<PAGE>

                                                                   EXHIBIT 10.32

                        CONFIDENTIAL SETTLEMENT AGREEMENT

          This CONFIDENTIAL SETTLEMENT AGREEMENT (this "Settlement"), dated as
of June 25, 2003, by and among JDS UNIPHASE CORPORATION, a Delaware corporation
("JDSU" or "Claimant"), and IPG PHOTONICS CORPORATION, a Delaware corporation
("IPG" or "Respondent");

                                   WITNESSETH:

          A. IPG and JDSU's predecessor in interest, SDL Inc., a Delaware
corporation ("SDL"), entered into a purchase and sale agreement entitled IPG
Photonics Corporation Purchase and Sale Agreement No. 1-99, dated May 11, 1999,
which was subsequently amended by the parties on or about May 18, 2000 and
amended a second time on or about November 15, 2000 (collectively, the
"Agreement"); and

          B. a dispute arose between IPG and SDL's successor in interest, JDSU,
concerning the parties' performance, rights, and obligations under the
Agreement; and

          C. JDSU has commenced an arbitration proceeding against IPG before the
American Arbitration Association, entitled JDS Uniphase Corporation against IPG
Photonics Corporation, AAA Number 74 181 01636 02, now pending before the AAA
San Jose Regional Office (the "Arbitration"), alleging that IPG has breached the
Agreement and now owes JDSU in excess of $10 million;

          D. JDSU also commenced a proceeding against IPG in Massachusetts state
court, entitled JDSU Uniphase Corp. v. IPG Photonics Corp., No. 02-1780, now
pending before the Superior Court of the Commonwealth of Massachusetts
requesting, among other things, equitable relief in the form of an attachment of
IPG's assets in Massachusetts (the "State Court Action").

          E. IPG has asserted counterclaims against JDSU and SDL in the
Arbitration and the State Court Action sounding in breach of contract, unfair
competition and violation of federal and state laws governing anti-trust and
unfair competition;

          F. Both parties have denied the others' operative allegations
contained in the Arbitration claim filed by JDSU and the counterclaims filed by
IPG; and

          G. IPG and JDSU each believes that it will be best served by ending
the disputes reflected in the Arbitration and the State Court Action and that
the continued prosecution of the Arbitration and the State Court Action will
entail the expenditure of substantial legal fees and management time for both
IPG and JDSU over the course of several years, resources that each of them
believes would be better spent in pursuit of such business interest; and

          H. Subject to the terms of this Settlement and the other instruments
and documents to be entered into by it pursuant hereto, JDSU is therefore
willing to dismiss the claims it has asserted against IPG in the Arbitration and
the State Court Action, and IPG is willing to dismiss the counterclaims that it
has asserted against JDSU in the Arbitration and the State Court Action; and

<PAGE>

          I. Accordingly, the parties hereto desire to settle their disputes
reflected in the Arbitration and the State Court Action on the terms and
conditions set forth herein;

     NOW, THEREFORE, in consideration of the mutual representations, warranties
and covenants set forth herein, the parties hereto hereby agree as follows:

1.   Representations and Warranties.

     Both IPG and JDSU hereby represent and warrant to the other that:

     A.   It has the corporate power and authority to enter into this Settlement
          and the other instruments and documents to be entered into by it
          pursuant hereto and to observe and perform its obligations hereunder
          and thereunder;

     B.   The execution and delivery of this Settlement and the other
          instruments and documents to be executed and delivered by it pursuant
          hereto, and the consummation of the transactions contemplated hereby
          and thereby, have been duly authorized by all necessary corporate
          action;

     C.   This Settlement and each other instrument and document to be executed
          and delivered by it pursuant hereto has been or, when executed and
          delivered, will have been, duly executed and delivered, and this
          Settlement and each such other instrument and document constitutes or,
          when executed and delivered by it, will constitute, a valid and
          binding agreement, enforceable against it in accordance with its terms
          (except insofar as enforceability may be limited by applicable
          bankruptcy, insolvency, reorganization, moratorium or similar laws
          affecting creditors' rights generally, or by principles governing the
          availability of equitable remedies);

     D.   None of the execution, delivery or performance of this Settlement and
          the other instruments and documents to be executed and delivered by it
          pursuant hereto, nor the consummation of the transactions contemplated
          hereby and thereby, nor compliance by it with the terms hereof and
          thereof, will: (i) conflict with or result in a breach of any of the
          provisions of its charter, by-laws, or equivalent governing documents;
          (ii) require any filing by it with, or any permit, authorization or
          consent from, any court, administrative agency, or other governmental
          or regulatory authority, foreign or domestic, or from any third party,
          except any filings or reports required to be made under and pursuant
          to applicable securities laws or the rules and regulations of any
          applicable stock exchange or market quotation system; (iii) result in
          a violation or breach of, or constitute (with or without due notice or
          lapse of time or both) a default under, any note, bond, mortgage,
          indenture, lease, license, franchise, permit or other instrument or
          agreement to which it is a party or by which it is bound or any of its
          assets is affected; or (iv) violate any order, writ, injunction,
          decree, statute or ordinance applicable to it; and,

     E.   It has not relied on any representation or warranty, written or oral,
          that is not set forth herein or in any of the instruments or documents
          executed pursuant hereto in entering into this Settlement and each
          other instrument and document to be executed and delivered by it
          pursuant hereto; it has entered into this Settlement and such other
          instruments and documents voluntarily and without duress, threat or
          undue influence;


                                       2

<PAGE>

          it has been represented in negotiations relating to and in the
          preparation of this Settlement by independent counsel of its own
          choosing, it has reviewed this Settlement and such other instruments
          and documents and each such document has been explained to it by its
          counsel, it is fully aware of its terms and provisions and of its
          legal effect; and it has conducted whatever investigation it has
          deemed necessary or appropriate prior to entering into this Settlement
          or any such other document.

     F.   Notwithstanding anything to the contrary in clauses B, C and D of this
          Section 1, IPG shall make the representations and warranties in such
          clauses B, C and D with respect to the Equity Documents (as
          hereinafter defined) at the time of and conditioned on the Closing (as
          hereinafter defined).

2.   Stay and Dismissal of the Arbitration Claims with Prejudice.

     A.   Concurrently with the execution of this Settlement, IPG and JDSU shall
          cause their respective attorneys to execute a Stipulation and Order to
          Stay the Arbitration ("Stipulation and Order To Stay Arbitration"),
          for a thirty (30) day period.

     B.   Upon the Closing, IPG and JDSU shall cause their respective attorneys
          to execute a Stipulation and Order of Dismissal for the dismissal with
          prejudice of the Arbitration ("Stipulation and Order of
          Dismissal-Arbitration"), subject only, as stated therein, to the terms
          and conditions of this Settlement.

     C.   Upon the Closing, IPG and JDSU shall cause their respective attorneys
          to execute a Stipulation and Order of Dismissal to dismiss the action
          entitled JDS Uniphase Corp. v. IPG Photonics Corp., No. 02-1780,
          currently pending in the Superior Court of the Commonwealth of
          Massachusetts ("Stipulation and Order of Dismissal-State Court
          Action"), and vacating the attachment of assets to which the parties
          have previously stipulated in that action.

     D.   Each of the parties hereto shall, promptly after the execution and
          delivery of this Settlement, return any and all materials in its
          possession to the party that provided such materials, if and to the
          extent required by any confidentiality agreements executed by such
          parties or protective orders governing the return of such materials.

3.   Structured Cash Payment to JDSU.

     A.   Promissory Note.

          Concurrently with the execution of this Settlement, IPG shall execute
          a promissory note (the "Note") in favor of JDSU, in the form of
          Exhibit A attached hereto in the principal amount of $6,079,472.60
          (Six million, seventy nine thousand, four hundred and seventy two
          dollars, and sixty cents), which shall be payable by IPG on the
          following schedule:

          i.   $666,000 shall be paid to JDSU during calendar year 2003 in two
               equal installments, pursuant to the terms of the Note;


                                       3

<PAGE>

          ii.  $2,000,000.00 shall be paid during calendar year 2004 in equal
               quarterly installments pursuant to the terms of the Note; and

          iii. the balance of the amount to be paid during calendar year 2005 in
               equal quarterly installments pursuant to the terms of the Note.

          Interest shall accrue on the outstanding balance of the Note at a rate
          of 4% (four) per annum commencing on the date of the Closing. Accrued
          and unpaid interest under the Note shall be payable at the same times
          as payments of principal.

          At the Closing, IPG shall pay to JDSU $302,006.30 (which amount
          represents a payment to JDSU of $334,000 less $31,993.70 for an
          outstanding account payable of JDSU owing to IPG).

     B.   Attachment: The Note shall be secured by a first priority security
          interest in certain IPG's assets set forth in the Security Agreement
          (the "Security Agreement") in the form of Exhibit B attached hereto,
          and in certain land owned by IPG set forth in the Mortgage (the
          "Mortgage") in the form of Exhibit C attached hereto. JDSU and IPG
          shall execute the Security Agreement and IPG shall execute the
          Mortgage concurrently with the execution of this Settlement.

     C.   Release of Liens: At or promptly following the Closing, JDSU shall
          release its liens and attachment on the assets of IPG under the Writ
          of Attachment, dated February 28, 2003 (Superior Court Department of
          the Trial Court Civil Action 02-1780C); it being agreed that the
          assets subject to such Writ of Attachment shall become the assets
          which shall the Note pursuant to the Security Agreement and the
          Mortgage.

     D.   Acceleration. The amounts set forth in Section 3(A) shall be
          accelerated and shall become immediately due and payable upon the
          occurrence of any of the following events:

          i.   IPG shall have defaulted in the performance of its obligations
               under the Note and shall have failed to cure such default within
               thirty (30) days of written notice thereof given by JDSU in
               accordance with terms of the Note; and

          ii.  A Change of Control of IPG, as defined in the Note.

     E.   Other Prepayments.

          i.   In the event that IPG engages in an equity financing prior to
               repayment and satisfaction of the Note, it shall provide to JDSU
               in payment of the Note 10% of any net proceeds raised through
               such financing; or

          ii.  In the event that IPG's commercial bank (BankNorth) releases to
               IPG any cash collateral currently held by it, IPG shall provide
               those funds to JDSU in payment of the Note as follows:


                                       4

<PAGE>

               a.   If the release occurs during 2003 or 2004, then IPG shall
                    pay JDSU 50% of such released cash in partial payment of the
                    Note; and

               b.   If the release occurs during 2005, IPG shall pay to JDSU 75%
                    of such released cash in partial payment of the Note, until
                    such Note is paid in full.

          All prepayments shall be applied in the reverse order of principal
payments under the Note.

     F.   Disposition of assets. IPG shall be permitted to sell, transfer or
          otherwise dispose of the assets securing the Note from time to time,
          provided that (a) the assets are sold for fair value, and (b) that the
          net consideration received by IPG in connection with the sale of the
          assets are used within five (5) business days of the receipt thereof
          to prepay the Note. All payments under this Section F shall be applied
          in the reverse order of principal payments under the Note.

4.   Commercial Relationship.

     A.   Concurrently with the execution of this Settlement, IPG and JDSU shall
          execute (a) a Master Supply Agreement, in the form of Exhibit D
          attached hereto, pursuant to which IPG agrees that it will supply to
          JDSU, pulsed Ytterbium fiber laser modules (current and new commercial
          versions) that it sells on the merchant market, excluding those fiber
          lasers as to which IPG is subject to exclusivity obligations and (b) a
          Master Supply Agreement under which JDSU agrees to supply to IPG, and
          IPG agrees to purchase from JDSU on the terms and conditions set forth
          in Exhibit E, commercially available Laser Diodes and packaged Laser
          Diodes that it sells on the merchant market.

5.   Investment By JDSU.

Promptly following the execution of this Settlement, IPG and JDSU will negotiate
in good faith to document and effectuate the general terms set forth below
governing the terms of a new series of convertible preferred stock of IPG (the
"Series D Preferred") and a convertible note (the "Convertible Note") to be to
be issued to JDSU at the Closing. The parties hereto agree that IPG shall
provide to JDSU drafts of the principal documents incorporating the terms of the
Series D Preferred and Convertible Note (collectively, the "Equity Documents")
to JDSU not later than three business days following the execution of this
Settlement. It is the goal of the parties hereto to execute and deliver the
Equity Documents (including obtaining all necessary approvals and consents,
which IPG agrees to request in good faith) not later than three weeks following
the execution of this Settlement. The terms of the Equity Documents shall
reflect the following:

     A.   IPG would provide a new series of convertible preferred stock, the
          Series D Preferred, having a $5,100,000 liquidation preference. IPG
          would issue the Series D Preferred representing 5% of IPG outstanding
          shares (fully diluted, including accounting for weighted average
          ratchet and warrant positions) to JDSU.

          i.   The liquidation preference and price per share would be $1.90 per
               share (equal to $5,100,000);


                                       5

<PAGE>


          ii.  Series D Preferred rights and preferences would be substantially
               similar to Series A Preferred and Series B Preferred stock of IPG
               currently outstanding (except for ratchet and warrants,
               participating rights after payment of full liquidation
               preference, and process control rights), including same
               liquidation preference and weighted average anti-dilution rights.
               The Series D Preferred would have no superior rights or
               preferences;

          iii. IPG would provide to JDSU copies of all financial materials
               submitted to its Board of Directors (e.g., balance sheets, income
               statements, cash flows), except for strategic marketing or
               product pricing materials. JDSU would agree to implement a
               "Chinese wall" within its organization to protect disclosure by
               the holder of the IPG materials to competing JDSU operating
               divisions and personnel; and

          iv.  This issuance would be subject to reasonable due diligence by
               JDSU and subject to reasonable confidentiality limitations on the
               material supplied to JDSU.

     B.   IPG would issue to JDSU the Convertible Note in the principal amount
          of $5,100,000, due three years after issuance and convertible, in
          whole or in part, at IPG's option, into Series D Preferred.

          i.   The conversion price for the Convertible Note into Series D
               Preferred would be $1.90 per share;

          ii.  The Series D Preferred shares acquired upon conversion of the
               Convertible Note would have a conversion price into common the
               same as the then conversion price for outstanding Series D
               Preferred shares (i.e., lower of $1.90/share or weighted average
               price (accounting for dilutive issuances, splits, reverse splits,
               etc.) of the outstanding Series D Preferred); and

          iii. The full amount of the Convertible Note would be immediately
               payable (or convertible) in the event of a Change in Control of
               IPG.

6.   Intellectual Property.

     A.   JDSU represents to its Knowledge (defined below) that no current
          product of JDSU violates any currently issued U.S. Patents owned by
          IPG for the design, manufacture or conception of fiber lasers or the
          components thereof. For purposes of this Settlement, "Knowledge" means
          the opinion of JDSU's Vice President of Intellectual Property, formed
          after due inquiry, including but not limited to the General Manager of
          JDSU's Commercial Lasers division.

     B.   IPG disclaims any and all rights, interests or ownership in and to any
          of the intellectual property used to develop or otherwise contained in
          the laser diodes and fiber laser products at issue in the Arbitration.
          IPG further agrees that JDSU's products have not violated IPG's fiber
          laser related patents; provided that this covenant does not affect any
          of IPG's rights or assets in the future, except as expressly stated in
          this Section 6 or in Sections 7B or 10B.


                                       6

<PAGE>

     C.   IPG covenants that it will not commence an action claiming that JDSU's
          or its Affiliates' products infringe any patents owned by IPG or its
          Affiliates, or which IPG or its Affiliates have the right to assert,
          for any period prior to the Closing. For purposes of this Settlement,
          "Affiliate" means an entity which owns or controls, directly or
          indirectly, more than 50% of the voting interests in, or more or than
          50% of the voting interests of which is owned or controlled, directly
          or indirectly, by a party.

     D.   IPG covenants that, for a period of three years from the date of the
          Closing, it will not bring any claims against JDSU or its Affiliates
          under any issued patents that exist as of the date of the Closing, or
          currently pending patent applications which IPG or its Affiliates own
          or have the right to assert. The covenant in the preceding sentence
          shall not prevent IPG from asserting patent infringement or
          intellectual property-related counterclaims or defenses against JDSU
          in a patent infringement lawsuit filed by JDSU against IPG, or for
          asserting misappropriation claims against JDSU directly related to the
          hiring or retention by JDSU of IPG's employees or consultants and the
          use by JDSU of information developed by such former IPG employee or
          consultant for or on behalf of IPG or others associated with IPG. In
          the event of any finding of liability against JDSU for patent
          infringement or violation of intellectual property rights of IPG, the
          parties agree to the following additional stipulations:

          i.   With respect to any existing JDSU fiber laser products, IPG
               foregoes recovery of any damages owed by JDSU to IPG for three
               years from the date of the Closing; and

          ii.  With respect to other JDSU products, IPG would be entitled to
               recover damages commencing not earlier than the date of the
               Closing.

     E.   Nothing in this Settlement shall be interpreted or construed as a
          grant, sale, transfer, assignment or license, directly or indirectly,
          by IPG or its Affiliates to JDSU of any intellectual property rights
          or properties, including without limitation any patent, copyright,
          trade secrets, trademarks or tradenames, of IPG or its Affiliates,
          whatsoever.

7.   Worldwide Mutual Releases.

     A.   JDSU Release:

          JDSU, on behalf of itself and its direct and indirect subsidiaries,
          and other Affiliates, and their respective directors, officers,
          employees, agents and representatives, including, without limitation,
          its and their attorneys, and their respective predecessors (including
          SDL), successors, assigns, heirs and legal representatives, hereby
          releases, acquits, and forever absolutely discharges IPG, its direct
          and indirect subsidiaries, and its other Affiliates, and its and their
          respective directors, officers, employees, agents and representatives,
          including, without limitation, its and their attorneys, and their
          respective predecessors, successors, assigns, heirs and legal
          representatives, of and from any and all actions, causes of action,
          claims, demands, damages, theories, affirmative defenses, judgments,
          liens, indebtedness, losses, expenses (including, without limitation,
          attorneys' fees and disbursements) and liabilities of every kind and
          character, whether known or unknown, suspected or unsuspected, certain


                                       7

<PAGE>

          or speculative, existing or prospective, liquidated or unliquidated,
          whether under the laws of the United States or any state thereof or
          any other country, which exist as of the date of this Settlement or
          may have come into existence at any time prior to the date of this
          Settlement.

     B.   IPG Release.

          IPG, on behalf of itself and its direct and indirect subsidiaries, and
          other Affiliates, and their respective directors, officers, employees,
          agents and representatives, including, without limitation, its and
          their attorneys, and their respective predecessors, successors,
          assigns, heirs and legal representatives, hereby releases, acquits,
          and forever absolutely discharges JDSU, its direct and indirect
          subsidiaries, and other Affiliates, and their respective directors,
          officers, employees, agents and representatives, including, without
          limitation, its and their attorneys, and their respective predecessors
          (including SDL), successors, assigns, heirs and legal representatives,
          of and from any and all actions, causes of action, claims, demands,
          damages, theories, affirmative defenses, judgments, liens,
          indebtedness, losses, expenses (including, without limitation,
          attorneys' fees and disbursements) and liabilities of every kind and
          character, whether known or unknown, suspected or unsuspected, certain
          or speculative, existing or prospective, liquidated or unliquidated,
          whether under the laws of the United States or any state thereof or
          any other country, which exist as of the date of this Settlement or
          may have come into existence at any time prior to the date of this
          Settlement.

     C.   No Release of Indebtedness.

          Nothing in this Settlement shall be deemed to constitute a release of
          indebtedness by JDSU to IPG which obligations existing as of the date
          hereof are contained solely in the Note and the related Security
          Agreement and Mortgage, and in the Convertible Note, it being agreed
          that this Settlement settles and releases all claims and allegations
          by the parties against each other regarding obligations and rights
          that were in dispute by each of JDSU and IPG in the Arbitration and
          the State Court Action.

     D.   Possession of Claims.

          The parties hereto represent and warrant that they are the owners of
          the Claims being released pursuant to this Settlement. The parties
          hereto further represent and warrant that they have not previously
          assigned, transferred, hypothecated, granted a security interest in or
          lien upon, or purported to assign, transfer, hypothecate or grant a
          security interest in or lien upon, any Claim or portion thereof which
          is released hereby to another person or entity which is not a
          signatory to this Settlement, and agree to indemnify fully the other
          parties hereto for any judgments, attorneys' fees or costs incurred
          which result from the assertion by any person of any interest in the
          released Claim due to any purported agreement or dispute as to
          ownership of the Claims released pursuant to this Settlement.


                                       8

<PAGE>

8.   California Civil Code Section 1542.

          The parties hereto acknowledge familiarity with Section 1542 of the
          Civil Code of the State of California, which provides as follows:

               A general release does not extend to claims which the creditor
               does not know or suspect to exist in his favor at the time of
               executing the release, which if known by him must have materially
               affected his settlement with the debtor.

     The parties hereto waive and relinquish any right and benefit which they
     have or may have under Section 1542 and any Massachusetts statutory or
     common law equivalent or any other similar applicable statutes to the full
     extent that they may lawfully waive all such rights and benefits pertaining
     to the subject matter of this Settlement as described above.

9.   Closing.

The consummation of the transactions and releases contemplated by this
Settlement shall occur at a closing (the "Closing"). It shall be a condition to
Closing that all of the Equity Documents shall be executed and delivered by the
parties hereto in form and substance reasonably satisfactory to both parties
hereto, and that all other documents or filings necessary or reasonably
requested by a party hereto to effectuate the Equity Document and the other
agreements set forth in this Settlement shall be executed and delivered and
shall have been made simultaneously. Subject to satisfaction of the conditions
in this Settlement, each party hereto shall deliver to the other party executed
originals of the Stipulation and Order of Dismissal-Arbitration; the Stipulation
and Order of Dismissal-State Court Action; the Note; the Security Agreement; the
Mortgage; the Master Supply Agreements; and the Equity Documents, including the
Convertible Note and a stock certificate representing the issued shares of
Series D Preferred. IPG shall also pay to JDSU at the Closing $302,006.30
referred to in Section 3(A) above. The covenants, representations and warranties
contained in Sections 6 (Intellectual Property), 7 (Worldwide Mutual Releases),
10 (Future Disputes), and 11 (Termination of Agreement) hereof shall become
effective only upon the consummation of the transactions contemplated by this
Settlement at the Closing.

10.  Future Disputes.

     A.   Attempts To Resolve.

          If, after the date of this Settlement, either IPG or JDSU (the
          "Alleging Party") believes it has a claim (a "New Dispute") against
          the other, the Alleging Party shall give notice to the other party of
          the New Dispute, setting forth, in reasonable detail, the nature and
          basis for the New Dispute. The parties, for a period of thirty (30)
          days (or such other longer period as determined by mutual consent of
          the Disputing Parties), shall use their best efforts to resolve such
          New Dispute between themselves and neither party shall commence any
          such action during such thirty (30) day period.

     B.   IPG's Assertion of Defenses.

          In the event JDSU brings an action against IPG for breach of any term
          or obligation of this Settlement and the other instruments and
          documents to be entered into by it pursuant hereto, IPG agrees that it
          will not assert as a counterclaim or defense in that action, any
          claims contending that JDSU has engaged in unfair competition or other
          claims brought under the anti-trust laws of the United States, any of
          its


                                       9

<PAGE>

          states, or a foreign country. To the extent that IPG wishes to pursue
          any of the foregoing claims against JDSU, IPG shall be permitted to
          assert those claims in a separate and unrelated action but only to the
          extent that the basis for the claim is not JDSU's assertion of a
          breach of any term or obligation of this Settlement and the other
          instruments and documents to be entered into by it pursuant hereto.

11.  Termination of Agreement.

     Upon execution of this Settlement, the Agreement between IPG and JDSU shall
terminate and neither party shall have any further rights or obligations
thereunder.

12.  Confidentiality.

     The terms of this Settlement are strictly confidential and none of the
parties hereto shall, nor shall it or he permit any of its or his subsidiaries
or affiliates, counsel, auditors, financial advisors or other representatives or
agents to, disclose the terms of this Settlement to the public generally or to
any third party except as required by applicable law or regulation or the rules
of any governing stock exchange or market quotation system. Notwithstanding the
foregoing, (A) any party hereto may disclose the fact that this Settlement has
been entered into among the parties hereto (but without disclosing its terms)
and represents a full settlement of all claims in the Arbitration, (B) any party
hereto may disclose this Settlement to any attorney, accountant, investors,
public relations advisor, insurance carrier or other consultant engaged by such
party in the ordinary course of business, in connection with tasks assigned to
such person or persons, so long as such attorney, investor, accountant, public
relations advisor, insurance carrier or other consultant is bound, subject to
the requirements of applicable law, to confidentiality, (C) any party may
disclose the existence and the terms of this Settlement if and to the extent
(but only to the extent) it is required to do so by an order of a court of
competent jurisdiction or by a subpoena or any other demand for discovery made
in an action or proceeding pending in a court or governmental agency of
competent jurisdiction, provided that, in the case of such a subpoena or other
demand for discovery, the party receiving such process shall notify each other
party to this Settlement of such receipt, together with delivery of a copy
thereof and, in such case, any such notified party shall have the right to
object, at its own cost, to compliance with any such subpoena or other demand
based on the confidentiality of this Settlement.

13.  Further Cooperation.

     The parties hereto agree to execute and deliver any and all additional
papers, documents and other assurances and shall do any and all acts or things
reasonably necessary in connection with the performance of their obligations
hereunder to implement the provisions of this Settlement.

14.  Costs and Fees.

     Each party shall bear its own attorneys' fees and costs incurred in
connection with the Arbitration and State Court Action, and with respect to the
negotiation, execution and delivery of this Settlement and each document
required to be delivered hereunder.


                                       10

<PAGE>

15.  Miscellaneous.

     A.   Notices.

     All notices, consents, waivers, and other communications under this
     Settlement and under each instrument or document executed and delivered
     pursuant hereto must be in writing and will be deemed to have been duly
     given when (i) delivered by hand (with written confirmation of receipt), or
     (ii) when received by the addressee, if sent by a nationally recognized
     overnight delivery service (receipt requested), in each case to the
     appropriate addresses and facsimile numbers set forth below (or to such
     other addresses and facsimile numbers as a party may designate by written
     notice to the other parties):

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

     with a copy to:   Gray Cary Ware & Freidenrich, LLP
                       1755 Embarcadero Road
                       Palo Alto, California 94303-3340
                       Attention: Jeffrey Lederman
                       Facsimile No.: (650) 320-7401

     IPG:              IPG Photonics Corporation
                       50 Old Webster Road
                       Oxford, Massachusetts 01540
                       Attention: Angelo Lopresti
                       Facsimile No.: (508) 373-1101

     with copies to:   Winston & Strawn
                       200 Park Avenue
                       New York, New York 10166
                       Attention: Joseph DiBenedetto
                       Facsimile No.: (212) 294-4700

     B.   Successors and Assigns; Rights of Third Parties.

     Except as otherwise expressly provided herein, all covenants and agreements
     contained in this Settlement by or on behalf of the parties hereto shall be
     binding on and inure to the benefit of the parties hereto and their
     respective heirs, legal representatives, successors and assigns. Nothing
     expressed or implied in this Settlement is intended or shall be construed
     to confer upon or give any person other than the parties hereto any rights
     or remedies under this Settlement, except only that each Releasee shall be
     entitled to enforce the releases granted hereunder in its favor.

     C.   Severability.

     Whenever possible, each provision of this Settlement and of each instrument
     and document entered into pursuant hereto shall be interpreted in such
     manner as to be effective and valid under applicable law, but if any
     provision of this Settlement or of any such other instrument or document is
     held to be prohibited by or invalid under applicable law, such provision
     shall be ineffective only to the extent of such prohibition or invalidity,
     without invalidating the remainder hereof or thereof, and any such
     prohibited or


                                       11

<PAGE>

     invalid provision shall be deemed to be amended to the extent necessary
     such that, as so amended, it will be valid and enforceable to the fullest
     extent possible under applicable law.

     D.   Governing Law.

     All claims and matters arising under or in connection with, or relating to,
     this Settlement shall be governed by and construed in accordance with the
     laws of the State of New York, without giving effect to its conflicts of
     laws rules.

     E.   Modifications, Waivers and Amendments.

     No amendment, change, waiver, modification, cancellation or termination of
     this Settlement or any part thereof, shall be valid unless expressly set
     forth in a written document signed by the party or parties against whom
     enforcement of the amendment, change, waiver, modification, cancellation or
     termination is sought. No waiver of any provision of this Settlement shall
     be deemed, or shall constitute, a waiver of any other provision, whether or
     not similar, nor shall any waiver constitute a continuing waiver unless it
     specifically so provides.

     F.   Nature of Settlement.

     Neither this Settlement nor any instrument or document executed pursuant
     hereto constitutes, nor shall it or any such other instrument or document
     be construed as, an admission by any party hereto or thereto of any breach
     of contract or other violation by any of them of any right of any such
     other party, any harm to any such other party, or any violation by any such
     party of any federal, state or local statute, law, ordinance, regulation or
     common law duty.

     G.   No Fraudulent Inducement.

     Each party hereto hereby irrevocably and unconditionally waives any and all
     claims or defenses to the full performance and enforcement of this
     Settlement and each instrument and document executed pursuant hereto or in
     connection herewith based on any allegation of fraud in the inducement or
     any other similar basis seeking to limit, prevent or obstruct the full
     performance and enforcement of this Settlement and each such other
     instrument and document.

     H.   Counterparts.

     This Settlement may be executed in two or more counterparts, any one of
     which need not contain the signatures of more than one party, but all such
     counterparts taken together shall constitute one and the same agreement,
     and may be executed and delivered by facsimile followed promptly by the
     original, with such execution and delivery by facsimile to be as binding
     and effective as delivery of the original.

     I.   Entire Agreement.

     This Settlement embodies the complete agreement among the parties and
     supersedes and preempts any prior understandings, agreements or
     representations by or among the parties, written or oral, which may have
     related to the subject matter hereof in any way.


                                       12

<PAGE>

     J.   Descriptive Headings; Interpretation.

     The descriptive headings of this Settlement are inserted for convenience
     only and do not constitute a Section of this Settlement. The use of the
     word "including" in this Settlement and in any instrument and document
     executed and delivered pursuant hereto shall be by way of example rather
     than by limitation. The terms and provisions of this Settlement are the
     result of the mutual efforts of the parties hereto and their respective
     attorneys, and no party, nor any of the parties' respective attorneys,
     shall be deemed the drafter of this Settlement or of any instrument or
     document executed pursuant hereto for purposes of interpreting any
     provision hereof in any judicial or other proceeding that may arise between
     or among them.

     K.   Survival of Representations and Warranties.

     The representations and warranties contained in this Settlement shall
     survive the execution and delivery of this Settlement.

          IN WITNESS WHEREOF, the parties hereto have executed this Confidential
Settlement Agreement on the date first written above.


                                        JDS UNIPHASE CORPORATION


                                        By: /s/ Christopher S. Dewees
                                            ------------------------------------
                                        Name: Christopher S. Dewees
                                        Its: Vice President


                                        IPG PHOTONICS CORPORATION


                                        By: /s/ Valentin P. Gapontsev
                                            ------------------------------------
                                        Name: Valentin P. Gapontsev
                                        Its: CEO and Chairman


                                       13
