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Exhibit 4.7  

THIS CONVERTIBLE PROMISSORY NOTE HAS BEEN, AND ANY SHARES ISSUED UPON CONVERSION PURSUANT TO THE TERMS HEREOF WILL BE, ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR
SALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THIS CONVERTIBLE PROMISSORY NOTE, AND ANY SECURITIES ISSUED UPON CONVERSION
PURSUANT TO THIS NOTE, HAVE NOT BEEN REGISTERED UNDER THE ACT OR ANY STATE SECURITIES LAW, AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED PURSUANT TO THE PROVISIONS OF THE ACT OR THOSE LAWS OR IF AN
EXEMPTION FROM REGISTRATION IS AVAILABLE.

 
 

SUBORDINATED CONVERTIBLE PROMISSORY NOTE    
    

	Principal Amount: $1,000,000	 	December 31, 2002

        FOR
VALUE RECEIVED, INRAD, INC., a New Jersey corporation (hereinafter called "Issuer"), hereby promises to pay to the order of WELLAND, 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 DOLLARS ($1,000,000) plus all accrued interest owing hereunder in
lawful money of the United States of America on or before the Maturity Date (as defined below), unless this Convertible Promissory Note (the "Note") is converted by the Holder as set forth herein. For
purposes of this Note, "Maturity Date" shall mean January 31, 2006. 

Interest.    Interest shall accrue on the unpaid principal amount of this Note at the rate of six percent (6%) per annum and shall be due and
payable on the Maturity Date. Interest shall be computed 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, in whole or in part, without premium or penalty; provided,
however, Issuer shall provide to the Holder written notice at least ten (10) business days prior to such prepayment. All payments made on account of this Note shall be applied first to the
payment of any costs of enforcement then due hereunder, second to the payment of accrued and unpaid interest then due hereunder, and the remainder, if any, shall be applied to the unpaid 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 payment of all or any part of the principal or interest due under this Note as and when the same shall become due and payable, at maturity, by declaration as permitted
hereunder, upon acceleration or otherwise; 

        Issuer
shall merge or consolidate with or into any other person or entity, sell, transfer, lease or otherwise dispose of all or any substantial portion of its assets or adopt a plan of
liquidation or dissolution; provided, however, that Issuer shall have the right to merge with any other
entity so long as Issuer shall be the surviving entity in any such merger; 

        Issuer
shall have applied for or consented to the appointment of a custodian, receiver, trustee or liquidator, or other court-appointed fiduciary of all or a substantial part of its
properties; or a custodian, receiver, trustee or liquidator or other court 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 Issuer files a voluntary petition in bankruptcy, or a petition or an answer seeking reorganization or
an arrangement with its creditors or seeking to take advantage of any insolvency law, or an answer admitting the material allegations of a petition in any bankruptcy, reorganization or insolvency
proceeding or has taken action for the purpose of effecting any of the foregoing; or if, within sixty (60) days after the commencement of any proceeding against Issuer seeking any
reorganization, rehabilitation, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the Federal bankruptcy code or similar order under future similar legislation,
the appointment of any trustee, receiver, custodian, liquidator, or other court-appointed fiduciary of Issuer or of all or any substantial part of its properties, such order or appointment shall not
have been vacated or stayed on appeal or if, within sixty (60) days after the expiration of any such stay, such order or appointment shall not have been vacated (all such events, collectively
"Insolvency Events"); 

Then
Holder, by notice in writing to Issuer (the "Acceleration Notice"), may declare the principal amount of this Note and all accrued but unpaid interest to be due and payable immediately, and upon
any such declaration the same shall become immediately due and payable; provided that if an Insolvency Event occurs, the principal amount of this Note and all accrued but unpaid interest shall become
and be immediately due and payable without any declaration or other act on the part of the Holder. 

Conversion.    The Holder may, at any time prior to the earlier of the Maturity Date or the prepayment of this Note by Issuer, convert all or
a portion of the principal and accrued interest then outstanding under this Note into fully paid and non-assessable shares of Issuer's Common Stock (the "Common Stock"), at the Conversion
Price (as defined below) per share. Such conversion shall be effected by the Holder by sending a written notice of conversion and this Note to Issuer for cancellation and issuance of the number of
shares of Common Stock into which this Note is being converted. In the event this Note is being converted in part, a replacement Note representing the unconverted portion of this Note shall be
delivered to the Holder. Upon conversion of this Note, only whole shares of Common Stock shall be issued. Any remainder due hereunder which is insufficient to purchase a whole share of Common Stock
shall be paid by Issuer in cash. The Conversion Price shall be (a) the price at which common stock is first issued for cash after the date of this Note to an unrelated third party investor or
(b) the price mutually agreed to by the Issuer and the Holder as its then fair market value if no such issuance has occurred within 12 months of the date hereof (the "Conversion Price").
To 

supplement
clause (a), if after the date hereof but before any third party purchase of Common Stock for cash, the Company issues any security convertible into Common Stock to an unrelated
third party investor for cash, the Conversion Price of this Note shall be the same as the conversion price of that convertible security. Once fixed, the Conversion Price and the amount and kind of
securities issuable upon conversion of this Note shall be subject to adjustment from time to time in accordance with the provisions of this Section 4. 

        4.1    Subdivision or Combination of Common Stock. In case Issuer shall at any
time subdivide (by any stock split, stock dividend or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such
subdivision shall be proportionately reduced, and, conversely, in case the outstanding shares of Common Stock shall be combined into a smaller number of shares, the Conversion Price in effect
immediately prior to such combination shall be proportionately increased.  

        4.2    Reorganization or Reclassification. If any
capital reorganization or reclassification of the capital stock of Issuer (other than in connection with a merger or other reorganization in which Issuer is not the surviving entity) shall be effected
in such a way that holders of Common Stock shall be entitled to receive stock, securities or assets with respect to or in exchange for Common Stock, then, as a condition of such reorganization or
reclassification, lawful and adequate provisions shall be made whereby the Holder shall thereupon have the right to receive upon the conversion of this Note, upon the terms and conditions specified
herein and in lieu of the shares of Common Stock immediately theretofore receivable upon the conversion of this Note, such shares of stock, securities or assets as may be issued or payable with
respect to or in exchange for the shares of Common Stock immediately theretofore receivable upon such conversion had such reorganization or reclassification not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests of the Holder to the end that the provisions hereof shall thereafter be applicable, as nearly as may be, in relation to
any shares of stock, securities or assets thereafter deliverable upon the exercise of such conversion rights.  

        4.3    Notice of Adjustment. Upon any adjustment of the Conversion Price, then and in each such case
Issuer shall give written notice thereof, by delivery in person, certified or registered mail, return receipt requested, telecopier or telex, addressed to the Holder at the address of the Holder, as
provided to Issuer, which notice shall state the Conversion Price resulting from such adjustment, setting forth in reasonable detail the method upon which such calculation is based. 

        4.4    Due Issuance of Shares Upon Conversion. Issuer covenants and agrees that
all shares of Common Stock or any such other securities which may be issued upon any whole or partial conversion of this Note will, upon issuance, be validly issued, fully paid and
non-assessable and free from all taxes, liens and charges with respect to the issue thereof.  

        4.5    Stock to be Reserved. Issuer will at all times
reserve and keep

available out of its authorized Common Stock, solely for the purpose of issuance upon the conversion of this Note as herein provided, such number of shares of Common Stock as
shall then be issuable upon the conversion hereof. Issuer will not take any action which results in any adjustment of the Conversion Price if the total number of shares of Common Stock issued and
issuable after such action upon conversion of this Note would, when added to the number of shares of Common Stock then reserved for issuance, exceed the total number of shares of Common Stock then
authorized by Issuer's Certificate of Incorporation.

        5.    Subordination. The Issuer hereby agrees, and the Holder of this Note by its acceptance agrees, that the payment of the
principal of and interest on the Note is hereby expressly made subordinate and junior in right of payment, to the extent set forth in the following paragraphs (a), (b) and (c), to the prior
payment in full of all Senior Debt of the Issuer, whether such Senior Debt, except as provided in Section 5 below, is incurred prior to, on or after the date hereof: 

        (a)    In
the event of insolvency or bankruptcy proceedings, or any receivership, liquidation, reorganization or other similar proceedings relative to the Issuer or to any of
the property of the Issuer, or in the event or any proceedings for voluntary liquidation, dissolution, or other winding-up of the Issuer, whether or not involving insolvency or bankruptcy,
then the holders of Senior Debt shall be entitled to receive payment in full of all principal of and interest on all Senior Debt before the Holder of this Note shall be entitled to receive any payment
on account of principal or interest on this Note, and to that end the holders of Senior Debt shall be entitled to receive for application in payment thereof any payment or distribution of any kind or
character, whether in cash or property or securities, which may be payable or deliverable in any such proceedings in respect of this Note. 

        (b)    In
the event that this Note is declared due and payable prior to its stated maturity, by reason of the occurrence of an Event of Default hereunder (under circumstances
when the provisions of the foregoing paragraph (a) shall not be applicable), then all principal of and interest on all Senior Debt outstanding at the time of such declaration shall first be
paid in full, before any payment on account of principal or interest is made upon this Note. 

        (c)    The
Issuer may make payments and, subject to Section 1 of this Note, prepayments of the principal of and interest of this Note if, at the time of the payment and
immediately after giving effect thereto, (i) there exists no default in any payment with respect to any Senior Debt and (ii) there shall not have occurred an event of default (other than
a default in the payment of amounts due thereon) with respect to any Senior Debt, as defined in the instrument under which the same is outstanding, permitting the holders thereof to accelerate the
maturity thereof, other than an event of default which shall have been cured or waived or shall have ceased to exist. Should the Holder of this Note, while there exists a default or an event of
default as provided in the immediately preceding sentence, and after being notified by the holder of the Senior Debt of the default, receive any such payment, or should the Holder of this Note receive
any distribution in bankruptcy, dissolution, or similar insolvency proceedings in regard to the Issuer, the Holder of the Note will hold such payment or distribution in trust for 

the
holder of the Senior Debt and will pay over such amounts to such holder to apply to the Senior Debt until the same is paid in full. 

        The
provisions of this Section 5 are for the purpose of defining the relative rights of the holders of Senior Debt and the Holder of the Note against the Issuer and its property.
Nothing herein shall impair, as between the Issuer and the Holder of this Note, the obligation of the Issuer, which is unconditional and absolute, to pay to the Holder the principal and interest in
accordance with the terms and the provisions hereof; nor shall anything herein prevent the Holder of this Note from exercising all remedies otherwise permitted by applicable law or hereunder upon
default under this Note, subject to the rights, if any, under this Section 5 of holders of Senior Debt to receive cash, property, stock or obligation otherwise payable or deliverable to the
Holder of this Note. The Issuer acknowledges and agrees that the rights of the Holder of this Note with respect to the Issuer's cash, property, rights and other assets of any kind are senior and prior
to the rights of any holder of capital stock of the Issuer arising from such capital stock. 

        (d)    Definition.
"Senior Debt" shall mean the principal of, interest on and, if applicable, any
premium on (i) the debt of the Issuer outstanding as of the date hereof, (ii) additional indebtedness incurred by the Issuer after date hereof for money borrowed from a bank, savings and
loan association trust Issuer, insurance Issuer or similar financial institution, (iii) purchase money secured debt, (iv) obligations of the Issuer as lessee under leases of real or
personal property which are treated as capital lease obligations under generally accepted accounting principals, and (v) any deferrals, renewals, refinancings or extensions of any of the
foregoing. 

        6.    Miscellaneous.

        6.1    Binding Effect; Assignability. This Note shall be binding upon Issuer, its successors and its assigns, and shall inure to
the benefit of Holder, its successors and its assigns. This Note is transferable or assignable by the Holder or any transferee of the Holder only to an Affiliate or a partner, or an heir,
administrator, executor or successor of the Holder; provided that such transfer or assignment is made in compliance with the Act and any applicable state and foreign securities laws. 

        6.2    Governing Law; Jurisdiction; Venue. This Note has been executed in and shall be governed by the laws of the State of New
Jersey. Issuer irrevocably submits to the exclusive jurisdiction of the courts of the State of New Jersey which will be the exclusive jurisdiction for disputes arising under the Note and the United
States District Court for the District of New Jersey for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Note. 

        IN
WITNESS WHEREOF, Issuer has caused this Note to be signed in its name by its duly authorized officer and its corporate seal to be affixed hereto. 

	 	 	INRAD, INC.
	

 	
 	

By:	
 	

/s/ WILLIAM S. MIRAGLIA

	 	 	William S. Miraglia, Secretary

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Exhibit 10.1  

 
 

  
  INRAD, INC.
  
  2000 EQUITY COMPENSATION PROGRAM    
    

        1.    Purposes.    This INRAD, Inc. Equity Compensation Program (the "Program") is intended to secure for
INRAD, Inc. (the "Corporation"), its direct and indirect present and future subsidiaries, including without limitation any entity which the Corporation reasonably expects to become a subsidiary
(the "Subsidiaries"), and its shareholders, the benefits arising from ownership of the Corporation's Common Stock, par value $.01 per share ("Common Stock"), by those selected directors, officers, key
employees and consultants of the Corporation and the Subsidiaries who are responsible for future growth. The Program is designed to help attract and retain superior individuals for positions of
substantial responsibility with the Corporation and the Subsidiaries and to provide these persons with an additional incentive to contribute to the success of the Corporation and the Subsidiaries. 

        2.    Elements of the Program.    In order to maintain flexibility in the award of benefits, the Program is comprised
of four parts -- the Incentive Stock Option Plan ("Incentive Plan"), the Supplemental Stock Option Plan ("Supplemental Plan"), the Stock Appreciation Rights Plan ("SAR Plan"), and the Performance
Share Plan ("Performance Share Plan"). Copies of the Incentive Plan, Supplemental Plan, SAR Plan, and Performance Plan are attached hereto as Parts I, II, III, and IV, respectively. Each such plan is
referred to herein as a "Plan" and all such plans are collectively referred to herein as the "Plans." The grant of an option, stock appreciation right, or performance share under one of the Plans
shall not be construed to prohibit the grant of an option, stock appreciation right or performance share under any of the other Plans. 

        3.    Applicability of General Provisions.    Unless any Plan specifically indicates to the contrary, all Plans shall
be subject to the general provisions of the Program set forth below under the heading "General Provisions of the Equity Compensation Program" (the "General Provisions"). 

GENERAL PROVISIONS OF THE EQUITY COMPENSATION PROGRAM  

        Article 1.    Administration.    The Program shall be administered by the Board of Directors of the Corporation
(the "Board" or the "Board of Directors") or any duly created committee appointed by the Board and charged with the administration of the Program. To the extent required in order to satisfy the
requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), such committee shall consist solely of "Outside Directors" (as defined herein). The Board, or any
duly appointed committee, when acting to administer the Program, is referred to as the "Program Administrator". Any action of the Program Administrator shall be taken by majority vote at a meeting or
by unanimous written consent of all members without a meeting. No Program Administrator or member of the Board of the Corporation shall be liable for any action or determination made in good faith
with respect to the Program or with respect to any option, stock appreciation right, or performance share granted pursuant to the Program. For purposes of the Program, the term "Outside Director"
shall mean a director who (a) is not a current employee of the Corporation or the Subsidiaries; (b) is not a former employee of the Corporation or the Subsidiaries who receives
compensation for prior services (other than benefits under a tax-qualified retirement plan) during the then current taxable year; (c) has not been an officer of the Corporation or the
Subsidiaries; and (d) does not receive remuneration (which shall be deemed to include any payment in exchange for goods or services) from the Corporation or the Subsidiaries, either directly or
indirectly, in any capacity other than as a director, except as otherwise permitted under Code Section 162(m) and the regulations thereunder. 

        Article 2.    Authority of Program Administrator.    Subject to the other provisions of this Program, and with
a view to effecting its purpose, the Program Administrator shall have the authority: (a) to construe and interpret the Program; (b) to define the terms used herein; (c) to
prescribe, amend and rescind rules and regulations relating to the Program; (d) to determine the persons to whom options, stock appreciation rights, and performance shares shall be
granted under the Program; (e) to determine the time or times at which options, stock appreciation rights, or performance shares shall be granted under the Program; (f) to determine the
number of shares subject to any option or stock appreciation right under the Program and the number of shares to be awarded as performance shares under the Program as well as the option price, and the
duration of each option, stock appreciation right, and performance share, and any other terms and conditions of options, stock appreciation rights, and performance shares; and (g) to make any
other determinations necessary or advisable for the administration of the Program and to do everything necessary or appropriate to administer the Program. All decisions, determinations and
interpretations made by the Program Administrator shall be binding and conclusive on all participants in the Program and on their legal representatives, heirs and beneficiaries. 

        Article 3.    Maximum Number of Shares Subject to the Program.    The maximum aggregate number of shares of
Common Stock issuable pursuant to the Program shall be 1,500,000 shares. No one person
participating in the Program may receive options, separately exercisable stock appreciation rights or other awards for more than 400,000 shares of Common Stock in any calendar year. All such shares
may be issued under any Plan, which is part of the Program. If any of the options (including incentive stock options) or stock appreciation rights granted under the Program expire or terminate for any
reason before they have been exercised in full, the unissued shares subject to those expired or terminated options and/or stock appreciation rights shall again be available for purposes of the
Program. If the performance objectives associated with the grant of any performance shares are not achieved within the specified performance objective period or if the performance share grant
terminates for any reason before the performance objective date arrives, the shares of Common Stock associated with such performance shares shall again be available for purposes of the Program. Any
shares of Common Stock delivered pursuant to the Program may consist, in whole or in part, of authorized and unissued shares or treasury shares. 

        Article 4.    Eligibility and Participation.    All directors, officers, employees and consultants of the
Corporation and the Subsidiaries shall be eligible to participate in the Program. The term "employee" shall include any person who has agreed to become an employee and the term "consultant" shall
include any person who has agreed to become a consultant. 

        Article 5.    Effective Date and Term of Program.    The Program shall become effective May 5, 2000 upon
approval of the Program by the Board of Directors of the Corporation, subject to approval of the Program by the shareholders of the Corporation within twelve months after the date of approval of the
Program by the Board of Directors. The Program shall continue in effect for a term of ten years from the date that the Program is adopted by the Board of Directors, unless sooner terminated by the
Board of Directors of the Corporation. 

        Article 6.    Adjustments.    In the event that the outstanding shares of Common Stock of the Corporation are
hereafter increased, decreased, changed into or exchanged for a different number or kind of shares or securities through merger, consolidation, combination, exchange of shares, other reorganization,
recapitalization, reclassification, stock dividend, stock split or reverse stock split (an "Adjustment Event"), an appropriate and proportionate adjustment shall be made by the Program Administrator
in the maximum number and kind of shares as to which options, stock appreciation rights, and performance shares may be granted under the Program. A corresponding adjustment changing the number or kind
of shares allocated to unexercised options, stock appreciation rights, and performance shares or portions thereof, which shall have been granted prior to any such Adjustment Event, shall likewise be
made. Any such adjustment in outstanding options and stock appreciation rights shall be made without change in the aggregate purchase price applicable to the unexercised portion of the option or stock
appreciation right but with a corresponding adjustment in the price for 

each
share or other unit of any security covered by the option or stock appreciation right. In making any adjustment pursuant to this Article 6, any fractional shares shall be disregarded. 

        Article 7.    Termination and Amendment of Program and Awards.    No options, stock appreciation rights or
performance shares shall be granted under the Program after the termination of the Program. The Program Administrator may at any time amend or revise the terms of the Program or of any outstanding
option, stock appreciation right or performance share issued under the Program, provided, however, that (a) any shareholder approval required by applicable law or regulation shall be obtained
and (b) no amendment, suspension or termination of the Program or of any outstanding option, stock appreciation right or performance share shall, without the consent of the person who has
received an option, stock appreciation right, or performance share, impair any of that person's rights or obligations under such option, stock appreciation right or performance share. 

        Article 8.    Privileges of Stock Ownership.    Notwithstanding the exercise of any option or stock
appreciation rights granted pursuant to the terms of the Program or the achievement of any performance objective specified in any performance share granted pursuant to the terms of the Program, no
person shall have any of the rights or privileges of a stockholder of the Corporation in respect of any shares of stock issuable upon the exercise of his or her option or stock appreciation right or
achievement of his or her performance objective until certificates representing the shares of Common Stock covered thereby have been issued and delivered. No adjustment shall be made for dividends or
any other distributions for which the record date is prior to the date on which any stock certificate is issued pursuant to the Program. 

        Article 9.    Reservation of Shares of Common Stock.    During the term of the Program, the Corporation will at
all times reserve and keep available such number of shares of its Common Stock as shall be sufficient to satisfy the requirements of the Program. 

        Article 10.    Tax Withholding.    The exercise of any option, stock appreciation right or performance share
under the Program is subject to the condition that, if at any time the Corporation shall determine, in its discretion, that the satisfaction of withholding tax or other withholding liabilities under
any state or federal law is necessary or desirable as a condition of, or in any connection with, such exercise or the delivery or purchase of shares pursuant thereto, then, in such event, the exercise
of the option, stock appreciation right or performance share shall not be effective unless such withholding tax or other withholding liabilities shall have been satisfied in a manner acceptable to the
Corporation. 

        Article 11.    Employment; Service as a Consultant or Director.    Nothing in the Program gives to any person
any right to continued employment by the Corporation or the Subsidiaries or to continued service as a consultant to or director of the Corporation or the Subsidiaries or limits in any way the right of
the Corporation or the Subsidiaries at any time to terminate or alter the terms of that employment or service. 

        Article 12.    Investment Letter; Restrictions on Obligation of the Corporation to Issue Securities; Restrictive
Legend.    Any person acquiring or receiving Common Stock or other securities of the Corporation pursuant to the Program, as a condition precedent to receiving the
shares of Common Stock or other securities, may be required by the Program Administrator to submit a letter to the Corporation stating that the shares of Common Stock or other securities are being
acquired for investment and not with a view to the distribution thereof. The Corporation shall not be obligated to sell or issue any shares of
Common Stock or other securities pursuant to the Program unless, on the date of sale and issuance thereof, the shares of Common Stock or other securities are either registered under the Securities Act
of 1933, as amended, and all applicable state securities laws, or exempt from registration thereunder. All shares of Common Stock and other securities issued pursuant to the Program shall bear a
restrictive legend referring to any restrictions on transferability applicable thereto, including those imposed by federal and state securities laws. 

        Article 13.    Rights Upon Termination of Employment, Service as a Consultant or Service as a Director.
    Notwithstanding any other provision of the Program, any benefit granted to an individual who has agreed to become an employee or a consultant of the Corporation or any Subsidiary or to 

become
an employee of any entity which the Corporation reasonably expects to become a Subsidiary, shall immediately terminate if the Program Administrator determines, in its sole discretion, that such
person will not become an employee or consultant of the Corporation or any Subsidiary. If a recipient ceases to be employed by or to provide consulting services or services as a director to the
Corporation or any Subsidiary, or a corporation or a parent or subsidiary of such corporation issuing or assuming a stock option in a transaction to which Section 424(a) of the Code
applies, for any reason other than death or disability, then, unless any other provision of the Program provides for earlier termination or the Option grant agreement provides otherwise: 

        (a) all
options and stock appreciation rights (other than "Naked Rights", as hereinafter defined) shall terminate immediately in the event the recipient's employment or consulting
services are terminated for cause and shall be exercisable, to the extent exercisable on the date of termination, for a period of: 

        (i) 90
days after the date of such termination if such termination is due to the recipient's resignation; and 

        (ii) 12
months after the date of such termination if such termination is due to the involuntary termination of the recipient's service or employment other than for cause. 

        (b) subject
to Section 5(b) of the SAR Plan, all Naked Rights not payable on the date of termination shall terminate immediately; and 

        (c) all
performance share awards shall terminate immediately unless the performance objectives have been achieved and the performance objective period has expired. 

        Article 14.    Rights Upon Disability.    If a recipient becomes disabled within the meaning of
Section 22(e)(3) of the Code while employed by or while rendering consulting services or services as a director to the Corporation or any Subsidiary (or a corporation or a parent or
subsidiary of such corporation issuing or assuming a stock option in a transaction to which Section 424(a) of the Code applies), then, unless any other provision of the Program provides
for earlier termination or the Option grant agreement provides otherwise: 

        (a) all
options and stock appreciation rights (other than Naked Rights) may be exercised, to the extent exercisable on the date of termination,, at any time within one year after
the date of termination due to disability; 

        (b) all
Naked Rights shall be fully paid by the Corporation as of the date of disability; and 

        (c) all
performance share awards for which all performance objectives have been achieved (other than continued employment or status as a consultant on the Vesting Date) shall be
paid in full by the Corporation; all other performance shares shall terminate immediately. 

        Article 15.    Rights Upon Death.    If a recipient dies while employed by or while rendering consulting
services or services as a director to the Corporation or any Subsidiary (or a corporation or a parent or subsidiary of such corporation issuing or assuming a stock option in a transaction to which
Section 424(a) of the Code applies), then, unless any other provision of the Program provides for earlier termination or the Option grant agreement provides otherwise: 

        (a) all
options and stock appreciation rights (other than Naked Rights) may be exercised by the person or persons to whom the recipient's rights shall pass by will or by the laws
of descent and distribution, to the extent exercisable on the date of death,, at any time within one year after the date of death unless any other provision of the Program provides for earlier
termination; 

        (b) all
Naked Rights shall be fully paid by the Corporation as of the date of death; and 

        (c) all
performance share awards for which all performance objectives have been achieved (other than continued employment or status as a consultant on the Vesting Date) shall be
paid in full by the Corporation; all other performance share awards shall terminate immediately. 

        Article 16.    Non-transferability.    Options and stock appreciation rights granted under the Program may not
be sold, pledged, assigned or transferred in any manner by the recipient otherwise than by will or by the laws of descent and distribution and shall be exercisable (a) during the recipient's
lifetime only by the recipient and (b) after the recipient's death only by the recipient's executor, administrator or personal representative, provided, however that the Program Administrator
may permit the recipient of an option granted pursuant to Part II of the Program to transfer options and/or stock appreciation rights granted in tandem with such options to a family member or a trust
or partnership created for the benefit of family members. In the case of such a transfer, the transferee's rights and obligations with respect to the applicable options or stock appreciation rights
shall be determined by reference to the recipient and the recipient's rights and obligations with respect to the applicable options or stock appreciation rights had no transfer been made. The
recipient shall remain obligated pursuant to Articles 10 and 12 hereunder if required by applicable law. Common Stock, which represents either performance, shares prior to the satisfaction of the
stated performance objectives and the expiration of the stated performance objective periods may not be sold, pledged, assigned or transferred in any manner. 

        Article 17.    Change in Control.    The Program Administrator shall have the authority to provide, either at
the time that any option or any stock appreciation right or performance share is granted or thereafter, that such option or stock appreciation right shall become fully exercisable upon the occurrence
of a Change in Control Event or that all restrictions, performance objectives, performance objective periods and risks of forfeiture pertaining to a performance share or stock bonus award shall lapse
upon the occurrence of a Change in Control Event. As used in the Program, a "Change in Control Event" shall be deemed to have occurred if any of the following events occur: 

        (a) the
consummation of any consolidation or merger of the Corporation in which the Corporation is not the continuing or surviving corporation or any consolidation or merger in
which the holders of the Corporation's Shares immediately prior to the consolidation or merger do not own fifty percent (50%) or more of the common stock of the surviving corporation immediately after
the consolidation or merger; or 

        (b) the
consummation of any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the
Corporation, other than to a subsidiary or affiliate; or 

        (c) an
approval by the shareholders of the Corporation of any plan or proposal for the liquidation or dissolution of the Corporation; or 

        (d) (A) a
purchase by any person (as such term is defined in Section 13(d) of the Exchange Act), corporation or other entity of any voting securities of the
Corporation (the "Voting Securities") (or securities convertible into Voting Securities) for cash, securities or any other consideration pursuant to a tender offer or exchange offer, unless, prior to
the making of such purchase of Voting Securities (or securities convertible into Voting Securities), the Board shall determine that the making of such purchase shall not be deemed a Change in Control
for purposes of the Program, or (B) any action
pursuant to which any person (as such term is defined in Section 13(d) of the Exchange Act), corporation or other entity (other than the Corporation or any benefit plan sponsored by the
Corporation or any of its subsidiaries) shall become the "beneficial owner" (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of Voting Securities
representing fifty percent (50%) or more of the combined voting power of the Corporation's then outstanding Voting Securities ordinarily (and apart from any rights accruing under special
circumstances) having the right to vote in the election of directors (calculated as provided in Rule 13d-3(d) in the case of rights to acquire any such securities), unless, prior to such
person so becoming such beneficial owner, the Board shall determine that such person so becoming such beneficial owner shall not be deemed to constitute a Change in Control for purposes of the
Program; or 

        (e) the
individuals (A) who, as of the date on which the Program is first adopted by the Board of Directors, constitute the Board (the "Original Directors") and
(B) who thereafter are elected to 

the
Board and whose election, or nomination for election, to the Board was approved by a vote of at least two thirds of the Original Directors then still in office (such Directors being called
"Additional Original Directors") and (C) who thereafter are elected to the Board and whose election or nomination for election to the Board was approved by a vote of at least two thirds of the
Original Directors and Additional Original Directors then still in office, cease for any reason to constitute a majority of the members of the Board. 

        Article 18.    Merger or Asset Sale.    For purposes of the Program, a merger or consolidation which would
constitute a Change in Control Event pursuant to Article 17 and a sale of assets which would constitute a Change in Control Event pursuant to Article 17 are hereinafter referred to as
"Article 18 Events". In the event of an Article 18 Event, each outstanding option, stock appreciation right, and performance share award shall be assumed or an equivalent benefit shall
be substituted by the entity determined by the Board of Directors of the Corporation to be the successor corporation. However, in the event that any such successor corporation does not agree in
writing, at least 15 days prior to the anticipated date of consummation of such Article 18 Event, to assume or so substitute each such option, stock appreciation right, and performance share
award, each option, stock appreciation right, or performance share award not so assumed or substituted shall be deemed to be fully vested and exercisable. If an option, stock appreciation right or
performance share award becomes fully vested and exercisable pursuant to the terms of this Article 18, the Program Administrator shall notify the holder thereof in writing or electronically
that (a) such holder's option, stock appreciation right or performance share award shall be fully exercisable until immediately prior to the consummation of such Article 18 Event and
(b) such holder's option, stock appreciation right or performance share award shall terminate upon the consummation of such Article 18 Event. For purposes of this Article 18, an
option, stock appreciation right or performance share award shall be considered assumed if, following consummation of the applicable Article 18 Event, the option, stock appreciation right or
performance share award confers the right to purchase or receive, for each share of Common Stock subject to the option, stock appreciation right or performance share award immediately prior to the
consummation of such Article 18 Event, the consideration (whether stock, cash or other securities or property) received in such Article 18 Event by holders of Common Stock for each share
of Common Stock held on the effective date of such Article 18 Event (and, if holders of Common Stock are offered a choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding shares of Common Stock); provided, however, that if such consideration received in such Article 18 Event is not solely
common stock of such successor, the Program Administrator may, with the consent of such successor corporation, provide for the consideration to be received in connection with such option, stock
appreciation right or performance share award to be solely common stock of such successor equal in fair market value to the per share consideration received by holders of Common Stock in the
Article 18 Event. 

        Article 19.    Method of Exercise.    Any optionee may exercise his or her option from time to time by giving
written notice thereof to the Corporation at its principal office together with payment in full for the shares of Common Stock to be purchased. The date of such exercise shall be the date on which the
Corporation receives such notice. Such notice shall state the number of shares to be purchased. The purchase price of any shares purchased upon the exercise of any option granted pursuant to the
Program shall be paid in full at the time of exercise of the option by certified or bank cashier's check payable to the order of the Corporation, by tender of shares of Common Stock which have a Fair
Market Value on the date of tender equal to the purchase price, or by a combination of checks and shares of Common Stock; provided however that any shares of Common Stock so tendered shall have been
owned by the optionee for a period of least six months free of any substantial risk of forfeiture or were purchased on the open market without assistance, direct or indirect, from the Corporation. The
Program Administrator shall, subject to such rules and procedures as the Program Administrator may prescribe, permit an optionee to make "cashless exercise" arrangements, to the extent
permitted by applicable law, and may require optionees to utilize the services of a single broker selected by the Program Administrator in connection with any cashless exercise. No option may be
exercised for a fraction of a share of Common Stock. If any portion of the purchase price is paid in shares of Common 

Stock,
those shares shall be valued at their then Fair Market Value as determined by the Program Administrator in accordance with Section 4 of the Incentive Plan. 

        Article 20.    Ten-year Limitations.    Notwithstanding any other provision of the Program, (a) no
option may be granted pursuant to the Program more than ten years after the date on which the Program was adopted by the Board of Directors and (b) any option granted under the Program shall,
by its terms, not be exercisable more than ten years after the date of grant. 

        Article 21.    Sunday or Holiday.    In the event that the time for the performance of any action or the giving
of any notice is called for under the Program within a period of time which ends or falls on a Sunday or legal holiday, such period shall be deemed to end or fall on the next day following such Sunday
or legal holiday which is not a Sunday or legal holiday. 

        Article 22.    Governing Law.    The Program shall be governed by and construed in accordance with the laws of
the State of New Jersey. 

        Article 23.    Pooling Transactions.    Notwithstanding anything contained in the Program to the contrary, in
the event of a Change in Control which is also intended to constitute a Pooling Transaction (as defined herein), the Program Administrator shall take such actions, if any, which are specifically
recommended by an independent accounting firm retained by the Corporation to the extent reasonably necessary in order to assure that the Pooling Transaction will qualify as such, including but not
limited to (a) deferring the vesting, exercise, payment or settlement with respect to any benefit granted under the Program, (b) providing that the payment or settlement in respect of
any such benefit be made in the form of cash, Shares or securities of a successor or acquirer of the Corporation, or a combination of the foregoing and (c) providing for the extension of the
term of any such benefit to the extent necessary to accommodate the foregoing, but not beyond the maximum term permitted for any such benefit. For purposes of the Program, the term "Pooling
Transaction" shall mean an acquisition of the Corporation in a transaction that is intended to be treated as a "pooling of interests" under generally accepted accounting principles. 

        Article 24.    Covenant Against Competition.    The Program Administrator shall have the right to condition the
award to an employee of the Corporation or the Subsidiaries of any option, stock appreciation right or performance share under the Program upon the recipient's execution and delivery to the
Corporation of an agreement in a form satisfactory to the Program Administrator containing such non-compete, non-solicitation and non-disclosure terms as shall be determined by the Program
Administrator. 

QuickLinks

INRAD, INC. 2000 EQUITY COMPENSATION PROGRAM

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