**Exhibit 10.3**

** **

**PROMISSORYNOTE**

 
| Principal  Amount:   $1,700,000 | June  30, 2003 |
|------------------------------------------------|----------------|

 

FOR VALUE RECEIVED, INRAD, INC., a New Jerseycorporation (hereinafter called “Issuer”), hereby promises to pay to the orderof CLAREX, LTD. and its successors and assigns (hereinafter called the“Holder”), at such address as the Holder may designate in writing to Issuer,the principal sum of ONE MILLION SEVEN HUNDRED THOUSAND DOLLARS ($1,700,000)plus all accrued interest owing hereunder in lawful money of the United Statesof America on or before the Maturity Date (as defined below).  For purposes of this Note, “Maturity Date”shall mean January 31, 2005.

 

# *Interest*. Interest shall accrue on the unpaid principal amount of this Note at therate of six and one-half percent (6.0%) per annum and shall be due and payableon the Maturity Date.  Interest shall becomputed on the basis of a 360 day year for the actual number of days elapsed.

 

# *Optional Prepayment; Order of Payments.* Issuer may prepay this Note at any time, inwhole or in part, without premium or penalty; provided, however, Issuer shallprovide to the Holder written notice at least ten (10) business days prior tosuch prepayment.  All payments made onaccount of this Note shall be applied first to the payment of any costs ofenforcement then due hereunder, second to the payment of accrued and unpaidinterest then due hereunder, and the remainder, if any, shall be applied to theunpaid principal balance of this Note.

 

# *Event of Default Defined; Acceleration of Maturity*.  If one or more of the following events(“Events of Default”) shall have occurred:

 

## a default in the paymentof all or any part of the principal or interest due under this Note as and whenthe same shall become due and payable, at maturity, by declaration as permittedhereunder, upon acceleration or otherwise;

 

## Issuer shall merge orconsolidate with or into any other person or entity, sell, transfer, lease orotherwise dispose of all or any substantial portion of its assets or adopt aplan of liquidation or dissolution; *provided*, *however*, that Issuer shallhave the right to merge with any other entity without creating an Event ofDefault so long as Issuer shall be the surviving entity in any such merger;

 

## Issuer shall haveapplied for or consented to the appointment of a custodian, receiver, trusteeor liquidator, or other court-appointed fiduciary of all or a substantial partof its properties; or a custodian, receiver, trustee or liquidator or othercourt appointed fiduciary shall have been appointed with the consent of Issuer;or Issuer is generally not paying its debts as they become due or is insolvent,or has made a general assignment for the benefits of its creditors; or Issuerfiles a voluntary petition in bankruptcy, or a petition or an answer seekingreorganization or an arrangement with its creditors or seeking to takeadvantage of any insolvency law, or an answer admitting the materialallegations of a petition in any bankruptcy, reorganization or

 

## 

 

## insolvencyproceeding or has taken action for the purpose of effecting any of theforegoing; or if, within sixty (60) days after the commencement of anyproceeding against Issuer seeking any reorganization, rehabilitation,arrangement, composition, readjustment, liquidation, dissolution or similarrelief under the Federal bankruptcy code or similar order under future similarlegislation, the appointment of any trustee, receiver, custodian, liquidator,or other court-appointed fiduciary of Issuer or of all or any substantial partof its properties, such order or appointment shall not have been vacated orstayed on appeal or if, within sixty (60) days after the expiration of any suchstay, such order or appointment shall not have been vacated (all such events,collectively “Insolvency Events”);

 

Then Holder, by noticein writing to Issuer (the “Acceleration Notice”), may declare the principalamount of this Note and all accrued but unpaid interest to be due and payableimmediately, and upon any such declaration the same shall become immediatelydue and payable; provided that if an Insolvency Event occurs, the principalamount of this Note and all accrued but unpaid interest shall become and beimmediately due and payable without any declaration or other act on the part ofthe Holder.

# * *

# *Security*. Payment of this Note is secured pursuant to the terms of a separateSecurity Agreement dated the date of this Note.

 

# Miscellaneous.

 

5.1           *Binding Effect;Assignability.*  This Note shall be binding upon Issuer, itssuccessors and its assigns, and shall inure to the benefit of Holder, itssuccessors and its assigns.  This Noteis transferable or assignable by the Holder or any transferee of the Holderonly to an Affiliate or a partner, or an heir, administrator, executor orsuccessor of the Holder.

 

5.2           *GoverningLaw; Jurisdiction; Venue*. This Note has been executed in and shall be governed by the laws of theState of New Jersey.  Issuer irrevocablysubmits to the exclusive jurisdiction of the courts of the State of New Jerseywhich will be the exclusive jurisdiction for disputes arising under the Noteand the United States District Court for the District of New Jersey for thepurpose of any suit, action, proceeding or judgment relating to or arising outof this Note.

 

IN WITNESSWHEREOF, Issuer has caused this Note to be signed in its name by its dulyauthorized officer and its corporate seal to be affixed hereto.

 
|   |   | INRAD, INC.             |
|--------|--------|-------------------------|
|   |   |                    |
|   | By:    | /s/William  S. Miraglia |   |

 

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