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                                                                    EXHIBIT 10.4

                            IPG PHOTONICS CORPORATION
                        NON-EMPLOYEE DIRECTORS STOCK PLAN
                            (Effective June 21, 2006)

IPG Photonics Corporation has established this IPG Photonics Corporation
Non-Employee Directors Stock Plan to attract and retain Non-Employee Directors
of IPG Photonics Corporation.

1.   DEFINITIONS

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

1.1. "Award" shall mean a Stock Option, a SAR, a Stock Award, a Stock Unit, or a
     Cash Award.

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

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

1.4. "Cause" shall have the meaning set forth in any written agreement between
     the Participant and the Company. If there is no written agreement between
     the Participant and the Company, or if such agreement does not define
     "Cause," then "Cause" shall have the meaning specified in the Award
     Agreement; provided, that if the Award Agreement does not so specify,
     "Cause" shall mean, as determined by the Board in its sole discretion, the
     Participant: (i) engages in conduct that cause financial or reputational
     injury to the Company; (ii) engages in any act of dishonesty or misconduct
     that results in damage to the Company, or its business or reputation or
     that the Board determines to adversely affect the value, reliability or
     performance of the Participant to the Company; (iii) refuses or fails to
     substantially comply with the human resources rules, policies, directions
     and/or restrictions relating to harassment and/or discrimination, or with
     compliance or risk management rules, policies, directions and/or
     restrictions of the Company; or (iv) fails to cooperate with the Company in
     any internal investigation or administrative, regulatory or judicial
     proceeding. If any part of the definition of Cause set forth in clauses (i)
     through (iv) above is deemed applicable to a Participant, this shall not
     preclude or prevent the reliance by the Company or the Board on any other
     part of the preceding sentence that also may be applicable. An act or
     omission is "willful" for this purpose if it was knowingly done, or
     knowingly omitted to be done, by the Participant not in good faith and
     without reasonable belief that the act or omission was in the best interest
     of the Company.

1.5. "Change in Control of the Company" shall mean the occurrence of any one or
     more of the following:

     (a)  Any "person" (as such term is defined in Section 3(a)(9) of the
          Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the
          Exchange Act), including a "group" (as defined in Section

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          13(d)(3) of the Exchange Act), other than (i) the Company, (ii) any
          wholly-owned subsidiary of the Company, or (iii) any employee benefit
          plan (or related trust) sponsored or maintained by the Company or any
          Affiliate, becomes a "beneficial owner" (as defined in Rule 13d-3
          under the Exchange Act), directly or indirectly, of securities of the
          Company having fifty percent (50%) or more of the combined voting
          power of the then-outstanding securities of the Company that may be
          cast for the election of directors of the Company (other than as a
          result of an issuance of securities initiated by the Company in the
          ordinary course of business) (the "Company Voting Securities");
          provided, however, that the event described in this paragraph (a)
          shall not be deemed to be a Change in Control by virtue of any
          underwriter temporarily holding securities pursuant to an offering of
          such securities;

     (b)  During any period of two consecutive years, individuals who at the
          beginning of any such period constitute the Board (the "Incumbent
          Directors") cease for any reason to constitute at least a majority of
          the Board, unless the election, or the nomination for election by the
          stockholders of the Company, of each new director of the Company
          during such period was approved by a vote of at least two-thirds of
          the Incumbent Directors then still in office;

     (c)  As the result of, or in connection with, any cash tender or exchange
          offer, merger or other business combination, sale of all or
          substantially all of the assets or contested election, or any
          combination of the foregoing transactions, less than a majority of the
          combined voting power of the then-outstanding securities of the
          Company or any successor corporation or entity entitled to vote
          generally in the election of the directors of the Company or such
          other corporation or entity after such transaction is held in the
          aggregate by the holders of the securities of the Company entitled to
          vote generally in the election of directors of the Company immediately
          prior to such transaction; or

     (d)  The shareholders of the Company approve a plan of complete liquidation
          of the Company.

     Notwithstanding the foregoing, a Change in Control shall not be deemed to
     occur solely because any person acquires beneficial ownership of more than
     fifty percent (50%) of the Company Voting Securities as a result of the
     acquisition of Company Voting Securities by the Company which reduces the
     number of Company Voting Securities outstanding; provided, however, that if
     after such acquisition by the Company such person becomes the beneficial
     owner of additional Company Voting Securities that increases the percentage
     of outstanding Company Voting Securities beneficially owned by such person,
     a Change in Control transaction shall then occur.

     Notwithstanding the foregoing, to the extent necessary to avoid subjecting
     Participants to interest and additional tax under Section 409A of the Code,
     no "Change in Control" will be deemed to occur unless and until paragraph
     (a), (b), (c) or (d), above, and the preceding paragraph are satisfied and
     Section 409A(a)(2)(A)(v) of the Code is satisfied.

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1.6. "Code" shall mean the Internal Revenue Code of 1986, as amended from time
     to time.

1.7. "Committee" shall mean (i) the Board or (ii) a committee or subcommittee of
     the Board appointed by the Board from among its members. The Committee may
     be the Board's Compensation Committee. Unless the Board determines
     otherwise, the Committee shall be comprised solely of not less than two
     members who each shall qualify as a "Non-Employee Director" within the
     meaning of Rule 16b-3(b)(3) (or any successor rule) under the Exchange Act.

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

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

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

     Notwithstanding the foregoing, to the extent necessary to avoid subjecting
     an individual to interest and additional tax under Section 409A of the
     Code, such individual shall not be deemed to have a Disability unless and
     until Section 409A(a)(2)(C) is satisfied.

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

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

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

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

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

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

1.15. "Non-Employee Director" shall mean a member of the Board who is not an
     employee of the Company or any of its affiliates.

1.16. "Nonqualified Stock Option" shall mean a Stock Option that does not
     qualify as an "incentive stock option" as such term is used in Code Section
     422.

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

1.18. "Participant" shall mean any Non-Employee Director to whom an Award has
     been granted by the Board under the Plan.

1.19. "Plan" shall mean the IPG Photonics Corporation Non-Employee Directors
     Stock Plan, as amended.

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

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

1.22. "Retirement" means termination of Service (other than removal for Cause,
     death or Disability) after completion of eight or more years of Service as
     a director, only if the Non-Employee Director shall provide Services until
     the end of a full one-year term (which for this purpose is until the next
     annual meeting of shareholders) or, in the event of a classified board of
     directors in which a class of directors is elected by shareholders and
     where a retiring director may be serving a multi-year term, until the end
     of a full year of such term (which for this purpose is until the next
     annual meeting of shareholders).

1.23. "SAR" shall mean a grant by the Board to a Participant of a stock
     appreciation right as described in Section 7 below.

1.24. "Service" shall mean the provision of services to the Company as a member
     of the Board of Directors of the Company.

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

1.26. "Stock Award" shall mean a grant by the Board to a Participant of an Award
     of Common Stock as described in Section 8.1 below.

1.27. "Stock Option" shall mean a grant by the Board to a Participant of an
     option to purchase Common Stock as described in Section 6 below.

1.28. "Stock Unit" shall mean a grant by the Board to a Participant of an Award
     as described in Section 8.2 below.

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

1.30. "Vest" shall mean:

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

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

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

          (ii) a right to transfer an Award subject to no Company-imposed
               restrictions or limitations other than restrictions and/or
               limitations imposed by Section 10 below.

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

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

2.   TERM OF PLAN. The Plan shall be effective as of the Effective Date. The
     Plan shall terminate on the 10th anniversary of the Effective Date, unless
     sooner terminated by the Board under Section 13.1 below.

3.   ELIGIBILITY AND PARTICIPATION

3.1. Eligibility. All Non-Employee Directors shall be eligible to participate in
     the Plan and to receive Awards.

3.2. Participation. Participants shall consist of such Non-Employee Directors as
     the Board in its sole discretion designates to receive Awards under the
     Plan.

4.   ADMINISTRATION

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

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

4.3. Authority of the Board. The Board shall have all the discretionary
     authority that may be necessary or desirable to enable it to discharge its
     responsibilities with respect to the Plan.

4.4. Delegation of Authority. The Board may delegate to the Committee all or any
     part of its authority under the Plan. To the extent of any such delegation,
     references in the Plan to the Board will be deemed to be references to the
     Committee.

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

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

4.7. Indemnification. Each person who is or has been a member of the Committee
     or the Board, and any individual or individuals to whom the Board has
     delegated authority under this Section 4, will be indemnified and held
     harmless by the Company from and against any loss, cost, liability, or
     expense that may be imposed upon or reasonably incurred by him or her in
     connection with or as a result of any claim, action, suit or proceeding to
     which he or she may be a party or in which he or she may be involved by
     reason of any action taken, or failure to act with respect to their duties
     on behalf of, under the Plan, except in circumstances involving such
     person's gross negligence or willful misconduct. Each such person will also
     be indemnified and held harmless by the Company from and against any and
     all amounts paid by him or her in a settlement approved by the Company, or
     paid by him or her in satisfaction of any judgment, of or in a claim,
     action, suit or proceeding against him or her and described in the previous
     sentence, so long as he or she gives the Company an opportunity, at its own
     expense, to handle and defend the claim, action, suit or proceeding before
     he or she undertakes to handle and defend it. The foregoing right of
     indemnification will not be exclusive of or limit any other rights of
     indemnification to which a person who is or has been a member of the
     Committee or the Board may be entitled under the Articles of Incorporation
     or By-Laws of the Company, as a matter of law, agreement or otherwise,
     including but not limited to any indemnification agreement between an
     indemnified person hereunder and the Company as it may be amended from time
     to time, or any power that the Company may have to indemnify him or her or
     hold him or her harmless. Any person entitled to indemnification under this
     Section shall have the right to elect to be indemnified under this Section
     or any other arrangement or agreement pursuant to which such person is
     entitled to indemnification from the Company, or any combination thereof.

5.   SHARES SUBJECT TO PLAN

5.1. Available Shares. At any given time, the maximum number of shares of Common
     Stock that may be issued or transferred to Participants under the Plan will
     be 0.75% of the number of Company shares outstanding (on a fully-diluted
     basis) at the end of the plan year preceding the then-current plan year, or
     on January 1, 2006, whichever is greater, subject to adjustments made in
     accordance with Section 5.2 below. Notwithstanding the foregoing, the
     maximum number of shares of Common Stock that may be issued or transferred
     to Participants under the Plan shall be 250,000 shares. Shares of Common
     Stock issued or transferred under the Plan may be either authorized or
     unissued shares, shares of issued stock held in the Company's treasury, or
     a combination of both,

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     at the discretion of the Company. Any shares of Common Stock underlying an
     Award which terminate by reason of expiration, forfeiture, cancellation or
     otherwise without the issuance of such shares shall again be available
     under the Plan. Awards that are payable only in cash are not subject to
     this Section 5.1.

5.2. Adjustment to Shares. If there is any change in the Common Stock of the
     Company, through merger, consolidation, Reorganization, Recapitalization,
     stock dividend, stock split, reverse stock split, split-up, split-off,
     spin-off, combination of shares, exchange of shares, dividend in kind or
     other like change in capital structure or distribution (other than normal
     cash dividends) to stockholders of the Company, an adjustment shall be made
     to each outstanding Award so that each such Award shall thereafter be with
     respect to or exercisable for such securities, cash and/or other property
     as would have been received in respect of the Common Stock subject to such
     Award had such Award been paid, distributed or exercised in full
     immediately prior to such change or distribution. Such adjustment shall be
     made successively each time any such change or distribution shall occur. In
     addition, in the event of any such change or distribution, in order to
     prevent dilution or enlargement of Participants' rights under the Plan, the
     Board shall have the authority to adjust, in an equitable manner, the
     number and kind of shares that may be issued under the Plan, the number and
     kind of shares subject to outstanding Awards, the exercise price applicable
     to outstanding Stock Options, and the Fair Market Value of the Common Stock
     and other value determinations applicable to outstanding Awards.
     Appropriate adjustments may also be made by the Board in the terms of any
     Awards granted under the Plan to reflect such changes or distributions and
     to modify any other terms of outstanding Awards on an equitable basis,
     including modifications of performance goals and changes in the length of
     performance periods. In addition, the Board is authorized to make
     adjustments to the terms and conditions of, and the criteria included in,
     Awards in recognition of unusual or nonrecurring events affecting the
     Company or the financial statements of the Company, or in response to
     changes in applicable laws, regulations, or accounting principles.

6.   STOCK OPTIONS

6.1. In General. The Board may, in its sole discretion, grant Stock Options to
     Non-Employee Directors on or after the Effective Date. The Stock Options so
     granted shall be Nonqualified Stock Options. The Board shall, in its sole
     discretion, determine the Non-Employee Directors who will receive Stock
     Options and the number of shares of Common Stock underlying each Stock
     Option. Each Stock Option shall be subject to such terms and conditions
     consistent with the Plan as the Board may impose from time to time. In
     addition, each Stock Option shall be subject to the terms and conditions
     set forth in Sections 6.2 through 6.6 below.

6.2. Exercise Price. The Board shall specify the exercise price of each Stock
     Option in the Award Agreement which exercise price shall not be less than
     100 percent of the Fair Market Value of the Common Stock on the date of
     grant.

6.3. Term of Stock Option. The Board shall specify the term of each Stock Option
     in the Award Agreement; provided, however, that no Stock Option

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     shall be exercisable after the 10th anniversary of the date of grant of
     such Stock Option. Each Stock Option shall terminate at such earlier times
     and upon such conditions or circumstances as the Board shall, in its sole
     discretion, set forth in the Award Agreement on the date of grant.

6.4. Vesting Date. The Board shall specify in the Award Agreement the Vesting
     Date for each Stock Option. The Board may grant Stock Options that are
     Vested, either in whole or in part, on the date of grant. If the Board
     fails to specify a Vesting Date in the Award Agreement, 25 percent of such
     Stock Option shall become exercisable on each of the first four one-year
     anniversaries of the date of grant and shall remain exercisable following
     such anniversary date until the Stock Option expires in accordance with its
     terms under the Award Agreement or under the terms of the Plan. The Vesting
     of a Stock Option may be subject to such other terms and conditions as
     shall be determined by the Board.

6.5. Exercise of Stock Options. The Stock Option exercise price may be paid in
     cash or, in the sole discretion of the Board, by delivery to the Company of
     shares of Common Stock then owned by the Participant, or by the Company's
     withholding a portion of the shares of Common Stock for which the Stock
     Option is exercisable, or by a combination of these methods. If the Common
     Stock is readily tradeable on a national securities exchange or other
     market system, payment may also be made by delivering a properly executed
     exercise notice to the Company and delivering a copy of irrevocable
     instructions to a broker directing the broker to promptly deliver to the
     Company the amount of sale or loan proceeds to pay the exercise price. To
     facilitate the foregoing, the Company may enter into agreements for
     coordinated procedures with one or more brokerage firms. The Board may
     prescribe any other method of paying the exercise price that it determines
     to be consistent with applicable law and the purpose of the Plan,
     including, without limitation, in lieu of the delivery to the Company of
     shares of Common Stock then owned by the Participant, providing the Company
     with a notarized statement attesting to the number of shares owned by the
     Participant, where, upon verification by the Company, the Company would
     issue to the Participant only the number of incremental shares to which the
     Participant is entitled upon exercise of the Stock Option. In determining
     which methods a Participant may utilize to pay the exercise price, the
     Board may consider such factors as it determines are appropriate.

6.6. Additional Terms and Conditions. The Board may, by way of the Award
     Agreements or otherwise, establish such other terms, conditions,
     restrictions and/or limitations, if any, of any Stock Option, provided they
     are not inconsistent with the Plan.

7.   SARS

7.1. In General. The Board may, in its sole discretion, grant SARs to
     Non-Employee Directors. A SAR is a right to receive a payment in cash,
     Common Stock or a combination of both, in an amount equal to the excess of
     (x) the Fair Market Value of the Common Stock, or other specified
     valuation, of a specified number of shares of Common Stock on the date the
     SAR is exercised over (y) the Fair Market Value of the Common Stock, or
     other specified valuation (which shall be no less than the Fair Market
     Value of the Common Stock), of such shares of Common Stock

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     on the date the SAR is granted, all as determined by the Board; provided,
     however, that if a SAR is granted retroactively in tandem with or in
     substitution for a Stock Option, the designated Fair Market Value of the
     Common Stock in the Award Agreement may be the Fair Market Value of the
     Common Stock on the date such Stock Option was granted. Each SAR shall be
     subject to such terms and conditions, including, but not limited to, a
     provision that automatically converts a SAR into a Stock Option on a
     conversion date specified at the time of grant, as the Board shall impose
     from time to time in its sole discretion and subject to the terms of the
     Plan.

8.   STOCK AWARDS AND STOCK UNITS

8.1. Stock Awards. The Board may, in its sole discretion, grant Stock Awards to
     Non-Employee Directors as additional compensation or in lieu of other
     compensation for services to the Company. A Stock Award shall consist of
     shares of Common Stock which shall be subject to such terms and conditions
     as the Board in its sole discretion determines appropriate including,
     without limitation, restrictions on the sale or other disposition of such
     shares and the Vesting Date with respect to such shares. The Board may
     require the Participant to deliver a duly signed stock power, endorsed in
     blank, relating to the Common Stock covered by such Stock Award and/or that
     the stock certificates evidencing such shares be held in custody or bear
     restrictive legends until the restrictions thereon shall have lapsed. With
     respect to shares of Common Stock subject to a Stock Award, the Participant
     shall have all of the rights of a holder of shares of Common Stock,
     including the right to receive dividends and to vote the shares, unless the
     Board determines otherwise on the date of grant.

8.2. Stock Units. The Board may, in its sole discretion, grant Stock Units to
     Non-Employee Directors as additional compensation or in lieu of other
     compensation for services to the Company. A Stock Unit is a hypothetical
     share of Common Stock represented by a notional account established and
     maintained (or caused to be established or maintained) by the Company for
     such Participant who receives a grant of Stock Units. Stock Units shall be
     subject to such terms and conditions as the Board, in its sole discretion,
     determines appropriate including, without limitation, determinations of the
     Vesting Date with respect to such Stock Units and the criteria for the
     Vesting of such Stock Units. Subject to Section 8.3, a Stock Unit granted
     by the Board shall provide for payment in cash or shares of Common Stock at
     such time or times as the Award Agreement shall specify. The Board shall
     determine whether a Participant who has been granted a Stock Unit shall
     also be entitled to a Dividend Equivalent Right.

8.3. Payout of Stock Units. Subject to a Participant's election to defer in
     accordance with Section 13.3 below, upon the Vesting of a Stock Unit, the
     shares of Common Stock representing the Stock Unit shall be distributed to
     the Participant, unless the Board, in its sole discretion, provides for the
     payment of the Stock Unit in cash (or partly in cash and partly in shares
     of Common Stock) equal to the value of the shares of Common Stock which
     would otherwise be distributed to the Participant.

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9.   CHANGE IN CONTROL

9.1. Accelerated Vesting. Notwithstanding any other provision of this Plan to
     the contrary, if there is a Change in Control of the Company, all
     outstanding Awards shall accelerate, including, without limitation,
     acceleration of the Vesting Date and/or payout of such Awards.

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

9.3. Assumption or Substitution of Awards. Notwithstanding anything contained in
     the Plan to the contrary, the Board may, in its sole discretion, provide
     that an Award may be assumed by any entity which acquires control of the
     Company or may be substituted by a similar award under such entity's
     compensation plans.

10.  TERMINATION OF SERVICE

10.1. Termination of Service Due to Death, Disability or Retirement. Subject to
     any written agreement between the Company and a Participant, if a
     Participant's Service is terminated due to death, disability or Retirement:

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

     (b)  all Vested portions of Awards held by the Participant on the date of
          the Participant's death or the date of the termination of his or her
          Service for disability or Retirement, as the case may be, shall remain
          exercisable until the earlier of:

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

          (ii) the date the Award would otherwise expire.

10.2. Termination of Service for Cause. Subject to any written agreement between
     the Company and a Participant, if a Participant's Service is terminated by
     the Company because of a removal for Cause, all Awards held by the
     Participant on the date of the termination of Service, whether Vested or
     non-Vested, shall immediately be forfeited by the Participant as of such
     date. A Participant's Service shall be deemed to have removed for Cause if,
     after the Participant's Service has

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     terminated, facts and circumstances are discovered that would have
     justified a removal for Cause.

10.3. Other Terminations of Service. Subject to any written agreement between
     the Company and a Participant, if a Participant's Service is terminated for
     any reason other than for Cause, death, disability or Retirement:

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

     (b)  all Vested portions of Awards held by the Participant on the date of
          the termination of his or her Service shall remain exercisable until
          the earlier of (i) the end of the 90-day period following the date of
          the termination of the Participant's Service or (ii) the date the
          Award would otherwise expire.

11.  TAXES

11.1. Withholding Taxes. The Company will have the power and the right to deduct
     or withhold, or require a Participant to remit to the Company, an amount
     sufficient to satisfy federal, state, and local taxes, domestic or foreign,
     required by law or regulation to be withheld with respect to any taxable
     event arising under the Plan.

11.2. Use of Common Stock to Satisfy Withholding Obligation. With respect to
     withholding required upon the exercise of Stock Options or SARs, upon the
     lapse of restrictions on a Stock Award, or upon any other taxable event
     arising as a result of Awards granted hereunder, the Company may satisfy
     the minimum withholding requirement for supplemental wages, in whole or in
     part, by withholding shares of Stock having a Fair Market Value (determined
     on the date the Participant recognizes taxable income on the Award) equal
     to the minimum withholding tax required to be collected on the transaction.
     The Participant may elect, subject to the approval of the Board, to deliver
     the necessary funds to satisfy the withholding obligation to the Company,
     in which case there will be no reduction in the shares of Common Stock
     otherwise distributable to the Participant.

12.  AMENDMENT AND TERMINATION

12.1. Termination of Plan. The Board may suspend or terminate the Plan at any
     time with or without prior notice; provided, however, that no action
     authorized by this Section 12.1 shall reduce the amount of any outstanding
     Award or change the terms and conditions thereof without the Participants'
     consent.

12.2. Amendment of Plan. The Board may amend the Plan at any time with or
     without prior notice; provided, however, that no action authorized by this
     Section 12.2 shall reduce the amount of any outstanding Award or change the
     terms and conditions thereof without the Participants' consent. No
     amendment of the Plan shall, without the approval of the stockholders of
     the Company:

     (a)  increase the total number of shares which may be issued under the Plan
          by amending the formula and/or limit contained in Section 5.1 hereof;
          or

                                       11

<PAGE>

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

     In addition, the Plan shall not be amended without the approval of such
     amendment by the Company's stockholders if such amendment is required under
     the rules and regulations of the stock exchange or national market system
     on which the Common Stock is listed.

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

13.  MISCELLANEOUS

13.1. Other Provisions. Awards granted under the Plan may also be subject to
     such other provisions (whether or not applicable to an Award granted to any
     other Participant) as the Company determines on the date of grant to be
     appropriate, including, without limitation, for the forfeiture of, or
     restrictions on resale or other disposition of, Common Stock acquired under
     any Stock Option, for the acceleration of Vesting of Awards in the event of
     a Change in Control of the Company, for the payment of the value of Awards
     to Participants in the event of a Change in Control of the Company, or to
     comply with federal and state securities laws.

13.2. Transferability. Each Award granted under the Plan to a Participant shall
     not be transferable otherwise than by will or the laws of descent and
     distribution, and Stock Options and SARs shall be exercisable, during the
     Participant's lifetime, only by the Participant. In the event of the death
     of a Participant, each Stock Option or SAR theretofore granted to him or
     her shall be exercisable during such period after his or her death as the
     Board shall, in its sole discretion, set forth in the Award Agreement on
     the date of grant and then only by the executor or administrator of the
     estate of the deceased Participant or the person or persons to whom the
     deceased Participant's rights under the Stock Option or SAR shall pass by
     will or the laws of descent and distribution. Notwithstanding the
     foregoing, the Board, in its sole discretion, may permit the
     transferability of a Stock Option by a Participant solely to members of the
     Participant's immediate family or trusts or family partnerships or other
     similar entities for the benefit of such persons, and subject to such
     terms, conditions, restrictions and/or limitations, if any, as the Board
     may establish and include in the Award Agreement.

13.3. Election to Defer Compensation Attributable to Award. The Board may, in
     its sole discretion and subject to Code Section 409A, allow a Participant
     to elect to defer the receipt of any compensation attributable to an Award
     under guidelines and procedures to be

                                       12

<PAGE>

     established by the Board after taking into account the advice of the
     Company's tax counsel.

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

13.5. No Right to Continued Service or to Grants. A Participant's rights, if
     any, to continue to serve the Company as a director shall not be enlarged
     or otherwise affected by his or her designation as a Participant under the
     Plan. The adoption of the Plan shall not be deemed to give any Non-Employee
     Director or any other individual any right to be selected as a Participant
     or to be granted an Award.

13.6. Governing Law. The Plan, all Awards granted hereunder, and all actions
     taken in connection herewith shall be governed by and construed in
     accordance with the laws of the State of Delaware without reference to
     principles of conflict of laws, except as superseded by applicable federal
     law. Participants and the Company each submit and consent to the
     jurisdiction of the courts in the Commonwealth of Massachusetts, County of
     Worcester, including the Federal Courts located therein, should Federal
     jurisdiction requirements exist in any action brought to enforce (or
     otherwise relating to) this Plan or an Award Agreement.

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

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

13.9. Compliance With Code Section 409A. Any provision of the Plan that becomes
     subject to Code Section 409A, will be interpreted and applied consistent
     with that Section and the applicable Treasury Regulations.

                                       13<PAGE>

                                                                    EXHIBIT 10.5

                            IPG PHOTONICS CORPORATION

                                SENIOR EXECUTIVE

                            SHORT-TERM INCENTIVE PLAN

                                ARTICLE I GENERAL

SECTION 1.1 PURPOSE.

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

SECTION 1.2 ADMINISTRATION OF THE PLAN.

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

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

SECTION 1.3 ELIGIBLE PERSONS.

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

<PAGE>

                                ARTICLE II AWARDS

SECTION 2.1 AWARDS.

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

SECTION 2.2 TERMS OF AWARDS.

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

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

SECTION 2.3 DETERMINATION OF AWARDS.

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

                                       2

<PAGE>

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

SECTION 2.4 PAYMENT OF AWARDS.

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

SECTION 2.5 EMPLOYMENT REQUIREMENT.

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

                        ARTICLE III ADJUSTMENT OF AWARDS

SECTION 3.1 ADJUSTMENTS.

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

                                       3

<PAGE>

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

SECTION 3.2 PAYMENT UPON CHANGE IN CONTROL.

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

     "Change in Control" means:

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

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

                                       4

<PAGE>

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

                            ARTICLE IV MISCELLANEOUS

SECTION 4.1 NO ADDITIONAL PARTICIPANT RIGHTS.

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

SECTION 4.2 NO ASSIGNMENT.

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

SECTION 4.3 TAX WITHHOLDING.

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

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

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

                                       5

<PAGE>

SECTION 4.5 SOURCE OF PAYMENTS.

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

SECTION 4.6 AMENDMENT AND TERMINATION.

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

SECTION 4.7 GOVERNMENTAL REGULATIONS.

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

SECTION 4.8 HEADINGS.

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

SECTION 4.9 GOVERNING LAW AND SEVERABILITY.

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

SECTION 4.10 EFFECTIVE DATE.

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

Adopted by IPG BOD on April 6, 2005

                                       6

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