<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-12
INRAD, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| 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 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
(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 Statement 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 AUGUST 14, 2000
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of INRAD, Inc.
(the "Company") will be held at the offices of Lowenstein Sandler P. C., 65
Livingston Avenue, Roseland, New Jersey on Monday, August 14, 2000 at 2:00 p.m.
for the following purposes:
1. To elect five directors to serve until the next Annual Meeting
of Shareholders.
2. To amend the Certificate of Incorporation of the Company to
increase the total number of Common Shares authorized.
3. To approve the INRAD, Inc. 2000 Equity Compensation Program.
4. To amend the INRAD, Inc. Key Employee Compensation Program
5. 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 June 30, 2000, 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
William S. Miraglia, Secretary
Northvale, New Jersey
July 24, 2000
<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 PC, 65 Livingston Avenue, Roseland,
New Jersey on Monday, August 14, 2000 at 2:00 p.m. This Proxy Statement and the
enclosed form of proxy are first being sent to shareholders on or about July 15,
2000
SHAREHOLDERS ENTITLED TO VOTE
Only shareholders of record at the close of business on June 30, 2000, 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 4,776,578 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, the election of directors will require the affirmative vote of a
plurality of the shares of Common Stock represented and entitled to vote at the
Annual Meeting. The approval of the amendment of the Certificate of
Incorporation, the 2000 Equity Compensation Program and the amendment of the
INRAD, Inc. Key employee compensation Program will require approval of a
majority of votes cast. 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, and in favor of the amendment of the Certificate of
Incorporation and the approval of the 2000 Equity Compensation Program and the
amendment of the INARD, Inc. Key Employee Compensation Program as 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 June 30, 2000. The 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.
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<TABLE>
<CAPTION>
Percent of
Name and Address Number of shares Common Stock
--------------------------------------------------------------------------------
<S> <C> <C>
Warren Ruderman 1,728,721 36.2
C/o INRAD, Inc.
181 Legrand Avenue
Northvale, NJ 07647
Clarex, Ltd. 2,582,214 (1) 48.9
C/o Bank of Nova Scotia
Trust Company Bahamas Ltd.
P.O. Box N1355
Nassau, Bahamas
CNA Holdings, Inc. 300,000 6.3
86 Morris Avenue
Summit, NJ 07901
Frank Wiedeman 57,750 (2) 1.2
C/o INRAD, Inc.
Thomas Lenagh 31,250 (3) 0.6
C/o INRAD, Inc.
Daniel Lehrfeld -0- 0.0
C/o INRAD, Inc.
John Rich -0- 0.0
C/o INRAD, Inc.
Directors and Executive 1,873,946 (4) 38.1
Officers as a group
(9 persons)
</TABLE>
(1) Including 500,000 shares issuable upon conversion of 10% convertible
preferred stock within 60 days.
(2) Including 57,750 shares subject to options or warrants exercisable
within 60 days.
(3) Including 31,250 shares subject to options or warrants exercisable
within 60 days.
(4) Including 143,625 shares subject to options or warrants exercisable
within 60 days.
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<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 of 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.
POSITION WITH COMPANY AND OTHER BUSINESS
<TABLE>
<CAPTION>
NAME AND AGE EXPERIENCE DURING PAST FIVE YEARS DIRECTOR SINCE
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Thomas Lenagh (74) Chairman of the Board of Directors (1999 - Present) 1998
Management Consultant (1990-Present)
Daniel Lehrfeld (56) President and Chief Executive Officer (1999-Present) 1999
Vice President, General Manager Electro-Optics Center
A division of Raytheon (formerly GM/Hughes and Magnavox
Electronics ( 1990-1999)
Warren Ruderman (80) Founder and former Chief Executive Officer (1973-2000) 1973
Frank Wiedeman (84) Executive Director (1980 - Present) 1998
American Capital Management, Inc.
John Rich (62) Vice President, C&D Technologies, Inc. (1999-Present) 2000
President, Hughes Danbury Optical Systems (1990-1999)
</TABLE>
During 1999, four meetings of the Board of Directors were held. Each
non-employee director is paid $500 for each Board Meeting he attends, and $250
for each conference call meeting he participates in. During 1999, each director
attended or participated in all the meetings held.
The Board has an Audit Committee whose members presently are John Rich, Tom
Lenagh and Frank Wiedeman. 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.
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.
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The directors serve one-year terms. Pursuant to agreements between the Company
and CNA Holdings, Inc. ("CNA"), CNA 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, CNA 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 or debentures are outstanding. Clarex has selected Messrs. Wiedeman and
Lenagh as representatives.
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<PAGE>
PROPOSAL TWO
INCREASE IN AUTHORIZED SHARES
The Board of Directors has recommended that the stockholders approve an
amendment to the Company's Certificate of Incorporation, as permitted by the New
Jersey Business Corporation Act, to increase the number of authorized shares of
Common Stock from 6,000,000 shares to 15,000,000 shares.
The Company is currently authorized by its Articles of Incorporation to
issue 6,000,000 shares of Common Stock, par value $0.01 per share. As of June
30, 2000, 4,776,578 shares of Common Stock were issued and outstanding. In
addition, the Company has reserved shares of Common Stock for issuance as
follows: 500,000 shares for issuance upon conversion of the Company's 10%
Convertible Preferred Stock, [plus an indeterminate number of shares for
issuance upon conversion of rights to receive unpaid dividends on such shares],
143,092 shares for issuance upon exercise of stock purchase warrants, and
500,000 shares for issuance upon exercise of authorized stock options under the
Company's stock option plan. Accordingly, the Company has issued or reserved
5,919,670 shares (i.e., all but 80,300 of its total authorized shares).
The Company has no plans, understandings or negotiations underway at
this time for the issuance of any material amounts of unissued and unreserved
shares except for the 2000 Equity Compensation Program described in proposal
three. If proposal two is not approved by the shareholders the Company will not
have sufficient authorized shares put into reserve of 1,500,000 for issuance
under the 2000 Equity compensation Program. The Board of Directors believes that
it is desirable to increase the number of shares of Common Stock to 15,000,000
both to provide for the 2000 Equity Compensation Program and other requirements.
The purpose of such increase is to place the Company in a position where it will
continue to have a sufficient number of shares of authorized and unissued Common
Stock, which can be issued for or in connection with such corporate purposes as,
may, from time to time, be considered advisable by the Board of Directors.
Having such shares available for issuance in the future will give the Company
greater flexibility and will allow such shares to be issued as determined by the
Board of Directors of the Company without the expense and delay of a special
shareholder's meeting to approve such additional authorized capital stock. Such
corporate purposes could include, with limitation: (a) issuance in connection
with any desirable acquisitions which may be presented to the Company, (b) the
payment of stock dividends or issuance pursuant to stock splits, (c) the
issuance of Common Stock upon exercise of options granted under the Company's
stock options plan or in connection with other employee benefit plans, (d) the
issuance of Common Stock upon the conversion of any preferred stock, the
exercise of warrants or the conversion of other securities convertible into
Common Stock which may be outstanding from time to time, and (e) issuance in
connection with an offering to raise capital for the Company.
The additional shares of Common Stock, together with other authorized
stock and unissued shares, generally would be available for issuance without any
requirement for further stockholder approval, unless stockholder action is
required by applicable law, the Company's governing documents, or any stock
exchange on which the Company's securities may then be listed.
Although the Board of Directors will authorize the issuance of
additional shares of Common Stock only when it considers doing so to be in the
best interests of stockholders, the issuance of additional shares of Common
Stock may, among other things, have a dilutive effect on the earnings and equity
per share of Common Stock and on the voting rights
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<PAGE>
of holders of shares of Common Stock. The increase in the authorized number of
shares of Common Stock also could be viewed as having anti-takeover effects.
While the Board of Directors has no current plans to do so, shares of Common
Stock could be issued in various transactions that would make a change in
control of the Company more difficult or costly and, therefore, less likely. For
example, shares of Common Stock could be privately sold to purchasers favorable
to the Board of Directors in opposing a change in control or to dilute the stock
ownership of a person seeking to obtain control. The Company is not aware of any
effort to accumulate shares of Common Stock or obtain control of the Company by
a tender offer, proxy contest, or otherwise, and the Company has no present
intention to use the increased shares of authorized Common Stock for
anti-takeover purposes.
Holders of Common Stock do not have preemptive rights to subscribe to
additional securities that may be issued by the Company, which means that
current stockholders do not have a right to purchase any new issue of capital
stock of the Company in order to maintain their proportionate ownership
interest. However, stockholders wishing to maintain their interests may be able
to do so through normal market purchases.
The affirmative vote of a majority of the votes cast by the holders of
shares entitled to vote thereon is required to approve the proposed amendment.
If the stockholders do not approve the proposed amendment, the number of
authorized shares of Common Stock will remain 6,000,000 and the company will not
issue options under the 2000 Equity Compensation Program, even if approved by
the Shareholders. Proxies will be voted in accordance with the specifications
marked thereon, and, if no specification is made, will be voted "FOR" the
increase in the number of authorized shares of Common Stock.
The Board of Directors recommends that the shareholders vote "FOR" the
proposal to increase the number of authorized shares of Common Stock.
7
<PAGE>
PROPOSAL THREE
ADOPTION OF THE INRAD, INC.
2000 EQUITY COMPENSATION PROGRAM
The Board of Directors of the Company (the "Board") adopted the INRAD,
Inc. 2000 Equity Compensation Program (the "Program"), subject to shareholder
approval. The Company currently maintains the 1991 Key Employee Compensation
Program (the "1991 Program"), and it has reserved 500,000 shares of the
Company's Common Stock for issuance under the 1991 Program. As of June 30, 2000,
74,500 shares remained available for issuance under the 1991 Program. Approval
of the Program is intended to ensure that the Company can continue to provide
stock options at levels determined appropriate by the Board. The following is a
brief description of the material features of the Program. Such description is
qualified in its entirety by reference to the Program, a copy of which is set
forth as Exhibit A to this Proxy Statement.
PURPOSE
The purpose of the Program is to help attract and retain superior
directors, officers, key employees and consultants of the Company and its
subsidiaries and to encourage them to devote their abilities and industry to the
success of the Company.
SHARES AND INCENTIVES AVAILABLE UNDER THE PROGRAM
The Program provides for grants of options, stock appreciation rights,
and performance shares. An aggregate of 1,500,000 shares of Common Stock are
authorized for issuance under the Program, which amount will be proportionately
adjusted in the event of certain changes in the Company's capitalization, a
merger, or a similar transaction. 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. Such shares may be
authorized and unissued shares or treasury shares. As of July 5, 2000, the
closing sale price per share of the Common Stock on the OTC Bulletin Board was
$3.50.
ELIGIBILITY
All directors, officers, employees and consultants of the Company and
its subsidiaries are eligible to receive awards under the Program. The Company
estimates that as of June 30, 2000, there were approximately 72 individuals
eligible to participate in the Program.
8
<PAGE>
DETERMINATION OF ELIGIBILITY; ADMINISTRATION OF THE PROGRAM
The Program will be administered by the Board or by a committee
appointed by the Board (the "Committee"), which 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"), shall consist solely of "Outside Directors" (as
defined). When acting to administer the Program, the Board or the Committee is
referred to as the "Program Administrator." For purposes of the Program, the
term "Outside Director" shall mean a director who (a) is not a current employee
of the Company or its subsidiaries; (b) is not a former employee of the Company
or its 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 Company or its subsidiaries; and (d)
does not receive remuneration (which shall be deemed to include any payment in
exchange for goods or services) from the Company or its 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.
The Program Administrator has full discretion and authority to: (a)
interpret the Program; (b) define its terms; (c) prescribe, amend and rescind
rules and regulations relating to the Program; (d) select eligible individuals
to receive options, stock appreciation rights, and performance shares under the
Program; (e) determine when options, stock appreciation rights, or performance
shares shall be granted under the Program; (f) determine the type, number, and
terms and conditions of awards to be granted and the number of shares of stock
to which awards will relate, and any other terms and conditions of options,
stock appreciation rights, and performance shares; and (g) make all other
determinations that may be necessary or advisable for the administration of the
Program.
Any action of the Program Administrator is final, conclusive and
binding on all parties in the Program and on their legal representatives, heirs
and beneficiaries. The Program provides that members of the Board or the
Committee acting as the Program Administrator will not be liable for any act or
determination taken or made in good faith in their capacities as such members
and will be fully indemnified by the Company with respect to such acts and
determinations.
TYPES OF AWARDS
The Program is comprised of four parts: (i) the Incentive Stock Option
Plan ("Incentive Plan"), (ii) the Supplemental Stock Option Plan ("Supplemental
Plan"), (iii) the Stock Appreciation Rights Plan ("SAR Plan"), and (iv) the
Performance Share Plan.
INCENTIVE PLAN. The Company intends that options granted pursuant to
the provisions of the Incentive Plan will qualify and will be identified as
"incentive stock options" ("ISOs") within the meaning of Section 422 of the
Code. The Program Administrator may grant ISOs to purchase Common Stock to any
employee of the Company or its subsidiaries. These options shall expire on the
date determined by the Program Administrator, but they shall not expire later
than 10 years from the date the options are granted. Any ISO granted to any
person who owns more than 10% of the combined voting power of all classes of
stock of the Company or any of its subsidiaries shall expire no later than 5
years from the date it was granted.
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The exercise price of ISOs may not be less than the fair market value
of the Company's Common Stock on the date of grant. However, the exercise price
of an ISO granted to a 10% or more stockholder may not be less than 110% of the
fair market value of the Company's Common Stock on the date of grant. The
aggregate fair market value, determined at the time of grant, of the shares of
Common Stock with respect to which ISOs are exercisable for the first time by an
optionee during any calendar year may not exceed $100,000.
SUPPLEMENTAL PLAN. Options granted under this Supplemental Plan shall
not be ISOs as defined in Section 422 of the Code. The Program Administrator may
grant supplemental stock options to eligible participants in the Program. These
options shall expire on the date determined by the Program Administrator, but
they shall not expire later than 10 years from the date the options are granted.
The exercise price of supplemental stock options shall be determined by the
Program Administrator at the time of grant.
SAR PLAN. The Program Administrator may grant stock appreciation rights
("SARs") to eligible participants in the Program. These SARs may be granted
either together with supplemental stock options or ISOs ("Tandem Options") or as
naked stock appreciation rights ("Naked Rights"). Tandem Options entitle the
holder to receive from the Company an amount equal to the fair market value of
the shares of Common Stock which the recipient would have been entitled to
purchase on that date upon the surrender of the unexpired option, less the
amount the recipient would have been required to pay to purchase the shares upon
the exercise of the option. Naked Rights 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. Payments to
recipients who exercise SARs may be made, at the discretion of the Program
Administrator, in cash by bank check, in shares of Common Stock with a fair
market value equal to the amount of payment, in a note in the payment amount, or
any combination of these totaling the payment amount.
PERFORMANCE SHARE PLAN. The Program Administrator may grant performance
shares to eligible participants in the Program. Each grant confers upon the
recipient the right to receive a specified number of shares of Common Stock of
the Company contingent upon the achievement of specified performance objectives
within a specified period (including the recipient's continued employment with
or service to the Company).
Payment may be made, in the discretion of the Program Administrator, in
shares of Common Stock, a check for the fair market value of the shares of
Common Stock to which the performance share award relates (the "payment
amount"), a note in the payment amount, or any combination of these totaling the
payment amount. The Program Administrator shall specify the performance
objectives, determine the duration of the performance objective period (not to
be less than 1 year nor more than 10 years from the date of the grant) and
determine whether performance objectives have been met during the designated
period. All determinations by the Program Administrator with respect to the
achievement of performance objectives shall be final, binding on and conclusive
with respect to each recipient.
EXERCISE
Options may be exercised by providing written notice to the Company,
specifying the number of shares to be purchased and accompanied by payment for
such shares, and otherwise in accordance with the applicable option agreement.
Payment may be made in cash, other shares of Common Stock or by a combination of
cash
10
<PAGE>
and shares. The Program Administrator may also permit cashless exercises
pursuant to procedures approved by the Program Administrator.
VESTING OF OPTIONS
Unless otherwise provided by the Program Administrator at the time of
grant or accelerated, stock options vest in 3 annual installments commencing one
year after the date of grant.
TRANSFERABILITY OF AWARDS
Grants of stock options and other awards are generally not transferable
except by will or by the laws of descent and distribution, except that the
Program Administrator may, in its discretion, permit transfers of supplemental
stock options and/or stock appreciation rights granted in tandem with such
options for estate planning or other purposes subject to any applicable
restrictions under federal securities laws. 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.
AWARD LIMITATIONS
The maximum number of shares of Common Stock subject to options,
separately exercisable stock appreciation rights or other awards that an
individual may receive in any calendar year is 400,000.
ACCELERATION OF VESTING; CHANGE IN CONTROL
The Program Administrator may, in its discretion, accelerate the
exercisability of any option or stock appreciation right or provide that all
restrictions, performance objectives, performance objective periods and risks of
forfeiture pertaining to a performance share award shall lapse upon the
occurrence of a "change in control" of the Company. Each of the following
constitutes a change in control under the Program: (i) the consummation of a
merger or consolidation where the Company is not the surviving Company or in
which the Company's shareholders before the transaction do not own 50% or more
of the common stock of the surviving corporation immediately after the
transaction; (ii) the sale or other disposition of all or substantially all of
the assets of the Company; (iii) shareholder approval for a complete liquidation
or dissolution of the Company; (iv) a purchase by a "person" within the meaning
of Sections 13(d) of the Securities Exchange Act of 1934, as amended, by a
corporation or by any other entity of any voting securities of the Company
pursuant to a tender offer or exchange offer, unless the Board previously
determined that such purchase would not be deemed a Change in Control for
purposes of the Program; (v) a purchase by a person, corporation or other entity
of beneficial ownership of at least 50% of the Company's voting securities,
unless the Board previously determined that such purchase would not be deemed a
Change in Control for purposes of the Program; or (vi) if the individuals who
were members of the Board when the Program was adopted (the "Original
Directors"), who
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are thereafter elected to the Board and whose election, or nomination for
election, to the Board was approved by the Original Directors then still in
office ("Additional Original Directors"), and who thereafter are elected to the
Board and whose election or nomination for election to the Board was approved by
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.
If a change in control occurs pursuant to a merger or consolidation or
sale of assets as described above, then 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 to
be the successor corporation unless the successor does not so agree at least 15
days prior to the merger, consolidation or sale of assets. In that instance,
each option, stock appreciation right, or performance share award shall be
deemed to be fully vested and exercisable.
EFFECT OF TERMINATION OF EMPLOYMENT OR SERVICE AS A DIRECTOR OR CONSULTANT
Except as otherwise provided in any agreement evidencing an award or
option:
(a) in the event that a participant's employment or service with the
Company is terminated for "cause," any outstanding options and awards of such
participant shall terminate immediately;
(b) in the event that a participant's employment or service with the
Company terminates due to death or disability (within the meaning of Section
22(e)(3) of the Code), all options and stock appreciation rights of such
participant (other than Naked Rights) will lapse unless exercised, to the extent
exercisable at the date of termination, within one year following such date of
termination, all performance awards for which all performance objectives and
conditions have been achieved and satisfied (other than continued employment or
status as a consultant) shall be paid in full (any remaining awards of such
participant will be forfeited), and all Naked Rights shall be fully paid by the
Company as of the date of death or disability; and
(c) in the event that a participant's employment or service with the
Company terminates for any other reason: (i) any outstanding options and awards
(other than Naked Rights) shall be exercisable, to the extent exercisable on the
date of termination, for a period of 90 days after the date of such termination
if the recipient resigned, and 12 months after the date of such termination if
it was an involuntary termination other than for cause; (ii) all Naked Rights
not payable on the date of termination shall terminate immediately; and (iii)
all performance share awards shall terminate immediately unless the performance
objectives have been achieved and the performance objective period has expired.
AMENDMENT, SUSPENSION OR TERMINATION OF THE PROGRAM
The Program will terminate on the day preceding the tenth anniversary
of its adoption, unless sooner terminated by the Board. Prior to that date, the
Program Administrator may amend, modify, suspend or terminate the Program,
provided, however, that (a) stockholder approval is obtained when required by
law, and (b) no such amendment, modification, suspension or termination by the
Program Administrator shall adversely affect the rights of participants, without
their consent, under any outstanding option, stock appreciation right, or
performance share.
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FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS AND AWARDS
BECAUSE OF THE COMPLEXITY OF THE FEDERAL INCOME TAX LAWS AND THE
APPLICATION OF VARIOUS STATE INCOME TAX LAWS, THE FOLLOWING DISCUSSION OF TAX
CONSEQUENCES IS GENERAL IN NATURE AND RELATES SOLELY TO FEDERAL INCOME TAX
MATTERS. PARTICIPANTS OF THE PROGRAM ARE ADVISED TO CONSULT THEIR OWN PERSONAL
TAX ADVISORS. IN ADDITION, THE FOLLOWING SUMMARY IS BASED UPON AN ANALYSIS OF
THE INTERNAL REVENUE CODE AS CURRENTLY IN EFFECT, EXISTING LAWS, JUDICIAL
DECISIONS, ADMINISTRATIVE RULINGS, REGULATIONS AND PROPOSED REGULATIONS, ALL OF
WHICH ARE SUBJECT TO CHANGE.
ISOS. In general, an optionee granted an ISO will not recognize taxable
income upon the grant or the exercise of the ISO (assuming the ISO continues to
qualify as such at the time of exercise). The excess of the fair market value of
shares of Common Stock received upon exercise of the ISO over the exercise price
is, however, a tax preference item which can result in imposition of the
alternative minimum tax. The optionee' s "tax basis" in the shares of Common
Stock acquired upon exercise of the ISO generally will be equal to the exercise
price paid by the optionee, except in the case in which the optionee pays the
exercise price by delivery of the shares of Common Stock otherwise owned by the
optionee (as discussed below).
If the shares acquired upon the exercise of an ISO are held by the
optionee for the "ISO holding period" of at least two years after the date of
grant and one year after the date of exercise, the optionee will recognize
long-term capital gain or loss upon the sale of the ISO Shares equal to the
amount realized upon such sale minus the optionee `s tax basis in the shares,
and such optionee will not recognize any taxable ordinary income with respect to
the ISO. As a general rule, if an optionee disposes of the shares acquired upon
exercise of an ISO before satisfying both holding period requirements (a
"disqualifying disposition"), the gain recognized on the disposition will be
taxed as ordinary income equal to the lesser of (i) the fair market value of the
shares at the date of exercise of the ISO minus the optionee `s tax basis in the
shares, or (ii) the amount realized upon the disposition minus the optionee' s
tax basis in the shares. If the amount realized upon a disqualifying disposition
is greater than the amount treated as ordinary income, the excess amount will be
treated as capital gain for federal income tax purposes. Certain transactions
are not considered disqualifying dispositions including certain exchanges,
transfers resulting from the optionee' s death, and pledges and hypothecations
of ISO Shares.
SUPPLEMENTAL STOCK OPTION PLAN. No income will be recognized to the
optionee at the time of the grant of an option, nor will the Company be entitled
to a tax deduction at that time. Upon the exercise of a supplemental stock
option, the optionee will be subject to ordinary income tax equal to the excess
of the fair market value of the stock on the exercise date over the exercise
price. The Company will be entitled to a tax deduction in an amount equal to the
ordinary income realized by the optionee. If shares acquired upon such exercise
are held for more than one year before disposition, any gain on disposition of
such shares will be treated as long-term capital gain.
STOCK APPRECIATION RIGHT. Neither the holder of a Tandem Option nor the
holder of a Naked SAR will be deemed to receive any income at the time a SAR is
granted. When any part of a SAR is exercised, the
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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. Income recognized by an optionee upon the exercise of a SAR will be
subject to federal withholding taxes.
PERFORMANCE SHARES. In general, participants will not realize taxable
income at the time of the grant of such an award. Participants will be subject
to tax at ordinary income rates on the value of such awards when payment is
received. If, however, an award is structured to permit a participant to
postpone payment, the participant becomes taxable at ordinary income rates when
payment is made available or the award is no longer subject to a substantial
risk of forfeiture. If the award is paid in shares, taxable income will be the
fair market value of the shares either at the time the award is made available
or at the time any restrictions (including restrictions under Section 16b of the
Exchange Act) subsequently lapse.
PERSONS SUBJECT TO LIABILITY UNDER SECTION 16(b) OF THE EXCHANGE ACT.
Special rules apply under the Code which may delay the timing and alter the
amount of income recognized with respect to awards granted to persons subject to
liability under Section 16(b) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Such persons include directors, "officers" (as defined
under Section 16 of the Exchange Act) and holders of more than 10% of the
Company's outstanding Shares.
COMPENSATION DEDUCTION LIMITATION. Code Section 162(m) generally
disallows a public company's tax deduction for compensation paid to the Chief
Executive Officer, or to any of the other four most highly compensated officers,
in excess of $1.0 million in any tax year. Compensation that qualifies as
"performance-based compensation" is excluded from the $1.0 million deductibility
cap, if various requirements are satisfied. The Company intends that options and
certain other awards granted to employees whom the Committee expects to be
covered employees at the time a deduction arises in connection with such awards,
qualify as "performance-based compensation," so that such awards will not be
subject to the deductibility cap.
WITHHOLDING. If the Company determines that the satisfaction of
withholding tax or other withholding liabilities under any state or federal law
is required as a condition of, or in any connection with, the exercise or
delivery or purchase of shares pursuant to the exercise of any option, stock
appreciation right or performance share under the Program, then the exercise of
the option, stock appreciation right or performance share shall not be effective
unless the withholding tax or other withholding liabilities shall have been
satisfied in a manner acceptable to the Company.
The affirmative vote of a majority of the votes cast by the holders of
shares entitled to vote thereon is required for approval of Proposal Three. If
the stockholders do not vote for approval, the 1991 Program will expire in 2000
and no plan will be in place for an equity compensation program. Proxies will be
voted in accordance with the specifications marked thereon, and, if no
specification is made, will be voted "FOR" the acceptance of the Program.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO ADOPT
THE COMPANY'S 2000 EQUITY COMPENSATION PROGRAM.
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PROPOSAL FOUR
ADOPTION OF AMENDMENT TO THE
INRAD, INC. KEY EMPLOYEE COMPENSATION PROGRAM
The Board of Directors proposes that stockholders approve an amendment
(the "1991 Program Amendment") to the Company's 1991 Key Employee Compensation
Program (the "1991 Program"), adopted by the Board on May 5, 2000. A summary of
certain terms of the 1991 Program appears in the Company's Definitive Proxy
Statement for its annual meeting of shareholders held on June 20, 1996, filed
with the Securities and Exchange Commission on May 21, 1996.
PROPOSED AMENDMENT
If the 1991 Program Amendment is approved, the first sentence of
Section 1 of the 1991 Program would read in its entirety as follows:
The Program shall be administered by a committee appointed by the Board
of Directors of the Corporation and composed solely of at least two
members of the Board.
If the 1991 Program Amendment is approved, the text of Section 4 of the
1991 Program would read in its entirety as follows:
Article 4. ELIGIBILITY AND PARTICIPATION. All directors, officers,
employees and consultants of the Corporation and the Subsidiaries shall
be eligible for selection by the Program Administrators 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.
GENERAL EFFECT OF THE PROPOSED 1991 PROGRAM AMENDMENT AND REASONS FOR APPROVAL
The proposed 1991 Program Amendment would remove the requirement that
members of the Board serving on the committee to administer the 1991 Program not
have been granted, during the 12 months preceding election to such committee,
any options or performance shares under the 1991 Program or any equity
securities pursuant to any other plan of the Company or its affiliates.
The proposed 1991 Program Amendment would also expand the list of
individuals eligible for selection by the Program Administrators to participate
in all four plans of the 1991 Program to all directors, officers, employees and
consultants of the Company and is subsidiaries. At present, (i) only regular
full-time employees (including officers) of the Company and its subsidiaries are
eligible for selection to participate in any of the four
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plans, and (ii) directors who are not full-time employees of the Company or its
subsidiaries are not eligible to participate in Plans I and IV.
The affirmative vote of a majority of the votes cast at the Annual
Meeting is required to approve the amendment to the 1991 Program. Proxies will
be voted in accordance with the specifications marked thereon, and, if no
specification is made, will be voted "FOR" the adoption of the amendment to the
1991 Program.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO ADOPT
THE AMENDMENT TO THE COMPANY'S 1991 KEY EMPLOYEE COMPENSATION PROGRAM.
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EXECUTIVE OFFICERS
The executive officers of the Company are Daniel Lehrfeld, Maria Murray, William
S. Miraglia, Relinda C. Walker, and Devaunshi Sampat.
Daniel Lehrfeld joined the Company in 1999 as President and Chief
Operating Officer. In April 2000 he was appointed Chief Executive Officer. Prior
to joining the Company, Mr. Lehrfeld held the position of Vice President and
General Manager of the Electro-Optics Center, a division successively of the
Raytheon, GM/Hughes Electronics and Magnavox Electronic Systems Corporation. He
has also held executive positions with Philips Laboratories and Grumman
Aerospace Corporation. Mr. Lehrfeld holds B.S. and M.S. degrees from Columbia
University School of Engineering and Applied Science and an M.B.A. degree from
the Columbia Graduate School of Business.
Maria Murray joined the Company in January 1989, became Vice President
of R&D Programs in 1993, and was appointed Sr. Vice President, Business
Development in 1999. Prior to joining INRAD, she held positions in electronic
design engineering in the laser and communication industries. She holds a B.S.
degree in Electrical Engineering from the University of Central Florida.
William S. Miraglia joined the Company as Secretary and Chief Financial
Officer in June 1999. Previously, he held the position of Vice President of
Finance for a division of UNC, Inc., a NYSE aviation company. Prior to his last
position, Mr. Miraglia has held management positions in the aerospace industry
and in public accounting. He holds a B.B.A. from Pace University, and an M.B.A
from Long Island University and is a Certified Public Accountant.
Relinda C. Walker joined the Company as Vice President, Manufacturing
in May 1999. Previously, Ms. Walker held the position of Vice President at
Instruments, SA where she directed a business unit. Ms. Walker holds a B.S. and
M.S. in Mathematics from Emory University.
Devaunshi Sampat joined the Company in 1998. In 1999 she was appointed
Vice President of Marketing and Sales. Prior to joining the Company, Ms. Sampat
held sales management positions within the Photonics industry with Princeton
Instruments and Oriel Instruments. Ms. Sampat holds a B.S. in Medical Technology
from the University of Bridgeport.
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.
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EXECUTIVE COMPENSATION
SUMMARY OF CASH AND OTHER COMPENSATION
The following table sets forth, for the years ended December 31, 1999,
1998 and 1997, the cash compensation paid by the Company and its subsidiaries,
to or with respect to the Company's Officers, whose total annual salary and
bonus exceeded $100,000, for services rendered in all capacities as an executive
officer during such period:
<TABLE>
<CAPTION>
Name and Position STOCK
----------------- -----
SALARY BONUS OPTIONS
------ ----- -------
<S> <C> <C> <C> <C>
Warren Ruderman, 1999 $130,000 none none
Chairman and Chief 1998 $130,000 none none
Executive Officer 1997 $130,000 none none
Daniel Lehrfeld, 1999 $40,000* none 100,000
President and Chief 1998 N/A N/A N/A
Operating Officer 1997 N/A N/A N/A
Maria Murray, 1999 $110,000 9,500 30,000
Vice President, 1998 Less than $100,000 none none
Business Development 1997 Less than $100,000 none 10,000
Devaunshi Sampat, 1999 Less than $111,000 22,600 20,000
Vice President, 1998 Less than $100,000 none 7500
Sales and Marketing 1997 Less than $100,000 none none
</TABLE>
* Compensation commencing as of October 1999 Employment Date.
(A) During the periods covered, no 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.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended December 31, 1999 approximately 6% of the
Company's net product sales were through a foreign agent, in which Dr. Warren
Ruderman a principal shareholder, has an investment. Terms of sales to this
foreign agent were substantially the same as to unrelated foreign agents.
During 1999 Clarex Ltd., a principal shareowner and debt holder of the
Company, purchased 500 shares of 10% convertible Preferred stock for $500,000.
Such shares are convertible into 500,000 shares of Common Stock.
During FY 2000, Clarex Ltd., a principal shareholder and debt holder of
the Company, exercised 250,000 warrants at a price of $.6875 per share and
95,000 warrants at a price of $1.50 per share and received 345,000 shares of
Common Stock of the Company. The same shareholder also converted a $250,000
secured convertible debenture into 200,000 shares of the Company's Common Stock.
Also during 2000 William F. Nicklin, a shareholder, converted a $100,000
convertible debenture into 80,000 shares of the Company's Common Stock.
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 shareholders were complied with.
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RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Holtz Rubenstein & Company 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, 2000. 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 matters would 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 judgment of the persons voting them.
NOTICE REGARDING FILING OF SHAREOWNER PROPOSALS
AT 2001 ANNUAL MEETING
As a result of regulations issued by the Securities and Exchange Commission, the
Company must receive all shareowner proposals for the 2001 Annual Meeting by
February 22, 2001.
By Order of the Board of Directors
William S. Miraglia, Secretary
Dated: July 24, 2000
--------------------------------------------------------------------------------
A COPY OF THE COMPANY'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31,
1999, 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.
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EXHIBIT A
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").
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<PAGE>
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.
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<PAGE>
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
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<PAGE>
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;
24
<PAGE>
(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
25
<PAGE>
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
26
<PAGE>
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.
27
<PAGE>
PART I
INCENTIVE STOCK OPTION PLAN
The following provisions shall apply with respect to options
granted by the Program Administrator pursuant to Part I of the Program:
Section 1. GENERAL. This Incentive Stock Option Plan
("Incentive Plan") is Part I of the Corporation's Program. 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. Unless any provision herein indicates to the
contrary, this Incentive Plan shall be subject to the General Provisions of the
Program.
Section 2. TERMS AND CONDITIONS. The Program Administrator may
grant incentive stock options to purchase Common Stock to any employee of the
Corporation or its Subsidiaries. The terms and conditions of options granted
under the Incentive Plan may differ from one another as the Program
Administrator shall, in its 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 Administrator, 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 option
granted under the Incentive Plan to any person who owns more than 10% of the
combined voting power of all classes of stock of the Corporation or any
Subsidiary shall expire no later than five years from the date on which the
option is granted.
Section 4. PURCHASE PRICE. The option price with respect to
any option granted pursuant to the Incentive Plan shall not be less than the
Fair Market Value of the shares on the date of the grant of the option; except
that the option price with respect to any option granted pursuant to the
Incentive Plan to any person who owns more than 10% of the combined voting power
of all classes of stock of the Corporation shall not be less than 110% of the
Fair Market Value of the shares on the date the option is granted. For purposes
of the Program, the phrase "Fair Market Value" shall mean the fair market value
of the Common Stock on the date of grant or other relevant date. If on such date
the Common Stock is listed on a stock exchange or is quoted on the automated
quotation system of NASDAQ, the Fair Market Value shall be the closing sale
price (or if such price is unavailable, the average of the high bid price and
the low asked price) of a share of Common Stock on such date. If no such closing
sale price or bid and asked prices are available, the Fair Market Value shall be
determined in good faith by the Program Administrator in accordance with
generally accepted valuation principles and such other factors as the Program
Administrator reasonably deems relevant.
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 are exercisable
for the first time by any employee during any calendar year (under the terms of
the Incentive Plan and all incentive stock option plans of the Corporation and
the Subsidiaries) shall not exceed $100,000.
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<PAGE>
Section 6. EXERCISE OF OPTIONS. Unless otherwise provided by
the Program Administrator at the time of grant or unless the installment
provisions set forth herein are subsequently accelerated pursuant to the General
Provisions of the Program or otherwise by the Program Administrator with respect
to any one or more previously granted options, incentive stock options may only
be exercised to the following extent during the following periods of time:
<TABLE>
<CAPTION>
Maximum Percentage of
Shares Covered by
Option That May be
During Purchased
------ ---------
<S> <C>
First 12 months after grant 0
First 24 months after grant 33-1/3%
First 36 months after grant 66-2/3%
Beyond 36 months after grant 100%
</TABLE>
Section 7. FAILURE TO SATISFY APPLICABLE REQUIREMENTS. In the
event that an option is intended to be granted pursuant to the provisions of
this Incentive Plan but fails to satisfy one or more requirements of this
Incentive Plan, such option shall be deemed to have been granted pursuant to the
Supplemental Plan set forth as Part II of the Program, provided that such option
satisfies the requirements of the Supplemental Plan.
29
<PAGE>
PART II
SUPPLEMENTAL STOCK OPTION PLAN
The following provisions shall apply with respect to options
granted by the Program Administrator pursuant to Part II of the Program:
Section 1. GENERAL. This Supplemental Stock Option Plan
("Supplemental Plan") is Part II of the Corporation's Program. Any option
granted pursuant to this Supplemental Plan shall not be an incentive stock
option as defined in Section 422 of the Code. Unless any provision herein
indicates to the contrary, this Supplemental Plan shall be subject to the
General Provisions of the Program.
Section 2. TERMS AND CONDITIONS. The Program Administrator may
grant supplemental stock options to any person eligible under Article 4 of the
General Provisions. The terms and conditions of options granted under this
Supplemental Plan may differ from one another as the Program Administrator
shall, in its discretion, determine as long as all options granted under this
Supplemental Plan satisfy the requirements of this Supplemental Plan.
Section 3. DURATION OF OPTIONS. Each option and all rights
thereunder granted pursuant to the terms of this Supplemental Plan shall expire
on the date determined by the Program Administrator, but in no event shall any
option granted under this Supplemental Plan expire later than ten years from the
date on which the option is granted.
Section 4. PURCHASE PRICE. The option price with respect to
any option granted pursuant to this Supplemental Plan shall be determined by the
Program Administrator at the time of grant.
Section 5. EXERCISE OF OPTIONS. Unless otherwise provided by
the Program Administrator at the time of grant or unless the installment
provisions set forth herein are subsequently accelerated pursuant to the General
Provisions of the Program or otherwise by the Program Administrator with respect
to any one or more previously granted options, incentive stock options may only
be exercised to the following extent during the following periods of time:
<TABLE>
<CAPTION>
Maximum Percentage of
Shares Covered by
Option That May be
During Purchased
------ ---------
<S> <C>
First 12 months after grant 0
First 24 months after grant 33-1/3%
First 36 months after grant 66-2/3%
Beyond 36 months after grant 100%
</TABLE>
30
<PAGE>
PART III
STOCK APPRECIATION RIGHTS PLAN
The following provisions shall apply with respect to stock
appreciation rights granted by the Program Administrator pursuant to Part III of
the Program:
Section 1. GENERAL. This Stock Appreciation Rights Plan ("SAR
Plan") is Part III of the Corporation's Program.
Section 2. TERMS AND CONDITIONS. The Program Administrator may
grant stock appreciation rights to any person eligible under Article 4 of the
General Provisions. Stock appreciation rights may be granted either in tandem
with supplemental stock options or incentive stock options as described in
Section 4 of this SAR Plan or as naked stock appreciation rights as described in
Section 5 of this SAR Plan.
Section 3. MODE OF PAYMENT. At the discretion of the Program
Administrator, payments to recipients upon exercise of stock appreciation rights
may be made in (a) cash by bank check, (b) shares of Common Stock having a Fair
Market Value (determined in the manner provided in Section 4 of the Incentive
Plan) equal to the amount of the payment, (c) a note in the amount of the
payment containing such terms as are approved by the Program Administrator or
(d) any combination of the foregoing in an aggregate amount equal to the amount
of the payment.
Section 4. STOCK APPRECIATION RIGHT IN TANDEM WITH
SUPPLEMENTAL OR INCENTIVE STOCK OPTION. A SAR granted in tandem with a
supplemental stock option or an incentive stock option (in either case, an
"Option") shall be on the following terms and conditions:
(a) Each SAR shall relate to a specific Option or portion of
an Option granted under the Supplemental Plan or Incentive Plan, as the
case may be, and may be granted by the Program Administrator at the same
time that the Option is granted or at any time thereafter prior to the
last day on which the Option may be exercised.
(b) A SAR shall entitle a recipient, upon surrender of the
unexpired related Option, or a portion thereof, to receive from the
Corporation an amount equal to the excess of (i) the Fair Market Value
(determined in accordance with Section 4 of the Incentive Plan) of the
shares of Common Stock which the recipient would have been entitled to
purchase on that date pursuant to the portion of the Option surrendered
over (ii) the amount which the recipient would have been required to pay
to purchase such shares upon exercise of such Option.
(c) A SAR shall be exercisable only for the same number of
shares of Common Stock, and only at the same times, as the Option to
which it relates. SARs shall be subject to such other terms and
conditions as the Program Administrator may specify.
(d) A SAR shall lapse at such time as the related Option is
exercised or lapses pursuant to the terms of the Program. On exercise of
the SAR, the related Option shall lapse as to the number of shares
exercised.
Section 5. NAKED STOCK APPRECIATION RIGHT. SARs granted by the
Program Administrator as naked stock appreciation rights ("Naked Rights") shall
be subject to the following terms and conditions:
(a) The Program Administrator may award Naked Rights to
recipients for periods not exceeding ten years. Each Naked Right shall
represent the right to receive the excess of the Fair Market Value of one
share of Common Stock (determined in accordance with Section 4 of the
Incentive Plan) on the date of exercise of the Naked Right over the Fair
Market Value of one share of Common Stock (determined in accordance with
Section 4 of the Incentive Plan) on the date the Naked Right was awarded
to the recipient.
(b) Unless otherwise provided by the Program Administrator at
the time of award or unless the installment provisions set forth herein
are subsequently accelerated pursuant to the General Provisions of the
Program or otherwise by the Program Administrator with respect to any one
or more previously granted Naked
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<PAGE>
Rights, Naked Rights may only be exercised to the following extent
during the following periods of employment or service as a consultant
or director:
<TABLE>
<CAPTION>
Maximum Percentage
of Naked Rights Which
During May be Exercised
------ ----------------
<S> <C>
First 12 months after award 0%
First 24 months after award 33-1/3%
First 36 months after award 66-2/3%
Beyond 36 months after award 100%
</TABLE>
(c) The Naked Rights solely measure and determine the amounts
to be paid to recipients upon exercise as provided in Section 5(a). Naked
Rights do not represent Common Stock or any right to receive Common
Stock. The Corporation shall not hold in trust or otherwise segregate
amounts which may become payable to recipients of Naked Rights; such
funds shall be part of the general funds of the Corporation. Naked Rights
shall constitute an unfunded contingent promise to make future payments
to the recipient.
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<PAGE>
PART IV
PERFORMANCE SHARE PLAN
The following provisions shall apply with respect to
performance shares granted by the Program Administrator pursuant to Part IV of
the Program:
Section 1. GENERAL. This Performance Share Plan ("Performance
Share Plan") is Part IV of the Corporation's Program. Unless any provision
herein indicates to the contrary, this Performance Share Plan shall be subject
to the General Provisions of the Program.
Section 2. TERMS AND CONDITIONS. The Program Administrator may
grant performance shares to any person eligible under Article 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 performance objective period including, but not limited to,
the recipient's continued employment or status as a consultant through the end
of such performance objective period. At the time of an award of a performance
share, the Program Administrator shall specify the performance objectives, the
performance objective period or periods and the period of duration of the
performance share grant. Any performance shares granted under this Plan shall
constitute an unfunded promise to make future payments to the affected person
upon the completion of specified conditions.
Section 3. MODE OF PAYMENT. At the discretion of the Program
Administrator, payments of performance shares may be made in (a) shares of
Common Stock, (b) a check in an amount equal to the Fair Market Value
(determined in the manner provided in Section 4 of the Incentive Plan) of the
shares of Common Stock to which the performance share award relates, (c) a note
in the amount specified above in Section 3(b) containing such terms as are
approved by the Program Administrator or (d) any combination of the foregoing in
the aggregate amount equal to the amount specified above in Section 3(b).
Section 4. PERFORMANCE OBJECTIVE PERIOD. The duration of the
period within which to achieve the performance objectives shall be determined by
the Program Administrator. The period may not be less than one year nor more
than ten years from the date that the performance share is granted. The Program
Administrator 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 90 days after the end of each applicable
performance objective period. All determinations by the Program Administrator
with respect to the achievement of performance objectives shall be final,
binding on and conclusive with respect to each recipient.
33
<PAGE>
EXHIBIT B
AMENDMENT TO THE
INRAD, INC. KEY EMPLOYEE COMPENSATION PROGRAM
AMENDMENT made this 30th day of June 2000 to the INRAD, Inc. Key
Employee Compensation Program (the "Program").
W I T N E S S E T H:
WHEREAS, INRAD, Inc. (the "Corporation") and its shareholders
heretofore adopted and established the Program effective in 1991; and
WHEREAS, the Program reserves to the Program Administrators the right
to amend the Plan, subject, generally, to the approval of the Corporation's
shareholders; and
WHEREAS, the Program Administrators desire to amend the Program,
subject to the approval of the Corporation's shareholders, in the manner
hereinafter provided;
NOW, THEREFORE, the Program is hereby amended as follows:
FIRST
The first sentence of Section 1 of the Program ("Administration") is
hereby amended in its entirety, to read as follows:
"The Program shall be administered by a committee appointed by the
Board of Directors of the Corporation and composed solely of at least
two members of the Board."
SECOND
Section 4 of the Program ("Eligibility and Participation") is hereby
amended in its entirety, to read as follows:
"Article 4. ELIGIBILITY AND PARTICIPATION. All directors, officers,
employees and consultants of the Corporation and the Subsidiaries shall
be eligible for selection by the Program Administrators 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."
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<PAGE>
THIRD
The foregoing Amendments shall, subject to the approval of the
Corporation's shareholders, be effective as of the date first above-written.
35
