INRAD INC, DEF 14A, 1996-05-21

INRAD INC
DEF 14A, 1996-05-21
MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES

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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934

FILED BY THE REGISTRANT /X/

FILED BY A PARTY OTHER THAN THE REGISTRANT / /

CHECK THE APPROPRIATE BOX:

/ / PRELIMINARY PROXY STATEMENT

/X/ DEFINITIVE PROXY STATEMENT

/ / DEFINITIVE ADDITIONAL MATERIALS

/ / SOLICITING MATERIAL PURSUANT TO RULE 14a-11(c) OR RULE 14a-12

INRAD, INC.
________________________________________________________________________________
(Name of Registrant as Specified in its Charter)

________________________________________________________________________________
(Name of Person Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check appropriate box):

/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.

/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).

/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

1) Title of each class of securities to which transaction applies:

2) Aggregate number of securities to which transaction applies:

3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:

4) Proposed maximum aggregate value of transaction:

5) Total fee paid:

/ / Fee paid previously with preliminary materials.

/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

1) Amount Previously Paid:

2) Form, Schedule or Registration No.:

3) Filing Party:

4) Date Filed:

<PAGE>

INRAD, INC.

181 Legrand Avenue
Northvale, New Jersey 07647

Notice of Annual Meeting of Shareholders
to be Held June 20, 1996

NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of INRAD, Inc.
(the "Company") will be held at the offices of Lowenstein, Sandler, Kohl, Fisher
& Boylan, 65 Livingston Avenue, Roseland, New Jersey on Thursday, June 20, 1996
at 10:00 a.m. for the following purposes:

1. To elect five directors to serve until the next Annual Meeting of
Shareholders.

2. To approve increasing the maximum number of shares which may be awarded
under the Company's Key Employee Compensation Program from 70,000 to
500,000.

3. To consider and act upon other matters which may properly come before the
meeting or any adjournment thereof.

The Board of Directors has fixed the close of business on May 15, 1996, as the
date for determining the shareholders of record entitled to receive notice of,
and to vote at, the Annual Meeting. Whether or not you expect to be present at
the Annual Meeting, you are requested to complete and sign the enclosed proxy
and return it in the enclosed envelope as promptly as possible. Shareholders who
are present at the meeting may revoke their proxies and vote in person. We hope
you will attend.

By Order of the Board of Directors

Ronald Tassello, Secretary

Northvale, New Jersey
May 20, 1996

<PAGE>

INRAD, INC.

PROXY STATEMENT

The following statement is furnished in connection with the solicitation by the
Board of Directors of INRAD, Inc., a New Jersey corporation with its principal
offices at 181 Legrand Avenue, Northvale, New Jersey 07647 (the "Company"), of
proxies to be used at the Annual Meeting of Shareholders of the Company to be
held at the offices of Lowenstein, Sandler, Kohl, Fisher & Boylan, 65 Livingston
Avenue, Roseland, New Jersey on Thursday, June 20, 1996 at 10:00 a.m. This Proxy
Statement and the enclosed form of proxy are first being sent to shareholders on
or about May 20, 1996.

Shareowners Entitled to Vote

Only shareowners of record at the close of business on May 15, 1996, the record
date fixed by the Board of Directors, will be entitled to notice of, and to vote
at, the Annual Meeting. At the close of business on the record date, there were
2,109,271 shares of the Company's common stock, par value $.01 per share (the
"Common Stock"), outstanding and entitled to vote at the meeting. Each share is
entitled to one vote.

The presence in person or by proxy of owners of a majority of the
outstanding shares of the Company's Common Stock will constitute a quorum for
the transaction of business at the Company's Annual Meeting. Assuming that a
quorum is present, (A) the election of directors and (B) the proposal to
increase the maximum number of shares which may be awarded under the Key
Employee Compensation Program will require the affirmative vote of a plurality
of the shares of Common Stock represented and entitled to vote at the Annual
Meeting. For purposes of determining the votes cast with respect to any matter
presented for consideration at the Annual Meeting, only those cast "for" are
included. Abstentions and broker non-votes are counted only for the purpose of
determining whether a quorum is present at the Annual Meeting. Owners of Common
Stock are not entitled to cumulative voting in the election of directors.

Voting: Revocation of Proxies

A form of proxy is enclosed for use at the Annual Meeting if a shareowner is
unable to attend in person. Each proxy may be revoked at any time before it is
exercised by giving written notice to the secretary of the Meeting. All shares
represented by valid proxies pursuant to this solicitation (and not revoked
before they are exercised) will be voted as specified in the form of proxy. If
no specification is given, the shares will be voted in favor of the Board's
nominees for directors described in this Proxy Statement.

Costs of Solicitation

The entire cost of soliciting these proxies will be borne by the Company. In
following up the original solicitation of the proxies by mail, the Company may
make arrangements with brokerage houses and other custodians, nominees and
fiduciaries to send proxies and proxy materials to the beneficial owners of the
stock and may reimburse them for their expenses in so doing. If necessary, the
Company may also use its officers and their assistants to solicit proxies from
the shareholders, either personally or by telephone or special letter.

Principal Shareholders

The following table presents certain information with respect to the security
ownership of the directors of the Company and the security ownership of the only
individuals or entities known by the Company to be the beneficial owner of more
than 5% of the Company's Common Stock as of March 1, 1996. The

<PAGE>

Company has been advised that all individuals listed have the sole power to vote
and dispose of the number of shares set opposite their names in the table.

Percent of
Name and Address Number of shares Common Stock (2)
- - ----------------------------------------------------------------

Warren Ruderman (1) 1,081,400 51.3
c/o INRAD, Inc.
181 Legrand Avenue
Northvale, NJ 07647

Clarex, Ltd. 1,845,513 (3) 50.8
c/o Bank of Nova Scotia
Trust Company Bahamas Ltd.
P.O. Box N1355
Nassau, Bahamas

Hoechst Celanese Corp. 300,000 14.2
Routes 202-206 North
Box 2500
Somerville, NJ 08876

William F. Nicklin 203,089 (4) 9.3
33 Grand Avenue
Newburgh, NY 12550

Aaron Dean 61,675 (5) 2.8
c/o INRAD, Inc.

Stanley A. Kitzinger 4,800 (6) 0.2
c/o INRAD, Inc.

William Maxson 3,162 (6) 0.1
c/o INRAD, Inc.

Donald H. Gately 16,417 (7) 0.8
c/o INRAD, Inc.

Directors and Executive 1,177,229 (8) 52.2
Officers as a group
(8 persons)

(1) By virtue of his shareholdings, Warren Ruderman may be deemed to be a
"parent" of the Company as that term is defined in the Rules and
Regulations of the Securities Act of 1933, as amended.

(2) Percentage calculated based on each person's actual ownership plus the
number of shares for that person subject to options, warrants or
convertible notes exercisable or convertible within 60 days.

(3) Including 1,522,485 shares subject to options, warrants or convertible
notes exercisable or convertible within 60 days.

(4) Including 72,562 shares subject to convertible notes convertible within 60
days.

(5) Including 51,675 shares subject to warrants within 60 days.

(6) Including 1,500 shares subject to options exercisable within 60 days.

(7) Including 16,417 shares subject to warrants within 60 days.

(8) Including 80,717 shares subject to options or warrants within 60 days.

3
<PAGE>

Certain Relationships and Related Transactions

In 1993, the principal shareowner and President of the Company exchanged an
unsecured demand note for a new promissory note maturing on December 31, 1996 in
the amount of $566,049 (including $154,049 of accrued interest) and 494,400
shares of common stock. The new note bears interest at 7% and is unsecured.
Interest expense related to the shareowner loan was approximately $72,000,
$74,000 and $106,000 in 1995, 1994 and 1993, respectively.

Repayment of the shareowner loan has been subordinated to the prior repayment of
the Company's indebtedness to Chemical Bank and to other secured indebtedness of
the Company. The principal shareowner has guaranteed borrowings under the
Company's existing credit facility with Chemical Bank. By mutual informal
agreement, beginning with the quarter ended June 30, 1995, the Company has
deferred interest payments to its principal shareowner. The payments are
expected to be resumed in 1996 and are expected to include both the scheduled
quarterly payment and any deferred payments. Although by its terms the
indebtedness to the shareowner is due on December 31, 1996, it cannot be repaid
until the Chemical Bank debt has been repaid in full. The shareowner has agreed
not to demand payment prior to December 31, 1996.

4
<PAGE>

PROPOSAL ONE

ELECTION OF DIRECTORS

Five directors are to be elected to serve a term of one year and thereafter
until their respective successors shall have been elected and shall have
qualified. Unless a shareowner checks the box "withhold authority" on his proxy
or indicates that his shares should not be voted for certain nominees, it is
intended that the persons named in the proxy will vote for the persons listed in
the table below to serve as directors. Discretionary authority is solicited to
vote for the election of a substitute for any nominee who, for any reason,
presently unknown, cannot be a candidate for election.

Nominees The following table sets forth the names and ages of the nominees for
election to the Board of Directors, the principal occupation or employment of
each nominee for the past five years, the principal business of the organization
in which said occupation is or was carried on, the name or any other public
corporation for which they served as Board members, and the period during which
each nominee has served as a director of the Company.
<TABLE>
<CAPTION>

Position with Company and Other Business Director
Name and Age Experience During Past Five Years Since
- - ---------------------- ---------------------------------------------------- --------
<S> <C> <C>
Warren Ruderman (76) Chairman of the Board of Directors, President 1973
and Chief Executive Officer of the Company
(1973-Present)

Aaron Dean (35) Vice President (1995-Present), M.D. Sass Associates ---
(investment banking firm); Vice President (1990-1995)
Arnhold and S. Bleichroeder, Inc. (investment
banking firm); Director, INRAD Inc., (1994-1995)

Stanley A. Kitzinger (79) Financial Consultant (1986-Present); Senior Vice 1984
President (1980-1986) of International Investors, Inc.
(mutual funds investment); Senior Vice President
(1980-1986) of Van Eck Management Corp. (invest-
ment management); Director (1988-1991) of Mutual
Series Fund, Inc. (mutual funds investment)

William B. Maxson (65) Consultant (1989-Present); Vice President (1984- 1989) 1988
Air Force Programs, Cypress International
(marketing and business development firm); Officer,
United States Air Force (1952-1984), retiring with
rank of Major General in 1984

Donald H. Gately (77) Management Consultant (1990-Present); 1995
Chief Operating Officer, Datamax Corporation
(1994-1996)

<PAGE>

During 1995, three meetings of the Board of Directors were held. The Company
pays a fee of $500 per meeting to non-employee directors. During 1995, each
director, with the exception of Mr. Gately and Mr. Maxson, attended at least 75%
of the aggregate of (i) the total number of meetings of the Board of Directors
and (ii) the total number of meetings held by all committees of the Board on
which he served.

The Board has established a Compensation Committee, consisting
of Warren Ruderman, Donald Gately and Stanley Kitzinger, to administer the
Company's Key Employee Compensation Program. The Compensation Committee met once
during 1995.

The Board has a standing Audit Committee whose members presently are Stanley A.
Kitzinger, William B. Maxson and Donald Gately. The Audit Committee reviews the
independence, qualifications and activities of the Company's independent
accountants. It meets privately with them as well as with management. The
Committee recommends to the Board the appointment of the independent
accountants. This Committee did not meet during 1995.

The Board has no separate Nominating Committee. The entire Board selects
management nominees for election as directors. While the Board will consider
nominees recommended by stockholders, it has not established formal procedures
for this purpose.

The directors serve one-year terms. Pursuant to agreements between the Company
and Hoechst Celanese Corporation ("Hoechst"), Hoechst may designate a
representative for nomination to the Company's Board of Directors; the Company
has agreed to use its best efforts to have a designated representative elected
to the Board of Directors. At the present time, Hoechst has not designated a
representative to the Board.

Pursuant to an agreement between INRAD and Clarex, Ltd. ("Clarex"),
the Company has agreed to use its best efforts to have two individuals selected
by Clarex elected to the Board of Directors as long as any of the subordinated
convertible notes are outstanding. Mr. Dean has been selected by Clarex as one
representative; a second representative has not been designated by Clarex at the
present time.

Executive Officers

The executive officers of the Company are Warren Ruderman, Maria Murray, Glenn
Nosti, and Ronald Tassello. For biographical information regarding Mr. Ruderman,
see "Nominees." Maria Murray joined the Company in January 1989 as Manager,
Federal R&D Programs, and was appointed Vice President, Marketing and Sales in
1995. Prior to joining INRAD, she held positions in electrical design
engineering in the laser and communication industries. She holds a B.S.E.E.
degree in Electrical Engineering from the University of Central Florida. Glenn
Nosti joined the Company as a Senior Sales Engineer in July 1990. He was
subsequently appointed Vice President, Manufacturing in 1994. Prior to joining
INRAD, he held positions as Marketing Manager or National Sales Manager at
companies within the laser optics industry. He received a B.S. in Business
Administration from East Carolina University and an M.B.A. in Marketing from
Fairleigh Dickinson University. Ronald Tassello joined the Company as Secretary
and Controller in October 1989, and was appointed Vice President, Finance in
1990. Prior to that time, he was employed as Senior Manager in the Hackensack
Office of Price Waterhouse, an accounting and consulting firm. He held various
positions with Price Waterhouse from 1983 to 1989. He received a B.B.A. from
Pace University and is a Certified Public Accountant.

Each of the executive officers has been elected by the Board of Directors to
serve as an officer of the Company until the next election of officers, as
provided in the Company's by-laws.

<PAGE>

Executive Compensation

Summary of Cash and Other Compensation
- - --------------------------------------

The following table sets forth, for the years ended December 31, 1995, 1994 and
1993, the cash compensation paid by the Company and its subsidiaries, to or with
respect to the Company's Chief Executive Officer, the only executive officer
whose total annual salary and bonus exceeded $100,000, for services rendered in
all capacities as an executive officer during such period:

</TABLE>
<TABLE>
<CAPTION>
Name and Current Annual Compensation(A) Long-Term All Other
Principal Position Year Salary Bonus Compensation Compensation ($)
- - -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Warren Ruderman, 1995 $130,000 none none none
President and Chief
Executive Officer 1994 $130,000 none none none

1993 $130,500 none none none
</TABLE>

(A) During the periods covered, no Executive Officer received perquisites
(i.e., personal benefits) in excess of the lesser of $50,000 or 10% of such
individual's reported salary and bonus.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who own more than ten percent of a
registered class of the Company's equity securities to file with the SEC initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Officers, directors and greater than ten
percent stockholders are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file.

To the Company's knowledge, based solely on the review of copies of reports and
other information furnished to the Company, all Section 16(a) filing
requirements applicable to the Company's officers, directors and greater than
ten percent shareowners were complied with except as follows:

In April 1996, Glenn Nosti, Ronald Tassello and Maria Murray, all executive
officers of the Company, filed with the SEC Forms 3, 4 and 5 to report
certain transactions, including the receipt of stock and granting of stock
options to them, as required by Section 16(a). At the time of the filing of
the respective forms for the aforementioned individuals, the forms were not
filed on a timely basis.

7
<PAGE>

PROPOSAL TWO

INCREASE THE NUMBER OF SHARES WHICH MAY BE AWARDED
UNDER THE KEY EMPLOYEE COMPENSATION PROGRAM

In 1991, the shareowners of the Company approved the Key Employee Compensation
Program (the "Plan"). The purpose of the Plan is to provide to selected officers
and other key employees of the Company and its subsidiaries, upon whose efforts
the Company is largely dependent for the successful conduct of its business,
additional incentive to enlarge their proprietary interest in the Company, to
continue and increase their efforts on the Company's behalf, and to remain in
the employ of the Company or its subsidiaries, and to attract and retain persons
to serve as outside directors of the Company. The Plan provides the committee
which administers the Plan (the "Committee") with the flexibility of granting
either non-qualified or incentive stock options under certain parts of the Plan.

Subject to adjustment as provided in the Plan, the Plan presently provides that
the total number of shares for which options may be granted and exercised shall
be limited to 70,000 shares of the Company's Common Stock. The Board of
Directors, certain of whose members are eligible to participate in certain parts
of the Plan, believes that it is in the best interests of the Company and its
shareowners to increase the maximum number of shares which may be awarded from
70,000 to 500,000 shares.

Description of the Plan

The full text of the Plan is set forth in Exhibit A to
this Proxy Statement to which reference is made, and the following description
of certain features of the Plan is qualified in its entirety by such reference.

The Plan provides for the granting of either incentive stock options
("I.S.O.'s") pursuant to Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), which are entitled to special tax benefits under the Code,
or compensatory stock options ("C.S.O.'s") which are not entitled to special tax
benefits under the Code, the granting of stock appreciation rights ("S.A.R.'s")
either coupled with stock options ("Tandem Options") or S.A.R.'s which are not
coupled with options ("Naked S.A.R.'s"), and the granting of shares of the
Company's Common Stock, or cash in lieu thereof, upon achievement of goals to be
specified by the Committee ("Performance Shares").

Effective Date and Expiration of the Plan. The Plan became effective
in 1991 upon ratification and approval by the shareowners of the Company and
will continue until August 31, 2000 unless discontinued at an earlier date by
the Board of Directors. No option shall be granted after the expiration of the
Plan.

Administration of Plan. The Plan shall be administered by a Committee to
be appointed from time to time by the Company's Board of Directors, consisting
of not less than two directors who are not eligible to receive options or other
benefits under the Plan. The Committee currently consists of Warren Ruderman,
Donald Gately and Stanley Kitzinger. The Committee may, from time to time, adopt
such rules and regulations as it may deem proper.

Maximum Number of Shares Subject to the Plan. Subject to adjustment by reason of
stock splits, stock dividends and similar capital adjustments, the Plan
currently provides that options may be granted under the Plan covering up to a
maximum of 70,000 shares of the Company's Common Stock. If the proposal is
approved, the number of shares which may be awarded will be increased to
500,000. Shares covered by expired, lapsed or cancelled options under the Plan
may again be made subject to an option.

Types of Option. Options granted under the Plan will, at the discretion
of the Committee, be I.S.O.'s which meet all the requirements of Section 422 of
the Code, or C.S.O.'s which do not meet all those requirements.

<PAGE>

Stock Appreciation Rights. The Committee may grant S.A.R.'s either as Tandem
Options or Naked S.A.R.'s. Tandem Options entitle the holder to receive from the
Company an amount equal to the fair market value upon the surrender of the
unexpired option, or a portion of the shares which the holder was entitled to
purchase less the amount of the option exercise price. Naked S.A.R.'s entitle
the holder to receive the excess of fair market value of those rights at the end
of a designated period over the fair market value of those rights when they are
granted. The amount shall be paid at the sole discretion of the Committee to the
holder all in stock or cash or any combination of the two.

Performance Shares. The Committee may grant Performance Shares to full time
employees. Performance Shares represent the right to receive shares of stock, or
cash in lieu thereof, if that employee achieves certain objectives within a time
period specified by the Committee.

Persons Eligible. Full time employees of the Company (52 at December 31, 1995)
are eligible to receive I.S.O.'s, C.S.O.'s, S.A.R.'s and Performance Shares.
Outside Directors are eligible to receive C.S.O.'s and S.A.R.'s, but not to
receive I.S.O.'s or Performance Shares. Warren Ruderman is not eligible to
receive any options or other benefits under the Plan.

The following table shows the benefits to be received by Dr. Ruderman and all
other executive officers as a group:

Number of Shares
Name (all I.S.O.'s) Exercise Price
- - ---- -------------- --------------

Warren Ruderman 0 N/A
All executive officers as a group 75,000 $1.00
All employees other than executive officers 0 N/A

On May 1, 1996, the market value of the Company's Common Stock was $0.50 per
share.

Grants. At December 31, 1995, 127,500 options were outstanding under the Plan,
including 75,000 options granted in December to key executive officers of the
Company subject to approval by the Company's shareowners of the amendment to
increase the maximum number of shares. The Company is seeking approval of the
proposal to enable the Company to attract and retain such key executive officers
whose services are vital to the Company. Since discretion for the grant of
benefits under the Plan is vested in the Committee, the Company is unable at the
present time, except as set forth above, to determine the identity or number of
officers, other employees and directors who may be granted options, S.A.R.'s or
Performance Shares under the Plan in the future.

Limitation on Amount of Grants. The number of options, S.A.R.'s and Performance
Shares to be granted to any person is within the discretion of the Committee.
However, the aggregate fair market value (determined as of the time the option
is granted) of stock for which any officer or other key employee may be granted
I.S.O.'s shall not, during the first calendar year in which such options are
exercisable, exceed $100,000.

Exercise Price. The exercise price of an I.S.O. will be determined by the
Committee and must be at least equal to the fair market value of the Common
Stock at the time of the grant, except that any officer or other employee owning
stock of the Company possessing more than 10% of the total combined voting power
of the Company's stock may not be granted an I.S.O. unless, at the time the
option is granted, the option price is at least 110% of the fair market value of
the stock subject to the option and the option by its terms is not exercisable
after the expiration of five years from the date the option is granted. The
exercise price of a C.S.O. may be any price determined by the Committee
including a price below fair market value at the time of the grant. In the case
of a S.A.R., the grantee does not have to make a payment upon exercise but will
be entitled to the excess of fair market value at a date specified in the grant
over fair market value at the time of the grant.

<PAGE>

Fair market value shall be the average of the high and low prices of the
Company's Common Stock on NASDAQ on the day the option is granted. The option
price under a replacement option shall not be less than the option price under
the surrendered option but in no event less than the fair market value, in the
case of an I.S.O., on the date of grant of the replacement option.

Payment of Purchase Price. The purchase price for all shares purchased upon
exercise of an option shall be paid in: (a) cash, or (b) by transferring to the
Company the number of shares of Common Stock having a fair market value on the
date of the exercise equal to the option price, or (c) in a cash equivalent
acceptable to the Committee whether or not the use of such cash equivalent was a
common practice at the time of the approval of this Plan by the shareowners or
(d) by any combination of cash, stock and cash equivalent.

Payment of the option price with shares of the Company's Common Stock or cash
equivalent enables optionees to exercise their options without a significant
cash payment and, therefore, makes it easier for optionees to exercise their
options. However, neither form of payment results in any increase in the
compensation that an option provides because the shares or cash equivalent
surrendered by an optionee must have a value equal to the option price. The
following example is illustrative: Assume that an option covering 100 shares at
an option price of $3 a share is exercised at a time when the market price is $6
a share. If the option is exercised for cash, the optionee pays $300 and
receives shares worth $600, for a gain of $300. If the option is exercised for
shares or cash equivalent, the optionee surrenders shares or cash equivalent
valued at $300 and receives shares worth $600, also for a gain of $300.

Payment of the option price with shares of the Company's stock also permits the
so-called "pyramiding" of shares. Pyramiding is a technique under which the
optionee requests the Company to automatically apply the shares received upon
the exercise of a portion of a stock option to satisfy the exercise price for
additional portions of the option. The Securities and Exchange Commission has
ruled that the practice of "pyramiding" in the exercise of stock options is a
permitted transaction under Rule 16b-3, assuming various conditions of the rule
are met. The effect of pyramiding is to allow an optionee to deliver a
relatively small number of shares to exercise even the largest option. The use
of pyramiding gives the optionee no more than the appreciation or "spread"
inherent in the exercise of the option. For example, an option holder has a
stock option under the Plan for 100 shares of Stock at an exercise price of $3
per share and wishes to exercise his entire option at a time when the Stock has
a fair market value of $6 per share. The option holder could exercise his entire
option by delivering 10 shares of Stock to the Company in payment of the
exercise price of 20 shares of Stock under the Option; by the simultaneous
delivery of those 20 shares in payment of the exercise price of 40 additional
shares under the option; and by the additional simultaneous delivery of 20 of
those shares in payment of the exercise price of the remaining 40 shares under
the option. The option holder would have delivered 50 shares of Stock in payment
of the exercise price of 100 shares of Stock under his option and, in net
effect, would have received the $300 increase in value or spread (that is, the
excess of the aggregate market value of the shares subject to the option over
the aggregate exercise price of the option) he had earned under his option in
the form of 50 shares of Stock having a fair market value of $300.

Option Period. There is a one year waiting period before either an I.S.O., a
C.S.O. or a Tandem S.A.R. may be exercised. Twenty-five percent of the option
may be exercised after 12 months, 50% after 24 months, 75% after 36 months and
100% after 48 months. However, neither an I.S.O., a C.S.O. nor a Tandem S.A.R.
may be exercised more than ten years after the grant (except for an I.S.O.
granted to a 10% shareowner which may not be exercised more than five years
after the grant).

A Naked S.A.R. will be exercisable at a date specified by the Committee at the
time of the grant, but shall not be less than six months nor more than five
years after the grant. The period for determining an employee's entitlement to
Performance Shares shall be determined by the Committee at the time of the
grant, but shall not be less than one year nor more than five years after the
grant.

Options and Tandem S.A.R.'s may be exercised for limited periods of time
following death, disability or termination of employment. Naked S.A.R.'s will be
deemed to have been exercised upon death or disability but will expire upon
termination of employment. A Performance Share terminates automatically if an
employee dies or terminates employment for any reason before the performance

<PAGE>

objective period ends. An optionees rights to exercise all installments shall be
accelerated in the event of a sale, merger, reorganization or liquidation of the
Company and all installments not exercised by the closing date of any such event
shall terminate.

Duration of the Plan. Unless sooner terminated by the Board of Directors in its
discretion, the Plan will terminate on August 31, 2000.

Modification. The Committee may amend, suspend or terminate the Plan but may
not, without shareowner approval, increase the maximum number of shares subject
to the Plan, change the minimum exercise price of I.S.O.'s, make S.A.R. payments
in excess of the difference between the option price and the fair market value
of the Company's Common Stock on the date the S.A.R. is exercised, or materially
increase the cost of the Plan to the Company. The Committee may not alter or
impair the rights of any employee under a grant made prior to amendment,
suspension or termination of the Plan.

Federal Income Tax Consequences

Under present United States tax laws and regulations, the Company believes that
the federal income tax consequences to employees of the Company who are citizens
or residents of the United States as a result of the grant and exercise of stock
options pursuant to the Plan will be as follows:

Grant of Options. The grant of an I.S.O. will not give rise to receipt of income
for federal income tax purposes by the employee. The grant of a C.S.O. will not
give rise to the receipt of income for federal income tax purposes by the
employee, assuming the option has no ascertainable fair market value on the date
of grant.

Exercise of Incentive Stock Options. The exercise of an I.S.O. will not give
rise to the receipt of income for federal income tax purposes by the employee.
If no disposition of the stock acquired upon exercise of an I.S.O. occurs until
more than two years after the I.S.O. was granted and more than one year after
the transfer of the stock to the optionee, any gain or loss realized will be
treated as long term capital gain or loss.

The disposition of stock acquired upon the exercise of an I.S.O. within two
years after the I.S.O. was granted or within one year after transfer of the
stock to the optionee will be a disqualifying disposition, and the optionee will
realize ordinary compensation income for federal income tax purposes in an
amount equal of the lesser of: (a) the fair market value of the option stock on
the date of exercise minus the exercise price, or (b) the amount realized on
disposition of the stock minus the exercise price.

If the exercise of an I.S.O. is made by delivery of shares of Common Stock of
the Company in payment of the option price, and such delivered shares were not
acquired upon exercise of an I.S.O. or if so acquired are so delivered after
expiration of the applicable holding period requirements of such I.S.O., the
shares delivered are deemed to be exchanged in a tax-free transaction for the
equivalent number of new shares of Common Stock. Such equivalent number of new
shares of Common Stock have the same basis and holding period as the shares of
Common Stock exchanged. The number of shares of Common Stock received in excess
of the number of shares delivered are deemed to be received in a tax-free
transaction and have a zero basis. If shares so acquired are sold after more
than two years after the I.S.O. was granted and more than one year after the
transfer of the shares to the optionee, then the gain or loss realized upon the
sale will constitute long-term capital gain or loss. The exercise of an I.S.O.
by delivery of shares of Common Stock acquired upon the exercise of another
I.S.O. prior to the expiration of the holding period requirement applicable to
such other I.S.O. will be deemed to be a taxable exchange and a disqualifying
disposition of the I.S.O. so delivered; but the stock so purchased should still
be entitled to I.S.O. treatment as described above if the applicable holding
period requirements are met.

11
<PAGE>

The Company will be entitled to a deduction for federal income tax purposes at
the same time and in the same amount as an employee is required to recognize
ordinary compensation income as described above.

Upon exercise of an I.S.O., the excess of the fair market value of the stock
acquired over the option price will be an "item of adjustment" to the optionee
(measured at the later of the time the option is exercised or the time the stock
received upon the exercise of the option is no longer subject to a substantial
risk of forfeiture) which may be subject to an "alternative minimum tax" under
the Code. There will be no "item of tax adjustment," however, if the stock
received upon exercise of the I.S.O. is disposed of in the same taxable year in
which the I.S.O. is exercised.

Exercise of Compensatory Options. The exercise of a C.S.O. by delivery of cash
or shares of Common Stock of the Company in payment of the option price will
give rise to the receipt by the employee of ordinary compensation income at the
time of exercise in an amount equal to the excess of the fair market value of
the shares of Common Stock acquired through the exercise of the option on the
date of exercise over the option price for such shares.

If the exercise of a C.S.O. is made by delivery of shares of Common Stock of the
Company in payment of the option price, the shares delivered are deemed to be
exchanged in a tax-free transaction for the equivalent number of new shares of
Common Stock.

Such equivalent number of new shares of Common Stock have the same basis and
holding period as the shares of Common Stock exchanged. The number of shares of
Common Stock received in excess of the number of shares delivered are included
in the optionee's income as ordinary compensation income at the fair market
value thereof at the time of exercise and have a basis equal to such fair market
value. If either (a) the excess shares of Common Stock which have been acquired
through the exercise of an option by delivery of Common Stock and included in
the optionee's income as ordinary compensation income are sold, or (b) shares of
Common Stock acquired through the exercise of an option for cash are sold, then
in either case the gain or loss arising from such sale, based on the difference
between the amount realized upon such sale and the fair market value of such
shares of Common Stock on the date compensation is realized, will constitute
capital gain or loss.

Stock Appreciation Right ("S.A.R."). Neither the holder of a Tandem Option nor
the holder of a Naked S.A.R. will be deemed to receive any income at the time a
S.A.R. is granted. When any part of a S.A.R. is exercised, the optionee will be
deemed to have received ordinary income on the exercise date in an amount equal
to the sum of the fair market value of shares and cash received. The Company
will be entitled to a corporate income tax deduction in an equal amount. Any
capital gains realized upon the sale of such shares will be subject to the same
provisions as capital gains realized upon the sale of non-qualified stock
options. Income recognized by an optionee upon the exercise of a S.A.R. will be
subject to federal withholding taxes.

Performance Shares. Receipt of an award under the Performance Share Plan will
not be considered the receipt of gross income for federal income tax purposes at
the time of the award, unless the recipient affirmatively elects to include the
fair market value of the shares at the date of the award in his gross income for
the year of the award. In the absence of such an election, a recipient's, gross
income in the year the restrictions terminate will include the fair market value
of the shares awarded at the date of the termination of the restrictions. The
Company will be entitled to a tax deduction at the same time and in the same
amount as the gross income which the recipient is considered to have received
pursuant to an award. If no election is made, the Company will also be entitled
to a tax deduction for any dividends paid to the recipient during the period
that the shares awarded remain restricted and such dividends will be taxed as
compensation, rather than dividends, to the recipient. The holding period for
shares of stock awarded for purposes of characterizing gain or loss on the sale
of any shares as long or short-term commences at the time the employee is
considered to have received gross income pursuant to an

<PAGE>

award. An employee's tax basis for shares of stock acquired will be equal to the
amount included in his gross income, which, if no election is made, will be the
fair market value of the shares at the date the restrictions terminate.

THE AFFIRMATIVE VOTE OF A MAJORITY OF THE VOTES CAST BY THE HOLDERS OF COMMON
STOCK IS REQUIRED TO APPROVE THE ADOPTION OF THE PLAN. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR THE PROPOSAL TO INCREASE THE MAXIMUM NUMBER OF SHARES
WHICH MAY BE AWARDED UNDER THE PLAN.

WARREN RUDERMAN, WHO OWNS 51.3% OF THE COMMON STOCK, INTENDS TO VOTE FOR THE
PROPOSAL.

13
<PAGE>

RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS

Price Waterhouse LLP, independent accountants, has been selected by the Board of
Directors to examine and report on the financial statements of the Company for
the fiscal year ending December 31, 1996. A representative of that firm is
expected to be present at the Annual Meeting and will have an opportunity to
make a statement if he so desires. The representative is expected to be
available to respond to appropriate questions from shareholders.

OTHER MATTERS

At the time this Proxy Statement was mailed to shareholders, management was not
aware that any other matter will be presented for action at the Annual Meeting.
If other matters properly come before the Meeting, it is intended that the
shares represented by proxies will be voted with respect to those matters in
accordance with the best judgement of the persons voting them.

NOTICE REGARDING FILING OF SHAREOWNER PROPOSALS
AT 1997 ANNUAL MEETING

As a result of regulations issued by the Securities and Exchange Commission, all
shareowner proposals for the 1997 Annual Meeting must be received by the Company
by February 22, 1997.

By Order of the Board of Directors

Ronald Tassello, Secretary

Dated: May 20, 1996

- - --------------------------------------------------------------------------------

A copy of the Company's annual report for the fiscal year ended December 31,
1995, including consolidated financial statements, accompanies this Proxy
Statement. The annual report is not to be regarded as proxy soliciting material
or as a communication by means of which any solicitation is to be made.

14
<PAGE>

EXHIBIT A
INRAD, INC.

KEY EMPLOYEE COMPENSATION PROGRAM

A. Purposes. This Inrad, Inc. Key Employee Compensation Program ("Program")
is intended to secure for Inrad, Inc. (the "Corporation"), its direct and
indirect subsidiaries (the "Subsidiaries") and its shareowners, the benefits
arising from ownership of the Corporation's common stock, $.01 par value per
share ("Common Stock"), by those selected directors, officers and other key
employees of the Corporation and the Subsidiaries who are most responsible for
future growth. The Program is designed to help attract and retain superior
personnel for positions of substantial responsibility with the Corporation and
the Subsidiaries and to provide key employees with an additional incentive to
contribute to the success of the Corporation and the Subsidiaries.

B. Elements of the Program. In order to maintain flexibility in the award
of stock benefits, the Program is comprised of four parts. The first part is the
Incentive Stock Option Plan ("Incentive Plan"). The second part is the
Compensatory Stock Option Plan ("Compensatory Plan"). The third part is the
Stock Appreciation Rights Plan ("S.A.R. Plan"). The fourth part is the
Performance Plan ("Performance Plan"). Copies of the Incentive Plan,
Compensatory Plan, S.A.R. Plan and Performance Plan are attached hereto as Part
I, Part II, Part III and Part IV, respectively, and are collectively referred to
herein as the "Plans." The grant of an option, appreciation right or performance
share under one of the Plans shall not be construed to prohibit the grant of an
option, appreciation right or performance share under any of the other Plans.

C. Applicability of General Provisions. All Plans shall include the General
Provisions except that the specific provision of any Plan shall take precedence
over any General Provision which is inconsistent with the specific provision.

GENERAL PROVISIONS

Section 1. Administration. The Program shall be administered by a committee
appointed by the Board of Directors of the Corporation and composed solely of
members of the Board (at least two in number) who have not, during the twelve
months preceding their election to such committee, being granted any options or
performance shares under the Program or any equity securities pursuant to any
other plan of the Company or its affiliates. The committee, when acting to
administer the Program, is referred to as the "Program Administrators." Any
action of the Program Administrators shall be taken by majority vote or the
unanimous written consent of the Program Administrators. No Program
Administrator or member of the Board of Directors 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 thereunder.

Section 2. Authority of Program Administrators. Subject to the other
provisions of this Program, and with a view to effecting its purpose, the
Program Administrators shall have sole authority in their absolute discretion:
(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 employees of the Corporation and the Subsidiaries
to whom options, appreciation rights and performance shares shall be granted
under the Program; (e) to determine the time or times at which options,
appreciation rights and 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, appreciation right and performance shares, and any
other terms and conditions of options, 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 Administrators shall be binding and conclusive on all
participants in the Program and on their legal representatives, heirs and
beneficiaries.

Section 3. Maximum Number of Shares Subject to the Program. The maximum
aggregate number of shares of Common Stock available pursuant to the Plans,
subject to adjustment as provided in Section 6 of the General Provisions, shall
be 500,000 shares of Common Stock. All such shares may be issued under the
Incentive Plan or any other Plan which is part of the Program. If any of the
options or stock appreciation rights granted under the Program

<PAGE>

expire or terminate for any reason before they have been exercised in full, the
unpurchased shares subject to those expired or terminated options and/or stock
appreciation rights shall again be available for the purposes of the Program. If
the performance objectives associated with the grant of any performance share(s)
are not achieved within the specified performance 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 the purposes of the Program.

Section 4. Eligibility and Participation. Only regular full-time employees
of the Corporation and the Subsidiaries, including officers whether or not
directors of the Corporation or the Subsidiaries, shall be eligible for
selection by the Program Administrators to participate in any one or more of the
Plans. Directors who are not full-time employees of the Corporation or the
Subsidiaries shall not be eligible to participate in Plans I and IV but shall be
eligible to participate in Plans II and III. Warren Ruderman is not eligible to
participate in the Program. In no event may any Program Administrator be granted
an option, stock appreciation fight or performance share under the Program while
such person is serving as a Program Administrator.

Section 5. Effective Date and Term of Program. The Program shall become
effective upon its adoption by the Board of Directors of the Corporation and
subsequent approval of the Program by a majority of the total votes eligible to
be cast at a meeting of shareowners of the Corporation, which vote shall be
taken within 12 months of adoption of the Program by the Corporation's Board of
Directors, provided, however, that options, appreciation rights and performance
shares may be granted under the Program prior to obtaining shareowner approval
of the Program so long as such options or appreciation rights or performance
shares are contingent upon such shareowner approval being obtained and may not
be exercised prior to such approval. The Program shall continue in effect until
August 31, 2000 unless sooner terminated by the Board of Directors of the
Corporation.

Section 6. Adjustments. If the shares of Common Stock of the Corporation as
a whole are 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
appropriate and proportionate adjustment shall be made in the maximum number and
kind of shares as to which options, appreciation rights and performance shares
may be granted or have been granted under the Program. A corresponding
adjustment changing the number or kind of shares allocated to unexercised
options, appreciation rights, performance shares or portions thereof, which
shall have been granted prior to any such change, shall likewise be made. Any
such adjustment in outstanding options and appreciation rights shall be made
without change in the aggregate purchase price applicable to the unexercised
portion of the option or appreciation right but with a corresponding adjustment
in the price for each share or other unit of any security covered by the option
or appreciation right. In making any adjustment pursuant to this Section 6, any
fractional shares shall be disregarded.

Section 7. Termination and Amendment of Program. No options, appreciation
rights or performance shares shall be granted under the Program after the
termination of the Program. Subject to the limitation contained in Section 8 of
the General Provisions, the Program Administrators may at any time amend or
revise the terms of the Program, including the form and substance of the option,
appreciation right, and performance share agreements to be used hereunder;
provided that no amendment or revision shall, without approval of the
shareowners of the Corporation, (a) increase the maximum aggregate number of
shares that may be sold or distributed pursuant to options, appreciation rights
or performance shares granted under the Program, except as permitted under
Section 6 of the General Provisions; (b) change the minimum purchase price for
shares under Section 4 of Plan I; or (c) materially increase the cost of the
Program to the Corporation.

Section 8. Prior Rights and Obligations. No amendment, suspension or
termination of the Program shall, without the consent of the employee who has
received an option, appreciation right or performance share, alter or impair any
of that employee's fights or obligations under any option, appreciation right or
performance share granted under the Program prior to such amendment, suspension
or termination.

Section 9. Privileges of Stock Ownership. Notwithstanding the exercise of
any options 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 employee shall have any of the rights or privileges
of a shareowner of the Corporation in respect of any shares of stock issuable
upon the exercise of his or her option or achievement of his or her performance
goal until certificates representing the shares 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 this Program.

A-2
<PAGE>

Section 10. Compliance With Securities Laws. Neither Shares of Common Stock
nor any interests therein shall be issued pursuant to any Plan unless the
issuance and delivery of those shares or rights shall comply with all relevant
provisions of state and federal law including, without limitation, the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder, and shall be further subject to the approval of counsel for the
Corporation with respect to such compliance. The Program Administrators may also
require any person to whom Shares or interests therein have been granted to
furnish evidence satisfactory to the Corporation, including a written and signed
representation letter and consent to be bound by any transfer restriction
imposed by law, legend, condition or otherwise, that the shares or Interests are
being acquired without any present Intention to sell or distribute the shares or
interests in violation of any state or federal law, rule or regulation. Further,
each person receiving those shares or interests shall consent to the imposition
of a legend on any certificate evidencing those shares or interests restricting
their transferability as required by law or by this Section.

Section 11. Reservation of Shares of Common Stock. The Corporation, during
the term of this Program, 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.

Section 12. Tax Withholding. The exercise of any option, appreciation right
or performance share granted 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, appreciation fight 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.

Section 13. Employment. Nothing in the Program or in any option, stock
appreciation right, or performance share award shall confer upon any eligible
director, officer or employee any right to continued employment (by the
Corporation or the Subsidiaries) or limit in any way the right of the
Corporation or the Subsidiaries at any time to terminate or after the terms of
that employment. Each person who is also an employee, if requested by the
Program Administrators, must agree in writing as a condition of acquiring rights
under any Plan and as a condition of continued employment, that he or she will
remain in the employ of the Corporation or the Subsidiaries (or a corporation or
a parent or subsidiary of such corporation issuing or assuming such rights in a
transaction to which Section 424(a) of the Internal Revenue Code of 1986, as
amended ("Code") applies) following the date of the granting of those rights for
a period specified by the Program Administrators, which period shall in no event
exceed three years and that he or she will not compete with the Corporation
during the period of his or her employ and for a period thereafter (not to
exceed two years) to be determined by the Program Administrators.

Section 14. Rights Not Transferable. No rights granted pursuant to any Plan
or Plans may be sold, pledged, assigned or transferred in any manner otherwise
than by will or the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined in the Code or the rules thereunder. Except
as otherwise provided in the immediately preceding sentence, rights granted
pursuant to the Program may be exercised during the lifetime of the grantee of
those rights only by that grantee.

Section 15. Restrictions on Transferability of Stock. No Shares of Stock
issued upon exercise of options or pursuant to Plan IV may be transferred
without registration under applicable securities laws unless, in the opinion of
counsel for the Corporation, such registration is not then required. The Program
Administrators may require any such potential recipient of Stock to execute an
agreement giving the Corporation a right of first refusal to purchase shares of
Stock which the potential recipient desires to sell.

Section 16. Notice. Any notice to be given under any Plan shall be in
writing and may be hand delivered or sent by certified mall, return receipt
requested or by courier. If the notice is addressed to the Corporation, it shall
be sent to the attention of the President.

A-3
<PAGE>

PLAN I

INRAD, INC.

INCENTIVE STOCK OPTION PLAN

Section 1. Purpose. The purpose of this Inrad, Inc. incentive Stock Option
Plan ("Incentive Plan") is to promote the growth and general prosperity of the
Corporation and the Subsidiaries by permitting the Corporation to grant options
to purchase shares of its Common Stock. The Incentive Plan is designed to help
attract and retain superior personnel for positions of responsibility with the
Corporation and the Subsidiaries, and to provide key employees with an
additional incentive to contribute to the success of the Corporation and the
Subsidiaries. The Corporation intends that options granted pursuant to the
provisions of the Incentive Plan will qualify and will be identified as
"incentive stock options" within the meaning of Section 422 of the Code. This
Incentive Plan is Part I of the Corporation's Employee Compensation Program
("Program").

Section 2. Option Terms and Conditions. The terms and conditions of options
granted under the Incentive Plan may differ from one another as the Program
Administrators shall, in their discretion, determine, as long as all options
granted under the Incentive Plan satisfy the requirements of the Incentive Plan.

Section 3. Duration of Options. Each option and all rights thereunder
granted pursuant to the terms of the Incentive Plan shall expire on the date
determined by the Program Administrators, but in no event shall any option
granted under the Incentive Plan expire later than ten years from the date on
which the option is granted. Notwithstanding the foregoing, any employee who
owns more than 10% of the combined voting power of all classes of stock of the
Corporation, or of the Subsidiaries, must exercise any options granted under
this Incentive Plan within five years from the date of grant. In addition, each
option shall be subject to early termination as provided in the Incentive Plan.

Section 4. Purchase Price. The purchase price for shares acquired pursuant
to the exercise, in whole or in part, of any option shall not be less than the
fair market value of the shares at the time of the grant of the option; except
that for any employee who owns more than 10% of the combined voting power of all
classes of stock of the Corporation, or of the Subsidiaries, the purchase price
shall not be less than 110% of fair market value. If, on the grant date, the
Common Stock is listed on a stock exchange or quoted on the automated quotation
system of NASDAQ, fair market value shall be the average of the high and low
prices of the Common Stock on such date. If no such prices are available or the
Common Stock is not so listed or quoted on such date, then fair market value
shall be determined by the Program Administrators on the basis of such factors
as they deem appropriate. It is understood, however, that in such instance, in
the absence of circumstances which, considered as part of a good faith
determination, would require a different conclusion, fair market value shall
equal the book value of one share of Common Stock as shown on the most recent
financial statement of the Corporation.

Section 5. Maximum Amount of Options in Any Calendar Year. The aggregate
fair market value (determined as of the time the option is granted) of the
Common Stock with respect to which incentive stock options, as defined in Code
Section 422(b), are exercisable for the first time by any employee during any
calendar year (under the terms of this plan and all such plans of the
Corporation and the Subsidiaries) shall not exceed $100,000.

Section 6. Exercise of Options. Unless otherwise provided by the Program
Administrators at the time of grant or unless the installment provisions set
forth herein are subsequently accelerated pursuant to Section 6 of this
Incentive Plan or otherwise by the Program Administrators with respect to any
one or more previously granted options, options may only be exercised to the
following extent during the following periods:

Cumulative Percentage
of Shares Covered
by Option Which May
Period be Purchased

First 12 months after grant ...............0
First 24 months after grant ..............25%
First 36 months after grant ..............50% *
First 48 months after grant ..............75% *
Beyond 48 months after grant ............100% *
- - --------------
* Less amounts exercised in prior periods.

A-4
<PAGE>

No option may be exercised for a fraction of a share of Common Stock. The
purchase price of any shares purchased shall be paid in full in cash or by
certified or cashier's check payable to the order of the Corporation or by
shares of Common Stock or a cash equivalent, if permitted by the Program
Administrators, or, if permitted by the Program Administrators, by a combination
of cash, check, shares of Common Stock and a cash equivalent, at the time of
exercise of the option. If any portion of the purchase price is paid in shares
of Common Stock, those shares shall be tendered at their then fair market value
as determined by the Program Administrators in accordance with Section 4 of this
Incentive Plan.

Section 7. Acceleration of Right of Exercise of Installments.
Notwithstanding the first sentence of Section 6 of this Incentive Plan, in the
event that the Corporation or its shareowners enter into an agreement to dispose
of all or substantially all of the assets or stock of the Corporation by means
of a sale, merger or other reorganization, liquidation or otherwise ("Sale
Agreement"), any option granted pursuant to the terms of the Incentive Plan
shall become immediately exercisable with respect to the full number of shares
subject to that option during the period commencing as of the date of the
agreement to dispose of all or substantially all of the assets or stock of the
Corporation and ending when the disposition of assets or stock contemplated by
that agreement is consummated (the "Closing Date") or the option is otherwise
terminated in accordance with its provisions or the provisions of this Incentive
Plan, whichever occurs first; provided, however, that no option shall be
immediately exercisable under this Section 7 on account of any agreement to
dispose of all or substantially all of the assets or stock of the Corporation by
means of a sale, merger or other reorganization, liquidation or otherwise where
the shareowners of the Corporation immediately before the consummation of the
transaction will own at least 50% of the total combined voting power of all
classes of stock entitled to vote of the surviving entity, whether the
Corporation or some other entity, immediately after the consummation of the
transaction. Unless otherwise provided by the Board of Directors of the
Corporation at the time any such Sale Agreement is executed, all options granted
pursuant to this Incentive Plan which have not been exercised on or before the
Closing Date shall terminate on the Closing Date. In the event the transaction
contemplated by a Sales Agreement is not consummated, but rather is terminated,
cancelled or expires, the options granted pursuant to the Incentive Plan shall
thereafter be treated as if the Sales Agreement had never been entered into.

Section 8. Written Notice Required. Any option granted pursuant to the
terms of the Incentive Plan shall be exercised when written notice of that
exercise has been given to the Corporation at its principal office by the person
entitled to exercise the option and full payment for the shares with respect to
which the option is exercised has been received by the Corporation.

Section 9. Option Rights Upon Termination of Employment. If an Optionee
ceases to be employed by the Corporation and the Subsidiaries (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, his or her option shall immediately terminate;
provided, however, that the Program Administrators may, in their discretion,
allow such option to be exercised (to the extent exercisable on the date of
termination of employment) at any time within three months after the date of
termination of employment, unless the option grant provides for earlier
termination.

Section 10. Option Rights Upon Disability. If an Optionee becomes disabled
within the meaning of Section 22(e)(3) of the Code while employed by the
Corporation or the Subsidiaries (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), the option may be exercised, to the extent
exercisable on the date of termination of employment, at any time within one
year after the date of termination of employment due to disability, unless the
option grant provides for earlier termination.

Section 11. Option Rights Upon Death of Optionee. If an Optionee dies while
employed by the Corporation or the Subsidiaries (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), his or her option
shall expire one year after the date of death unless by its terms it expires
sooner. During that one year or shorter period, the option may be exercised, to
the extent that it remains unexercised on the date of death, by the person or
persons to whom the Optionee's rights under the option shall pass by will or by
the laws of descent and distribution, but only to the extent that the Optionee
is entitled to exercise the option at the date of death.

A-5
<PAGE>

PLAN II

INRAD, INC.

COMPENSATORY STOCK OPTION PLAN

Section 1. Purpose. The purpose of this Inrad, Inc. Compensatory Stock
Option Plan ("Compensatory Plan") is to permit the Corporation to grant options
to purchase shares of its Common Stock to selected key employees and outside
directors of the Corporation and the Subsidiaries. The Compensatory Plan is
designed to help attract and retain superior personnel for positions of
substantial responsibility with the Corporation and the Subsidiaries and to
provide key employees with an additional incentive to contribute to the success
of the Corporation and the Subsidiaries. Any option granted pursuant to this
Compensatory Plan shall be clearly and specifically designated as not being an
incentive stock option, as defined in Section 422(b) of the Code. This
Compensatory Plan is Part II of the Program.

Section 2. Option Terms and Conditions. The terms and conditions of options
granted under this Compensatory Plan may differ from one another as the Program
Administrators shall, in their discretion, determine as long as all options
granted under this Compensatory Plan satisfy the requirements of this
Compensatory Plan.

Section 3. Duration of Options. Each option and all rights thereunder
granted pursuant to the terms of this Compensatory Plan shall expire on the date
determined by the Program Administrators, but in no event shall any option
granted under the Compensatory Plan expire later than ten years from the date on
which the option is granted. In addition, each option shall be subject to early
termination as provided in this Compensatory Plan.

Section 4. Purchase Price. The purchase price for shares acquired pursuant
to the exercise, in whole or in part, of any option shall be determined by the
Program Administrators.

Section 5. Exercise of Options. Unless otherwise provided by the Program
Administrators at the time of grant or unless the installment provisions set
forth herein are subsequently accelerated pursuant to Section 6 of this
Compensatory Plan or otherwise by the Program Administrators with respect to any
one or more previously granted options, options may only be exercised to the
following extent during the following periods:

Cumulative Percentage
of Shares Covered
by Option Which May
Period be Purchased
- - ----- ----------------
First 12 months after grant .............0
First 24 months after grant ............25%
First 36 months after grant ............50% *
First 48 months after grant ............75% *
Beyond 48 months after grant ..........100% *
- - --------------
* Less amounts exercised in prior periods.

Section 6. Acceleration of Right of Exercise of Installments.
Notwithstanding the first sentence of Section 5 of this Compensatory Plan, in
the event that the Corporation or its shareowners enter into an agreement to
dispose of all or substantially all of the assets or stock of the Corporation by
means of a sale, merger, or other reorganization, liquidation, or otherwise
("Sale Agreement"), any option granted pursuant to the terms of this
Compensatory Plan shall become immediately exercisable with respect to the full
number of shares subject to that option during the period commencing as of the
date of the agreement to dispose of all or substantially all of the assets or
stock of the Corporation and ending when the disposition of assets or stock
contemplated by that agreement is consummated (the "Closing Date"), or the
option is otherwise terminated in accordance with its provisions or the
provisions of this Compensatory Plan, whichever

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occurs first; provided, however, that no option shall be immediately exercisable
under this Section 6 on account of any agreement to dispose of all or
substantially all of the assets or stock of the Corporation by means of a sale,
merger or other reorganization, liquidation or otherwise where the shareowners
of the Corporation immediately before the consummation of the transaction will
own at least 50% of the total combined voting power of all classes of stock
entitled to vote of the surviving entity, whether the Corporation or some other
entity, immediately after the consummation of the transaction. Unless otherwise
provided by the Board of Directors of the Corporation at the time any such Sale
Agreement is executed, all options granted pursuant to this Compensatory Plan
which have not been exercised on or before the Closing Date shall terminate on
the Closing Date. In the event the transaction contemplated by a Sales Agreement
is not consummated, but rather is terminated, cancelled or expires, the options
granted pursuant to this Compensatory Plan shall thereafter be treated as if the
Sale Agreement had never been entered into.

Section 7. Written Notice Required. Any option granted pursuant to the
terms of this Compensatory Plan shall be exercised when written notice of that
exercise has been given to the Corporation at its principal office by the
persons entitled to exercise the option and full payment for the shares with
respect to which the option is exercised has been received by the Corporation.

Section 8. Option Rights Upon Termination Of Employment. If any Optionee
under this Compensatory Plan ceases to be employed by the Corporation and the
Subsidiaries (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 disability or death, his or her
option shall immediately terminate, provided, however, that the Program
Administrators may, in their discretion, allow such option to be exercised (to
the extent exercisable on the date of termination) at any time within three
months after the date of termination of employment, unless either the option or
this Compensatory Plan otherwise provides for earlier termination.

Section 9. Option Rights Upon Disability. If an Optionee becomes disabled
within the meaning of Section 22(e)(3) of the Code while employed by the
Corporation or the Subsidiaries (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), the option may be exercised, to the extent
exercisable on the date of termination of employment, at any time within one
year after the date of termination of employment due to disability, unless
either the option or this Compensatory Plan otherwise provide for earlier
termination.

Section 10. Option Rights Upon Death of 0ptionee. If an Optionee dies while
employed by the Corporation or the Subsidiaries (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), his or her option
shall expire one year after the date of death unless by its terms or the terms
of this Compensatory Plan it expires sooner. During this one year or shorter
period, the option may be exercised, to the extent that it remains unexercised
on the date of death, by the person or persons to whom the Optionee's rights
under the option shall pass by will or by the laws of descent and distribution,
but only to the extent that the Optionee is entitled to exercise the option at
the date of death.

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PLAN III

INRAD, INC.

STOCK APPRECIATION RIGHTS PLAN

Section 1. Purpose. The purpose of this Inrad, Inc. Stock Appreciation
Rights Plan ("S.A.R. Plan") is to permit the Corporation to grant stock
appreciation rights for its Common Stock to key employees and outside directors
of the Corporation and the Subsidiaries. The S.A.R. Plan is designed to help
attract and retain superior personnel for positions of substantial
responsibility with the Corporation and the Subsidiaries and to provide key
employees with an additional incentive to contribute to the success of the
Corporation and the Subsidiaries. This S.A.R. Plan is Part III of the
Corporation's Key Employee Compensation Program ("Program").

Section 2. Terms and Conditions. The Program Administrators may, but shall
not be obligated to, authorize the Corporation to accept on such terms and
conditions as they deem appropriate in each case, the surrender by the recipient
of a stock option granted under the Incentive Plan or the Compensatory Plan of
the right to exercise that option, or portion thereof, in consideration for the
payment by the Corporation of an amount equal to the excess of the fair market
value (determined as provided in Section 4 of the Incentive Plan) of the shares
of Common Stock subject to such option, or portion thereof, surrendered, over
the option price of such shares which shall equal the fair market value of those
shares on the date such S.A.R. is granted. Such payment, at the discretion of
the Program Administrators, may be made in shares of Common Stock valued at the
then fair market value thereof (determined as provided in Section 4 of the
Incentive Plan) or in cash or cash equivalents, or partly in cash or cash
equivalents, and partly in shares of Common Stock. The Program Administrators
may, but shall not be obligated to, authorize naked stock appreciation rights
(i.e., rights not granted in tandem with options) in accordance with Section 4
hereof.

Section 3. Tandem Stock Option-Stock
Appreciation Right. Whenever an option authorized pursuant to the Incentive Plan
or the Compensatory Plan and a S.A.R. authorized hereunder are granted together
and the exercise of one affects the right to exercise the other, the following
requirements shall apply:

(a) The S.A.R. will expire no later than the expiration of the underlying
stock option;

(b) the S.A.R. shall be for no more than the difference between the
exercise price of the underlying option and the fair market value of
the stock subject to the underlying option (determined in accordance
with Section 4 of the Incentive Plan) as of the date of the most
recently prepared financial statement of the Corporation prior to the
date that the S.A.R. is exercised;

(c) the S.A.R. shall be transferable only when the underlying stock option
is transferable and under the same conditions; and

(d) the S.A.R. may be exercised only when the underlying stock option is
eligible to be exercised.

(e) Upon the exercise of the S.A.R., the number of shares of Common Stock
available under the stock option to which it relates shall decrease by
a number equal to the number of shares for which the right was
exercised. Upon the exercise of a stock option, any S.A.R. related to
shares of Stock issued upon exercise of that option shall terminate.

Section 4. Naked Stock Appreciation Right. The Program Administrators may
provide that any stock appreciation right granted pursuant to this Section 7
shall be a naked stock appreciation right ("Naked S.A.R.s"), in which event:

(a) Participants shall be awarded Naked S.A.R.'s for a period of up to
five years or such shorter period which shall not be less than six months,
as may be determined by the Program Administrators. Such designated period
may vary as among participants and as among awards to a participant. At the
end of such designated period with respect to a participant, such
participant shall receive an amount equal to the appreciation in fair
market value of his or her Naked S.A.R.'s as determined in paragraph "b" of
this Section 4 (the "Rights Award"). The Rights Award shall be payable in
cash or in shares of Common Stock, or any combination of the two as may be
determined by the Program Administrators. A participant may receive as many
awards of Naked S.A.R.'s at various times as may be determined to be
appropriate by the Program Administrators.

(b) For purposes of determining the amount of a Rights Award, the
Program Administrators shall determine the fair market value of Naked
S.A.R.'s held by such participant at the end of the designated period for
which such Naked S.A.R.'s have been held ("Valuation Period") and subtract
therefrom the fair market value of the same Naked

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<PAGE>

S.A.R.'s on the date awarded to such participant. The fair market value of
one Naked S.A.R. on a valuation date for purposes of the S.A.R. Plan shall
be determined by the Program Administrators in the same manner as the fair
market value of one share of Common Stock is to be determined pursuant to
Section 4 of the Incentive Plan. The fair market value of Naked S.A.R.'s
held by a participant on a valuation date shall be determined by
multiplying the number of Naked S.A.R.'s held by such participant by the
fair market value of one Naked S.A.R. on such valuation date. The
measurement of appreciation shall be made separately with respect to each
separate award of Naked S.A.R.'s.

(c) The Naked S.A.R.'s shall be used solely as a device for the
measurement and determination of the amount to be paid to participants as
provided in this S.A.R. Plan. The Naked S.A.R.'s shall not constitute or be
treated as property or as a trust fund of any kind. All amounts at any time
attributable to the Naked S.A.R.'s shall be and remain the sole property of
the Corporation and the participants' rights hereunder are limited to the
right to receive cash and shares of Common Stock as herein provided.

(d) Notwithstanding the first sentence of paragraph (a) of this
Section 4, in the event that the Corporation or its shareowners enter into
an agreement to dispose of all or substantially all of the assets or stock
of the Corporation by means of a sale, merger or other reorganization,
liquidation or otherwise ("Sale Agreement"), any Naked S.A.R. granted
pursuant to paragraph (a) of this Section 4 shall be deemed to be exercised
on the date when the disposition of assets or stock contemplated by that
agreement is consummated (the "Closing Date") or on the date that the Naked
S.A.R. is otherwise terminated in accordance with its provisions or the
provisions of this S.A.R. Plan, whichever occurs first; provided, however,
that no Naked S.A.R. shall be deemed exercised under this paragraph (d) on
account of any agreement to dispose of all or substantially all of the
assets or stock of the Corporation by means of a sale, merger or other
reorganization, liquidation or otherwise where the shareowners of the
Corporation immediately before the consummation of the transaction will own
at least 50% of the total combined voting power of all classes of stock
entitled to vote of the surviving entity, whether the Corporation or some
other entity, immediately after the consummation of the transaction. In the
event the transaction contemplated by the Sale Agreement is not
consummated, but rather is terminated, cancelled or expires, the Naked
S.A.R.'s granted pursuant to paragraph "a" of this Section 4 shall
thereafter be treated as if the Sale Agreement had never been entered into.

Section 5. Termination of Employment. If a person who has received rights
under this S.A.R. Plan ("Grantee") should cease to be employed by the
Corporation or the Subsidiaries, or a corporation assuming the Corporation's
obligations under this S.A.R. Plan ("Successor") for any reason other than death
or disability, his or her S.A.R.'s and Naked S.A.R.'s shall immediately
terminate.

Section 6. Rights Upon Disability. If a Grantee becomes disabled within the
meaning of Section 22(e)(3) of the Code while employed by the Corporation or the
Subsidiaries or a Successor, his or her S.A.R.'s and Naked S.A.R.'s shall be
deemed exercised on the date of termination of employment.

Section 7. Rights Upon Death. If a Grantee dies while employed by, or while
an outside director of, the Corporation or the Subsidiaries or a Successor, his
or her S.A.R.'s and Naked S.A.R.'s shall be deemed exercised on the date of
death.

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<PAGE>

PLAN IV

INRAD, INC.
PERFORMANCE SHARE PLAN

Section 1. Purpose. The purpose of this Inrad, Inc. Performance Share Plan
("Performance Plan") is to promote the growth and general prosperity of the
Corporation and the Subsidiaries by permitting the Corporation to grant
Performance Shares to help attract and retain superior personnel for positions
of substantial responsibility with the Corporation and the Subsidiaries and to
provide key employees with an additional incentive to contribute to the success
of the Corporation and the Subsidiaries. This Performance Plan is Part IV of the
Corporation's Key Employee Compensation Program ("Program").

Section 2. Terms
and Conditions. The Program Administrators may grant performance shares to any
employee eligible under Section 4 of the General Provisions. Each performance
share grant shall confer upon the recipient thereof the right to receive a
specified number of shares of Common Stock of the Corporation contingent upon
the achievement of specified performance objectives within a specified period
("Performance Shares"). The Program Administrators shall specify the performance
objectives and the period of duration of the performance share grant at the time
that such Performance Share is granted. Any Performance Shares granted under
this Plan shall constitute an unfunded promise to make future payments to the
affected employee upon the completion of specified conditions. The grant of an
opportunity to receive performance shares shall not entitle the affected
employee to any rights to specific funds or assets of the Corporation or the
Subsidiaries.

Section 3. Cash in Lieu of Stock. In lieu of some or all of the Performance
Shares earned by achievement of the specified performance objectives within the
specified period, the Program Administrators may distribute cash in an amount
equal to the fair market value of the Common Stock as of the date of the most
recently prepared financial statement of the Corporation available at the time
that the employee achieves the performance objective within the specified
period. Such fair market value shall be determined in accordance with Section 4
of the Incentive Plan, on the business day next preceding the date of payment.

Section 4. Performance Objective Period. The duration of the period
within which to achieve the performance objectives is to be determined by the
Program Administrators. The period may not be less than one year nor more than
five years from the date that the performance share is granted. The Program
Administrators shall determine whether performance objectives have been met with
respect to each applicable performance objective period. Such determination
shall be made promptly after the end of each applicable performance objective
period, but in no event later than 2 1/2 months after the end of each applicable
performance objective period. Neither Common Stock nor cash shall be delivered
to any participant pursuant to the Performance Plan until such determination is
made.

Section 5. Performance Share Rights Upon Termination of Employment for Any
Reason. If a participating employee dies or otherwise terminates service with
the Corporation or the Subsidiaries or a Successor for any reason, with or
without cause, which shall include death and disability, prior to the expiration
of the performance objective period, any Performance Shares granted to him
during that period shall terminate automatically.

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