. This Agreement shall be governed by, construed and
          -------------
enforced in accordance with the substantive laws of the Commonwealth of
Massachusetts, without regard to its principles of conflicts of laws.

     15.  Severability. In the event that any provision of this Agreement shall
          ------------
be determined to be invalid, illegal or otherwise unenforceable by any court of
competent jurisdiction, the validity, legality or enforceability of the other
provisions in this Agreement shall not affected thereby.

     16.  Binding Effect.  This Agreement shall be binding upon and inure to the
          --------------
benefit of the Corporation and Employee and their respective heirs, legal
representatives, executors, administrators, successors and assigns.

     17.  Entire Agreement. This Agreement constitutes the entire Agreement
          ----------------
between the parties with respect to the subject matter hereof and supercedes any
and all other agreements, either oral or in writing, among the parties hereto
with respect to the subject matter hereof.

                                      -5-
<PAGE>

     18.  Modification. This Agreement may not be changed orally, but may be
          ------------
amended, revoked, changed or modified at any time by a written agreement
executed by Employee and the Corporation.

     IN WITNESS WHEREOF, this Agreement has been duly executed on the day and
year set forth above.

/s/ Valentin Gapontsev                        /s/ John Geagea
-----------------------------------------     ----------------------------------
Valentin Gapontsev                            John Geagea
President and Chief Executive Officer
IPG PHOTONICS CORPORATION USA

                                      -6-
<PAGE>

1.   A house-hunting trip for you and your wife of up to one week duration
     including airfare and local expenses.
2.   Up to thirty days temporary lodging once you have moved to Sturbridge.
3.   Coverage for receipted expenses including house sales cost, moving expenses
     for your possessions and local closing costs up to a total of $40K. Some of
     these expenses may be taxable; this responsibility remains with you.
4.   Unreceipted expenses up to $3,000 to cover the cost of incidental items
     related to your move.

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