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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
BENTHOS, INC.
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(Name of Small Business Issuer in Its Charter)
Massachusetts 04-2381876
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
49 Edgerton Drive, Falmouth, Massachusetts 02556
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(Address of Principal Executive Offices) (Zip Code)
508-563-1000
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(Issuer's Telephone Number, Including Area Code)
Securities to be registered under Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Each Class is to be
to be so Registered Registered
None
Securities to be registered under Section 12(g) of the Act:
Common Stock, $.0667 par value
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ITEM 1. DESCRIPTION OF BUSINESS
Benthos, Inc. (the "Company") was founded in 1962 to act as a supplier of
oceanographic products. It was incorporated as a Massachusetts corporation in
1965. Over the last 34 years, the Company has developed and acquired new
technology and products. Currently, the Company consists of two distinct
divisions: the Undersea Systems Division and the Container Inspection Systems
Division.
During the last three years, the Company has been going through a period of
marketing and product transition. From 1962 to 1993 the Company's sales were
primarily in the Undersea Systems Division, predominantly to educational,
governmental and research institutions. During 1994 and 1995, the sales in these
markets declined as government funding for these institutions was reduced
primarily as a result of a decrease in governmental expenditures for military
and scientific purposes. During the same period, the sales of the Container
Inspection Systems Division increased by 67.6%, from $3,071,000 in fiscal 1994
to $5,146,000 in the first nine months of fiscal 1996. Recent growth in the
Container Inspection Systems Division has been spurred in large part by the sale
of equipment to the North American brewery industry. See Item 2, "Management's
Discussion and Analysis" herein.
The Company's wholly-owned subsidiary, Benthos International, Inc. acts as
a foreign sales corporation (FSC) for the Company's foreign sales. It has no
substantial assets, liabilities or income.
Undersea Systems Division
The Company's Undersea Systems Division designs, develops, manufactures and
sells products and services used in oceanographic and undersea environments.
The markets for these products include the oceanographic research community
(research institutions, universities, government agencies and similar
organizations). Certain products are also sold to the oil industry (for
offshore oil and gas exploration) and the nuclear power industry. The product
range includes acoustic transponders used for location marking and navigation,
acoustic release devices used for recovering instrumentation packages from the
depths of the ocean, imaging systems (including video, 35mm and digital still
cameras), hydrophones used for geophysical exploration and sound detection,
remotely operated vehicles for inspection and light work tasks and glass
flotation products used to house instruments and to provide buoyancy. The
Company's undersea products are generally marketed under the trade name
"Benthos."
Container Inspection Systems Division
The Company's Container Inspection Systems Division designs, develops,
manufactures and sells systems used to inspect the integrity of containers in
the food, pharmaceutical and beverage industries. The customers for these
systems include manufacturers of food, beverages and pharmaceuticals packaged in
bottles, cans, glass jars, plastic containers and assorted vacuum packages with
metal and plastic caps. These systems are marketed
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under the trade name "TapTone." TapTone systems integrate various sensor
technologies with digital signal processing techniques in order to inspect
containers for leakage, seal integrity, low or high pressure, and similar
packaging defects. TapTone systems may be used on-line as continuous inspection
systems that operate at production speeds or as off-line inspection systems to
periodically validate package integrity.
1. Principal Products
Undersea Systems
The Company's undersea products are divided into five distinct product
groups as follows:
a. Acoustics
The Acoustics product group includes transponders, acoustic releases and
companion deck control systems. Transponders are used to transmit and receive
acoustic signals underwater for the purposes of determining location,
navigation, or sending and receiving data. These products are used for
scientific research, salvage and ship positioning operations. Both expendable
and recoverable products are manufactured. The transponder line includes low
cost versions that transmit a limited signal selection in response to a command
received, as well as more sophisticated versions that can be programmed to
transmit a wide variety of functions in response to received commands.
Transponders are monitored by and communicate with companion deck units which
are typically located on board a ship.
Acoustic releases are sound-operated devices that will anchor underwater
products in place and will release those products, allowing them to float to the
surface, in response to an acoustic command signal transmitted from the surface.
The acoustic release product line includes both deep water (up to 12,000
meters), heavy duty releases as well as recently introduced shallow water (up to
600 meters), light duty, low cost releases. Releases may be operated with
companion deck control units.
b. Hydrophones
Hydrophones are underwater sensors designed to produce an output signal in
response to an acoustic pressure signal. They can be thought of as underwater
microphones. The Company's hydrophone products are typically used in the
offshore oil and gas exploration industry, where they listen to acoustic sound
waves generated by the reflections of an acoustic signal as it bounces off of
the various geological layers beneath the ocean floor. These data are used to
generate information about the geological structure beneath the ocean as a means
of locating promising oil and gas exploration sites. The Company's hydrophone
product line is also used in military applications to listen for and detect
submarines and other vessels under and on
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the surface of the ocean. Hydrophones may also be sold to research institutions
for various applications such as listening to marine animals.
The Company's hydrophone product line includes sophisticated versions that
offer high sensitivity and can operate at great depth without significant
variation in response, as well as low cost hydrophones for the seismic research
industry that are produced in high production volumes. The Company's hydrophone
products may be used with companion amplifiers that convert the electrical
signals to usable formats and they may be integrated into arrays, which are
groupings of hydrophones assembled together in long tubes for the purpose of
added acoustic sensitivity and for listening to acoustic signals over a long
distance.
c. Imaging
The imaging product group consists of a line of cameras that are packaged
in enclosures that allow them to operate at varying depths underwater. The
Company's capabilities include still cameras (typically 35 mm), video cameras,
and recently introduced digital still cameras that can capture an image
comprised of digital data for transmission to the surface and subsequent
processing by software. The Company also sells companion underwater camera
flashes.
The Company's imaging products are used in research to photograph
underwater wildlife and geological formations. Imaging products are also used in
the commercial market to photograph underwater structures, such as oil rigs and
shipwrecks, for the purposes of inspection. Imaging products are also employed
in military applications to remotely inspect underwater objects such as mines.
d. Remotely Operated Vehicles (ROVs)
ROVs are unmanned underwater vehicles that are controlled from the surface
by a skilled operator. The Company's ROV product line includes a number of
specialized designs that are aimed at specific markets. These markets include
the research sector, where ROVs may be used as a camera delivery system for
visual documentation and inspection. ROVs are also sold to the nuclear power
industry, where they are used to perform inspections and light work tasks in
radioactive cooling water pools, and to the military sector, where they may be
used for remote inspection and to retrieve or deliver objects. The Company's
ROV products are also used for sewer and pipeline inspection. ROV systems are
occasionally used by the entertainment industry.
e. Glass Flotation
The Company manufactures a line of glass spheres that are used to provide
buoyancy to underwater products and systems and
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may be used to house underwater instruments and electronics, such as
transponders. Glass spheres are offered in three sizes depending on the
individual requirements of buoyancy and/or housing size. The Company also
customizes its glass spheres for individual customer requirements by providing
various penetrations, machined surfaces and electrical connectors. The Company
pressure tests all of its glass sphere products in order to insure successful
operation at desired depths. Glass spheres are normally provided with companion
plastic "hard hats" that allow for protection of the glass from breakage and for
safe transport.
Container Inspection Systems
The Company's container inspection systems are used to inspect bottles,
cans and similar packages for a variety of defects. The TapTone product line
includes the following:
a. TapTone II Pressure/Vacuum Discriminator
TapTone II uses acoustic technology to test for acceptable levels of
pressure or vacuum in containers that have metal closures and/or are metallic
themselves (such as beverage cans, glass bottles with metal crowns, and
conventional steel cans). These data are used to determine if the tested package
meets preset quality acceptance criteria. TapTone II is used for a variety of
food processing and beverage applications and its principal market is the
brewing and beverage industry. The TapTone II system is an on-line, high speed
inspection system designed to test 100% of produced products and to reject
containers that are determined to be defective. A typical TapTone II system
consists of a sensor assembly, an electronic control and display unit, and a
rejector for removing defective containers from the production line. TapTone II
is also available in a case configuration which incorporates multiple sensors
for testing products that have been packaged in sealed cases.
b. Tracker
The Tracker system uses a proximity sensor to measure the deflection of the
metal lid on a container. These data are used to determine if the container
meets preset quality acceptance criteria based upon lid deflection and its
correlation with the pressure or vacuum inside the container. Tracker systems
are normally used on beverage cans and conventional steel cans. Tracker systems
are on-line, high speed inspection systems designed to test 100% of produced
product, rejecting containers that are determined to be defective. A typical
Tracker system consists of a sensor assembly, an electronic control and display
unit, and a rejector for removing defective containers from the production line.
Tracker systems are also available in a case configuration that incorporates
multiple proximity sensors for testing products that have been packaged in
sealed cases.
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c. Turbo Tracker
The Turbo Tracker uses digital signal processing to enhance the accuracy
and performance of the Tracker system, allowing the system to test a wider
variety of containers. The Turbo Tracker system is also available in a case
configuration.
d. Laser Tracker
The Laser Tracker system is similar to the Tracker system except that it
uses a laser beam to measure closure deflection on a container with a non-
metallic lid or closure. These data are correlated with pressure inside the
container and are used to determine container quality based upon preset
criteria.
e. Squeezer System
The Squeezer system mechanically deforms a resilient container with a
preset force. These data are used to determine if the container is leaking
based upon preset criteria. Squeezer systems are typically used on squeezable
packages, such as plastic bottles, jugs, and pouches.
2. Distribution and Marketing Methods
The Undersea Systems Division and the Container Inspection Systems Division
market their products through an international network of independent sales
representatives and distributors. Sales representatives and distributors are
located in North America, South America, Europe, the Far East, Africa and
Australia. Domestic and international customers may also order the Company's
products directly from its headquarters in Massachusetts. Both divisions of the
Company participate in a number of trade shows and exhibitions around the world.
The Company also maintains an internal staff of trained sales and marketing
personnel with experience and expertise in the markets served by the Company.
3. New Products
The Company continually invests in new product development. Since October
1993, the Undersea Systems Division has introduced a digital still camera, a
shallow water acoustic release, and a low cost Reduced Diameter Array ("RDA")
seismic hydrophone. During that period, the Container Inspection Systems
Division introduced the Turbo Tracker and the Laser Tracker.
4. Competition
Undersea Systems Division
The Company competes with a variety of larger and smaller companies in each
of its product sectors. The Company's policy is to compete based upon technical
superiority and quality. In some product categories, such as glass flotation,
the Company believes
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that it has a majority share of the market. In the hydrophone and ROV product
groups, the Company has a minority market share and competes with larger
companies, such as Teledyne, that have significantly more resources than the
Company. In the acoustics and imaging product groups, the Company competes with
a variety of domestic and foreign competitors that are generally of the same
approximate size as the Company.
Container Inspection Systems Division
The majority of the competition for the Container Inspection Systems
Division is European-based. In general, these competitors are larger and offer a
broader product range than the Company. There are also three significant
domestic competitors, two of which are larger companies similar in size and
product breadth to the European competitors. The Company believes that it does
not have any significant competition in the market for leak detection in glass
bottles with metal caps. The Company's policy is to compete by offering
technically advanced, innovative products that feature better performance than
those offered by competitors.
5. Sources and Availability of Raw Materials
The products of both divisions generally utilize mechanical and electrical
components that are readily available from a wide variety of domestic and
foreign vendors. In certain cases, the Company produces components internally,
utilizing its labor force and machine shop capability. Some components are
specially designed for specific products and are purchased from a single vendor.
A ceramic component that is used in the seismic hydrophone product is purchased
from a single vendor, although the Company believes that there are other vendors
that possess the capability to provide a replacement component. The Company's
glass flotation products are also purchased from a single vendor, Motorola
Corp., although similar products could be obtained from other vendors. The
Company has not experienced any problems with the supply of its raw materials
and it believes that its sources of supply are adequate for its present and
future requirements.
6. Dependence on Major Customers.
Although the Company has a number of major customers, during the first nine
months of fiscal 1996, no one customer represented more than 10% of the
Company's total revenue. During the first nine months of fiscal 1996, sales to
the Miller Brewing Company represented approximately 9% of the Company's sales
and approximately 15% of the sales of the Container Inspection Systems Division.
The Company does not have a written purchase agreement with Miller Brewing
Company, other than a purchase order.
7. Patents, Trademarks and Other Agreements
The Company possesses several patents pertaining to the design and
manufacture of its products. Several names utilized by the Company are also
trademarked. It is the Company's policy to
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seek patent protection on products and designs that it considers important to
its future. However, the Company believes that quality and technical
superiority, rather than patent protection, are the most important criteria for
its future success.
The Company does not license any of its patents or designs to others at
this time. The Company is currently a licensee under a non-exclusive license
pertaining to the design of its seismic hydrophone product from The Penn State
Research Foundation.
8. Government Approvals and Contracts
There are no government approvals required for any of the products
currently manufactured by the Company. Certain products of the Undersea Systems
Division cannot be sold to certain countries under U.S. export controls. The
Company does not anticipate that these export restrictions will be removed in
the near future.
During the first nine months of fiscal 1996, approximately 10% of the sales
of the Undersea Systems Division were derived from military procurement
contracts, particularly contracts with the U.S. Navy. Accordingly, these
revenues will continue to be subject to the risks of changes in government
appropriations and changes in national defense policies and priorities. There
can be no assurance that the U.S. Navy will continue to purchase the Company's
products.
9. Effect of Government Regulations
The Company is not aware of any government regulations or pending
legislation that would affect the future sale of its products.
10. Research and Development
The Company maintains an internal staff of engineers and external
consultants with experience and expertise in the technologies it utilizes. The
majority of research and development programs are internally funded. Research
and development expenditures were $914,000 and $598,000, for the fiscal years
ended September 30, 1994 and 1995, respectively; and $431,000 and $441,000, for
the nine months ended July 2, 1995 and June 30, 1996, respectively. In addition,
the Company has an ongoing technical consulting agreement with William D.
McElroy, an expert in undersea acoutics.
11. Environmental Protection Regulations
The Company believes that its compliance with current federal, state, and
local environmental regulations will not have a material adverse effect on its
capital expenditures, earnings, or competitive position.
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12. Employees
As of June 30, 1996, the Company employed 63 full-time individuals, 13 of
whom were engaged in research and development, 26 in manufacturing and 24 in
sales, marketing and administrative positions. None of the Company's employees
is covered by a collective bargaining agreement. The Company believes that it
maintains good relations with its employees.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Overview
The Company was founded in 1962 to act as a supplier of oceanographic
products. Over the last 34 years, the Company has developed and acquired new
technology and products. Currently, the Company consists of two distinct
divisions: the Undersea Systems Division and the Container Inspection Systems
Division. The Container Inspection Systems Division was formed in 1971 using
aspects of acoustic technology (originally developed for oceanographic products)
and applied to the testing of cans and bottles.
During the last three years, the Company has been going through a period of
marketing and product transition. From 1962 to 1993 the Company's sales were
primarily in the Undersea Systems Division, predominantly to educational,
governmental and research institutions. During fiscal 1994 and 1995, the sales
in these markets declined as government funding for these institutions was
reduced primarily as a result of a decrease in governmental expenditures for
military and scientific purposes. During the same period, the sales of the
Container Inspection Systems Division increased by 67.6%, from $3,071,000 in
fiscal 1994 to $5,146,000 during the first nine months of fiscal 1996. Recent
growth in the Container Inspection Systems Division has been spurred in large
part by the sale of equipment to the North American brewery industry.
Results of Operations
The following table presents, for the periods indicated, certain
consolidated statements of income data. The Company's quarterly financial
statements are based upon fiscal quarters consisting of thirteen weeks.
Accordingly, interim financial information reported for a nine month period
consists of data for a 39 week period ended on the dates specified.
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<TABLE>
<CAPTION>
Year Ended Nine Months Ended
September 30 July 2, June 30,
---------------- -------- --------
1994 1995 1995 1996
------- ------- -------- --------
(In Thousands)
<S> <C> <C> <C> <C>
Net Sales $9,506 $8,014 $6,196 $8,874
Cost of sales 4,815 4,033 2,977 3,988
------ ------ ------ ------
Gross profit 4,691 3,981 3,219 4,886
Operating expenses:
Selling, general and
administrative 3,415 3,010 2,325 2,889
Research and development 914 598 431 441
------ ------ ------ ------
Total operating expenses 4,329 3,608 2,756 3,330
Operating income 362 373 463 1,556
Interest expense, net 90 125 97 82
------ ------ ------ ------
Income before income taxes 272 248 366 1,474
Provision for income taxes 67 86 128 516
------ ------ ------ ------
Net income $ 205 $ 162 $ 238 $ 958
====== ====== ====== ======
</TABLE>
The following table presents, for the periods indicated, the percentage
relationship of consolidated statements of income items to total sales.
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
September 30, July 2, June 30,
------------------ -------- ---------
1994 1995 1995 1996
------- ------- -------- ---------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 50.7 50.3 48.0 44.9
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Gross profit 49.3 49.7 52.0 55.1
Operating expenses:
Selling, general and
administrative 35.9 37.6 37.5 32.6
Research and development 9.6 7.5 7.0 5.0
----- ----- ----- -----
Total operating expenses 45.5 45.1 44.5 37.6
----- ----- ----- -----
Operating income 3.8 4.6 7.5 17.5
Interest expense, net 0.9 1.5 1.6 0.9
----- ----- ----- -----
Income before income taxes 2.9 3.1 5.9 16.6
Provision for income taxes 0.7 1.1 2.1 5.8
----- ----- ----- -----
Net income 2.2% 2.0% 3.8% 10.8%
===== ===== ===== =====
</TABLE>
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Nine months Ended July 2, 1995 and June 30, 1996
Sales. Total sales increased by 43.2% to $8,874,000 for the nine months
ended June 30, 1996 from $6,196,000 for the same period in 1995. Sales of the
Container Inspection Systems Division increased by 85.5% to $5,144,000 for the
same period in fiscal 1996 from $2,773,000 in the first nine months of fiscal
1995. This increase was attributable primarily to the continued penetration of
the TapTone II inspection system into the brewery market. Sales of the Undersea
Systems Division increased by 9.0% to $3,730,000 for the first nine months of
fiscal 1996 from $3,423,000 for the corresponding period in fiscal 1995. The
increase in oceanographic product sales was a result of increased shipments
among the Undersea Systems Division's acoustic, imaging and robotics product
lines. The introduction of a new digital still camera and the E-ROV remotely
operated vehicle for the nuclear power industry were the primary contributors to
the increased activity in this division.
Gross Profit. Gross profit increased by 51.8% to $4,886,000 for the first
nine months of fiscal 1996 from $3,219,000 for the corresponding period in 1995.
As a percentage of revenue, gross profit increased to 55.1% for the first nine
months of fiscal 1996 compared to 52.0% for the same period in fiscal 1995. The
increase in gross margin was attributable to the increased sales in the higher
margin TapTone product line, while the Undersea Systems Division's contribution
decreased. The decrease in the Undersea Systems Division's profit margin was
attributable to higher than expected manufacturing startup costs for the new RDA
hydrophone product; a high level of low margin engineering specials activity and
the additional provision for excess and obsolete inventory.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by 24.1% to $2,889,000 for the nine months
ended June 30, 1996 from $2,325,000 in the same period in fiscal 1995. As a
percentage of sales, selling, general and administrative expenses decreased to
32.6% for the 1996 period compared to 37.5% for the same period in the prior
year. This decrease was attributable to the growth in sales during a period in
which the primary increase in selling, general and administrative expenses was
in direct sales commissions, trade shows and promotional activities.
Research and Development Expenses. Research and development expenses
increased 2.3% to $441,000 for the first nine months of fiscal 1996 from
$431,000 for the same period in the prior year. As a percentage of sales these
expenses decreased from 7.0% in 1995 to 5.0% in 1996. The decrease was
attributable to the increase in sales levels as well as a reassessment of the
Company's research and development expenses to enable the Company to take
advantage of its current technological advantage in the TapTone product line.
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Interest Expense, Net. Interest expense, net, decreased by 12.8% to
$82,000 for the first nine months of fiscal 1996 from $97,000 for the same
period in the prior year. The decrease is attributable to reduced level of
borrowings for the first nine months of fiscal 1996. Interest income for the
periods was negligible.
Years Ended September 30, 1995 and 1994
Sales. Total sales decreased 15.7% to $8,014,000 for fiscal 1995 from
$9,506,000 for fiscal 1994. Sales within the Container Inspection Systems
Division increased 18.6% to $3,643,000 for fiscal 1995 from $3,071,000 for
fiscal 1994. The increase was attributable primarily to the sale of the TapTone
II inspection system into the brewery market. TapTone division sales
represented 45.5% of total Company sales. Sales of the Undersea Systems
Division decreased 31.0% to $4,371,000 for fiscal 1995 from $6,335,000 for
fiscal 1994. The decrease in the Undersea Systems Division sales was
representative of an overall global softening of this market. Oil prices
remained low which limited exploration activities. Government funded research
and defense-related programs were also drastically cut.
Gross Profit. Gross profit for fiscal 1995 decreased 15.1% to $3,981,000
from $4,691,000 for fiscal 1994. As a percentage of sales, the gross profit
increased slightly to 49.7% for fiscal 1995 compared to 49.3% for fiscal 1994.
The Container Inspection Systems Division's contribution to gross profit
increased for the same period for fiscal 1995 compared to fiscal 1994 and the
undersea systems division's contribution decreased for the same period.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased 11.9% to $3,010,000 for fiscal 1995 from
$3,415,000 for fiscal 1994. This decrease was attributable to the reduction in
direct sales commissions and general and administrative expenses.
Research and Development Expenses. Research and development expenses
decreased 34.5% to $598,000 for fiscal 1995 from $914,000 for fiscal 1994. The
decrease in research and development expenses was attributable to the reduced
staffing in robotics and the delay of some development projects.
Interest Expense, Net. Interest expense, net, increased 38.9% to $125,000
for fiscal 1995 from $90,000 for fiscal 1994. This increase was attributable to
the increased borrowing under the Company's line of credit.
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Liquidity and Capital Resources
The Company's principal capital requirement is to provide working capital
to support its growth. The Company has short- term financing available under a
$1,500,000 line of credit facility with a local bank.
As of June 30, 1996, the Company had cash and cash equivalents of
approximately $959,000 as compared to a balance of $17,000 on September 30,
1995. Operating income as of June 30, 1996 was $957,530 compared to $238,181
for the same period in 1995. Accounts receivable increased by $97,748 as a
result of increased sales, offset somewhat by increased advanced deposits from
TapTone customers. Inventories increased by $561,933 in order to support the
higher orders and sales volumes and to support an increase in customer
demonstration systems for TapTone systems. Prepaid expenses increased by
$146,779 due primarily to increases in customer advance payments for Taptone
systems. Accounts payable increased by $986,318 entirely as a result of
increased inventory procurement and improved cash management. Net cash provided
by operating activities increased to $1,479,587 as of June 30, 1996 as compared
to cash used of $65,532 for the nine months ended July 2, 1995.
For the period ended June 30, 1996 the Company used cash of $180,678
for investing activities. Of this total, $146,802 was used to purchase
property, plant and equipment. The remaining $33,876 were expenditures for
patents, trademarks and other assets.
Cash flows from financing activities for the period ended June 30, 1996
included the purchase of treasury stock for $92,232, sale of treasury stock to
the Company's ESOP of $6,884 and $27,500 realized from the exercise of stock
options. The Company used $275,000 to pay down its short term line of credit
during the period. The Company made payments of $24,982 on its long term debt
during the nine months ended June 30, 1996. These items resulted in net cash
used by financing activities of $357,740 for the period.
As of June 30, 1996, cash and cash equivalents increased by $941,169 as
compared to a decrease of $161,574 for the period ended July 2, 1995.
The Company has a line of credit for $1,500,000 which is collateralized by
the assets of the Company. As of June 30, 1996, the Company had no outstanding
advances against the line of credit. The Company also has a mortgage on its
office and manufacturing facilities as detailed in Note 3 to Consolidated
Financial Statements.
The Company believes that existing cash balances, current line of credit
arrangement and cash anticipated to be generated from operations will be
sufficient to finance the Company's operations for the next twelve months. A
portion of the Company's cash may be used to acquire or invest in complementary
businesses or products or to obtain the right to use complementary technologies.
From time to time, in the ordinary course of business, the Company evaluates
potential acquisitions of such businesses, products or technologies. The
Company has no current agreements or commitments, and is not currently engaged
in any negotiations with respect to any such transaction.
Prospects for the Future
Undersea Systems Division
The Undersea Systems Division continues to focus its efforts on developing
commercial markets such as the offshore oil and gas exploration market and the
nuclear inspection market. The Company believes that a number of its products,
such as hydrophones, are well positioned to take advantage of technological
trends in these markets. Many of these markets, such as oil and gas
exploration, are cyclical in nature and subject to changes in domestic and
international economics. It is reasonable to expect that the Company's
participation in markets will be affected by these periodic business cycles.
The Company believes that the decline in U.S. Government and military
spending has reached its bottom. It is possible, however, that further declines
will be experienced or that future spending will continue at its present
depressed levels. It is also possible, however, that U.S. Government spending
will increase in the future, especially in the areas of offshore mineral
exploration and environmental research. The Company also believes that future
U.S. military expenditures for undersea products will increase in order to
maintain established fleet capabilities.
The Company is not aware of any trends or changes in market characteristics
for the markets served by its undersea products which would adversely affect
either sales or gross profits.
Container Inspection Systems Division
The industries served by the Container Inspection Systems Division continue
to be interested in improving process and quality control. Increased
competition within these industries, as well as increased product liability
exposure and an effort to improve operating yields and lower costs, have led to
an increase in capital spending for products and systems that help improve
quality and process control. These trends are favorable for the Company's
TapTone products and the Company expects these market characteristics to
continue in the future.
The Container Inspection Systems Division competes with a number of
domestic and international competitors. It is possible that increased
competitive pressures will be experienced in the future, affecting both sales
and gross profits. The Company is not aware of any technological trends that
would adversely affect the sales of its products within the industry segments
served by its Container Inspection Systems Division.
Profit Margins
Overall
Overall profit margins on the Company's products are influenced by the
relative mix of sales between the Undersea Systems Division and the Container
Inspection Systems Division. For the nine months ended June 30, 1996, sales of
the Container Inspection Systems Division increased to 58% of total Company
sales as compared to 45% for the same period ended July 2, 1995. This resulted
in an overall gross profit for the Company of 55.1% for the nine months ended
June 30, 1996 as compared to 52.0% for the same period ended July 2, 1995.
Undersea Systems Division
Profit margins on Undersea Systems Division products range from
approximately 30% for certain imaging systems products to more than 50% for
certain glass flotation products. Hydrophone products have gross profit margins
ranging between approximately 30% to 45%. The Company expects that the overall
sales mix of its undersea products will shift slightly in the future due to
increased sales of hydrophone products to the offshore oil and gas market. The
Company does not expect this sales mix to adversely affect overall profit
margins. It is possible that increased competition will result in lower
realized selling prices for certain products, especially hydrophones, resulting
in reductions in product profit margins. The Company is not aware of other
trends or competitive pressures that would adversely affect either product mix
or gross profit margin within its glass flotation, imaging, ROV and acoustic
product lines.
Container Inspection Systems Division
Profit margins on Container Inspection Systems Division products range
between approximately 45% and 65%. The Company expects that the sales mix of
different products will not significantly change and will not adversely affect
overall divisional gross margins in the future. It is possible that increased
competition will result in an overall reduction of selling prices and associated
profit margins. The Company is not aware of any technological trends or
marketplace trends which would adversely affect gross margins on these product
lines.
ITEM 3. DESCRIPTION OF PROPERTY
The Company owns its corporate offices in North Falmouth, Massachusetts,
which consist of 35,000 square feet of office and light industrial manufacturing
space in two single-story, industrial buildings on a 34 acre rural setting. The
Undersea Systems Division and the Container Inspection Systems Division are
housed in separate facilities, each with its own dedicated engineering,
manufacturing, testing and sales administration staff. All facilities have been
recently modernized and are in good condition.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following information is furnished as of September 30, 1996 with
respect to the beneficial ownership of shares of Common Stock of the Company by
the directors and executive officers of the Company, all of the directors and
officers of the Company as
13
<PAGE>
a group and all persons known to be the beneficial owners of more than five
percent of such outstanding stock. Unless otherwise indicated, persons named
below held sole voting and investment power over the shares listed below as of
September 30, 1996.
In accordance with the rules of the Securities and Exchange Commission,
shares which an individual has the right to acquire pursuant to stock options
which are exercisable within sixty days are considered to be beneficially owned.
For purposes of calculating the percentage ownership of stock for an individual
who holds exercisable stock options, such shares were also considered to be
outstanding. Reference should be made to the footnotes below for further
information as to each individual listed.
<TABLE>
<CAPTION>
Shares Percent of Outstanding
Name and Address (1) Beneficially Owned Common Stock
<S> <C> <C>
Samuel O. Raymond 181,653 (2) 22.5%
Ronald K. Church 85,500 (3) 10.6%
State Street Bank and Trust
Company, Trustee of the
Benthos, Inc. Employee
Stock Ownership Plan 37,363 (4) 4.6%
John L. Coughlin
A. Theodore Mollegen, Jr. 15,000 1.9%
Thurman F. Naylor 15,000 (5) 1.8%
Stephen D. Fantone 13,000 (6) 1.6%
All directors and officers
as a group (5 persons) 224,653 (7) 27.2%
</TABLE>
(1) Except as set forth below, the address of each of the individuals set
forth in the table is c/o Benthos, Inc., 49 Edgerton Drive, Falmouth,
Massachusetts 02556. The address of Ronald K. Church is 46 Riddle
Hill Road, Falmouth, Massachusetts 02540. The address of State
Street Bank and Trust Company is 225 Franklin Street, Boston,
Massachusetts 02110.
(2) Includes 21,822 shares owned by Mr. Raymond's children, as to which
shares Mr. Raymond disclaims beneficial ownership.
14
<PAGE>
(3) Includes 12,000 shares owned by Mr. Church's wife, as to which shares
Mr. Church disclaims beneficial ownership.
(4) Pursuant to the terms of the plan, the Trustee is entitled to vote all
shares, except in respect of corporate matters requiring more than a
majority stockholder vote, in which case the plan participants are
entitled to direct the Trustee as to the manner in which all shares
allocated to such participants' accounts are to be voted. Following
the effective date of this registration statement, plan participants
will be entitled to direct the Trustees as to the manner in which all
shares allocated to such participants' accounts are to be voted.
(5) Consists of 15,000 shares which Mr. Naylor has the right to acquire
through the exercise of a stock option granted January 29, 1993.
(6) Includes 5,000 shares which Dr. Fantone has the right to acquire
through the exercise of a stock option for 15,000 shares granted
January 19, 1995.
(7) Includes an aggregate of 20,000 shares which the directors and
officers have the right to acquire through the exercise of certain
options.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
The current directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Samuel O. Raymond 67 Chief Scientist and Chairman of the Board
of Directors
John L. Coughlin 44 President and Chief Executive Officer,
Treasurer and Director
A. Theodore Mollegen, Jr. 59 Director
Thurman F. Naylor 76 Director
Stephen D. Fantone 43 Director
</TABLE>
15
<PAGE>
The Company's board of directors is classified into three classes, with the
members of the respective classes serving for staggered three-year terms. The
first class, consisting of Mr. Coughlin, is eligible for re-election at the 1997
annual meeting; the second class, consisting of Mr. Mollegen and Dr. Fantone, is
eligible for re-election at the 1998 annual meeting; the third class, consisting
of Messrs. Raymond and Naylor, is eligible for re-election at the 1999 annual
meeting.
The following information is provided with respect to the business
experience of each director and executive officer of the Company:
Mr. Raymond founded the Company in 1962 and served as its President for
twenty years. He previously served as Chairman of the Board from 1965-1982 and
has been the current Chairman since 1989. Mr. Raymond served as the President
and Chief Executive Officer of the Company from June 1995 to April 1996. Mr.
Raymond has served as a director of the Company since 1965. Mr. Raymond has a
B.S. in Mechanical Engineering from M.I.T. and was instrumental in the
development and marketing of many of the Company's original products in both the
Undersea Systems Division and the Container Inspection Systems Division.
Mr. Coughlin has served as President, Chief Executive Officer and a
director of the Company since April 1996 and as Treasurer since October 1996.
Prior to joining the Company, he was President (1993-1996) and Vice President of
Sales and Marketing (1990-1993) of Dynisco Instruments, an operating division of
Dynisco, Inc., a wholly owned subsidiary of Berwind Industries. Dynisco
Instruments is a manufacturer of pressure and temperature measurement products
for the plastics industry. He holds a B.S. in Physics from Georgetown University
and an MS in Physics from Northeastern University.
16
<PAGE>
Dr. Fantone became a director of the Company in March 1995. Since
1982, he has been President of Optikos Corporation, an optical engineering firm
which he founded and which specializes in the design of optical products and
instrumentation and optical test equipment. He has B.S. degrees in Electrical
Engineering and Management from M.I.T. and a Ph.D. in optics from the University
of Rochester. Dr. Fantone has been awarded over 25 patents and is the author of
numerous technical papers and articles on optical technology. He is also
currently a Senior Lecturer in the Mechanical Engineering Department at M.I.T.
Mr. Mollegen has served as a director of the Company since 1985. He
is the President and Chief Executive Officer of Allied Resources Corporation, a
company which provides technical training, engineering, health management, and
safety management services to industrial firms. Prior to joining Allied
Resources in 1993, Mr. Mollegen was Chairman and Chief Executive Officer of
Analysis & Technology, Inc., a provider of engineering and technical services to
the U.S. Navy. Mr. Mollegen has a B.E. in Electrical Engineering from Yale
University and is the author of over 90 technical papers and reports on undersea
topics. He is a member of the board of Technology for Connecticut (TECHCONN),
Inc. and of the Southeast Area Technology Development Center (SEATECH). He is
also a member of the Forum of Connecticut College and a member of the Advisory
Committee of the University of New Haven Southeast Branch.
Mr. Naylor is President of Cameras and Images International, Inc. (a
dealer in photographic images and equipment), is the owner and founder of the
Naylor Museum of Photography in Brookline, Massachusetts, and has served as a
director of the Company since 1987. Mr. Naylor is an internationally recognized
authority on photographic history, processes, and technology. Mr. Naylor is the
former Chairman, President and CEO of Standard- Thomson Corporation, a
manufacturer of temperature and pressure controls and electronic equipment. Mr.
Naylor was also the former Chairman, President and CEO of Thomson International
Corporation (1959-1989), a manufacturer of temperature controls with engineering
and manufacturing facilities in twelve countries. Mr. Naylor has a B.A. in
Economics from Fordham University and a B.S. in Mechanical Engineering from The
Johns Hopkins University. Mr. Naylor is also a member of the Board of Directors
of Analysis & Technology, Inc., Sandler Productions, Inc. (motion picture and
television production) and Summit Industries, Inc. (a manufacturer of x-ray
equipment).
On September 27, 1996, J. Luke Sabella resigned as the Company's
Treasurer and Chief Financial Officer, positions in which he served since July
1993. Mr. Sabella's resignation was amicable and did not reflect any dispute or
disagreement with the Company.
There are no family relationships among the directors or executive
officers of the Company.
None of the following events have occurred within the past five years
with respect to any director or executive officer of the Company or, to the
knowledge of the Company, any person
17
<PAGE>
owning 5% or more of the outstanding shares of Common Stock of the Company:
(1) Any bankruptcy petition filed by or against any business of which such
person as a general partner or executive officer either at the time of
the bankruptcy or within two years prior to that time;
(2) Any conviction in a criminal proceeding or being subject to a pending
criminal proceeding (excluding traffic violations and other minor
offenses);
(3) Being subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of
business, securities or banking activities; and
(4) Being found by a court of competent jurisdiction (in a civil action),
the Commission or the Commodity Futures Trading Commission to have
violated a Federal or State securities or commodities law, and the
judgment has not been reversed, suspended, or vacated.
ITEM 6. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the compensation paid by the Company for the
Company's last three fiscal years to the two persons who served as Company's
chief executive officer during the Company's fiscal year ended September 30,
1995. No other executive officers received an annual salary and bonus exceeding
$100,000.
<TABLE>
<CAPTION>
Name and Fiscal Annual Compensation All Other
--------------------
Principal Position Year Salary Bonus Compensation (1)
- ------------------------- ------ ---------- -------- ----------------
<S> <C> <C> <C> <C>
Samuel O. Raymond 1995 $ 85,176 494 $ 606
Chairman, Chief 1994 85,800 6,000 456
Scientist, President 1993 85,670 -- 1,291
and Chief Executive
Officer (2)
Lawrence W. Gray, 1995 88,362 494 171,523
President and Chief 1994 114,305 24,390 1,750
Executive Officer (3) 1993 130,981 20,000 2,278
All directors and 1995 273,024 1,097 172,772
officers as a group 1994 280,778 40,300 2,316
(6 in all) 1993 316,863 25,000 5,610
</TABLE>
18
<PAGE>
(1) Includes amounts contributed to individual accounts with the Company's
Employee Stock Ownership Plan and 401(k) Retirement Plan described
below and $171,523 in severance pay to Mr. Gray incurred with respect
to fiscal 1995.
(2) Mr. Raymond served as Chief Scientist and Chairman of the Board of
Directors throughout the last three fiscal years. In addition, he
served as President and Chief Executive Officer from June 1995 to
April 1996.
(3) Mr. Gray served as President and Chief Executive Officer until June 5,
1995.
The Company's policy is to pay each of its non-employee directors a fee of
$750 for each directors' meeting attended and to reimburse travel expenses when
incurred. The Company intends to continue this policy in the future.
No stock options were granted to or exercised by any of the executive
officers named in the Summary Compensation Table above during the fiscal year
ended September 30, 1995 and no such executive officer held any unexercised
options as of that date.
Employment Contracts
In 1990, the Company entered into an employment agreement with Samuel O.
Raymond as its Chief Scientist and as Chairman of the Board of Directors for as
long as he is elected to that position at a base salary of $85,176 per year.
This agreement commenced on August 1, 1990 and will expire on July 31, 2005.
After the expiration of the initial term, the agreement will automatically be
renewed annually as of August 1, 2005 and each August 1 thereafter. The
agreement also provides that if a change in control of the Company should occur
during the first, second or last five years of the initial term of the
agreement, Mr. Raymond is entitled to receive $427,974, $335,504, or $199,636,
respectively, from the Company. The Company has also agreed to pay the premium
on a $1,500,000 life insurance policy on Mr. Raymond's life under a split dollar
plan.
The Company has entered into an employment agreement with John L. Coughlin,
effective April 8, 1996, pursuant to which Mr. Coughlin agrees to serve as the
President and Chief Executive
19
<PAGE>
Officer of the Company. The agreement provides for an initial base salary of
$144,000 and an initial bonus of $20,000 payable October 1, 1996 provided that
Mr. Coughlin is employed by the Company on that date. In addition, pursuant to
the agreement, Mr. Coughlin was granted an incentive stock option to purchase
50,000 shares of the Company's Common Stock at an exercise price of $6.50 per
share, vesting in four equal annual installments commencing on the first
anniversary of the date of grant.
Employee Stock Ownership Plan
Employees of the Company who are over the age of 19 and have completed one
year of service are eligible to participate in the Benthos, Inc. Employee Stock
Ownership Plan (the "ESOP"), originally adopted by the Company in 1979. The
ESOP is administered by a committee approved by the Board of Directors (the
"ESOP Committee"). The Company may make annual contributions to the Trustee of
the Plan, State Street Bank and Trust Company, Boston, Massachusetts, in an
amount determined by the Board of Directors. Such contributions are invested by
the Trustee, under the direction of the ESOP Committee, in the Company's stock.
Contributions are allocated among participants' individual accounts in
proportion to their individual annual compensation. Benefits become vested
according to years of service, increasing incrementally from 20% after one year
of service to 100% after five years of service. Upon an employee's retirement,
benefits are distributable in shares of the Company's stock.
401(k) Retirement Plan
All employees who are over the age of 19 are eligible to participate in the
Section 401(k) Retirement Plan adopted by the Company effective July 1, 1987
(the "401(k) Plan"). The 401(k) Plan is administered by the Company. Pursuant
to the 401(k) Plan, three types of contributions may be made to a Trust Fund for
which IDS Bank and Trust Company serves as Trustee. First, an employee may
defer a certain amount of salary each calendar year. In addition, the Company
makes matching contributions and may make additional contributions which are
allocated among participants who have completed at least one year of service.
All contributions are subject to certain percentage limitations set forth in the
Internal Revenue Code, and the plan contains certain vesting requirements.
Withdrawal of contributions by a participant prior to retirement age (as that
term is defined in the plan) is only permitted in limited circumstances as
defined in the plan and generally tax penalties are imposed upon participants
who withdraw their contributions prior to age
59-1/2.
20
<PAGE>
Supplemental Executive Retirement Plan
The Supplemental Executive Retirement Plan became effective August 1, 1990
for the benefit of certain members of management as determined from time to time
by the Board of Directors. The plan enables participants to exclude from gross
income elective amounts paid on their behalf by the Company to a Retirement
Trust Fund to be subsequently paid to the participants after retirement. It is
administered by an Administrative Committee consisting of Samuel O. Raymond and
Stephen D. Fantone.
The Company has established the Benthos, Inc. Supplemental Executive
Retirement Trust Fund and will transfer to the trust fund, on an annual or more
frequent basis, an amount equal to the elective deferrals made by the
participants. No such elective deferrals had been made by participants as of
September 30, 1995. Samuel O. Raymond and Stephen D. Fantone are Trustees of the
Trust Fund.
1990 Stock Option Plan
a. Description of the Plan
The 1990 Stock Option Plan (the "1990 Plan") was approved by the
stockholders of the Company on January 26, 1990. Two hundred thousand (200,000)
shares of the authorized but unissued or treasury shares of the Common Stock of
the Company have been reserved for the grant of options under the 1990 Plan.
The 1990 Plan will terminate ten (10) years from December 20, 1989.
The 1990 Plan is administered by the Board of Directors which may in its
sole discretion grant options to purchase shares and issue shares upon the
exercise of such options as provided in the plan. The Board may delegate its
powers, duties and responsibilities to a Committee, the members of which shall
be "disinterested persons" as described in the plan. The Board has delegated
its responsibilities to a committee of disinterested directors (the
"Compensation and Incentive Stock Option Committee").
The 1990 Plan provides for the grant of incentive stock options to officers
and key employees of the Company or of any subsidiary Company, and of non-
qualified options to officers, key employees and advisors of the Company or of
any of its subsidiaries. The Board of Directors determines the eligibility of
an individual, the designation of the type of option and the number of shares to
be optioned to an eligible individual, taking into account the position and
responsibilities of the individual being considered, the nature and value of the
Company or its subsidiaries of such individuals' service, his or her present and
potential contribution to the success of the Company and such other factors as
the Board may deem relevant.
21
<PAGE>
More than one option may be granted to an eligible individual, although no
option which is designated as an incentive stock option shall be granted to an
individual who owns stock representing more than ten percent (10%) of the stock
of the Company unless the purchase price shall be at least one hundred ten
percent (110%) of the fair market value of the stock at the time the option is
granted.
No cash consideration is received by the Company for granting an option but
each option is evidenced by an option agreement. The option price of shares
designated as non- qualified options is determined by the Board of Directors.
The price for incentive stock options must be the fair market value of the
Common Stock at the time the option is granted as determined by the Board in
accordance with regulations under Section 422 of the Internal Revenue Code.
Payment for shares may be made in cash for the full amount or in shares already
held by the optionee, or by a combination of cash and shares, although the Board
of Directors must give consent to payment made in shares.
Options will be granted for a term not exceeding ten years as determined by
the Board of Directors at the time of the grant, subject to earlier termination
as specified in the Plan. Except as otherwise determined from time to time by
the Board of Directors, options may not be exercised during the first twelve
(12) months after the option is granted. Thereafter, options become exercisable
as to twenty-five percent (25%) of the shares covered thereby and as to an
additional twenty-five percent (25%) upon the expiration of each of the next
three (3) succeeding twelve (12) month periods. An optionee may exercise an
option which has become exercisable in full or in part. Options are not
transferable by the optionee and are held for purposes of investment in the
Company. The Company is prohibited under the Plan from making loans to
optionees to permit them to exercise options granted under the Plan.
b. Federal Income Tax Consequences
(i) Incentive Stock Options
An optionee will not recognize taxable income upon the grant or exercise of
an incentive stock option. Moreover, if stock acquired upon such exercise is
held for a least two years from the date on which the option is granted and at
least one year after the date of exercise, the optionee will not realize taxable
income as a result of exercising the option, and any gain or loss realized by
the optionee on the ultimate sale of such stock is treated as long-term capital
gain or loss.
22
<PAGE>
In the event that the optionee disposes of the stock prior to the
expiration of the required holding periods (a "disqualifying disposition"), the
optionee will realize ordinary income to the extent of the lesser of (i) the
excess of the fair market value of the stock at the time of exercise over the
exercise price, or (ii) the excess of the amount received for the stock upon
disposition over the exercise price. The basis in the stock acquired upon
exercise of the option will equal the amount of taxable income recognized by the
optionee plus the option exercise price. Upon eventual disposition of the
stock, the optionee will recognize long-term or short-term capital gain or loss,
depending on the holding period of the stock and the difference between the
amount realized by the optionee upon disposition of the stock and his basis in
the stock.
Notwithstanding the tax treatment accorded incentive stock options, the
excess of the fair market value of stock on the date of the exercise of the
option over the exercise price of the option is an item of tax preference for
alternative minimum tax purposes giving rise to potential tax liability at the
alternative minimum tax rate. If the alternative minimum tax does apply to the
optionee, an alternative minimum tax credit may reduce the regular tax upon
eventual disposition of the stock.
The Company will not be allowed an income tax deduction upon the grant or
exercise of an incentive stock option by the optionee. In addition, provided
that the holding requirements noted above are met, the Company will not be
allowed an income tax deduction upon the ultimate disposition by the optionee of
stock acquired through the exercise of an option. In the event, however, of a
disqualifying disposition, the Company will be allowed an income tax deduction
in an amount equal to the ordinary income recognized by the optionee.
(ii) Non-Qualified Stock Options
As in the case of incentive stock options, no income is recognized by the
optionee on the grant of a non-qualified stock option. On the exercise by an
optionee of a non-qualified option, the excess of the fair market value of the
stock when the option is exercised over its cost to the optionee will be (a)
taxable to the optionee and (b) generally deductible for Federal income tax
purposes by the Company.
The optionee's tax basis in his stock will equal his cost for the stock
plus the amount or ordinary income he had to recognize with respect to the non-
qualified stock option. Accordingly, upon a subsequent disposition of stock
acquired upon the exercise of a non-qualified option, the optionee will
recognize short-term or long-term capital gain or loss, depending
23
<PAGE>
upon the holding period of the stock, equal to the difference between the amount
realized upon disposition of the stock by the optionee and his basis in the
stock. Stock acquired on the exercise of a non-qualified stock option is not
subject to the above-mentioned two (2) year and one (1) year holding periods
that are imposed on incentive stock options and the exercise of a non-qualified
stock option does not give rise to an item of tax preference for alternative
minimum tax purposes.
As of September 30, 1996, options for the purchase of an aggregate of
144,500 shares of Common Stock at exercise prices ranging from $2.625 to $6.50
per share were outstanding under the 1990 Plan.
Stock Option Plan for Non-Employee Directors
This plan (the "Director Plan") was approved by the stockholders on March
4, 1994. Under the Director Plan, each director who is not an employee of the
Company will be entitled to receive (when he initially assumes office, and when
any other option held by such director expires), an option for the purchase of
15,000 shares of the Company's Common Stock at an exercise price equal to market
value as of the date of the grant of the option, provided that the maximum
number of shares which, in the aggregate, may be acquired under the Plan and
under any option outstanding on March 1, 1994 and held by a non-employee
director is 15,000 shares. The option will not be exercisable during the first
twelve months after the date of the grant. After twelve months, the option will
be exercisable as to one-third of the shares covered thereby. After twenty-four
months from the date of grant, the option will be exercisable as to two-thirds
of the shares covered thereby and after thirty-six months from the date of
grant, the option will be exercisable as to all of the shares covered thereby.
The options expire five years from the date of grant and are not transferable.
In the event the director ceases to serve as a director of the Company, the
option may be exercised only to the extent that the option is exercisable and is
in effect on the day such service ceases.
In the event of a sale or transfer of all or substantially all of the
assets of the Company, a merger into another corporation or a change in control
arising by reason of the acquisition by a person or group, owning prior to such
time less than 51% of the outstanding stock of the Company of additional shares
so that the person or group owns 51% or more of the outstanding stock, the
options will become exercisable in full, notwithstanding the exercise schedule.
Under certain circumstances, the Board of Directors may cancel the options for
consideration in cash or in kind so as to expedite a sale of assets or change in
control.
24
<PAGE>
The Director Plan provides that the number of shares issuable thereunder
shall be adjusted to prevent dilution in the event of any reorganization,
merger, consolidation, recapitalization, reclassification, stock split-up,
combination of shares or stock dividend.
The Director Plan may be terminated at any time by the Board of Directors
and will terminate in any event ten years from the date of its adoption by the
stockholders.
Each of the Company's present non-employee directors was granted an option
for the purchase of 15,000 shares of the Company's Common Stock as described in
Item 4 above. Although these options were granted prior to the adoption of the
Director Plan, the terms of such options are substantially the same as those
applicable to the Director Plan as described above, except that the options can
continue to be held by a director who ceases to be a director but continues to
serve as a consultant rendering advice and service similar to the advice and
service rendered by a director. Mr. Mollegan exercised his stock option for
15,000 shares on July 12, 1996.
The Federal income tax consequences upon grant and exercise of stock
options under the Director Plan are as described in "1990 Stock Option Plan -
Federal Income Tax Consequences - Non- Qualified Stock Options" above.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company is currently negotiating an agreement with a corporation wholly
owned by Dr. Stephen D. Fantone, a director of the Company, with respect to the
concept of utilizing optical means for assessing beverage container height of
fill. Under the proposed agreement, the Company will pay the development costs
to Dr. Fantone's corporation. If the technology is developed, the proprietary
rights will be owned by Dr. Fantone's corporation, which will grant an exclusive
license to the Company for the use of the technology upon terms and conditions
(including royalties) to be determined by negotiation. John L. Coughlin,
President and Chief Executive Officer of the Company is negotiating the contract
with Dr. Fantone. The Company's policy with respect to business relationships
with officers, directors, or affiliates is that any such relationships must be
fully disclosed to the Board of Directors and must be upon terms not less
favorable to the Company than those available from third parties dealing at
arm's length.
ITEM 8. LEGAL PROCEEDINGS
Not Applicable.
ITEM 9. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's Common Stock is traded over-the-counter and is listed on the
OTC Bulletin Board under the symbol BTHS. Company has applied for listing of its
Common Stock on the Nasdaq SmallCap market and experts said listing to be
effective immediately following the effectiveness of this registration
statement.
25
<PAGE>
The following table sets forth the high and low bid information for the
Company's Common Stock for the periods shown. Said quotations reflect inter-
dealer prices, without retail mark-up, mark-down, or commission, and may not
represent actual transactions.
<TABLE>
<CAPTION>
Quarter Ended High Low
<S> <C> <C>
December 31, 1993 $ 3.50 $2.75
March 31, 1994 3.50 2.00
June 30, 1994 2.75 1.50
September 30, 1994 2.25 1.50
December 31, 1994 2.50 1.75
March 31, 1995 3.75 1.50
June 30, 1995 5.25 1.88
September 30, 1995 7.25 5.25
December 31, 1995 7.25 3.50
March 31, 1996 7.50 4.25
June 30, 1996 16.00 6.00
</TABLE>
As of September 30, 1996, there were approximately 310 holders of record of
the Company's Common Sock.
The Company has never declared dividends on its Common Stock and does not
anticipate paying dividends in the foreseeable future.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
Periodically over the last three years the Company has sold Common Stock to
the Company's Employee Stock Ownership Plan and to certain individuals upon
exercise of employee stock options.
<TABLE>
<CAPTION>
No.
Date Shares Purchaser Transaction Proceeds
<S> <C> <C> <C> <C>
July 1996 15,000 A. Theodore Mollegen, Jr. Option Exercise $41,250
April 1996 10,000 Joel Rizzo Option Exercise 27,500
March 1996 1,496 ESOP Sale to ESOP 6,883
March 1994 3,273 ESOP Sale to ESOP 16,818
March 1993 2,378 ESOP Sale to ESOP 12,237
</TABLE>
The shares issued to Messrs. Mollegen and Rizzo are restricted securities
issued pursuant to a written contract relating to the compensation of such
persons, a transaction exempt from registration under the Securities Act
pursuant to Rule 701 thereunder. The shares issued to the ESOP were issued
pursuant to a written compensatory benefit plan in a transaction which did not
constitute a statutory "sale", or, in the alternative, was exempt from
registration under the Securities Act pursuant to Rule 701 thereunder.
ITEM 11. DESCRIPTION OF SECURITIES
The Company is authorized to issue 2,500,000 shares of Common Stock, $.0667
par value per share, of which 806,560 shares were issued and outstanding as of
September 3, 1996. The record
26
<PAGE>
holders of validly issued and outstanding shares of Common Stock are entitled to
one vote per share on all matters to be voted upon by stockholders.
The holders of Common Stock are entitled to such dividends, if any, as may
be declared by the Board of Directors in its discretion out of funds legally
available for that purpose and to participate pro rata in any distribution of
the Company's assets upon liquidation.
The holders of Common Stock have no preemptive rights nor are there any
redemption rights with respect to the Common Stock. The outstanding shares of
Common Stock are fully paid and nonassessable and not subject to further call or
assessment by the Company.
Certain provisions of Massachusetts law applicable to the Company could
have the effect of discouraging a third party from making a tender offer or
otherwise attempting to obtain control of the Company, even though such an
attempt might be beneficial to the Company and its stockholders.
Chapter 110D of the Massachusetts General Laws regulates "control share
acquisitions" of Massachusetts corporations. In general, this statute provides
that any stockholder of a corporation subject to the statute which acquires
beneficial ownership of 20% or more of the outstanding voting stock of a
corporation may not vote such stock unless the stockholders of the corporation
so authorize.
Under Chapter 110F of the Massachusetts General Laws, a publicly-held
Massachusetts corporation is prohibited from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person becomes an interested
stockholder, unless (i) the interested stockholder obtains the approval of the
corporation's board of directors before becoming an interested stockholder, (ii)
the interested stockholder acquires 90% of the outstanding voting stock of the
corporation (excluding shares held by certain affiliates of the corporation) at
that time it becomes an interested stockholder, or (iii) the business
combination is approved by both the board of directors and the holders of two-
thirds of the outstanding voting stock of the corporation (excluding shares held
by the interested stockholder). An "interested stockholder" is a person who,
together with its affiliates and associates, owns 5% or more the outstanding
voting stock of the corporation. A "business combination" includes a merger, a
stock or asset sale, and certain other transactions resulting in a financial
benefit to the interested stockholder. The Company may at any time elect not to
be governed by Chapter 110F by vote of a majority of its stockholders, but such
an election would not be effective for
27
<PAGE>
twelve months and would not apply to a business combination with any person who
became an interested stockholder before such election.
Section 50A of the Massachusetts Business Corporation Law provides that the
directors of a Massachusetts corporation which has a class of voting stock
registered under the Securities Exchange Act of 1934 shall be classified into
three classes, each of whom is to be elected for a three-year staggered term.
The Board of Directors of the Company has voted to classify the board as
described in Item 5, "Directors, Officers, Promoters and Control Persons."
The foregoing statements do not purport to be complete and are qualified in
their entirety by reference to the detailed provisions of the relevant statutes
or of the Company's Restated Articles of Organization and by-laws, copies of
which are filed as exhibits to this Registration Statement.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 7 of the Company's By-Laws provides, in effect, that each director,
officer, or employee of the Company appointed or elected by the Board of
Directors (and certain other persons) shall be indemnified by the Company
against any fine, penalty, liability or judgment (including amounts paid in
settlement and reasonable professional fees) incurred by an indemnified person
arising out of any action, suit or proceeding (civil, criminal, administrative
or investigative) brought or threatened, in which the indemnified person is
involved as a result of his service as a director, officer, or employee of the
Company. No indemnification shall be provided to any person in any proceeding
in which it shall have been adjudicated that he did not act in good faith in the
reasonable belief that his actions were in the best interest of the Company.
With respect to amounts paid in compromise or settlement, no indemnification
shall be provided to any person if it is determined by a majority of the
disinterested directors then in office or by the holders of a majority of the
outstanding stock that he did not act in good faith in the reasonable belief
that his actions were in the best interest of the Company.
The foregoing is a summary description of the more detailed indemnification
provisions contained in the Company's By-Laws and is qualified in its entirety
by reference to said By-Laws, a copy of which is filed herewith as Exhibit 3.2.
As permitted by Section 13(b)(1 1/2) of the Massachusetts Business
Corporation Law, Article VI of the Company's Articles of Organization, a copy of
which is filed herewith as Exhibit 3.1, provides as follows:
28
<PAGE>
"No director of the Corporation shall be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a
director notwithstanding any statutory provision or other law imposing such
liability, except for liability of a director (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 61 or 62 of Chapter 156B
of the Massachusetts General Laws [relating to unauthorized distributions
to stockholders and loans to insiders], or (iv) for any transaction from
which the director derived an improper personal benefit."
The Company maintains a directors and officers liability insurance policy
covering its directors and officers against liability for errors, omissions,
neglect or breach of duty in their capacity as officers or directors of the
Company, subject to standard exclusions and conditions.
ITEM 13. FINANCIAL STATEMENTS
The information required by this item is incorporated by reference to the
Financial Statements set forth on pages F-1 through F-15 hereof.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) The financial statements set forth in the Index to Consolidated
Financial Statements contained on page F-1 hereof are filed herewith
as a part of this registration statement.
(b) The exhibits set forth in the Exhibit Index on the page immediately
preceding the exhibits are filed herewith as a part of this
registration statement.
29
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant has caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
BENTHOS, INC.
By JOHN L. COUGHLIN
----------------------
John L. Coughlin,
President
Date: December 16, 1996
30
<PAGE>
BENTHOS, INC. AND SUBSIDIARY
Index to Consolidated Financial Statements
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Public Accountants F-2
Consolidated Balance Sheets as of September 30,
1994 and 1995 and June 30, 1996 (Unaudited) F-3
Consolidated Statements of Income for the Years Ended
September 30, 1993, 1994 and 1995 and for the Thirty-Nine
Weeks Ended July 2, 1995 and June 30, 1996 (Unaudited) F-4
Consolidated Statements of Stockholders' Investment for the
Years Ended September 30, 1993, 1994 and 1995 and for the Thirty-
Nine Weeks Ended June 30, 1996 (Unaudited) F-5
Consolidated Statements of Cash Flows for the Years
Ended September 30, 1993, 1994 and 1995 and for the Thirty-Nine
Weeks Ended July 2, 1995 and June 30, 1996 (Unaudited) F-6
Notes to Consolidated Financial Statements F-7
</TABLE>
F-1
<PAGE>
[LETTERHEAD OF ARTHUR ANDERSEN LLP APPEARS HERE]
Report of Independent Public Accountants
To Benthos, Inc.:
We have audited the accompanying consolidated balance sheets of Benthos, Inc. (a
Massachusetts corporation) and subsidiary as of September 30, 1994 and 1995, and
the related consolidated statements of income, stockholders' investment and cash
flows for each of the three years in the period ended September 30, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Benthos, Inc. and subsidiary as
of September 30, 1994 and 1995, and the results of their operations and their
cash flows for each of the three years in the period ended September 30, 1995,
in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
October 24, 1995
(Except for the matter
discussed in Note 8,
as to which the date
is December 16, 1996.)
F-2
<PAGE>
BENTHOS, INC. AND SUBSIDIARY
Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
September 30, June 30,
1994 1995 1996
(Unaudited)
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 189,623 $ 17,461 $ 958,630
Accounts receivable, less reserves of approximately $50,000, $71,000
and $140,000 at September 30, 1994 and 1995 and June 30, 1996,
respectively 701,739 996,299 1,094,047
Inventories 3,198,514 3,303,156 3,865,089
Prepaid expenses 65,202 65,009 211,788
Deferred tax asset 229,500 285,000 285,000
---------- ---------- ----------
Total current assets 4,384,578 4,666,925 6,414,554
---------- ---------- ----------
Property, Plant and Equipment, at cost:
Land 127,339 127,339 127,339
Buildings and improvements 1,737,336 1,868,548 1,878,043
Equipment and fixtures 1,790,934 1,969,007 2,106,314
Demonstration equipment 326,326 326,326 326,326
---------- ---------- ----------
3,981,935 4,291,220 4,438,022
Less-Accumulated depreciation 2,448,298 2,797,798 3,045,298
---------- ---------- ----------
1,533,637 1,493,422 1,392,724
---------- ---------- ----------
Other Assets 202,187 223,775 247,005
---------- ---------- ----------
$6,120,402 $6,384,122 $8,054,283
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Demand note payable $ - $ 275,000 $ -
Current maturities of long-term debt 30,908 41,628 44,143
Accounts payable 466,849 390,238 665,455
Accrued expenses 557,698 425,717 1,136,818
Customer deposits 50,284 329,473 413,526
---------- ---------- ----------
Total current liabilities 1,105,739 1,462,056 2,259,942
---------- ---------- ----------
Long-Term Debt, net of current maturities 902,651 868,658 841,251
---------- ---------- ----------
Commitments (Note 8)
Stockholders' Investment:
Common stock, $.0667 par value--
Authorized-2,500,000 shares
Issued-981,785 shares at September 30, 1994 and 1995 and
991,785 shares at June 30, 1996 65,482 65,482 66,149
Capital in excess of par value 636,274 636,274 663,107
Retained earnings 4,002,592 4,164,399 5,121,929
Treasury stock, at cost (592,336) (812,747) (898,095)
---------- ---------- ----------
Total stockholders' investment 4,112,012 4,053,408 4,953,090
---------- ---------- ----------
$6,120,402 $6,384,122 $8,054,283
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
<PAGE>
BENTHOS, INC. AND SUBSIDIARY
Consolidated Statements of Income
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
YEAR ENDED SEPTEMBER 30, JULY 2, JUNE 30,
1993 1994 1995 1995 1996
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net Sales $10,638,553 $9,505,911 $8,014,416 $6,195,857 $8,874,204
Cost of Sales 5,728,698 4,814,680 4,033,704 2,976,977 3,988,587
----------- ---------- ---------- ---------- ----------
Gross profit 4,909,855 4,691,231 3,980,712 3,218,880 4,885,617
Selling, General and
Administrative Expenses 3,418,393 3,415,025 3,009,931 2,325,542 2,888,844
Research and Development Expenses 863,194 914,188 597,798 430,500 441,301
----------- ---------- ---------- ---------- ----------
Income from operations 628,268 362,018 372,983 462,838 1,555,472
Interest Income 13 830 616 587 1,734
Interest Expense (86,131) (90,823) (125,792) (97,244) (83,676)
----------- ---------- ---------- ---------- ----------
Income before provision for
income taxes 542,150 272,025 247,807 366,181 1,473,530
Provision for Income Taxes 175,000 67,000 86,000 128,000 516,000
----------- ---------- ---------- ---------- ----------
Net income $ 367,150 $ 205,025 $ 161,807 $ 238,181 $ 957,530
=========== ========== ========= ========= =========
Net Income Per Common
and Common Equivalent Share $.41 $.24 $.18 $.27 $1.09
==== ==== ==== ==== =====
Weighted Average Common and Com-
mon Equivalent Shares Outstanding 892,366 871,411 890,111 883,109 876,291
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
<PAGE>
BENTHOS, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Investment
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL IN TREASURY STOCK, AT COST TOTAL
NUMBER $.0667 EXCESS OF RETAINED EARNINGS NUMBER STOCKHOLDERS'
OF SHARES PAR VALUE PAR VALUE OF SHARES AMOUNT INVESTMENT
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1992 981,785 $65,482 $641,115 $3,430,417 117,258 $(603,407) $3,533,607
Sale of treasury stock - - (3,081) - (2,378) 12,237 9,156
Purchase of treasury
stock - - - - 744 (2,864) (2,864)
Net income - - - 367,150 - - 367,150
--------- ---------- -------- ---------- ------- --------- ----------
Balance, September 30,
1993 981,785 65,482 638,034 3,797,567 115,624 (594,034) 3,907,049
Sale of treasury stock - - (1,760) - (3,273) 16,818 15,058
Purchase of treasury
stock - - - - 3,289 (15,120) (15,120)
Net income - - - 205,025 - - 205,025
--------- ---------- -------- ---------- ------- --------- ----------
Balance, September 30, 1994 981,785 65,482 636,274 4,002,592 115,640 (592,336) 4,112,012
Purchase of treasury
stock - - - - 72,786 (220,411) (220,411)
Net income - - - 161,807 - - 161,807
--------- ---------- -------- ---------- ------- --------- ----------
Balance, September 30, 1995 981,785 65,482 636,274 4,164,399 188,426 (812,747) 4,053,408
Sale of treasury stock
(unaudited) - - - - (1,496) 6,884 6,884
Purchase of treasury
stock (unaudited) - - - - 13,295 (92,232) (92,232)
Exercise of stock
options (unaudited) 10,000 667 26,833 - - - 27,500
Net income (unaudited) - - - 957,530 - - 957,530
--------- ---------- -------- ---------- ------- --------- ----------
Balance, June 30, 1996
(Unaudited) 991,785 $66,149 $663,107 $5,121,929 200,225 $(898,095) $4,953,090
========= ========== ======== ========== ======= ========= ==========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
F-5
<PAGE>
BENTHOS, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
YEAR ENDED SEPTEMBER 30, JULY 2, JUNE 30,
1993 1994 1995 1995 1996
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 367,150 $ 205,025 $ 161,807 $ 238,181 $ 957,530
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities--
Depreciation and amortization 445,920 340,522 362,340 266,529 258,146
Deferred income taxes (145,000) (125,000) (48,000) - -
Changes in assets and liabilities--
Accounts receivable 170,865 616,592 (294,560) (568,304) (97,748)
Inventories (414,075) (372,622) (104,642) (288,376) (561,933)
Prepaid expenses (39,875) 30,951 193 29,039 (146,779)
Accounts payable and accrued expenses 469,806 (144,170) (208,592) 208,778 986,318
Customer deposits - 50,284 279,189 48,621 84,053
--------- --------- --------- --------- ----------
Net cash provided by (used
in) operating activities 854,791 601,582 147,735 (65,532) 1,479,587
--------- --------- --------- -------- ----------
Cash Flows from Investing Activities:
Purchase of property, plant and
equipment (425,995) (225,990) (295,011) (275,962) (146,802)
Increase in other assets (24,577) (52,416) (41,928) (26,754) (33,876)
--------- --------- --------- -------- ----------
Net cash used in investing
activities (450,572) (278,406) (336,939) (302,716) (180,678)
--------- --------- --------- --------- ----------
Cash Flows from Financing Activities:
Purchase of treasury stock (2,864) (15,120) (220,411) (220,411) (92,232)
Sale of treasury stock 9,156 15,058 - - 6,884
Exercise of stock options - - - - 27,500
(Decrease) increase in demand note payable (260,000) (150,000) 275,000 450,000 (275,000)
Payments on long-term debt, net (150,996) (32,877) (37,547) (22,915) (24,892)
--------- --------- --------- --------- ----------
Net cash (used in) provided
by financing activities (404,704) (182,939) 17,042 206,674 (357,740)
Net (Decrease) Increase in Cash and
Cash Equivalents (485) 140,237 (172,162) (161,574) 941,169
Cash and Cash Equivalents, beginning
of period 49,871 49,386 189,623 189,623 17,461
--------- --------- --------- --------- ---------
Cash and Cash Equivalents, end of period $ 49,386 $ 189,623 $ 17,461 $ 28,049 $ 958,630
======== ========= ======== ======== =========
Supplemental Disclosure of Cash Flow
Information:
Interest paid during the period $ 86,129 $ 90,823 $125,791 $ 96,678 $ 83,676
======== ========= ======== ======== =========
Income taxes paid during the period $ 93,012 $ 186,356 $158,885 $131,569 $ 235,337
======== ========= ======== ======== =========
Supplemental Disclosure of Noncash
Investing and Financing Activities:
Equipment acquired under capital lease
obligations $ 29,995 $ - $ 14,274 $ 14,274 $ -
======== ========= ======== ======== =========
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
F-6
<PAGE>
BENTHOS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Including Data Applicable to Unaudited Periods)
(1) Operations and Significant Accounting Policies
Benthos, Inc. (the Company) designs, manufactures, sells and services
oceanographic and robotic equipment for underwater exploration, research
and defense, and electronic inspection equipment for the automated
assessment of the seal integrity of consumer food, beverage, pharmaceutical
and chemical containers. The Company's marketplaces are located throughout
the world.
The accompanying consolidated financial statements reflect the application
of certain significant accounting policies as described below and elsewhere
in the accompanying consolidated financial statements.
(a) Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary, Benthos International Inc., a
foreign sales corporation. All material intercompany transactions and
balances have been eliminated in consolidation.
(b) Management Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
(c) Cash and Cash Equivalents
The Company considers all highly liquid securities with original
maturities of three months or less to be cash equivalents.
(d) Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market. Work-in-process and finished goods inventories include
materials, labor and overhead. Inventories consist of the following at
September 30, 1994, 1995 and June 30, 1996:
<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Raw materials $ 182,286 $ 216,200 $ 223,174
Work-in-process 2,435,091 2,575,713 3,012,255
Finished goods 581,137 511,243 629,660
---------- ---------- ----------
$3,198,514 $3,303,156 $3,865,089
========== ========== ==========
</TABLE>
F-7
<PAGE>
BENTHOS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Including Data Applicable to Unaudited Periods)
(Continued)
(1) Operations and Significant Accounting Policies (Continued)
(e) Depreciation and Amortization
The Company provides for depreciation and amortization using the
straight-line and declining-balance methods by charges to operations in
amounts estimated to allocate the cost of the assets over their
estimated useful lives, as follows:
<TABLE>
<CAPTION>
ESTIMATED
ASSETS CLASSIFICATION USEFUL LIFE
<S> <C>
Buildings and improvements 15-33 Years
Equipment and fixtures 3-8 Years
Demonstration equipment 5 Years
</TABLE>
(f) Intangible Assets
The Company assesses the realizability of intangible assets in
accordance with Statement of Financial Accounting Standards (SFAS) No.
121, Accounting for Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of. The adoption of this standard did not have a
material effect on the Company's financial position or results of
operations.
(g) Revenue Recognition and Warranty Costs
The Company recognizes product revenue upon shipment. Amounts received
from customers for future delivery are shown as customer deposits in
the accompanying balance sheets. The Company has not provided for any
warranty reserves, as warranty costs incurred by the Company have been
insignificant.
(h) Net Income Per Share
Net income per share is based on the weighted average number of common
and common equivalent shares outstanding during each year. Common
equivalent shares include outstanding stock options to the extent
dilutive using the treasury stock method.
F-8
<PAGE>
BENTHOS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Including Data Applicable to Unaudited Periods)
(Continued)
(1) Operations and Significant Accounting Policies (Continued)
(i) Interim Financial Statements
The accompanying consolidated balance sheet as of June 30, 1996, the
consolidated statements of operations and cash flows for the thirty-
nine weeks ended July 2, 1995 and June 30, 1996, and the consolidated
statement of stockholders' investment for the thirty-nine weeks ended
June 30, 1996 are unaudited, but in the opinion of management have
been prepared on a basis substantially consistent with the audited
financial statements and include all adjustments, consisting only of
normal recurring adjustments necessary for a fair presentation of the
results of these interim periods. The results of the thirty-nine weeks
ended June 30, 1996 are not necessarily indicative of the results to
be expected for the year ending September 30, 1996.
(j) New Accounting Standard
In October 1995, the Financial Accounting Standards Board (FASB)
issued SFAS No. 123, Accounting for Stock-Based Compensation. The
Company has determined that it will continue to account for stock-
based compensation for employees under Accounting Principles Board
Opinion No. 25 and elect the disclosure-only alternative under SFAS
No. 123. The Company will be required to disclose the pro forma net
income or loss and per share amounts in the notes to the financial
statements using the fair-value-based method beginning in the year
ending September 30, 1997, with comparable disclosures for the year
ended September 30, 1996. The Company has not determined the impact of
these pro forma adjustments.
(k) Reclassifications
The Company has reclassified certain prior year information to conform
with the current year's presentation.
(l) Financial Instruments
The estimated fair value of the Company's financial instruments, which
include cash and cash equivalents, accounts receivable and
current/long-term debt, approximate their carrying value.
F-9
<PAGE>
BENTHOS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Including Data Applicable to Unaudited Periods)
(Continued)
(2) Accrued Expenses
Accrued expenses consist of the following at September 30, 1994, 1995 and
June 30, 1996:
<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Accrued commission $ 104,344 $ 85,013 $ 134,076
Accrued vacation 93,176 83,370 92,370
Accrued income taxes 97,716 68,071 347,124
Accrued 401(k)/ESOP 30,000 28,000 163,700
Other accrued expenses 232,462 161,263 399,548
--------- -------- ----------
$ 557,698 $425,717 $1,136,818
========= ======== ==========
</TABLE>
(3) Long-Term Debt
Long-term debt consists of the following at September 30, 1994, 1995 and
June 30, 1996:
<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Mortgage note payable to a bank in monthly payments of principal
and interest of $9,085 through June 2004, with the balance due
in July 2004, interest at 9.25%. The note is secured by land
and buildings. The Company is required to maintain certain
covenants, including debt service coverage, as defined $908,421 $882,337 $861,137
Obligations under capital leases 25,138 27,949 24,257
-------- -------- --------
933,559 910,286 885,394
Less-Current maturities of long-term debt 30,908 41,628 44,143
-------- -------- --------
$902,651 $868,658 $841,251
======== ======== ========
</TABLE>
The following table summarizes principal payments required on all long-term debt
as of September 30, 1995:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
<S> <C>
1996 $ 41,628
1997 37,556
1998 42,259
1999 37,365
2000 40,972
Thereafter 710,506
--------
$910,286
========
</TABLE>
F-10
<PAGE>
BENTHOS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Including Data Applicable to Unaudited Periods)
(Continued)
(4) Demand Note Payable
As of June 30, 1996, the Company has a $1,500,000 unsecured line of credit
with a bank. The Company had $275,000 outstanding under this line of credit
at September 30, 1995. There were no amounts outstanding under this line of
credit at June 30, 1996. Borrowings under this agreement are payable on
demand and bear interest at the bank's prime rate (8.25% at June 30, 1996).
The Company is required to maintain certain minimum ratios of liquidity and
debt to equity.
(5) Income Taxes
The Company accounts for income taxes under the liability method in
accordance with SFAS No. 109, Accounting for Income Taxes. Under the
liability method specified by SFAS No. 109, a deferred tax asset or
liability is determined based on the difference between the financial
statement and tax bases of assets and liabilities, as measured by the
enacted tax rates assumed to be in effect when these differences reverse.
The components of the provision for income taxes for each of the three
years in the period ended September 30, 1995 were as follows:
<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
Federal--
Current $ 270,000 $ 157,000 $ 210,000
Deferred (135,000) (100,000) (147,000)
--------- --------- ---------
135,000 57,000 63,000
--------- --------- ---------
State--
Current 50,000 35,000 55,000
Deferred (10,000) (25,000) (32,000)
--------- --------- ---------
40,000 10,000 23,000
--------- --------- ---------
$175,000 $ 67,000 $ 86,000
======== ======== =========
</TABLE>
The Company's effective tax rate differed from the statutory rate for the
reasons set forth below:
<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
Federal statutory rate 34.0 % 34.0 % 34.0 %
State income taxes, net of federal tax benefit 6.3 2.4 1.8
R&D credit (7.1) (9.4) -
Tax benefit of foreign sales corporation (2.5) (3.6) (2.8)
Other 1.6 1.2 1.7
---- ---- ----
Effective tax rate 32.3 % 24.6 % 34.7 %
==== ==== ====
</TABLE>
F-11
<PAGE>
BENTHOS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Including Data Applicable to Unaudited Periods)
(Continued)
(5) Income Taxes (Continued)
The components of the net deferred tax asset recognized in the accompanying
consolidated balance sheets are as follows:
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
Deferred tax assets are primarily the
result of temporary differences, includ-
ing nondeductible reserves and accruals $ 296,000 $ 486,000
Valuation allowance (26,000) (168,000)
--------- ---------
Net deferred tax asset $ 270,000 $ 318,000
========= =========
</TABLE>
Due to the uncertainty surrounding the timing of the realization of the
benefits of certain of its favorable tax attributes in future tax returns,
the Company has placed valuation allowances of approximately $26,000 and
$168,000 as of September 30, 1994 and 1995, respectively, against its
otherwise recognizable net deferred tax assets. At September 30, 1994 and
1995, $40,500 and $33,000, respectively, of the deferred tax asset were
classified as long-term and included in other assets.
(6) Employee Benefit Plans
(a) Stock Option Plans
The Company has granted to certain directors and an outside consultant
nonqualified stock options to purchase shares of the Company's common
stock at a price not less than the fair market value of the shares at
the date of grant. The options are exercisable ratably over a three-
year period, commencing one year from the date of grant, and expire
not more than five years from the date of grant. At September 30,
1995, 65,000 shares of common stock were reserved for issuance upon
exercise of the nonqualified stock options that expire on or before
July 1996. At September 30, 1995, 10,000 shares were available for
grant.
In January 1990, the Company adopted the 1990 Stock Option Plan (the
1990 Plan), pursuant to which 200,000 shares of the Company's common
stock were reserved for issuance. The 1990 Plan is administered by the
Board of Directors and provides for the granting of incentive stock
options and nonqualified stock options. The options are exercisable
ratably over a four-year period, commencing one year from the date of
grant, and expire not more than 10 years from the date of grant. The
purchase price applicable to incentive stock options granted may not
be less than the fair market value as of the date of grant. At
September 30, 1995, 130,000 shares were available for grant.
F-12
<PAGE>
BENTHOS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Including Data Applicable to Unaudited Periods)
(Continued)
(6) Employee Benefit Plans (Continued)
(a) Stock Option Plans (Continued)
Stock option activity is summarized as follows:
<TABLE>
<CAPTION>
INCENTIVE STOCK OPTIONS NONQUALIFIED STOCK OPTIONS
NUMBER NUMBER
OF SHARES PRICE RANGE OF SHARES PRICE RANGE
<S> <C> <C> <C> <C>
Outstanding, September 30, 1992 106,450 $2.31-$2.63 65,000 $2.75-$4.25
Granted - - 30,000 2.88- 3.13
Terminated (50,950) 2.31- 2.63 (40,000) 2.75- 4.25
------- ----------- ------- ------------
Outstanding, September 30, 1993 55,500 2.63 55,000 2.75- 3.38
Granted 77,000 3.06 - -
------- ----------- ------- -------------
Outstanding, September 30, 1994 132,500 2.63- 3.06 55,000 2.75- 3.38
Granted - - 15,000 2.63
Terminated (62,500) 2.63- 3.06 (15,000) 3.28
------- ----------- ------- -------------
Outstanding, September 30, 1995 70,000 2.63- 3.06 55,000 2.63- 2.88
Granted 59,500 6.50 - -
Terminated (15,000) 3.06 - -
Exercised - - (10,000) 2.75
------- ----------- ------- -------------
Outstanding, June 30, 1996 114,500 $2.63-$6.50 45,000 $2.63- $ 2.88
======= =========== ======= =============
Exercisable, June 30, 1996 30,000 $2.63-$3.06 35,000 $2.25-$ 2.88
======= =========== ======= =============
</TABLE>
(b) Employee Stock Ownership Plan
The Company has an Employee Stock Ownership Plan (ESOP) for
substantially all employees. Contributions to the ESOP are made at the
discretion of the Board of Directors, provided that the total amount
contributed for any ESOP year does not exceed the maximum amount
allowable by the Internal Revenue Code. Amounts allocated to a
participant's account vest ratably over five years based on years of
completed service, as defined. The accompanying consolidated
statements of income for the years ended September 30, 1993, 1994,
1995 and for the thirty-nine weeks ended June 30, 1996 include
provisions for contributions to the ESOP of approximately $15,000,
$8,000, $7,000 and $40,925, respectively. There was no provision for
contributions to the ESOP for the thirty-nine weeks ended July 2,
1995.
F-13
<PAGE>
BENTHOS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Including Data Applicable to Unaudited Periods)
(Continued)
(6) Employee Benefit Plans (Continued)
(c) 401(k) Retirement Plan
The Company maintains a 401(k) Retirement Plan covering all eligible
employees, as defined. Contributions to the plan are made at the
discretion of the Board of Directors in an amount determined by the
Board. These contributions vest to a participant's account ratably
over five years based on years of credited employment, as defined.
Additionally, each participant may elect to contribute up to 20% of
their compensation for the plan year, but not more than $9,240 (for
fiscal 1995), to the plan. The accompanying consolidated statements of
income for the years ended September 30, 1993, 1994, 1995 and for the
thirty-nine weeks ended June 30, 1996 include provisions for
contributions to the plan of approximately $45,000, $22,000, $21,000
and $122,775, respectively. There was no provision for contributions
to the Plan for the thirty-nine weeks ended July 2, 1995.
(d) Supplemental Executive Retirement Plan
The Company has a Supplemental Executive Retirement Plan (SERP) for
the benefit of certain management and highly compensated executive
employees. Under the SERP, participants may elect to defer a portion
of their compensation paid by the Company for supplemental retirement
benefits. The Company also established the Supplemental Executive
Retirement Trust (the Trust Fund) and shall regularly transfer to the
Trust Fund amounts equal to the elective deferrals made by
participants under the SERP. No such elective deferrals have been made
by participants as of June 30, 1996.
(7) Export Sales Information
Export sales primarily to Europe and Asia were approximately $4,211,000,
$3,768,000 and $3,699,000 in 1993, 1994 and 1995, respectively, and
approximately $2,960,000 and $4,986,000 for the thirty-nine weeks ended
July 2, 1995 and June 30, 1996, respectively.
(8) Employment and Noncompetition Agreement
The Company has an employment and noncompetition agreement, as amended,
with an officer/stockholder. In connection with the employment agreement,
the Company has agreed to provide a $1,500,000 split dollar life
insurance policy on the officer/stockholder's life. At the
officer/stockholder's request, the Company is obligated to repurchase from
the officer/stockholder the
F-14
<PAGE>
BENTHOS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Including Data Applicable to Unaudited Periods)
(Continued)
(8) Employment and Noncompetition Agreement (Continued)
number of shares that are contributed to or purchased by the Company's ESOP
each year. The Company also has the right of first refusal on any future
sales of common stock by the officer/stockholder at fair market value. In
addition, a change in the control of the Company, as defined, will result
in certain payments to the officer/stockholder, as outlined under the
employment agreement.
Compensation expense of approximately $81,000, $85,000 and $85,000 related
to this agreement is included in the accompanying 1993, 1994 and 1995
consolidated statements of income, respectively, and $64,376 and $93,882
for the thirty-nine weeks ended July 2, 1995 and June 30, 1996,
respectively.
(9) Industry Segment Information
The Company operates in two industry segments-undersea systems and
container inspected systems. Information with respect to industry segments
are set forth as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
1993 1994 1995
<S> <C> <C> <C>
Sales to unaffiliated customers--
Undersea systems $ 8,577,000 $ 6,435,000 $4,371,000
Container inspection systems 2,062,000 3,071,000 3,643,000
----------- ----------- ----------
Total $10,639,000 $ 9,506,000 $8,014,000
=========== =========== ==========
Income from operations--
Undersea systems $ 508,000 $ (134,000) $ (285,000)
Container inspection systems 120,000 496,000 658,000
----------- ----------- ----------
Total $ 628,000 $ 362,000 $ 373,000
=========== =========== ==========
Identifiable assets--
Undersea systems $ 4,343,000 $3,820,000
Container inspection systems 1,090,000 1,973,000
Corporate assets 687,000 591,000
----------- ----------
Total $ 6,120,000 $6,384,000
=========== ==========
</TABLE>
F-15
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
<C> <S>
3.1 Restated Articles of Organization
3.2 By-Laws
4.1 Common Stock Certificate
10.1 Employment Contract with Samuel O. Raymond
10.2 Employment Contract with John L. Coughlin
10.3 Employee Stock Ownership Plan
10.4 401(k) Retirement Plan
10.5 Supplemental Executive Retirement Plan
10.6 1990 Stock Option Plan
10.7 Stock Option Plan for Non-Employee Directors
10.8 License Agreement between the Company and The
Penn State Research Foundation dated
December 13, 1993
10.9 Technical Consultancy Agreement between the
Company and William D. McElroy dated
July 12, 1994
10.10 General Release and Settlement Agreement
between the Company and Lawrence W. Gray
dated February 8, 1996
10.11 Line of Credit Loan Agreement between the
Company and Cape Cod Bank and Trust Company
dated September 24, 1990, as amended
10.12 Commercial Mortgage Loan Extension and
Modification Agreement between the Company
and Cape Cod Bank and Trust Company, dated
July 6, 1994
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
11 Computation of Earnings Per Share
21 Subsidiaries of the Registrant
23 Consent of Independent Public Accountants
27 Financial Data Schedule
</TABLE>
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
RESTATED ARTICLES OF ORGANIZATION
(General Laws, Chapter 156B, Section 74)
We, John L. Coughlin , *President/
-----------------------------------------------------
and Stephen D. Fantone , *Clerk/
-------------------------------------------------------
of Benthos, Inc.
---------------------------------------------------------------------------,
(Exact name of corporation)
located at 49 Edgerton Drive, Falmouth
-------------------------------------------------------------------,
(Street address of corporation Massachusetts)
do hereby certify that the following Restatement of the Articles of Organization
was duly adopted at a meeting held on September 23 , 1996 by a vote
--------------------- -----
of the directors/or:
ARTICLE I
The name of the corporation is:
Benthos, Inc.
ARTICLE II
The purpose of the corporation is to engage in the following business
activities:
See attached.
*Delete the inapplicable words. **Delete the inapplicable clause.
Note: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on separate 8 1/2 x 11 sheets of
paper with a left margin of at least 1 inch, additions to more than one article
may be made on a single sheet so long as each article requiring each addition is
clearly indicated.
<PAGE>
ARTICLE III
State the total number of shares and par value, if any, of each class of stock
which the corporation is authorized to issue:
- --------------------------------------------------------------------------------
WITHOUT PAR VALUE WITH PAR VALUE
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
Common: Common: 2,500,000 $0.06 2/3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Preferred: Preferred:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ARTICLE IV
If more than one class of stock is authorized, state a distinguishing
designation for each class. Prior to the issuance of any shares of a class, if
shares of another class are outstanding, the corporation must provide a
description of the preferences, voting powers, qualifications, and special or
relative rights or privileges of that class and of each other class of which
shares are outstanding and of each series then established within any class.
Not Applicable.
ARTICLE V
The restrictions, if any, imposed by the Articles of Organization upon the
transfer of shares of stock of any class are;
Not Applicable.
ARTICLE VI
**Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution, or for
limiting, defining, or regulating the powers of the corporation, or of its
directors or stockholders, or of any class of stockholders:
See Continuation Sheet 6
**If there are no provisions state "None".
Note: The preceding six (6) articles are considered to be permanent and may
ONLY be changed by filing appropriate Articles of Amendment.
<PAGE>
ARTICLE II
The purpose of the corporation is to engage in the following activities:
To manufacture, produce, prepare, experiment with, purchase, and otherwise
acquire, import, export, sell, distribute, and otherwise dispose of, and
generally to trade and deal in, in any manner whatsoever, machinery, equipment,
apparatus and tools of every kind and description.
To engage in research, exploration, laboratory and development work
relating to any substance, compound or mixture, now known or which may hereafter
be known, discovered or developed, and to perfect, develop, manufacture, use,
apply and generally deal in any such substance, compound or mixture.
To manufacture, purchase or otherwise acquire, invest in, own, mortgage,
pledge, sell, assign and transfer or otherwise dispose of, trade, deal in and
deal with goods, wares and merchandise and personal property of every class and
description.
To acquire, and pay for in cash, stock or bonds of this corporation or
otherwise, the good will, rights, assets and property, and to undertake or
assume the whole or any part of the obligations or liabilities of any person,
firm, association or corporation.
To purchase, hold, sell and transfer the shares of its own capital stock;
provided it shall not use its funds or property for the purchase of its own
shares of capital stock when such use would cause any impairment of its capital
except as otherwise permitted by law, and provided further, that shares of its
own capital stock belonging to it shall not be voted upon directly or
indirectly.
In general, to carry on any other business in connection with the
foregoing, and to have and exercise all the powers conferred by the laws of
Massachusetts upon corporations formed under its corporation law, and to do any
or all of the things hereinbefore set forth to the same extent as natural
persons might or could do.
<PAGE>
CONTINUATION SHEET 6
No director of the Corporation shall be liable to the Corporation or its
stockholders for monetary damages for breach or fiduciary duty as a
director notwithstanding any statutory provision or other law imposing such
liability, except for liability of a director (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 61 or 62 of Chapter 156B
of the Massachusetts General law, or (iv) for any transaction from which
the director derived an improper personal benefit.
<PAGE>
ARTICLE VII
The effective date of the restated Articles of Organization of the corporation
shall be the date approved and filed by the Secretary of the Commonwealth. If a
later effective date is desired, specify such date which shall not be more than
thirty days after the date of filing.
ARTICLE VIII
THE INFORMATION CONTAINED IN ARTICLE VIII IS NOT A PERMANENT PART OF THE
ARTICLES OF ORGANIZATION.
a. The street address (post office boxes are not acceptable) of the principal
office of the corporation in Massachusetts is:
49 Edgerton Drive, Falmouth
b. The name, residential address and post office address of each director and
officer of the corporation is as follows:
NAME RESIDENTIAL ADDRESS POST OFFICE ADDRESS
President: John L. Coughlin 34 Forge Way, Duxbury 49 Edgerton Drive,
Falmouth, MA
Treasurer: J. Luke Sabella 56 Fletcher Rd., Bedford same as above
Clerk: Stephen D. Fantone 340 Summer Street, Lynfield same as above
Directors: Samuel O. Raymond 302 W. Falmouth Highway, same as above
N. Falmouth
John L. Coughlin same as above same as above
A. Theodore Mollegen, Jr. 337 Pleasant Street., same as above
Willimantic CT
Thurman F. Naylor 102 Fernwood Rd., same as above
Chestnut Hill, MA
Stephen D. Fantone same as above same as above
c. The fiscal year (i.e., tax year) of the corporation shall end on the last day
of the month of : September
d. The name and business address of the resident agent, if any, of the
corporation is: None
**We further certify that the foregoing Restated Articles of Organization affect
no amendments to the Articles of Organization of the corporation as heretofore
amended,
SIGNED UNDER THE PENALTIES OF PERJURY, this 18th day of October , 1996,
---- ---------------- --
/s/ John L. Coughlin, , "President/
- ------------------------------------------------------------
/s/ Stephen D. Fantone ' "Clerk/
- ------------------------------------------------------------
*Delete the applicable words. **If there are no amendments, state 'None'.
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
RESTATED ARTICLES OF ORGANIZATION
(GENERAL LAWS, CHAPTER 156B, SECTION 74)
------------------------------------------------------------------------
------------------------------------------------------------------------
I hereby approve the within Restated Articles of Organization and, the
filing fee in the amount of $200.00 having been paid, said articles are
deemed to have been filed with me this 5th day of November, 1996.
Effective Date:________________________________________________________
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
William F. Griffin,Jr., Esquire
---------------------------------------------
Davis, Malm & D'Agostine, P.C.
One Boston Place
---------------------------------------------
Boston, MA 02108
---------------------------------------------
Telephone: 617-367-2500
-----------------------------------
<PAGE>
8 March 1994 By-Laws of the Corporation
- --------------------------------------------------------------------------------
BY-LAWS
-------
of
--
BENTHOS, INC.
-------------
ARTICLE I
---------
Articles of Organization
------------------------
The name and purposes of the Corporation shall be as set forth in the Articles
of Organization. These By-Laws, the powers of the Corporation and its Directors
and stockholders, and all matters concerning the conduct and regulation of the
business of the Corporation, shall be subject to such provisions in regard
thereto, if any, as are set forth in the articles of Organization. All
references in these By-Laws to the Articles of Organization shall be construed
to mean the Articles of Organization of the Corporation as from time to time
amended or restated.
ARTICLE 2
---------
Fiscal Year
-----------
Except as from time to time otherwise determined by the Directors, the fiscal
year of the Corporation shall be the twelve months ending on September 30.
ARTICLE 3
---------
Meetings of Stockholders
------------------------
Section 3.1 Annual Meeting
- --------------------------
The Annual Meeting of the Stockholders shall be held at 10 o'clock A.M. on the
First Friday in March in each year, if not a legal holiday, and, if a legal
holiday, then on the next secular day following, or at such other date and time
within six months after the end of the Corporation's fiscal year as shall be
designated from time to time by the Board of Directors, the Chairman of the
Board or the President and stated in the notice of the meeting. Purposes for
which an Annual Viceting is to be held. additional to those prescribed by law
and these By-Laws, may be specified by the President or by the Directors.
________________________________________________________________________________
Benthos, Inc. 1
<PAGE>
8 March 1994 By-Laws of the Corporation
- --------------------------------------------------------------------------------
If such Annual Meeting as not been held as herein provided, a special Meeting of
the Stockholders in Lieu of the annual Meeting may be held, and any business
transacted or elections held at such Special Meeting shall have the same effect
as if transacted or held 'at the Annual Meeting, and in such case all references
to these By-Laws, except in this Section 3.1, to the Annual Meeting of the
Stockholders shall be deemed to refer to such Special Meeting. Any such Special
Meeting shall be called, and the purposes thereof shall be specified in the
Call, as provided in Section 3.2 of this Article 3.
Section 3.2 Special Meetings
- ----------------------------
A Special Meeting of the Stockholders may be called at any time by the
President, or by a majority of the Directors acting by vote or by written
instrument or instruments signed by them. A Special Meeting of Stockholders
shall be called by the Clerk, or in the case of the death, absence, incapacity
or refusal of the Clerk, by any other officer, upon written application of one
or more stockholders who hold at least one-tenth part in interest of the stock
entitled to vote at the meeting. Such Call shall state the time, place, and
purposes of the meeting.
Section 3.3 Place of Meetings
- -----------------------------
All meetings of the stockholders shall be held at the principal office of the
Corporation in Massachusetts, unless a different place within Massachusetts or,
if permitted by the Articles of Organization, elsewhere within the United States
is designated by the Chairman of the Board of Directors, the President, or by a
majority of the Directors acting by vote or by written instrument or instruments
signed by them. Any adjourned session of any meeting of the stockholders shall
be held at such place within Massachusetts or, if permitted by the Articles of
Organization, elsewhere within the United States as is designated in the vote of
adjournment.
Section 3.4 Notice of Meetings
- ------------------------------
A written Notice of the place, date and hour of all meetings of stockholders
stating the purposes of the meeting shall be given at least seven (7) days
before the meeting to each stockholder entitled to vote thereat, by leaving such
Notice with him or at his residence or usual place of business. or by mailing,
postage prepaid, and addressed to such stockholder at his address as it appears
in the records of the Corporation. Such Notice shall be given by the Clerk, or
in the
________________________________________________________________________________
Benthos, Inc. 2
<PAGE>
8 March 1994 By-Laws of the Corporation
- --------------------------------------------------------------------------------
case of the death, absence, incapacity or refusal of the Clerk, by any other
officer or by a person designated either by the Clerk, by the person or persons
calling the meeting or by the Board of Directors. Whenever Notice of a meeting
is required to be given a stockholder under any provision of law, of the
Articles of Organization, or of these By-Laws, a written Waiver thereof,
executed before or after the meeting by such stockholder or his attorney
thereunto authorized, and filed with the records of the meeting, shall be deemed
equivalent to such Notice.
Section 3.5 Quorum
- ------------------
At any meeting of the stockholders, a quorum for the election of any Director or
for the consideration of any question shall consist of a majority in interest of
all stock issued, outstanding and entitled to vote at such election or upon such
question, respectively, except that if two or more classes of stock are entitled
to vote as separate classes for the election of any Director or upon any
question, then in the case of each such class a quorum for the election of any
Director or for the consideration of such question shall consist of a majority
in interest of all stock of that class issued, outstanding and entitled to vote
thereon. Stock owned by the Corporation, if any, except stock held directly or
indirectly by it in a fiduciary capacity, shall be disregarded in determining
any quorum. Whether or not a quorum is present, any meeting may be adjourned
from time to time by a majority of the votes properly cast upon the question,
and the meeting may be held as adjourned without further notice.
When a quorum for an election is present at any meeting, a plurality of the
votes properly cast for any office shall elect such office. When a quorum for
the consideration of a question is present at any meeting, a majority of the
votes properly cast upon the question shall decide the question; except that if
two or more classes of stock are entitled to vote as separate classes upon such
question, then in the case of each such class a majority of the votes of such
class properly cast upon the question shall decide the vote of that class upon
the question; and except in any case where a larger vote is required by law or
by the Articles of Organization.
Section 3.6 Action without Meeting
- ----------------------------------
Any action required or permitted to be taken at any meeting of the stockholders
may be taken without a meeting if all stockholders entitled to vote on the
matter consent to the action in writing and the written Consents are filed with
the records of the meetings of stockholders. Such Consents shall be treated for
all purposes as a vote at a meeting.
________________________________________________________________________________
Benthos, Inc. 3
<PAGE>
8 March 1994 By-Laws of the Corporation
- --------------------------------------------------------------------------------
Section 3.7 Proxies and Voting
- ------------------------------
Except as may otherwise be provided in the Articles of Organization,
stockholders entitled to vote shall have one vote for each share of stock
entitled to vote owned by them. Stockholders entitled to vote may vote in person
or by proxy. Except as otherwise provided by law, no proxy dated more than six
(6) months before the meeting named therein shall be valid and no proxy shall be
valid after the final adjournment of such meeting. A proxy with respect to stock
held in the name of two or more persons shall be valid if executed by any one of
them unless at or prior to the exercise of the proxy the Corporation receives
specific written notice to the contrary from any one of them. A proxy purporting
to be executed by or on behalf of a stockholder shall be deemed valid unless
challenged at or prior to its exercise and the burden of proving invalidity
shall rest on the challenger. Proxies shall be filed with the Clerk, or person
performing the duties of clerk, at the meeting, or any adjournment thereof,
before being voted.
The Corporation shall not, directly or indirectly, vote upon any share of its
own stock; but nothing herein shall be construed as limiting the right of the
Corporation to vote shares of stock held directly or indirectly by it in a
fiduciary capacity.
Section 3.8 Stockholder Proposals
- ---------------------------------
In addition to any other applicable requirements, written notice to the Clerk
stating the business to be brought by stockholders before an Annual Meeting of
the stockholders or a Special Meeting in lieu of the Annual Meeting shall be
given sixty days prior to the anniversary date of the immediately preceding
Annual Meeting and within ten days of the written notice of any Special Meeting
of the stockholders not in lieu of an Annual Meeting.
Section 3.9 Stockholder Nominations
- -----------------------------------
Written notice to the clerk stating stockholder nominations for the election of
directors, other than those recommended by the Board of Directors, shall be
given sixty days prior to the anniversary date of the immediately preceding
Annual Meeting of the stockholders and within ten days of the written notice of
any Special Meeting of the stockholders to elect Directors.
________________________________________________________________________________
Benthos, Inc. 4
<PAGE>
8 March 1994 By-Laws of the Corporation
- --------------------------------------------------------------------------------
ARTICLE 4
---------
Directors
---------
Section 4.1 Enumeration, Election and Term of Office
- ----------------------------------------------------
There shall be a Board of Directors of the Corporation, the number to be
determined by the stockholders. The Board of Directors shall consist of not less
than three (3) Directors, except that whenever there shall be only two (2)
stockholders the number of Directors shall be not less than two (2), and
whenever there shall be only one (1) stockholder the number of Directors shall
be not less than one (1). The Board of Directors may he enlarged by the
stockholders at any meeting or by vote of a majority of the Directors then in
office. The Directors shall be chosen at the Annual Meeting of the Stockholders
by such stockholders as have the right to vote thereon, and each shall hold
office until the next annual election of Directors and until his successor is
chosen and qualified or until he sooner dies, resigns, is removed or becomes
disqualified. Any election of Directors by stockholders shall be by ballot if so
requested by any stockholder entitled to vote thereon. No Director need be a
stockholder.
Section 4.2 Powers
- ------------------
The business of the Corporation shall be managed by the Board of Directors,
which shall exercise all the powers of the Corporation except as otherwise
required by law, by the Articles of Organization or by these By-Laws. In the
event of one or more vacancies in the Board of Directors, the remaining
Directors, if at least two (2) Directors still remain in office, may exercise
the powers of the full Board until such vacancy or vacancies are filled.
Section 4.3 Meetings of Directors
- ---------------------------------
Regular meetings of the Directors may be held without notice at such places and
at such times as may be fixed from time to time by the Directors. A regular
meeting of the Directors may be held without notice immediately following the
Annual Meeting of Stockholders or any Special Meeting held in lieu thereof.
Special Meetings of Directors may be called by the Chairman of the Board, the
President, the Treasurer or any two (2) or more Directors. or if there shall be
less than three (3) Directors by
________________________________________________________________________________
Benthos, Inc. 5
<PAGE>
8 March 1994 By-Laws of the Corporation
- --------------------------------------------------------------------------------
any one (1) Director, and shall be held at such time and place as specified in
the Call. Reasonable notice of each special meeting of the Directors shall be
given to each Director. Such notice may be given by the Secretary or assistant
Secretary of the Board, the clerk or any Assistant Clerk or by the officer or
one of the Directors calling the meeting. Notice to a Director shall in any case
be sufficient if set by telegram at least forty-eight (48) hours or by mail at
least ninety-six (96) hours before the meeting addressed to him at his usual or
last known business or residence address, or if given to him at least forty-
eight (48) hours before the meeting in person or by telephone or by facsimile
machine or by handing him a written Notice. Notice of a meeting need not be
given to any Director if a written waiver of Notice, executed by him before or
after the meeting, is filed with the records of the meeting, or to any Director
who attends the meeting without protesting prior thereto or at its commencement
the lack of notice to him. A Notice or Waiver of Notice need not specify the
purposes of the meeting.
Section 4.4 Quorum of Directors
- -------------------------------
At any meeting of the Directors, a quorum for any election or for the
consideration of any question shall consist of a majority of the Directors then
in office. Whether or not a quorum is present any meeting may be adjourned from
time to time by a majority of the votes properly cast upon the question, and the
meeting may be held as adjourned without further Notice. When a quorum is
present at any meeting, the votes of a majority of the Directors present shall
be requisite and sufficient for election to any office and shall decide any
question brought before such meeting, except in any case where a larger vote is
required by law, by the Articles of Organization or by these By-Laws.
Section 4.5 Consent in Lieu of Meeting and Participation in Meetings by
- -----------------------------------------------------------------------
Communications Equipment
- ------------------------
Any action required or permitted to be taken at any meeting of the Board of
Directors may be taken without a meeting if all the Directors consent to the
action in writing and the written Consents are filed with the records of the
meetings of the Directors. Such consents shall be treated for all purposes as a
vote of the Directors at a meeting,
Members of the Board of Directors or any Committee designated thereby may
participate in a meeting of such Board or Committee by means of a conference
telephone or similar
________________________________________________________________________________
Benthos, Inc. 6
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8 March 1994 By-Laws of the Corporation
- -------------------------------------------------------------------------------
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time and participation by such means
shall constitute presence in person at a meeting.
Section 4.6 Committees
- ----------------------
By vote of a majority of the Directors then in office, the Directors may elect
from their own number an Executive Committee or other Committees and may by like
vote delegate to any such Committee some or all of their powers except those
which by law may not be delegated.
ARTICLE 5
---------
Officers
--------
Section 5.1 Enumeration, Election and Term of Office
- ----------------------------------------------------
The officers of the Corporation shall include a President, a Treasurer and a
Clerk, who shall be chosen by the Directors at their first meeting following the
Annual Meeting of the Stockholders. Each of them shall hold his office until the
next annual election to the office which he holds and until his successor is
chosen and qualified or until he sooner dies, resigns, is removed or becomes
disqualified.
The Directors may choose one of their number to be Chairman of the Board and
determine his powers, duties and term of office. The Directors may at any time
appoint such other officers, including one or more Vice Presidents, Assistant
Treasurers, Assistant Clerks, Secretary of the Board and an Assistant Secretary
of the Board as they deem wise, and may determine their respective powers,
duties and terms of office.
No officer need be a stockholder or a Director except that the Chairman of the
Board shall be a Director. The same person may hold more than one office, except
that no person shall be both President and Clerk.
________________________________________________________________________________
Benthos, Inc. 7
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8 March 1994 By-Laws of the Corporation
- --------------------------------------------------------------------------------
Section 5.2 President and Chairman of the Board
- -----------------------------------------------
The President shall be the Chief Executive Officer of the Corporation and,
subject to the control and direction of the Directors, shall have general
supervision and control of the business of the Corporation. He shall preside at
all meetings of the stockholders at which he is present, and, if he is a
Director, at all meetings of the Directors if there shall be no Chairman of the
Board or in the absence of the Chairman of the Board.
If there shall be a Chairman of the Board, he shall make his counsel available
to the other officers of the Corporation, and shall have such other duties and
powers as may from time to time be conferred on him by the Directors. He shall
preside at all meetings of the Directors at which he is present, and, in the
absence of the President, at all meetings of stockholders
Section 5.3 Treasurer and Assistant Treasurer
- ---------------------------------------------
The Treasurer shall have the custody of the funds and valuable books and papers
of the Corporation, except such as are directed by these By-Laws to be kept by
the Clerk or by the Secretary of the Board. He shall perform all other duties
usually incident to his office, and shall be at all times subject to the control
and direction of the Directors. If required by the Directors, he shall give bond
in such form and amount and with such sureties as shall be determined by the
Directors.
If the Treasurer is absent or unavailable, any Assistant Treasurer shall have
the duties and powers of Treasurer and shall have such further duties and powers
as the Directors shall from time to time determine.
Section 5.4 Clerk and Assistant Clerk
- -------------------------------------
If the Corporation shall not have a resident agent appointed pursuant to law,
the Clerk shall be a resident of the Commonwealth of Massachusetts. The Clerk
shall record all proceedings of the stockholders in a book to be kept therefor.
In case a Secretary of the Board is not elected, the Clerk shall also record all
proceedings of the Directors in a book to be kept therefor.
If the Corporation shall not have a transfer agent, the Clerk shall also keep or
cause to be kept the stock and transfer records of the Corporation, which shall
contain the names of all stockholders and the record address and the amount of
stock held by each.
________________________________________________________________________________
Benthos, Inc. 8
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8 March 1994 By-Laws of the Corporation
- --------------------------------------------------------------------------------
If the Clerk is absent or unavailable, any Assistant Clerk shall have the duties
and powers of the Clerk and shall have such further duties and powers as the
Directors shall from time to time determine.
Section 5.5 Secretary of the Board and Assistant Secretary
- ----------------------------------------------------------
If a Secretary of the Board is elected, he shall record all proceedings of the
Directors in a book to be kept therefor.
If the Secretary of the Board is absent or unavailable, any Assistant Secretary
shall have the duties and powers of the Secretary and shall have such further
duties and powers as the Directors shall from time to time determine.
If no Secretary or Assistant Secretary has been elected, or if, having been
elected, no Secretary or assistant Secretary is present at any meeting of the
Directors, the clerk or an Assistant Clerk shall record the proceedings of the
Directors.
Section 5.6 Temporary Clerk and Temporary Secretary
- ---------------------------------------------------
If no Clerk or Assistant Clerk shall he present at any meeting of the
stockholders, or if no Secretary, Assistant Secretary, Clerk or Assistant Clerk
shall be present at any meeting of the Directors, the person presiding at the
meeting shall designate a Temporary Clerk or Secretary to perform the duties of
Clerk or Secretary.
Section 5.7 Other Powers and Duties
- -----------------------------------
Each officer shall, subject to these By-Laws and to the control and direction of
the Directors, have in addition to the duties and powers specifically set forth
in these By-Laws, such duties and powers as are customarily incident to his
office and such additional duties and powers as the Directors may from time to
time determine.
________________________________________________________________________________
Benthos, Inc. 9
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8 March 1994 By-Laws of the Corporation
- --------------------------------------------------------------------------------
ARTICLE 6
---------
Resignations, Removals and Vacancies
------------------------------------
Section 6.1 Resignations
- ------------------------
Any Director or officer may resign at any time by delivering his resignation in
writing to the President or the Clerk or to a meeting of the Directors. Such
resignations shall take effect at such time as is specified therein, or if no
such time is so specified, then upon delivery thereof to the President or the
Clerk or to a meeting of the Directors.
Section 6.2 Removals
- --------------------
Directors, including Directors elected by the Directors to fill vacancies in the
Board, may be removed with or without assignment of cause by vote of the holders
of a majority of the shares entitled to vote in the election of Directors,
provided that the Directors of a class elected by a particular class of
stockholders may be removed only by the vote of the holders of a majority of the
shares of the particular class of stockholders entitled to vote for the election
of such Directors.
The Directors may terminate or modify the authority of any agent or employee.
The Directors may remove any officer from office with or without assignment of
cause by vote of a majority of the Directors then in office.
The Directors may by vote of a majority of the Directors then in office remove
any Director for cause.
If cause is assigned for removal of any Director or officer, such Director or
officer may be removed only after a reasonable notice and opportunity to be
heard before the body proposing to remove him.
No Director or officer who resigns or is removed shall have any right to any
compensation as such Director or officer for any period following his
resignation or removal, or any right to damages on account of such removal
whether his compensation be by the month or by the year or otherwise; provided,
however. that the foregoing provision shall not prevent such Director or
________________________________________________________________________________
Benthos, Inc. 10
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8 March 1994 By-Laws of the Corporation
- --------------------------------------------------------------------------------
officer from obtaining damages for breach of any contract of employment legally
binding upon the Corporation.
Section 6.3 Vacancies
- ---------------------
Any vacancy in the Board of Directors, including a vacancy resulting from an
enlargement of the Board, may be filled by vote of a majority of the Directors
then in office or, in the absence of such election by the Directors, by the
stockholders at a meeting called for the purpose; provided, however, that any
vacancy created by the stockholders may be filled by the stockholders at the
same meeting at which such action was taken by them.
If the office of any officer becomes vacant, the Directors may choose or appoint
a successor by vote of a majority of the Directors present at the meeting at
which such choice or appointment is made.
Each such successor shall hold office for the unexpired term of his predecessor
and until his successor shall be chosen or appointed and qualified, or until he
sooner dies, resigns, is removed or becomes disqualified.
ARTICLE 7
---------
Indemnification of Directors and Others
---------------------------------------
Section 7.1 Definitions
- -----------------------
For purposes of this Article 7:
(a) "Director/officer" means any person who is serving or has served as a
Director, officer or employee of the Corporation appointed or elected by the
Board of Directors or the stockholders of the Corporation. or any Director,
officer or employee of the Corporation who is serving or has served at the
request of the Corporation as a Director, officer, trustee, principal, partner,
member of a committee, employee or other agent of any other organization, or in
any capacity with respect to any employee benefit plan of the Corporation or any
of its subsidiaries.
________________________________________________________________________________
Benthos, Inc. 11
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8 March 1994 By-Laws of the Corporation
- --------------------------------------------------------------------------------
(b) "Proceeding" means any action, suit or proceeding, whether civil, criminal,
administrative or investigative, brought or threatened in or before any court,
tribunal, administrative or legislative body or agency, and any claim which
could be the subject of a Proceeding.
(c) "Expense" means any fine or penalty, and any liability fixed by a judgment,
order, decree or award in a Proceeding, any amount reasonably paid in settlement
of a Proceeding and any professional fees and other disbursements reasonably
incurred in connection with a Proceeding. The term "Expense" shall include any
taxes or penalties imposed on a Director/officer with respect to any employee
benefit plan of the Corporation or any of its subsidiaries.
Section 7.2 Right to Indemnification
- ------------------------------------
Except as limited by law or as provided in Sections 7.3 and 7.4 of this Article
7, each Director/ officer (and his heirs and personal representatives) shall be
indemnified by the Corporation against any Expense incurred by him in connection
with each Proceeding in which he is involved as a result of his serving or
having served as a Director/Officer.
Section 7.3 Indemnification not Available
- -----------------------------------------
No indemnification shall be provided to a Director/officer with respect to a
Proceeding as to which it shall have been adjudicated that he did not act in
good faith in the reasonable belief that his action was in the best interests of
the Corporation, or, to the extent that such Proceeding relates to service with
respect to an employee benefit plan, in the best interests of the participants
or beneficiaries of such employee benefit plan.
Section 7.4 Compromise or Settlement
- ------------------------------------
In the event that a Proceeding is compromised or settled so as to impose any
liability or obligation on a Director/officer or upon the Corporation, no
indemnification shall be provided as to said Director/officer with respect to
such Proceeding if it is determined (i) by a majority of the disinterested
Directors then in office or (ii) in the absence of any disinterested Directors
or at the request of a majority of the disinterested Directors, by the holders
of a majority of the outstanding stock entitled to vote for Directors. voting as
a single class, exclusive of any stock owned by any interested Director/officer,
that with respect to the matter involved in such Proceeding
________________________________________________________________________________
Benthos, Inc. 12
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8 March 1994 By-Laws of the Corporation
- --------------------------------------------------------------------------------
said Director/officer did not act in good faith in the reasonable belief that
his action was in the best interest of the Corporation or, to the extent that
such Proceeding relates to service with respect to an employee benefit plan, in
the best interests of the participants or beneficiaries of such employee benefit
plan. In lieu of submitting the question to a vote of disinterested Directors or
stockholders, as provided above, the Corporation may deny indemnification to
said Director/ officer with respect to such Proceeding, if there has been
obtained at the request of a majority of the Directors then in office, an
opinion in writing of independent legal counsel, other than counsel to the
Corporation, to the effect that said Director/officer did not act in good faith
in the reasonable belief that his action was in the best interests of the
Corporation or, to the extent that such Proceeding relates to service with
respect to an employee benefit plan, in the best interests of the participants
or beneficiaries of such employee benefit plan.
Section 7.5 Advances
- --------------------
The Corporation shall pay sums on account of indemnification in advance of a
final disposition of a Proceeding upon receipt of an undertaking by the
Director/officer to repay such sums if it is subsequently established that he is
not entitled to indemnification pursuant to Sections 7.3 and 7.4 hereof, which
undertaking may be accepted without reference to the financial ability of such
person to make repayment.
Section 7.6 Not Exclusive
- -------------------------
Nothing in this Article 7 shall limit any lawful rights to indemnification
existing independently of this Article 7.
Section 7.7 Insurance
- ---------------------
The provisions of this Article 7 shall not limit the power of the Board of
Directors to authorize the purchase and maintenance of insurance on behalf of
any Director/officer against any liability incurred by him in any such capacity,
or arising out of his status as such, whether or not the Corporation would have
the power to indemnify him against such liability under this Article 7.
________________________________________________________________________________
Benthos, Inc. 13
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8 March 1994 By-Laws of the Corporation
- --------------------------------------------------------------------------------
Section 7.8 Amendment
- ---------------------
The provisions of this Article may be amended or repealed by the stockholders;
however, no amendment or repeal of such provisions which adversely affects the
rights of a Director/officer under this Article with respect to his acts or
omissions prior to such amendment or repeal shall apply to him without his
consent.
ARTICLE 8
---------
Stock
-----
Section 8.1 Stock Authorized
- ----------------------------
The total number of shares and the par value, if any, of each class of stock
which the Corporation is authorized to issue, and if more than one class is
authorized, the descriptions, preferences, voting powers, qualifications and
special and relative rights and privileges as to each class and any series
thereof, shall be as stated in the Articles of Organization.
Section 8.2 Issue of Authorized Unissued Capital Stock
- ------------------------------------------------------
Any unissued capital stock from time to time authorized under the Articles of
Organization and Amendments thereto may be issued, and any shares of capital
stock restored to the status of authorized but unissued stock may be reissued,
by vote of the Directors. No stock shall be issued unless the cash, so far as
due, or the property, services or expenses for which it was authorized to be
issued, has been actually received or incurred by, or conveyed or rendered to,
the Corporation, or is in its possession as surplus.
Section 8.3 Certificates of Stock
- ---------------------------------
Each stockholder shall be entitled to a certificate in such form as may be
prescribed from time to time by the Directors or stockholders. stating the
number and the class and the designation of the series, if any, of the shares
held by him. Such certificates shall be signed by the President or a Vice
President and by the Treasurer or an Assistant Treasurer. Such signatures may be
facsimiles if the certificate is signed by a transfer agent. or by a registrar,
other than a Director,
________________________________________________________________________________
Benthos, Inc. 14
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8 March 1994 By-Laws of the Corporation
- --------------------------------------------------------------------------------
officer or employee of the Corporation. In case any officer who has signed or
whose facsimile signature has been placed on such certificate shall have ceased
to be such officer before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer at the time of its
issue.
Every certificate issued by the Corporation for shares of stock at a time when
such shares are subject to any restriction on transfer pursuant to the Articles
of Organization, the By-Laws or any agreement to which the Corporation is a
party shall have the restriction noted conspicuously on the certificate and
shall also set forth on the face or back of the certificate either the full text
of the restriction, or a statement of the existence of such restriction and a
statement that the Corporation will furnish a copy thereof to the holder of such
certificate upon written request and without charge.
Every stock certificate issued by the Corporation at a time when it is
authorized to issue more than one class or series of stock shall set forth upon
the face or back of the certificate either the full text of the preferences,
voting powers, qualifications and special and relative rights of the shares of
each class and series, if any, authorized to be issued, as set forth in the
Articles of Organization, or a statement of the existence of such preferences,
powers, qualifications and rights and a statement that the Corporation will
furnish a copy thereof to the holder of such certificate upon written request
and without charge.
Section 8.4 Replacement Certificate
- -----------------------------------
In case of the alleged loss or destruction or the mutilation of a certificate of
stock, a new certificate may be issued in place thereof, upon such conditions as
the Directors may determine.
Section 8.5 Transfers
- ---------------------
Subject to the restrictions, if any, imposed by the Articles of Organization,
the By-Laws or any agreement to which the Corporation is a party, shares of
stock shall be transferred on the books of the Corporation only by the surrender
to the Corporation or its transfer agent of the certificate representing such
shares properly endorsed or accompanied by a written assignment of such shares
or by a written power of attorney to sell, assign or transfer such shares,
properly executed, with necessary transfer stamps affixed. and with such proof
that the endorsement, assignment or
________________________________________________________________________________
Benthos, Inc. 15
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8 March 1994 By-Laws of the Corporation
- --------------------------------------------------------------------------------
power of attorney is genuine and effective as the Corporation or its transfer
agent may reasonably require. Except as may otherwise be required by law, the
Corporation shall be entitled to treat the record holder of stock as shown on
its books as the owner of such stock for all purposes, including the payment of
dividends and the right to vote with respect thereto, regardless of any
transfer, pledge or other disposition of such stock, until the shares have been
transferred on the books of the Corporation in accordance with the requirements
of these By-Laws. It shall be the duty of each stockholder to notify the
Corporation of his post office address.
Section 8.6 Record Date
- -----------------------
The Directors may fix in advance a time, which shall be not more than sixty (60)
days before the date of any meeting of stockholders or the date for the payment
of any dividend or the making of any distribution to stockholders or the last
day on which the consent or dissent of stockholders may be effectively expressed
for any purpose, as the record date for determining the stockholders having the
right to notice of and to vote at such meeting and any adjournment thereof or
the right to receive such dividend or distribution or the right to give such
consent or dissent, and in such case only stockholders of record on such date
shall have such right, notwithstanding any transfer of stock on the books of the
Corporation after the record date; or without fixing such record date the
Directors may for any such purposes close the transfer books for all or any part
of such period.
If no record date is fixed and the transfer books are not closed:
(1) The record date for determining stockholders having the right to notice of
or to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given.
(2) The record date for determining stockholders for any other purpose shall be
at the close of business on the day on which the Board of Directors acts with
respect thereto,
________________________________________________________________________________
Benthos, Inc. 16
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8 March 1994 By-Laws of the Corporation
- --------------------------------------------------------------------------------
ARTICLE 9
---------
Miscellaneous Provisions
------------------------
Section 9.1 Execution of Papers
- -------------------------------
All deeds, leases, transfers, contracts, bonds, notes, releases, checks, drafts
ad other obligations authorized to be executed on behalf of the Corporation
shall be signed by the President or the Treasurer except as the Directors may
generally or in particular cases otherwise determine.
Section 9.2 Voting of Securities
- --------------------------------
Except as the Directors may generally or in particular cases otherwise
determine, the President or the Treasurer may, on behalf of the Corporation (i)
waive Notice of any meeting of stockholders or shareholders of any other
corporation, or of any association, trust or firm, of which any securities are
held by this Corporation; (ii) appoint any person or persons to act as proxy or
attorney-in-fact for the Corporation, with or without substitution, at any such
meeting; and (iii) execute instruments of Consent to stockholder or shareholder
action taken without a meeting.
Section 9.3 Corporate Seal
- --------------------------
The seal of the Corporation shall be a circular die with the name of the
Corporation, the word "Massachusetts" and the year of its incorporation cut or
engraved thereon, or shall be in such other form as the Board of Directors or
the stockholders may from time to time determine.
Section 9.4 Corporate Records
- -----------------------------
The original, or attested copies, of the Articles of Organization, By-Laws, and
the records of all meetings of incorporators and stockholders, and the stock and
transfer records, which shall contain the names of all stockholders and the
record address and the amount of stock held by each. shall be kept in
Massachusetts for inspection by the stockholders at the principal office of the
Corporation or at an office of the Clerk, or if the Corporation shall have a
transfer agent or a resident agent, at an office of either of them. Said copies
and records need not all be kept in the same office.
________________________________________________________________________________
Benthos, Inc. 17
<PAGE>
8 March 1994 By-Laws of the Corporation
- --------------------------------------------------------------------------------
ARTICLE 10
----------
Amendments
----------
These By-Laws may at any time be amended or repealed by vote of the Stockholders
or, if permitted by the Articles of Organization, may be amended or repealed by
vote of a majority of the Directors then in office except that no amendment may
be made by the directors which alters provisions of these By-Laws with respect
to the removal of Directors, indemnification of Directors and officers or
amendment of these By-Laws. Notice of the substance of any proposed amendment or
repeal shall be stated in the Notice of any meeting of the stockholders called
for the purpose of proposing such amendment or repeal.
Not later than the time of giving Notice of the meeting of stockholders next
following the making, amending or repealing by the Directors of any By-Law,
notice thereof stating the substance of such change shall be given to all
stockholders entitled to vote on amending the By-Laws.
________________________________________________________________________________
Benthos, Inc. 18
<PAGE>
BENTHOS
BENTHOS, INC.
Number Shares
B ------
--------
COMMON STOCK INCORPORATED UNDER THE LAWS OF THE SEE REVERSE FOR
COMMONWEALTH OF MASSACHUSETTS CERATIN DEFINITIONS
THIS CERTIFIES THAT
SPECIMEN
is the registered holder of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $.06 2/3 PAR VALUE, OF
BENTHOS, INC.
transferable only on the share register of the Corporation in person or by duly
authorized attorney upon surrender of this certificate properly endorsed or
assigned. This certificate and the shares represented hereby are issued and
shall be held subject to all of the provisions of the Articles of Incorporation
and any amendments thereof to all of which the holder of this certificate by
acceptance hereof assents.
This certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
/s/ J. Luke Sabella (CORPORATE SEAL) /s/ John L. Coughlin
TREASURER AND CFO PRESIDENT & CEO
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER AND TRUST COMPANY
TRANSFER AGENT AND REGISTRAR,
BY /s/
AUTHORIZED SIGNATURE
<PAGE>
(reverse side)
BENTHOS, INC
<TABLE>
<CAPTION>
The following abbreviations, when used in the inscription on the face of this certificate, shall
be construed as though they were written out in full according to applicable laws or regulations:
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - CUSTODIAN
TEN ENT - as tenants by the entireties ----------- -----------
JT TEN - as joint tenants with right of (Cust) (Minor)
survivorship and not as under Uniform Gifts to Minors
tenants in common Act
----------------------------
(State)
Additional abbreviations may also be used though not in the above list.
For value received, hereby sell, assign and transfer unto
---------------------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------
- ----------------------------------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------Shares
of the Common Stock represented by the within Certificate, and do hereby irrevocably constitute and appoint
- ---------------------------------------------------------------------------------------------------Attorney
to transfer the said stock on the books of the within-named Corporation with full power of substitution in
the premises.
Dated
---------------------------
NOTICE:-------------------------------------------------------------------------
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
SINATURE(S) GUARANTEED:-----------------------------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
</TABLE>
<PAGE>
EMPLOYMENT AGREEMENT
This Agreement, made by and between Benthos, Inc., a Massachusetts
corporation having its principal office in North Falmouth, Massachusetts (the
"Company"), and Samuel O. Raymond of Falmouth, Massachusetts ("Executive").
WITNESSETH:
WHEREAS, the Company desires to employ Executive and Executive desires to
be employed by the Company upon the terms arid conditions set forth herein,
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed as follows:
1. EMPLOYMENT: The Company hereby employs Executive as its Chief
----------
Scientist and Executive hereby accepts employment by the Company upon the terms
and conditions herein set forth. Executive shall also serve as Chairman of the
Board of Directors of the Company for as long as elected to that position. The
primary place of Executive's employment as Chief Scientist shall be at the
Company's principal office, located in North Falmouth, Massachusetts, or at such
other location as the Company and the Executive shall mutually designate.
2. TERM: The term of this Agreement shall commence on August 1, 1990 and
----
shall expire on July 31, 2005. After expiration of the initial term, the
Agreement will automatically be renewed annually as of August 1, 2005 and each
August 1 thereafter; provided the Company has not given written notice to
Executive of its intent not to renew at least 90 days prior to the renewal date.
Anything herein to the contrary notwithstanding, this Agreement shall terminate
upon the occurrence of any of the following events:
(a) Any material breach of any of the covenants or obligations
hereunder that has not been remedied within thirty (30) days after written
notice thereof from the affected party.
(b) Written notice from Executive to the Company within 90-days prior
to any anniversary date of this Agreement.
(c) Except for the provisions of Paragraph 7(a) hereof, on the date
of Executive's death.
3. DUTIES: Executive, as the Company's Chief Scientist, will utilize his
------
technical expertise in the
<PAGE>
Company's research and development activities, in marketing the Company's
products and in promoting the Company's interests during the term hereof. It is
recognized and understood by the parties that Executive's duties will not
require Executive to devote his full and complete attention to the business
interests of the Company and Executive shall, at his sole and complete
discretion, be free to determine his schedule and hours of employment during the
term of this Agreement.
4. COMPENSATION: Subject to the provisions of this Agreement, the
------------
Company shall pay to Executive for all services to be performed by Executive as
Chief Scientist during the term of this Agreement a salary at the rate of
$50,000 per annum, payable in periodic payments in accordance with the Company's
practices for other executive, managerial, and supervisory employees, as such
practices may be determined from time to time. The Board of Directors of the
Company will review such salary annually and adjust said salary to reflect any
increases in the cost of living and, furthermore, in its discretion, may also
grant increases thereof based upon Executive's performance. The Company shall
pay to Executive for services to be performed as Chairman of the Board of
Directors of the Company for the first year of the term of this Agreement an
annual fee of $25,000, and will be paid in subsequent years such fee as the
Board of Directors shall determine. All such payments as Chief Scientist and
Chairman of the Board of Directors will be subject to such deductions as may be
required by law, government regulation or order, or by agreement with, or
consent of, Executive. In addition to the payments set forth above, the Company
agrees that during the term of this Agreement Executive shall be entitled to
reimbursement by the Company for all reasonable expenses actually and
necessarily incurred by him on its behalf in the course of his employment
hereunder, for which he shall submit vouchers in a form satisfactory to the
Company and which are approved in advance by the Company in its sole discretion.
5. BENEFITS: During the term of this Agreement, Executive shall be
--------
eligible to participate in such medical and dental plans, retirement plans and
such other fringe benefit programs as may be approved from time to time by the
Company for the benefit of its employees, in accordance with the terms and
provisions thereof.
6. DISABILITY: In the event Executive is permanently disabled so as to
----------
be unable to fully perform his services hereunder, Executive's obligation to
perform such services will terminate. In the event of such termination of
Executive's services, Executive's salary as defined in Paragraph 4
- 2 -
<PAGE>
attributable to services as the Company's Chief Scientist shall continue for the
then remaining initial term of this Agreement, reduced by any payments received
by Executive under any long-term disability plan or policy maintained by the
Company. The Company shall, in its sole discretion based on competent medical
advice, have the right to determine whether Executive is and continues to be
permanently disabled for purposes of this Paragraph. Anything herein to the
contrary, if Executive shall die before the completion of any disability
payments hereunder, any remaining payments during the balance of such fifteen
(15) year period shall be forfeited as of the date of Executive's death. All
such payments will be subject to such deductions as may be required by law,
government regulation or order, or by agreement with, or consent of, Executive.
7. PURCHASE OF STOCK: The Company and Executive shall have the
-----------------
following rights and obligations with respect to any shares of capital stock of
the Company (the "Shares") which may then be owned by Executive of even date.
The provisions of this Paragraph 7 permitting or obligating the Company to
purchase Shares of Executive shall apply only if and to the extent that the
Trustee of the Company's ESOP does not purchase the Shares at the direction of
the ESOP Committee pursuant to the terms of the ESOP.
(a) In the event of the termination of Executive's employment by
virtue of the death of Executive, the Company shall have the right, and, upon
request of Executive's heirs or legal representatives shall have the obligation,
to purchase such Shares as are then owned by Executive as of his date of death
and equal in value to (i) the estate, inheritance, legacy, and succession taxes
(including any interest collected as part of such taxes) imposed because of
Executive's death, and (ii) the amount of Executive's funeral and administration
expenses allowable as a deduction under Section 2053 of the Internal Revenue
Code. The purchase price of any such Shares shall be the Fair Market Value (as
hereinafter defined) as of the date on which the Company gives notice of its
intent to purchase, or Executive's heirs or legal representatives request the
Company to purchase, as the case may be.
(b) Whenever the Executive desires to sell any Shares, other than
pursuant to other subparagraphs of this Paragraph 7, he shall first give written
notice thereof to the Company. Such notice shall specify the terms and
conditions of the proposed sale, including the number and type of shares sought
to be sold, the identity of the proposed transferee, the proposed aggregate
purchase price and payment terms. Upon receipt of such notice, the Company shall
have the right to
- 3 -
<PAGE>
purchase such Shares upon delivery of written notice to the Executive given not
later than thirty (30) days after the actual receipt of the notice of intent to
sell Shares and the Executive shall be required to sell the Shares to the
Company at the price and on the terms set forth in the notice. The Company shall
pay for and the Executive shall deliver the Shares to be sold in the manner set
forth in subparagraph (e) of this Paragraph at such time and place designated in
the Company's notice of purchase within thirty (30) days of the giving of such
notice. If the Company does not exercise its right to purchase such Shares, the
Executive shall have sixty (60) days, starting with the expiration of the thirty
(30) day period within which the Company shall give notice of its intention to
purchase, to sell the Shares on the same terms and conditions and to the same
person or persons as shall be set forth in his notice to the Company and if he
shall fail to so sell the Shares within such period, he shall hold said Shares
subject to the obligation to offer them again to the Company before any
subsequent sale. This subparagraph shall not apply to any transfer of Shares by
gift, provided, however, that the transferee shall agree to be bound by the
terms of this subparagraph while the Executive is receiving payments from the
Company under this Agreement.
The obligation under this subparagraph (b) of the Executive to offer Shares
to the Company shall not apply to any sales made in routine open market
brokerage transactions or to or through an over the counter market maker who
deals as a principal for his own account rather than as a broker except to the
extent that such sales in the aggregate exceed during each three month period
the greater of one percent of the number of shares of the same class of stock on
the day of the sale outstanding or the average reported weekly trading volume
during the four calendar weeks preceeding the sale. Any sales in excess of said
amount shall be subject to the obligation to offer the Shares to the Company as
herein before set forth.
(c) If the Board of Directors of the Company shall have voted for any
fiscal year to make a contribution to the Company's ESOP during the term of this
Agreement in Shares or in cash for the purpose of purchasing Shares, other than
a cash contribution to be used to repay an "exempt loan" as defined in Treasury
Regulations Section 59.4975-7(b)(l)(iii), the Executive shall have the right to
require that the Company purchase such Shares as are then owned by the Executive
and equal in number to the Shares to be contributed to the ESOP or the value of
the Company's cash contribution for such year. the purchase price of any such
Shares then owned by the Executive shall be the Fair Market Value as of the date
on which the Executive requests, in accordance with this Paragraph, that the
Company purchase such Shares.
- 4 -
<PAGE>
(d) In the event the Company desires to exercise its right to
purchase Shares hereunder, except in the case of a purchase under subparagraph
(b) above, or Executive or the Executive's heirs or legal representatives wish
to exercise the right to require the Company to purchase Shares hereunder, the
party wishing to exercise such right shall give written notice to the Company
following the event giving rise to the exercise of such right, and the Company
shall purchase such Shares as it is required to purchase at a closing to be held
within 60 days following the determination of Fair Market Value. At such
closing, Executive or his heirs or legal representatives shall deliver to the
Company one or more certificates evidencing the Shares to be purchased, endorsed
in blank or accompanied by an executed stock power, in either case with
signature guaranteed and the Company shall pay the purchase price therefor in
cash.
(e) Fair Market Value of the Shares for all purposes hereunder shall
initially be determined by the Board of Directors of the Company in good faith
within thirty (30) days after notice by the Company of its intent to purchase or
a request from Executive or the Executive's heirs or legal representatives to
have the Company purchase Shares. In no event shall the fact that such Shares
constitute a minority or a majority interest be taken into account in valuing
such Shares. Notwithstanding the foregoing, if such Shares are then listed on
any national or regional securities exchange, the Fair Market Value shall be the
mean between the high and low sales prices on the largest of such exchange for
the ten business day period preceding the date of notice to purchase or
requiring the purchase of Shares. If the Shares are not then listed on any such
exchange, the Fair Market Value of such Shares shall be the mean between the
closing "bid" and the closing "ask" prices as reported in any national,
regional, local or additional listing of the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") for the ten business day period
immediately preceding the date of notice to purchase or requiring the purchase
of Shares. If the Shares are not listed on any national or regional stock
exchange, nor quoted by NASDAQ, and Executive or his heirs or legal
representatives, as the case may be, disagrees with the Fair Market Value as
determined by the Board of Directors, Executive or his heirs or legal
representatives, as the case may be, may engage an appraiser reasonably
acceptable to the Company to determine such Fair Market Value, which
determination shall be made within 60 days. The fees and expenses of such
appraiser shall be borne by Executive or his heirs or legal representatives, as
the case may be.
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<PAGE>
8. CHANGE OF CONTROL: The Company shall have the following obligations
-----------------
to Executive during the initial term of this Agreement in the event of a Change
in Control (as hiereinafter defined) of the Company:
(a) In the event of a Change in Control within the first five years
of the initial term of this Agreement, Executive shall be entitled to a payment
from the Company of $427,974. Payment to Executive of the amount required
hereunder shall be made within 60 days following the event giving rise to a
Change in Control.
(b) In the event of a Change in Control within the second five years
of the initial term of this Agreement, Executive shall be entitled to a payment
from the Company of $335,504. Payment to Executive of the amount required
hereunder shall be made within 60 days following the event giving rise to a
Change in Control.
(c) In the event of a Change in Control within the last five years of
the initial term of this Agreement, Executive shall be entitled to a payment
from the Company of $199,636. Payment to Executive of the amount required
hereunder shall be made within 60 days following the event giving rise to a
Change in Control.
(d) For purposes of this Paragraph, a Change in Control shall be
deemed to occur in connection with any of the following events that take place
without the prior approval of Executive and without a declaration by the Board
of Directors that any such event shall not constitute a change in control for
the purposes of this Agreement:
(i) the acquisition by an entity, person or group (including
all affiliates of such entity, person or group) of the
beneficial ownership, as that term is defined in Rule 13d-
3 under the Securities Exchange Act of 1934, of the
capital stock of the Company entitled to exercise more
than 50% of the outstanding voting power of all capital
stock of the Company (exclusive of stock owned by
Executive and Executive's spouse and lineal descendants
and ascendants);
(ii) the effective time of a merger or consolidation of the
Company with one or more other corporations as a result of
which the holders of the outstanding voting stock of the
Company immediately prior to such merger or consolidation
hold less than 80% of the voting stock of the surviving or
resulting corporation;
- 6-
<PAGE>
(iii) the effective time of a transfer of 50% or more of the
aggregate book value of the assets of the Company other
than to an entity of which the Company owns at least 80%
of the voting stock of such entity.
9. RESTRICTIVE COVENANT: During the term of this Agreement, and for a
--------------------
period of two years following the termination of Executive's employment with the
Company for any reason, including termination occasioned by the expiration of
this Agreement, Executive shall not:
(a) Within the United States, engage in, or work for, or own, manage,
operate, control or participate in the ownership, management, operation or
control of, or be connected with, or have any financial interest in, any
individual, partnership, firm, corporation or institution engaged in the same or
similar activities to those now or hereafter carried on by the Company.
(b) Directly or indirectly divert or attempt to divert from the
Company any business in which the Company has been actively engaged during the
term hereof, nor interfere with the relationships of the Company with its
dealers, distributors, sources of supply or customers.
(c) Interfere with the relationship of the Company and any of its
employees, agents or representatives.
If any court determines that any restrictive covenant contained herein, or any
part thereof, is unenforceable because of the duration or geographic scope of
such provision, such court shall have the power to reduce the duration or scope
of such provision, as the case may be, and, in its reduced form, such provision
shall then be enforceable and shall be enforced.
10. NONDISCLOSURE OF CONFIDENTIAL INFORMATION:
-----------------------------------------
(a) Executive acknowledges that the Company may disclose certain
confidential information to Executive during the term of this Agreement to
enable him to perform his duties hereunder. Executive hereby covenants and
agrees that he will not, without the prior written consent of the Company,
during the term of this Agreement or at any time thereafter, disclose or permit
to be disclosed to any third party by any method whatsoever any of the
confidential information of the Company. For purposes of this Agreement,
"confidential information" shall include, but not be limited to, any and all
records, notes, memoranda, data, ideas, processes, methods, techniques,
- 7 -
<PAGE>
systems, formulas, patents, models, devices, programs, computer software,
writings, research, personnel information, customer information, the Company's
financial information, plans, or any other information of whatever nature in the
possession or control of the Company which has not been published or disclosed
to the general public, or which gives to the Company an opportunity to obtain an
advantage over competitors who do not know of or use it. Executive further
agrees that if his employment hereunder is terminated for any reason, he will
leave with the Company and will not take originals or copies of any and all
records, papers, programs, computer software and documents and all matter of
whatever nature which bears secret or confidential information of the Company.
(b) The foregoing subparagraph shall not be applicable if and to the
extent Executive is required to testify in a judicial or regulatory proceeding
pursuant to an order of a judge or administrative law judge issued after
Executive and his legal counsel urge that the aforementioned confidentiality be
preserved.
(c) Executive agrees promptly to reduce to writing and to disclose
and assign, and hereby does assign, to the Company, its parent subsidiaries,
successors, assigns and nominees, all inventions, discoveries, improvements,
copyrightable material, trademarks, programs, computer software and ideas
concerning the same, relating to the business of the Company, which Executive
may make or conceive, either solely or jointly with others, during the period of
his employment by the Company, its parent, subsidiaries or successors.
(d) Executive agrees, without charge to the Company and at the
Company's expense, to execute, acknowledge and deliver to the Company all such
papers, including applications for patents, applications for copyright and
trademark registrations, and assignments thereof, as may be necessary, and at
all times to assist the Company, its parent, subsidiaries, successors, assigns
and nominees in every proper way to patent or register said programs, computer
software, ideas, inventions, discoveries, improvements, copyrightable material
or trademarks in any and all countries and to vest title thereto in the Company,
its parent, subsidiaries, successors, assigns or nominees.
(e) Executive will promptly report to the Company all discoveries,
inventions, or improvements of whatever nature conceived or made by him at any
time he was employed by the Company, its parent, subsidiaries or successors. All
such (discoveries, inventions and improvements which are applicable to the
Company' s business shall 1 be the sole and exclusive property of the Company.
- 8 -
<PAGE>
(f) The covenants set forth in this Paragraph which are made by
Executive are in consideration of the employment, or continuing employment of,
and the compensation paid to, Executive during his employment by the Company.
The foregoing covenants will not prohibit Executive from disclosing confidential
or other information to other employees of the Company or to third parties to
the extent that such disclosure is necessary to the performance of his duties
under this Agreement.
11. SETTLEMENT OF DISPUTES: Any controversy or claim out of or relating
----------------------
to this Agreement, or the breach thereof, may, at the election of either party
or their heirs, executors, administrators, or assigns, be settled by arbitration
in accordance with the rules and procedures of the American Arbitration
Association, and judgment upon the award rendered by the Arbitrator(s) may be
entered in any court having jurisdiction thereof. The Arbitrator may grant any
remedy or relief which the Arbitrator deems just and equitable and within the
scope and purpose of the Agreement of the parties hereto, other than punitive
damages. All expenses of any arbitration proceeding shall be born equally by the
parties, unless they agree otherwise or unless the Arbitrator in the award
assesses such expenses, or any part thereof, against any specified party or
parties.
12. ADDITIONAL REMEDIES: Executive recognizes that irreparable injury
-------------------
will result to the Company and to its business and properties in the event of
any breach by Executive of any of the provisions of Paragraphs 9 and 10 of this
Agreement or either of them, and that Executive's continued employment and the
benefits hereunder are predicated on the commitments undertaken by him pursuant
to said Paragraphs. In the event of any breach of any of Executive's commitments
pursuant to Paragraphs 9 and 10 or either of them, the Company shall be
entitled, in addition to any other remedies and damages available, to injunctive
relief to restrain the violation of such commitments by Executive or by any
person or persons acting for or with Executive in any capacity whatsoever.
13. NONASSIGNMENT: This Agreement is personal to Executive and shall not
-------------
be assigned by him. Executive shall not hypothecate, delegate, encumber,
alienate, transfer or otherwise dispose of his rights and duties hereunder. The
Company may assign this Agreement without Executive's consent to any other
entity who, in connection with such assignment, acquires all or substantially
all of the Company's assets or into or with which the Company is merged or
consolidated.
- 9 -
<PAGE>
14. WAIVER: The waiver by the Company of a breach by Executive of any
------
provision of this Agreement shall not be construed as a waiver of any subsequent
breach by Executive.
15. SEVERABILITY: If any clause, phrase, provision or portion of this
------------
Agreement or the application thereof to any person or circumstance shall be
invalid or unenforceable under any applicable law, such event shall not affect
or render invalid or unenforceable the remainder of this Agreement and shall not
affect the application of any clause, provision, or portion hereof to other
persons or circumstances.
16. BENEFIT: The provisions of this Agreement shall inure to the benefit
-------
of the Company, its successors and assigns, and shall be binding upon the
Company and Executive, its and his heirs, personal representatives and
successors, including, without limitation, Executive's estate and executors,
administrators, or trustees of such estate. In the event of the merger or
consolidation of the Company with or into any other corporation or entity, or in
the event substantially all of the assets of the Company. shall be transferred
to another corporation, the successor corporation resulting from the merger or
consolidation, or the transferee of such assets, as the case may be, shall, as a
condition to the consummation of the merger, consolidation or sale, assume the
obligations of the Company hereunder and shall be substituted for the Company
hereunder.
17. RELEVANT LAW: This Agreement shall be construed and enforced in
------------
accordance with the laws of the Commonwealth of Massachusetts.
18. NOTICES: All notices, requests, demands and other communications in
-------
connection with this Agreement shall be made in writing and shall be deemed to
have been given when delivered by hand or 48 hours after mailing at any general
or branch United States Post Office, by registered or certified mail, postage
prepaid, addressed as follows, or to such other address as shall have been
designated in writing by the addressee:
(a) If to the Company:
Benthos, Inc.
Attn: Richard L. Mappes
Edgerton Drive
North Falmouth, Massachusetts 02556
(b) If to the Executive:
Samuel O. Raymond
P.O. Box 444
Falmouth, Massachusetts 02556
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<PAGE>
19. ENTIRE AGREEMENT: This Agreement sets forth the entire understanding
----------------
of the parties and supersedes all prior agreements, arrangements, and
communications, whether oral or written, pertaining to the subject matter
hereof; and this Agreement shall not be modified or amended except by written
agreement of the Company and Executive.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
duplicate as a sealed instrument on the 24th dayof September 1990.
BENTHOS, INC.
By: /s/ Lawrence W. Gray
--------------------------------
Lawrence W. Gray, President
/s/ Samuel O. Raymond
-----------------------------------
Samuel O. Raymond
- 11 -
<PAGE>
AMENDMENT TO AGREEMENT BETWEEN
BENTHOS, INC. AND SAMUEL O. RAYMOND
WHEREAS Benthos, Inc., a Massachusetts Corporation having its principal
office in North Falmouth, Massachusetts, (the Company) and Samuel O. Raymond of
Falmouth, Massachusetts, (the Executive) entered into an employment agreement on
September 24, 1990, (the Agreement) and whereas the parties desire to coordinate
changes in compensation for the Executive under the Agreement with the fiscal
year of the Company which ends on September 30 of each year;
NOW THEREFORE it is agreed by and between the Company and the Executive
that commencing with the fiscal year ending September 30, 1994, changes in the
compensation of the Executive under the Agreement, if any, shall be effective as
of the first day of October of each year. The first such change will be as of
October 1, 1993, so that the annual compensation in effect commencing October 1,
1993, will be $85,176 consisting of $27,040 as Chairman and $58,136 as Chief
Scientist.
It is further agreed that the annual review referred to in Section 4 of the
Agreement shall take place after the close of each fiscal year and be effective
as of the first day of October of the new fiscal year.
Executed in duplicate as a sealed instrument this 30th day of November,
----
1993.
Benthaos, Inc.
By /s/ Lawrence W. Gray
---------------------------
Lawrence W. Gray, President
/s/ Samuel O. Raymond
---------------------------
Samuel O. Raymond
<PAGE>
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
----------------------------------------
THIS AGREEMENT entered into this 16th day of December, 1996 by and between
BENTHOS, INC., a Massachusetts corporation having its principal place of
business in Falmouth, Massachusetts (the "Company") and SAMUEL O. RAYMOND, of
Falmouth, Massachusetts (the "Executive"),
WITNESSETH THAT:
---------------
WHEREAS, the Company and the Executive are parties to a certain Employment
Agreement dated September 24, 1990, as amended by instrument dated November 30,
1993 (the "Agreement"); and
WHEREAS, the parties hereto desire to further amend the Agreement in
certain respects,
NOW THEREFORE, in consideration of the mutual covenants herein expressed
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto do hereby agree as follows:
1. The Agreement is hereby amended by deleting subparagraph (a) of
Section 7 thereof in its entirety and by adding the following new paragraph 20:
20. LIFE INSURANCE: The Company agrees to pay in a timely manner all
--------------
premiums applicable to an SLD Ultra Advantage insurance policy to be issued
by Security Life of Denver insuring the life of the Executive and providing
a death benefit payable to a trust to be created by the Executive for the
benefit of his family or payable to such other beneficiary as the Executive
or the Trustee of said Trust shall from time to time determine in the
amount of $1,500,000 pursuant to a split dollar plan, single bonus method,
or the equivalent thereof for the term of the Employment Agreement
commencing with the first annual premium to be paid in December 1996 and
continuing through and including the ninth annual premium due in December
2004
<PAGE>
and annually thereafter during each annual extension of the Employment
Agreement.
(a) The Company agrees to enter into a collateral assignment
split-dollar life insurance agreement with the Policy Owner and
to execute such instruments as may be necessary or appropriate
to place a split-dollar plan into effect.
(b) The Policy Owner shall have the right at any time and at
the termination of the employment of the Executive to terminate
the collateral assignment of the policy under the split-dollar
plan by paying to the Company an amount equal to the aggregate
premiums paid by the Company reduced by all amounts paid by the
Policy Owner to the Company on account of the policy. Payment in
full shall be made by cash or check or on such other terms as
the Company and the Policy Owner shall mutually agree. Upon such
termination the Company's obligation to pay premiums shall
cease.
2. Notices to the Company under paragraph 18 shall hereafter be
addressed to the attention of John L. Coughlin, President.
3. The parties do hereby confirm, approve and ratify the Agreement
as amended hereby, in all respects and to all extents and purposes.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed in duplicate as a sealed instrument as of the day and year first above
written.
BENTHOS, INC.
By: JOHN L. COUGHLIN
---------------------------------
John L. Coughlin, President
SAMUEL O. RAYMOND
------------------------------------
Samuel O. Raymond
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT made and entered into in Falmouth, Massachusetts, between BENTHOS,
INC., a Massachusetts corporation with a usual place of business situated at 49
Edgerton Drive, North Falmouth, Massachusetts 02556 (the " Company") and JOHN L.
COUGHLIN, of 34 Forge Way, Duxbury, Massachusetts 02332 (the "Executive"),
effective as of the 8th day of April, 1996.
W I T N E S S E T H:
WHEREAS, the operations of the Company are a complex matter requiring
direction and leadership in a variety of arenas, including financial, strategic
planning, research, marketing, and others;
WHEREAS, the Executive possesses useful knowledge and skills and has extensive
management experience; and
WHEREAS, subject to the terms and conditions hereinafter set forth, the
Company wants to employ the Executive as the President and Chief Executive
Officer of the Company and the Executive wants to accept such employment by the
Company;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
terms, provisions and conditions set forth in this Agreement, the Company and
the Executive hereby mutually agree as follows:
1. Employment. The Company shall employ the Executive and the Executive will
----------
serve the Company as President and Chief Executive Officer of the Company upon
the terms and conditions provided herein. In the discharge of the duties of the
Executive hereunder, the Executive shall report to the Board of Directors of the
Company.
2. Term. Subject to earlier termination as hereinafter provided, the
----
employment of the Executive hereunder shall be for a term of four (4) years,
commencing on the effective date hereof, and may be extended or renewed only by
a written agreement executed and delivered by the Executive and an expressly
authorized representative of the Company. The term of this Agreement, as from
time to time extended or renewed, is hereafter referred to as "the term of this
Agreement" or "the term hereof".
3. Capacity and Performance.
------------------------
a. During the term hereof, the Executive shall serve the Company as the
President and Chief Executive Officer of the Company. In addition and without
further compensation, the
1
<PAGE>
Executive shall serve as a Director of the Company if so elected or appointed
from time to time.
b. During the term hereof, the Executive shall be employed by the Company
on a full-time basis and shall perform such duties and responsibilities on
behalf of the Company as may be designated from time to time by the Board of
Directors of the Company.
c. During the term hereof, the Executive shall devote the full business
time and the best efforts, business judgment, skill and knowledge of the
Executive to the advancement of the business and interests of the Company and to
the discharge of the duties of the Executive hereunder. The Executive shall not
engage in any other business activity or serve in any industry, trade,
professional, governmental, or academic position during the term of this
Agreement, except as may be approved in advance by the Company.
4. Compensation and Benefits. As compensation for all services performed by
-------------------------
the Executive hereunder during the term hereof and subject to the satisfactory
performance of the duties and obligations of the Executive to the Company, the
compensation and benefits to be earned by the Executive pursuant to this
Agreement are as follows:
a. Base Salary. During the term hereof, the Company shall pay the
-----------
Executive a base salary at the rate of One Hundred Forty-four Thousand
($144,000) Dollars per annum, payable in accordance with the payroll practices
of the Company for its executives and subject to increase from time to time by
the Board of Directors, in its sole discretion. Such base salary, as from time
to time adjusted, is hereafter referred to as the "Base Salary".
b. Initial Bonus. In addition to the Base Salary, if the effective date
-------------
of this Agreement and the actual full time employment of the Executive
commences on or before May 1, 1996, and provided that the Executive is employed
by the Company on October 1, 1996 and is not in breach of this Agreement, the
Executive shall be paid a Twenty Thousand ($20,000) Dollar bonus on October 1,
1996.
c. Base Salary and Bonus Adjustments. On or about October 1, 1996, the
---------------------------------
Board of Directors will review the Base Salary and the incentive bonus of the
Executive and will make such adjustments as the Board of Directors in its sole
discretion determines to be appropriate in light of the performance of the
Executive and will provide the Executive with a sufficient level of incentive in
pursuit of the goals which are established by the Board of Directors.
d. Stock Options. The Executive will receive a stock option under the
-------------
stock option plan of the Company for Fifty Thousand (50,000) shares of the
common stock of the Company in accordance with the form of option agreement
attached hereto as Exhibit A which agreement will be executed and delivered by
the Company and the Executive on the effective date hereof.
e. Other Benefits. The Executive will be entitled to such annual vacation
--------------
as shall be agreed upon between the Executive and the Board of Directors of the
Company as well as any
2
<PAGE>
fringe benefits and perquisites that may from time to time be afforded generally
to senior executive officers of the Company. Without limiting the generality of
the foregoing, the Executive shall be entitled to participate in or receive
benefits under any 401(k), pension, employee stock ownership plan, retirement
plan, life insurance, health and accident plan or other arrangement made
available by the Company now or in the future, generally to the senior executive
officers of the Company, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and arrangements and of the
terms of this Agreement.
f. Expenses. The Executive shall be entitled to receive prompt
--------
reimbursement for all reasonable expenses incurred by the Executive (in
accordance with the policies and procedures established from time to time by the
Board of Directors of the Company or any Committee thereof) in the performance
of the duties of the Executive hereunder, provided such expenses are properly
accounted for in accordance with the policies of the Company.
5. Termination of Employment and Severance Benefits. Notwithstanding the
------------------------------------------------
provisions of Section 2 above, the employment of the Executive hereunder shall
terminate prior to the expiration of the term under the following circumstances:
a. Death. In the event of the death of the Executive during the term
-----
hereof, the employment of the Executive hereunder shall immediately and
automatically terminate. In such event, the Company shall pay to the estate of
the Executive any earned and unpaid Base Salary and any incentive or bonus
compensation that is earned but unpaid, prorated through the date of death of
the Executive.
b. Disability. The Company may terminate the employment of the Executive
----------
hereunder in the event the Executive becomes disabled during the term hereof due
to any illness, injury, accident or condition of either a physical or
psychological nature and, as a result, is unable to perform substantially all of
the duties and responsibilities of the Executive hereunder on a full time basis,
for ninety (90) consecutive days, or for ninety (90) days cumulatively within
any twelve (12) month period, or if in the opinion of a duly licensed physician
the same is likely to occur. In connection with this Section 5b., at the request
of the Company the Executive shall submit to a medical examination by a
physician selected by the Company to whom the Executive, or the duly appointed
guardian of the Executive, if any, has no reasonable objection. If the
Executive shall refuse to submit to such medical examination, then the
determination of the Board of Directors on disability shall be conclusive. The
Board of Directors may designate another employee to act in the place of the
Executive during any period of disability. Notwithstanding any such
designation, the Executive shall continue to receive Base Salary in accordance
with the provisions of Section 4a. above to the extent permitted by the then
applicable benefit plans, until the Executive becomes eligible for disability
income benefits under the disability income plan of the Company or the
termination of the employment of the Executive, whichever shall first occur.
While receiving disability income payments under any disability income plan of
the Company, the Executive shall not be entitled to receive any Base Salary but
shall continue to participate in Company benefit plans under Section 4e. hereof
and the terms of such plans until the termination
3
<PAGE>
of the Employment of the Executive. On or before the commencement of the seventh
month of the term hereof, the Company will provide the Executive with reasonable
long term disability insurance coverage.
c. By the Company for Cause. The Company may terminate the employment of
------------------------
the Executive hereunder for cause at any time upon notice to the Executive
setting forth in reasonable detail the nature of such cause. The following, as
determined by the Board of Directors in its reasonable judgement shall
constitute cause for termination:
i. The failure of the Executive to satisfactorily perform
(other than by reason of disability), or material negligence in the
performance of, the duties and responsibilities of the Executive to
the Company;
ii. Material breach by the Executive of any provision of this
Agreement; or
iii. Other conduct by the Executive that is materially harmful
to the business, interests, or reputation of the Company.
Upon the giving of written notice to the Executive of termination of the
employment of the Executive for cause, the Company shall have no further
obligation or liability to the Executive, other than for Base Salary and
prorated incentive bonus, if any, earned and unpaid at the date of termination.
d. By the Company Without Cause. The Company may terminate this
----------------------------
Agreement at anytime without cause provided that the Company shall pay the
Executive the severance benefits as provided for in Section 6b. hereof.
e. Post-Agreement Employment. In the event the Executive remains in
-------------------------
the employ of the Company following the termination of this Agreement, whether
by expiration of the term or otherwise, such employment shall be at-will.
6. Compensation of Executive Upon Termination. In the event of the
------------------------------------------
termination of the Employment of the Executive hereunder, the Company shall pay
the Executive the following:
a. Base Salary. If the employment of the Executive is terminated for
-----------
any reason other than disability, then the Company will pay the Executive the
Base Salary and prorated incentive bonus, if any, of the Executive earned
through the date of termination. If the employment of the Executive is
terminated due to disability of the Executive, then the Executive will be
compensated in accordance with the provisions of Section 6b. hereof.
b. Severance Pay. Provided that the Executive satisfies the
-------------
requirements of severance set forth in Section 6c. below, if the Company (i)
terminates the Executive ) because
4
<PAGE>
of disability pursuant to Section 5b. hereof, (ii) terminates the Executive
without cause pursuant to Section 5d. hereof, or (iii) allows this Agreement to
expire at the expiration of the term hereof and this Agreement is not supplanted
by another agreement and as a result thereof the Company discontinues the
employment of the Executive after the expiration of the term hereof (hereinafter
sometimes collectively referred to as "Terminating Events" or individually as a
"Terminating Event"), then the Company shall pay the Executive severance pay in
accordance with the provisions hereof. If the Terminating Event occurs at any
time within the first two months of the term hereof, then the Executive will be
paid severance pay equal to two months of Base Salary plus 1/3 of the initial
bonus set forth in Section 4b. If the Terminating Event occurs after the first
two months of the term hereof but prior to the commencement of the seventh month
of the term hereof, then the total amount of the severance to be paid to the
Executive will be computed as follows: one month of Base Salary and 1/6 of the
said initial bonus for each month of the term employed prorated up to the date
of termination. If the Terminating Event occurs after the commencement of the
seventh month of the term hereof, then the total amount of severance pay to be
paid to the Executive will be computed as follows: an amount equal to the
immediate preceding six month's Base Salary plus any unpaid incentive or initial
bonus earned but unpaid as of the date of termination of the Executive.
Acceptance by the Executive of the severance pay shall constitute full
settlement of any claim the Executive may assert against the Company, its
affiliates, directors, officers, employees or agents.
c. Requirements of Severance. The obligation of the Company to pay
-------------------------
severance pay to the Executive is contingent upon the Executive executing and
delivering, all in form and substance satisfactory to the Company, (i) if the
Executive is then a member of the Board of Directors of the Company, a
resignation from the Board of Directors of the Company, (ii) a general release
of the Company by the Executive, (iii) a resignation as President and Chief
Executive Officer of the Company and (iv) satisfactory evidence to the Company
that the Executive has returned all property, Confidential Information and
Documents of the Company to the Company.
7. Confidentiality /Intellectual Property.
--------------------------------------
a. The Executive acknowledges that the Company continually develops
Confidential Information, as hereinafter defined, that the Executive may develop
Confidential Information for the Company and that the Executive may learn of
Confidential Information during the course of the employment of the Executive by
the Company. The Executive will comply with the policies and procedures of the
Company for protecting Confidential Information and shall never disclose to any
one (except as required by applicable law or for the proper performance of the
duties of the Executive to the Company), or use for the benefit or gain of the
Executive, any Confidential Information obtained by the Executive incident to
the employment of the Executive by the Company. The Executive understands that
this restriction shall continue to apply after the employment of the Executive
terminates, regardless of the reason for such termination.
b. Documents. All records, tapes and other media of every kind and
---------
description
5
<PAGE>
relating to the business, present or otherwise of the Company and any copies in
whole or in part, thereof (the "Documents"), whether or not prepared by the
Executive, shall be the sole and exclusive property of the Company. The
Executive shall safeguard all Documents and shall surrender to the Company at
the termination of the employment of the Executive, or at such earlier time or
times as the Board of Directors of the Company may specify, all Documents in the
possession or control of the Executive.
c. Assignment of Intellectual Property. The Executive shall promptly
-----------------------------------
and fully disclose all Intellectual Property, as hereinafter defined to the
Company. The Executive hereby assigns and agrees to assign to the Company, or
as otherwise directed by the Board of Directors, all the right, title and
interest of the Executive in and to all Intellectual Property. The Executive
agrees to execute any and all applications for domestic and foreign patents,
copyrights or other proprietary rights and to do such other acts (including
without limitation the execution and delivery of instruments of further
assurance and confirmation) requested by the Board of Directors to assign the
Intellectual Property to the Company and to permit the Company to enforce any
patents, copyrights, or other proprietary rights to the Intellectual Property.
The Executive will not charge the Company for any time spent in complying with
these obligations. All copyrightable works that the Executive creates shall be
considered "work made for hire".
d. Definitions. The following terms shall have the following
-----------
meanings:
(i) "Confidential Information" means any and all
information of the Company that is not generally known by others with
whom the Company competes or conducts business, or with whom the
Company may plan to compete or conduct business, and any and all
information, publicly known in whole or in part or not, which, if
disclosed by the Company would assist in competition against the
Company. Confidential Information includes without limitation such
information relating to (a) the development, research, testing,
manufacturing, marketing and financial activities of the Company, (b)
the Products, as hereinafter defined, (c) the costs, sources of
supply, financial performance and strategic plans of the Company, (d)
identity and special needs of the customers of the Company and (e) the
people and the organizations with whom the Company has business
relationships and those relationships. Confidential Information also
includes comparable information that the Company has received
belonging to others or which was received by the Company with any
understanding whatsoever that it would not be disclosed.
(ii) "Intellectual Property" means inventions,
discoveries, developments, methods, processes, compositions, works,
concepts, and ideas (Whether or not patentable or copyrightable or
constituting trade secrets) conceived, made, created, developed or
reduced to practice by the Executive (whether alone or with others,
whether or not during normal business hours or on or off the premises
of the Company) during the employment of the Executive, and during the
period of one (1) year following the termination of the employment of
the Executive, that relate
6
<PAGE>
to either the Products or any prospective activity of the Company.
(iii) "Products" mean all products planned, researched ,
developed, tested, manufactured sold, licensed, leased or otherwise
distributed or put into use by the Company, together with all services
provided or planned by the Company during the employment of the
Executive.
8. Non-Competition; Solicitation.
-----------------------------
a. Non-Competition. The Executive shall not for so long as the
----------------
Executive is employed hereunder and for a period of two (2) years thereafter,
serve, directly or indirectly, as an operator, owner, partner, consultant,
officer, director, or employee of any firm or corporation which, as of the date
of termination of employment, is or has plans to be substantially and directly
in competition within the United States of America with the Company. It is
agreed that the remedy at law for any breach of the foregoing shall be
inadequate and that the Company shall be entitled to injunctive relief in the
enforcement thereof in addition to any other remedy permitted by law. In the
event that this Section shall be determined by any court of competent
jurisdiction to be unenforceable by reason of its extending for too great a
period of time or over too large a geographic area or over too great a range of
activities, it shall be interpreted to extend over the maximum period of time,
geographic area or range of activities as to which it may be enforceable.
Nothing herein contained shall prevent the Executive from holding or investing
in securities listed on a national securities exchange or sold in the over-the-
counter market, provided such investments do not exceed in the aggregate one
(1%) percent of the issued and outstanding capital stock of a corporation which
is a competitor within the meaning of this Section.
b. Solicitation. The Executive shall not during the term of this
-------------
Agreement and for a period of two (2) years thereafter, directly or indirectly,
either solicit or induce any customers of the Company or its affiliates to
patronize any business which competes with that of the Company, or solicit or
induce any employees of the Company to leave employment with the Company.
9. Enforcement of Covenants. The Executive acknowledges that the
------------------------
Executive has carefully read and considered all the terms and conditions of this
Agreement, including the restraints imposed upon the Executive by Sections 7 and
8 hereof. The Executive agrees that said restraints are necessary for the
reasonable and proper protection of the Company and that such restraints are
reasonable in respect to subject matter, length of time, and geographic area.
The Executive further acknowledges that, were the Executive to breach any of the
covenants contained in Sections 7 and 8 hereof , the damage to the Company would
be irreparable. The Executive therefore agrees that the Company, in addition to
any other remedies available to the Company, shall be entitled to preliminary
and permanent injunctive relief against any breach or threatened breach by the
Executive of any of said covenants without posting bond. The Executive and the
Company further agree that , in the event that any provision of Sections 7 and 8
hereof shall be determined to be unenforceable by a court of competent
jurisdiction by reason of it being extended
7
<PAGE>
over too great a time, too large a geographic area or too great a range of
activities, such provision shall be deemed to be modified to permit its
enforcement to the maximum extent permitted by law.
10. Conflicting Agreements. The Executive hereby represents and warrants
----------------------
that the execution of this Agreement and the performance of the obligations of
the Executive hereunder will not breach or be in conflict with any other
agreement to which the Executive is a party or is bound and that the Executive
is not now subject to any covenants against competition or similar covenants
that would affect the performance of the Executive hereunder. The Executive
will not disclose to or use on behalf of the Company any proprietary information
of a third party without the consent of such third party.
11. Withholding. All payments made to the Executive by the Company under
-----------
this Agreement shall be reduced by any tax or other amounts required to be
withheld by the Company under applicable law.
12. Assignment. Neither the Company nor the Executive may make any
----------
assignment of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other; provided, however,
that the Company may assign its rights and obligations under this Agreement
without the consent of the Executive in the event that the Company shall
hereafter affect a reorganization, consolidate with, or merge into, any other
person or entity transfer all or substantially all of its properties or assets
to any other Person or entity. This Agreement shall inure to the benefit of and
be binding upon the Company and the Executive, their respective successors,
executors, administrators, heirs and permitted assigns.
13. Severability. If any portion or provision of this Agreement shall to
------------
any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
14. Waiver. No waiver of any provision hereof shall be effective unless
------
made in writing and signed by the waiving party. The failure of either party to
require the performance of any term or obligation of this Agreement, or the
waive by either party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
15. Notices. Any and all notices, requests, demands and other
-------
communications provided for by this Agreement shall be in writing and shall be
effective when delivered in person or deposited in the United States mail,
postage prepaid, registered or certified, and addressed to the Executive at the
last known address of the Executive on the books of the Company or, in the case
of the Company, at its principal place of business, attention of the Chairman of
the Board of Directors, or to such other address as either party may specify by
notice to the other.
8
<PAGE>
16. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties and supersedes all prior communications, agreements and
understandings, written or oral, with respect to the terms and conditions of the
Executive's employment.
17. Amendment. This Agreement may be amended or modified only by a
---------
written instrument signed by the Executive and by an expressly authorized
representative of the Company who is authorized by a vote of the Board of
Directors of the Company to execute such amendment or modification on behalf of
the Company.
18. Headings. The headings and captions in this Agreement are for
--------
convenience only and in no way define or describe the scope or content of any
provision of this Agreement.
19. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.
20. Governing Law. This is a Massachusetts contract and shall be
-------------
construed and enforced under and be governed in all respects by the laws of the
Commonwealth of Massachusetts, without regard to the conflict of laws principals
thereof.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
by the Company, by its duly authorized representative, and by the Executive, as
of the date first above written.
COMPANY: BENTHOS, INC.
By: SAMUEL O. RAYMOND
-------------------------------------
Samuel O. Raymond, Chairman of the
Board of Directors
EXECUTIVE: JOHN L. COUGHLIN
-------------------------------------------
John L. Coughlin
9
<PAGE>
BENTHOS, INC. EMPLOYEE
STOCK OWNERSHIP PLAN
AS AMENDED AND RESTATED
EFFECTIVE AS OF OCTOBER 1, 1987
<PAGE>
BENTHOS, INC. EMPLOYEE
STOCK OWNERSHIP PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
ARTICLE I
NAME AND EFFECTIVE DATE
<S> <C> <C>
1.1 NAME OF PLAN 1
1.2 EFFECTIVE DATE 1
ARTICLE 11
DEFINITIONS 1
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 EMPLOYEES ELIGIBLE TO PARTICIPATE 8
3.2 REINSTATEMENT OF PARTICIPATION 9
3.3 PARTICIPATION FOLLOWING A LEAVE OF ABSENCE 9
ARTICLE IV
COMPANY CONTRIBUTIONS
4.1 DISCRETIONARY CONTRIBUTIONS 10
4.2 SUPPLEMENTAL CONTRIBUTIONS 11
4.3 PAYMENT OF CONTRIBUTIONS 11
ARTICLE V
ALLOCATION OF CONTRIBUTIONS,
FORFEITURES AND INVESTMENT EARNINGS
5.1 ALLOCATING CONTRIBUTIONS AND FORFEITURES 11
5.2 VALUATION OF TRUST ASSETS 13
5.3 DIVIDENDS ON COMPANY SHARES 13
5.4 ADJUSTMENT OF ACCOUNTS 14
5.5 DIVERSIFICATION OF ACCOUNTS BY PARTICIPANTS 14
5.6 ANNUAL STATEMENTS 15
</TABLE>
- i -
<PAGE>
<TABLE>
<CAPTION>
ARTICLE VI
PARTICIPANT CONTRIBUTIONS
<S> <C> <C>
6.1 VOLUNTARY CONTRIBUTIONS 15
ARTICLE VII
CONTRIBUTION AND BENEFIT LIMITATIONS
7.1 DEFINITIONS 15
7.2 ANNUAL ADDITIONS LIMITATION 18
7.3 COMBINED BENEFIT LIMITATIONS 18
7.4 ADJUSTED DOLLAR LIMITS 19
7.5 CORRECTING EXCESS AMOUNTS 20
ARTICLE VIII
RETIREMENT AND DISABILITY BENEFITS
8.1 COMMENCEMENT OF BENEFITS 21
8.2 ALTERNATE FORM OF BENEFIT PAYMENTS 22
8.3 MINIMUM RETIREMENT AND DISABILITY DISTRIBUTIONS 22
ARTICLE IX
DEATH BENEFITS
9.1 DEATH BENEFITS 23
9.2 DEATH BENEFIT WAIVER 24
9.3 ALTERNATE FORMS OF DEATH BENEFIT PAYMENTS 24
9.4 MINIMUM DEATH BENEFIT DISTRIBUTIONS 25
9.5 BENEFICIARY DESIGNATION 26
ARTICLE X
TERMINATION BENEFITS
10.1 VESTED BENEFITS 27
10.2 DISTRIBUTION OF BENEFITS 29
10.3 REINSTATEMENT OF VESTING SERVICE 29
10.4 VESTING AMENDMENTS 30
</TABLE>
- ii -
<PAGE>
<TABLE>
<CAPTION>
ARTICLE XI
APPLICATION FOR BENEFITS
<S> <C> <C>
11.1 APPLYING FOR BENEFITS 31
11.2 RETIREMENT BENEFITS 31
11.3 DISABILITY BENEFITS 32
11.4 DEATH BENEFITS 32
11.5 TERMINATION BENEFITS 32
11.6 DENIAL OF BENEFITS 32
11.7 MISSING PARTICIPANTS AND BENEFICIARIES 33
11.8 PAYMENTS To INCOMPETENTS OR MINORS 33
11.9 ELIGIBLE ROLLOVER DISTRIBUTIONS 34
ARTICLE XII
RIGHTS OF PARTICIPANTS
12.1 PARTICIPANT STATUS 35
12.2 LEAVE OF ABSENCE 36
12.3 ASSIGNMENT AND ALIENATION 37
12.4 QUALIFIED DOMESTIC RELATIONS ORDERS 37
12.5 DISTRIBUTION OF SHARES 39
12.6 VOTING OF SHARES 41
ARTICLE XIII
ADMINISTRATION OF THE PLAN
13.1 ADMINISTRATIVE COMMITTEE 43
13.2 ORGANIZATION AND PROCEDURES 43
13.3 DUTIES AND POWERS 44
13.4 CONSULTATION BY THE COMMITTEE 45
13.5 FINALITY OF ACTIONS 45
13.6 INDEMNIFICATION 45
13.7 COMPENSATION AND EXPENSES OF EMPLOYEES 45
ARTICLE XIV
THE TRUST FUND
14.1 THE TRUSTEE 46
14.2 THE TRUST FUND 46
14.3 PURCHASES OF SHARES LOANS TO THE TRUST FUND 46
14.4 REVERSION OF ASSETS 48
</TABLE>
- iii -
<PAGE>
<TABLE>
<CAPTION>
ARTICLE XV
PLAN FIDUCIARIES
<S> <C> <C>
15.1 NAMED FIDUCIARIES 49
15.2 BONDING REQUIREMENTS 49
15.3 PROHIBITED TRANSACTIONS 49
15.4 FIDUCIARY RESPONSIBILITIES 50
15.5 INVESTMENT MANAGERS 51
ARTICLE XVI
AMENDMENT, TERMINATION AND MERGER
16.1 PLAN AMENDMENT 52
16.2 PLAN TERMINATION 52
16.3 PLAN MERGER 54
ARTICLE XVII
MISCELLANEOUS PROVISIONS
17.1 INTERPRETATION 54
17.2 LIABILITY FOR EMPLOYEE REPRESENTATIONS 55
17.3 DESCRIPTIVE HEADINGS 55
17.4 CONSTRUCTION 55
17.5 MULTIPLE ORIGINALS 55
ARTICLE XVIII
TOP-HEAVY PROVISIONS
18.1 TOP-HEAVY DEFINITIONS 55
18.2 TOP-HEAVY BENEFITS 59
18.3 ADJUSTED BENEFIT LIMITATIONS 60
18.4 ELIGIBILITY FOR ALLOCATIONS 61
</TABLE>
- iv -
<PAGE>
BENTHOS, INC. EMPLOYEE STOCK OWNERSHIP PLAN
Pursuant to a resolution of its Board of Directors, Benthos, Inc., a
corporation duly organized under the laws of the Massachusetts and having its
principal place of business in North Falmouth, Massachusetts (hereinafter
referred to as the "Company"), has adopted this Amendment to its Employee Stock
Ownership Plan, said Amendment to be in the form of a completely restated Plan,
for the purpose of recognizing the contribution made to the successful operation
of the Company by its Employees, and to reward such contribution for those
Employees who qualify as Participants hereunder by investing primarily in
Company securities as defined in Section 409(1) of the Code. This Plan is
intended to be an employee stock ownership plan within the meaning of Section
4975(e)(7) of the Internal Revenue Code.
A R T I C L E I
NAME AND EFFECTIVE DATE
SECTION 1.1 NAME OF PLAN
This Plan shall be known as the "Benthos, Inc. Employee Stock Ownership
Plan.
SECTION 1.2 EFFECTIVE DATE.
This Plan became effective as of August 17, 1979. This Amendment restating
the Plan shall be effective as of October 1, 1987.
A R T I C L E II
DEFINITIONS
When used in this Plan, the following terms have the meanings set forth
below unless a different meaning is plainly required by the context:
"Account" means the individual account established in the name of each
Participant reflecting his portion of the Company's contributions, and the net
earnings or losses thereon, and any Shares of the Company allocated to the
Participants Account.
"Administrative Committee", "Committee" or "ESOP Committee" means the
committee appointed by the Board of
<PAGE>
Directors of the Company to administer the Plan as set forth in Article XIII.
"Affiliated Group" means any group of corporations or other business
organizations of which the Company is a member, determined by using tests
established under Sections 414(b), (c), (m) and (o) of the Code, modified for
purposes of Section 415 of the Code only by Section 415(h).
"Application for Benefits" means the form provided by the Administrative
Committee in order to receive benefits hereunder.
"Beneficiary" means any individual, trust, estate, or other recipient
entitled to receive death benefits payable hereunder, on either a primary or
contingent basis.
"Benefit Starting Date" means the first day of the first period for which a
Participant, Inactive Participant, or Beneficiary is considered to have received
benefit payments under the Plan or the first date on which such benefit payments
are paid or are payable.
"Board of Directors" means the board of directors of the Company as shall be
serving from time to time.
"Break in Service" means the failure of an Employee to complete more than
500 Hours of Service during the 12-month computation period used for purposes of
determining whether the Employee has completed a Year of Service.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means any corporation or business organization which shall assume
the obligations of this Plan with respect to its Employees. The term "Company"
shall also include any predecessor business organization.
"Compensation" means, effective October 11, 1991, the total base salary and
wages for services paid by the Company to a Participant for any Plan Year,
including sick pay and pay for overtime, calculated at the Participant's base
rate, but excluding cash incentive pay and any so-called "fringe benefits", and
any contributions or benefits hereunder or under any other pension, profit-
sharing, group insurance or other employee benefit plan now or hereafter adopted
other than elected amounts contributed with respect to an arrangement under
Section 125 or 401(k) of the Code; provided, however, that the term
"Compensation" shall exclude any compensation paid to a Participant for that
part of such Plan Year prior to the date he became a Participant, and shall
include any
- 2 -
<PAGE>
compensation otherwise falling within the foregoing definition and paid to any
person who becomes a Participant on the Effective Date for that part of the Plan
Year prior to the Effective Date. For Plan Years beginning prior to October 1,
1991, Compensation shall exclude overtime pay. Anything herein to the contrary
notwithstanding, a Participant's Compensation for any Plan Year beginning after
1988 shall be deemed not to exceed $200,000, subject to any adjustments to
reflect increases in the cost of living determined by the Secretary of the
Treasury and after applying the family aggregation rules of Section 414(q)(6) of
the Code pursuant to Section 401(a)(17) of the Code.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual Compensation of each employee
taken into account under the plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not exceeding 12
months, over which Compensation is determined (determination period) beginning
in such calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual Compensation limit will be multiplied by a fraction,
the numerator of which is the number of months in the determination period, and
the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in this
plan to the limitation under section 401(a)(17) of the Code shall mean the OBRA
'93 annual compensation limit set forth in this provision.
"Disabled Participant" means a Participant who has become permanently and
totally incapable of performing the duties he was previously performing for the
Company for physical or mental reasons. Such disability shall be deemed to
exist only when an Application for Benefits has been filed with the
Administrative Committee by or on behalf of such Participant within one year
following his separation from service with the Company and when such disability
is thereafter certified to the Committee by a licensed physician approved by the
Committee.
"Entry Date" means each day of each Plan Year.
- 3 -
<PAGE>
"Employee" means an individual employed by the Company as a common-law
employee. Anything herein to the contrary notwithstanding, the term "Employee"
shall not include:
(a) any non-resident alien who receives no earned income from the
Company which constitutes income from sources within the United States;
(b) any individual included in a unit of employees covered by a
collective bargaining agreement with the Company with respect to which
retirement benefits were the subject of good faith negotiation; and
(c) any Leased Employee of the Company.
"ERISA" means the Employee Retirement Income Security Act of 1974, as now in
effect and as thereafter amended, and any regulations issued thereunder.
"Exempt Loan" means any loan to the Trust Fund which satisfies the
requirements of Section 14.3.
"Fair Market Value" shall mean the value of the Shares of the Company as
determined by the Administrative Committee by resorting to the first available
of the following sources:
(a) the mean between the closing bid and asked price of the Shares on
a recognized securities exchange as of any date of reference;
(b) the mean of the bid and asked prices published as of any date of
reference;
(c) for Shares acquired prior to January 1, 1987, the market value of
the Shares based upon an appraisal prepared by an independent appraiser selected
by the Committee, and upon such other factors affecting value as the Committee
deems appropriate; or
(d) for Shares acquired on or after January 1, 1987, the market value
of the Shares based upon an appraisal prepared by an independent appraiser
selected by the Committee meeting requirements similar to those contained in
Regulations under Section 170(a)(1) of the Code.
"Fiscal Year" means the twelve month period ending on September 30 each
year.
- 4 -
<PAGE>
"Hour of Service" means:
(a) Each hour for which an Employee is directly or indirectly
compensated, or entitled to be compensated, by the Company for the performance
of duties.
(b) Each hour, to a maximum of 501 hours for any single continuous
period, for which an Employee is directly or indirectly compensated, or entitled
to be compensated, by the Company for reasons other than the performance of
duties (irrespective of whether the employment relationship has terminated) such
as vacation, holidays, incapacity, layoff, jury duty, military duty, or leave of
absence. Hours shall not be credited for payment to an Employee from a plan
required by workmen's compensation, unemployment compensation, or disability
insurance law, nor shall hours be credited for reimbursement of an Employee for
his medical or medically related expenses.
(c) Each hour for which back pay, irrespective of mitigation of
damages, has been awarded or agreed to by the Company, provided that if such
award or agreement of back pay is for reasons other than the performance of
duties, such hours shall be subject to the restrictions of paragraph (b).
(d) For purposes of determining whether a Break in Service has
occurred, each hour to a maximum of 501 hours, for any single continuous period
of absence, regardless of whether the Employee is compensated for such absence.,
if such absence occurs by reason of pregnancy of the Employee, birth of a child
of the Employee, adoption of a child by the Employee, or the Employee caring for
a child for the period beginning immediately following such birth or adoption if
such Hours of Service would otherwise have been credited to the Employee but for
such absence. Hours of Service credited under this subsection (d) will be
credited in the computation period in which such absence commences or, if not
necessary to prevent a Break in Service in such period, in the immediately
following computation period. Hours of Service credited to the Employee under
this subsection (d) shall only be credited upon receipt by the Administrative
Committee of such timely information as may be reasonably required to establish
the existence and duration of such absence.
The same Hours of Service shall not be credited under more than one of the
paragraphs above. All Hours of Service shall be computed and credited to
computation periods in accordance with Sections 2530.200b-2(b) and (c) of the
Department of Labor regulations. In determining an Employee's Hours of Service,
he shall receive credit for all Hours of Service performed for any member of the
Affiliated Group and any predecessor business organization of the Company.
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"Inactive Participant" means a former Participant who has died or otherwise
terminated his employment with the Company or incurred a Break in Service and
who has a balance remaining in his Account.
"Investment Account" means the individual account established in the name of
each Participant reflecting his portion of the Company's contributions and the
net earnings or losses thereon, other than any Shares allocated to his Share
Account.
"Investment Manager" means an individual, firm or corporation appointed
pursuant to Article 15 to manage the investments of all or a portion of Trust
Fund assets which are not invested in Shares.
"Leased Employee" means an individual who performs services for the Company,
other than as a common-law employee, if (a) such services are provided pursuant
to a written or oral agreement between the Company and any other person; (b) the
individual has performed during any consecutive 12-month period (i) at least
1,500 Hours of Service for the Company or (ii) a number of Hours of Service
which is at least 501 and which is at least equal to 75% of the median Hours of
Service that are customarily performed by an employee of the Company in the
particular position; and (c) such services are of a type which historically have
been performed by employees of organizations in the same business field as the
Company. The term "Leased Employee" shall not include any individual who is a
participant in a nonintegrated money purchase pension plan sponsored by the
leasing organization providing immediate participation and vesting and a
contribution rate of 10% of Earnings, as defined in Section 7.1, provided the
number of Leased Employees, determined without regard to this sentence, do not
constitute more than 20% of the Company's nonhighly compensated work force as
defined in Section 414(n) of the Code.
"Leave of Absence" means an interruption of service authorized in accordance
with Article XII.
"Normal Retirement Age" means age 65.
"Normal Retirement Date" means a Participant's 65th birthday.
"Participant" means an Employee who is eligible under the terms of Article
III of this Plan, but unless otherwise indicated, shall not include an Inactive
Participant or a Participant who has become ineligible for any reason.
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"Plan" means the Benthos, Inc. Employee Stock Ownership Plan as of its
original effective date, including any subsequent amendments thereto.
"Plan Year" means the 12-month period ending on September 30 of each year.
For years prior to the effective date of the Plan, the corresponding 12-month
period shall be the Plan Year solely for purposes of determining an Employee's
eligibility to participate and his nonforfeitable benefit.
"Regulation" means any rule or regulation promulgated under Section 7805 of
the Code by the Secretary of the Department of the Treasury, or his delegate.
"Required Distribution Date" means April 1st of the calendar year following
the year in which a Participant or Inactive Participant attains age 70 1/2.
"Retired Participant" means an individual who has been a Participant but who
has commenced receiving retirement benefits under Article VIII following his
Normal Retirement Age.
"Share" means any stock of the Company which shall qualify as an employer
security as defined in Section 409(1) of the Code.
"Share Account" means the individual account established in the name of each
Participant reflecting his interest in the Shares of the Company allocated as
provided in Section 5.1.
"Suspense Account" means the account established to reflect any Shares
purchased with the proceeds of an Exempt Loan pending allocation to
Participants' Share Accounts.
"Trust Agreement" means the Benthos, Inc. Employee Stock Ownership Trust
Agreement providing for the Trust Fund in which Plan contributions are held by
the Trustee.
"Trust Fund" means all of the assets held under the Trust Agreement.
"Trustee" means the trustee or trustees by whom the assets of the Plan are
held pursuant to the Trust Agreement as provided in Article XIV.
"Valuation Date" means the date as of which the Trust Fund is valued and the
Account maintained on behalf of each Participant, Inactive Participant or
Beneficiary is adjusted as provided hereunder. The Trust Fund shall be valued
on the last
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day of each Plan Year and on such additional dates as the Administrative
Committee shall deem appropriate.
"Year of Service" means:
(a) For purposes of determining an Employee's eligibility to
participate in this Plan, the completion of at least 1,000 Hours of Service in
(i) the 12-month period commencing on the date the Employee is first credited
with an Hour of Service, plus (ii) any Plan Years, beginning with the Plan Year
that includes the first anniversary of the date the Employee is first credited
with an Hour of Service, in which the Employee completes at least 1,000 Hours of
Service. If an Employee is credited with a least 1,000 Hours of Service in the
12-month period commencing on the date he is first credited with an Hour of
Service and the Plan Year that includes the first anniversary of such date, he
shall be credited with two Years of Service for purposes of his eligibility to
participate in this Plan.
(b) For purposes of determining an Employee's non-forfeitable Account
balance attributable to Company contributions, the completion of at least 1,000
Hours of Service in any Plan Year. An Employee who completes 1,000 Hours of
Service in both his first twelve months of employment and in the Plan Year
during which the first anniversary of his date of employment occurs shall be
credited with two years of service for vesting purposes.
A R T I C L E III
ELIGIBILITY AND PARTICIPATION
SECTION 3.1 EMPLOYEES ELIGIBLE TO PARTICIPATE
(a) Every Employee of the Company shall become a Participant hereunder
on the later of the effective date or the draft on which he shall have completed
a Year of Service and shall have attained 19 years of age.
(b) In the event that a Participant who has not incurred a Break in
Service becomes ineligible to participate in the Plan because he is no longer a
member of the eligible class of Employees entitled to participate, such
individual shall participate immediately upon his return to such eligible class.
If such Participant incurs a Break in Service, his eligibility to participate
will be governed by Section 3.2.
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(c) In the event that an individual who is not a member of the
eligible class of Employees becomes a member of such class, such individual
shall participate immediately if he would have previously become a Participant
had he been in the class of Employees entitled to participate.
SECTION 3.2 REINSTATEMENT OF PARTICIPATION
If an Inactive Participant incurs a Break in Service, his subsequent
eligibility hereunder shall be determined as follows:
(a) If he had a vested interest in any Company contributions allocated
to his Account before he incurred the Break in Service, his subsequent
eligibility to participate shall be determined under Section 3.1 by aggregating
his prior Years of Service and without regard to such Break in Service.
(b) If he did not have a vested interest in any Company contributions
allocated to his Account prior to incurring a Break in Service, his subsequent
eligibility to participate shall be determined under Section 3.1 by aggregating
his prior Years of Service and without regard to such Break in Service, provided
that the number of his consecutive Breaks in Service is either less than (i)
five years, or (ii) his aggregate number of Years of Service prior to the Break
in Service.
(c) If he did not have a vested interest in any Company contributions
allocated to his Account prior to incurring a Break in Service and the number of
his consecutive Breaks in Service both equals or exceeds (i) five years, and
(ii) his aggregate number of Years of Service and (iii) exceeds his aggregate
number of Years of Service prior to the Break in Service, his subsequent
eligibility hereunder shall be determined in accordance with the provisions of
Section 3.1, taking into account any Years of Service occurring prior to the
Break in Service, but only after completion of one Year of Service after the
date of his reemployment. If any Years of Service are not required to be taken
into account by reason of a period of consecutive Breaks in Service, such years
shall not be taken into account in applying this Section 3.2 to a subsequent
period of Breaks in Service.
SECTION 3.3 PARTICIPATION FOLLOWING A LEAVE OF ABSENCE
For the purposes of this Article III, any period of employment interrupted
solely by a Leave of Absence as provided for in Article XII shall be considered
as a period of continuous employment.
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A R T I C L E IV
COMPANY CONTRIBUTIONS
SECTION 4.1 DISCRETIONARY CONTRIBUTIONS
(a) Subject to the provisions of this Plan and the Trust Agreement,
the Company shall make, for each Plan Year, such contribution for the Fiscal
Year in which such Plan Year ends as the Board of Directors may direct by
resolution, provided no such annual contribution shall exceed the lesser of the
following:
(i) An amount equal to 15% of the aggregate annual gross
compensation, including all payments reportable for Federal
income tax purposes, paid or accrued by the Company to, or
for, all eligible Participants hereunder for the Company's
Fiscal Year for which the contribution is made. This amount
shall be increased to not greater than 25% of Participants'
annual gross compensation to the extent that Company
contributions made for Fiscal Years beginning prior to 1987
were less than the deduction limitations applicable to those
years. If the Company maintains any qualified profit sharing
plans or stock bonus plans in addition to this Plan, this Plan
and such other plans shall be treated as a single plan for
purposes of applying the preceding limits and the maximum
contribution to this Plan under this subparagraph (i) shall be
reduced to the extent of the contributions to such other
qualified plans.
(ii) An amount equal to 25% of the aggregate annual gross
compensation for the Companys Fiscal Year for which the
contribution is made, including all payments reportable for
Federal income tax purposes, paid or accrued by the Company
to, or for, all eligible Participants hereunder and all
eligible participants under any other qualified defined
contribution plan and under any qualified defined benefit
retirement plans for which a deduction is allowed under
Section 404 of the Code, less the contributions to such other
qualified plans.
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<PAGE>
(b) Notwithstanding the limitations of subsection (a), if the
contributions of the Company for the applicable Plan Year are applied to the
repayment of the principal balance on an Exempt Loan as described in Section
14.3, the maximum amount contributed to this Plan by the Company for any Plan
Year shall be increased by such principal payment, but not in excess of 25% of
the aggregate annual gross compensation paid or accrued by the Company to, or
for, all eligible Participants for the Company's Fiscal Year for which the
contribution is made, plus any contributions of the Company applied to the
payment of interest on such Exempt Loan for the year.
(c) The Company's contribution shall not be reduced by any amounts
forfeited under Article X or XI, and such forfeitures shall be reallocated among
the Accounts of remaining Participants as provided in Article V.
SECTION 4.2 SUPPLEMENTAL CONTRIBUTIONS
In addition to contributions made pursuant to Section 4.1, the Company shall
make any contributions necessary to restore to Account balances the amounts
previously forfeited by individuals described in Article X and Article XI.
SECTION 4.3 PAYMENT OF CONTRIBUTIONS
Company contributions for the year may be paid in cash or in Shares of the
Company. Company contributions shall be made as of the last day of the Plan
Year, and shall be paid to the Trustee within the time allowed by the Code for
tax deductible contributions. Contributions in Shares of the Company shall be
valued as of the day of the contribution for purposes of determining the maximum
allowable contribution to the Plan pursuant to this Article IV. At its
discretion, the Company may make contributions at any time during the Plan Year.
Such advance contributions shall be held in the Trust Fund and, to the extent
not utilized to purchase Shares, shall be invested by the Trustee in accordance
with the Trust Agreement pending allocation to Participants' Accounts as
provided in Section 5.1.
A R T I C L E V
ALLOCATION OF CONTRIBUTIONS, FORFEITURES
AND INVESTMENT EARNINGS
SECTION 5.1 ALLOCATING CONTRIBUTIONS AND FORFEITURES
The Administrative Committee shall maintain a Share Account and an
Investment Account in the name of each Participant.
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Subject to the limits of Article VII, the Administrative Committee shall credit
to the Account of each Participant described in Section 5.1(d) that portion of
the Company's contributions under Section 4.1 and forfeitures to which he is
entitled, determined as follows:
(a) If the Company's contribution or forfeitures for the Plan Year
include Shares, including Shares purchased with Company contributions pending
allocation to Participants' Accounts, the Administrative Committee shall, as of
the last day of each Plan Year, allocate the Company's Share contribution for
such Plan Year and any forfeitures of Shares to the Share Accounts of the
eligible Participants proportionately, including fractional Shares, in
accordance with the ratio which the Compensation of each eligible Participant
for the Plan Year bears to the aggregate Compensation paid to, or for, all
eligible Participants for the Plan Year.
(b) Except as provided in subsection (c) below, if the Companys
contribution or forfeitures for the Plan Year include cash or assets other than
Shares, the Administrative Committee shall, as of the last day of each Plan
Year, allocate the Companys contribution for such Plan Year and any forfeitures
to the Investment Accounts of the eligible Participants proportionately in
accordance with the ratio which the Compensation of each eligible Participant
for the Plan Year bears to the aggregate Compensation paid to, or for, all
eligible Participants for the Plan Year.
(c) If any portion of the Company's contribution or forfeitures for a
given Plan Year are used to repay an Exempt Loan, the total contribution and
forfeitures otherwise credited to the Investment Accounts of Participants for
the Plan Year under subsection (b) above shall be reduced by the amount applied
to repay the Exempt Loan, including interest, and the Administrative Committee
shall instead, as of the last day of the Plan Year, allocate the number of
Shares released from encumbrance as provided in Section 14.3(c) as a result of
such contribution and forfeitures to eligible Participants proportionately,
including fractional Shares, in accordance with the ratio which the Compensation
of each eligible Participant bears to the aggregate Compensation paid to, or
for, all eligible Participants for the Plan Year.
(d) Participants eligible for an allocation under this Section 5.1
shall include (i) each Participant who was employed by the Company on the last
day of the Plan Year, and (ii) each Inactive Participant who shall have died or
become a Retired Participant or a Disabled Participant during the Plan
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<PAGE>
Year. Anything herein to the contrary notwithstanding, to the extent that any
shareholder of the Company sells Shares to the Trustee and elects not to
recognize the gain from such sale under Section 1042 of the Code, no portion of
the Shares acquired in such transaction, or any assets attributable to such
Shares, may be directly or indirectly allocated for ten years after the date of
the sale (or, if later, the allocation date attributable to the final payment of
an Exempt Loan incurred in connection with the sale) for the benefit of:
(i) the selling shareholder;
(ii) his spouse, brothers or sisters (whether by the whole or
half blood), ancestors or lineal descendants; or
(iii) any shareholder owning (as determined under Section 318(a)
of the Code) more than 25% in value of any class of stock of
the Company.
SECTION 5.2 VALUATION OF TRUST ASSETS
(a) As of each Valuation Date, the Trustee shall determine the net
worth of the Trust Fund which has not been invested in Shares of the Company and
deliver a statement of valuation to the Administrative Committee. In
determining the net worth of the Trust Fund, the Trustee shall value such assets
of the Trust Fund, exclusive of any contributions that are payable to the. Trust
Fund, after having subtracted therefrom the amount of any forfeitures which have
occurred since the preceding Valuation Date. The valuation of the Trust Fund
shall be at its fair market value as of the Valuation Date.
(b) As of each Valuation Date, the Administrative Committee shall
determine the Fair Market Value of that portion of the Trust Fund that has been
invested in Shares of the Company. The Administrative Committee shall promptly
notify the Trustee in writing of each such valuation.
SECTION 5.3 DIVIDENDS ON COMPANY SHARES
(a) Except as provided in subsection (b), cash dividends received by
the Trustee on Shares of the Company that have been allocated to the Share
Accounts of Participants on the record date for the dividend shall be allocated
as of each Valuation Date to each Participant's Investment Account on the basis
of the balance of Shares in his Share Account. Cash dividends received by the
Trustee on Shares of the Company that are allocated to the Suspense Account on
the record date for the dividend by reason of an Exempt Loan shall be used to
repay
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<PAGE>
such Loan, and any amount in excess of the outstanding Loan balance shall be
treated as investment earnings of the Trust Fund and allocated as provided in
Section 5.2. Any stock dividends on Company Shares shall be credited to the
respective Share Accounts of Participants or the Suspense Account with respect
to which such dividends were issued on the record date for the dividend.
(b) At the election of the Administrative Committee, any cash
dividends that have been received by the Trustee with respect to Shares of the
Company and that are otherwise allocable to the Investment Accounts of
Participants for the Plan Year as provided in subsection (a) may be distributed
in cash to Participants, or their Beneficiaries, not later than 90 days after
the close of the Plan Year in which paid, or utilized to repay any outstanding
balance, including interest, on an Exempt Loan. If, pursuant to this subsection
(b), cash dividends are applied to repay an Exempt Loan, the Share Account of
each Participant shall be credited with such additional Shares of the Company
from the Suspense Account as are equal in value to amount of the dividend that
would have been allocated to the Participant's Investment Account pursuant to
subsection (a).
SECTION 5.4 ADJUSTMENT OF ACCOUNTS
The Administrative Committee shall adjust each Account to reflect any
increase or decrease in the net worth of the Trust Fund as of each Valuation
Date. Such adjustment shall be made to the Account in proportion to its balance
as of the Valuation Date bears to the aggregate values of all Accounts;
provided, however, that in accordance with nondiscriminatory procedures
established by the Administrative Committee, the allocation of any increase or
decrease in the net worth of the Trust Fund shall be adjusted for amounts
credited to Accounts since the preceding Valuation Date with appropriate credit
given for the period during which such contributions were credited to the
Account.
SECTION 5.5 DIVERSIFICATION OF ACCOUNTS BY PARTICIPANTS
(a) A Participant who has attained age 55 and completed 10 years of
participation in the Plan shall, by providing written instructions to the
Administrative Committee during the 90-day period beginning with the first day
of each of the six Plan Years immediately following the Plan Year in which such
age and service requirements are satisfied, be entitled to direct the Trustee to
distribute in cash to Participant up to 25 percent (50 percent in the case of a
Participant's final election year) of the value of his Share
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Account on the Valuation Date preceding or coinciding with such election. As
soon as practical after receipt of the Participant's written directions, but in
no event later than 90 days after each election period, the Administrative
Committee shall direct the Trustee, in writing, to distribute the funds in
accordance therewith following receipt by the Trustee of the Participant's
instructions. Any expense incurred in connection with a Participant's election
shall be charged against the Participant's Account.
(b) The Administrative Committee shall from time to time establish
rules and procedures which it determines to be necessary or appropriate for the
proper administration of the distribution option available to Participants.
SECTION 5.6 ANNUAL STATEMENTS
The Administrative Committee shall furnish on an annual basis, or in more
frequent intervals as determined by the Committee, a statement to each
Participant, Inactive Participant, and Beneficiary of the net earnings or losses
and Shares credited to or charged against his Account, the amount of any annual
contributions and forfeitures and Shares allocated to such Account, and the
total value of such Account.
A R T I C L E VI
PARTICIPANT CONTRIBUTIONS
SECTION 6.1 VOLUNTARY CONTRIBUTIONS
The Trustee shall not accept voluntary contributions from any Participant.
A R T I C L E VII
CONTRIBUTION AND BENEFIT LIMITATIONS
SECTION 7.1 DEFINITIONS
For purposes of this Article VII, the terms set forth herein shall be
defined as follows:
(a) "Annual Additions" means, for each Limitation Year, the sum of:
(i) The contributions by the Company and other members of the
Affiliated Group to this Plan or any other qualified defined
contribution
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retirement plan other than contributions that are used to pay
interest on an Exempt Loan if no more than 1/3 of the
contributions to this Plan are credited during the Limitation
Year to the Accounts of highly compensated employees described
in Section 414(q) of the Code;
(ii) Any forfeitures allocated to a Participant under such a plan
other than forfeitures of Shares acquired with the proceeds of
an Exempt Loan if no more than 1/3 of the contributions to this
Plan are credited to the Accounts of highly compensated
employees described in Section 414(q) of the Code;
(iii) Any contribution to such a plan by the Participant; and
(iv) For purposes of the dollar limitation on Annual Additions, any
contributions by the Company and other members of the
Affiliated Group allocated in years beginning after March 31,
1984 to an individual medical expense reimbursement account
which is established under Section 401(h) of the Code for a
Participant under any pension or annuity plan, or, in the case
of a key employee as defined in Section 416 of the Code, any
contribution by the Company and other members of the Affiliated
Group allocated in Limitation Years beginning after 1985 on his
behalf to a separate account in a funded welfare benefit plan
established for the purpose of providing post-retirement
medical benefits.
In determining a Participant's Annual Additions, forfeitures and contributions
of Shares shall be determined at the fair market value of the Shares as of the
date of allocation. Anything herein to the contrary notwithstanding, the term
"Annual Additions" shall not include any investment earnings allocable to a
Participant, any rollover contributions or amounts transferred directly to a
trustee from another qualified plan, recontributions of amounts previously
distributed to terminated employees who are reemployed, or payments of principal
and interest on any plan loans made to a Participant.
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(b) "Earnings" means amounts paid or made available to a Participant
by the Company and other members of the Affiliated Group for a Limitation Year,
including salary and wages, overtime pay, bonuses, commissions, non-qualified
stock options includible in income in the year granted, and taxable fringe
benefits; but shall not include amounts contributed by the Company (including
elected amounts deferred under an arrangement described in Section 401(k) of the
Code) under the Plan or any other plan of the Affiliated Group or any
nonqualified fringe benefits which are nontaxable or not currently taxable to
employees.
(c) "Excess Amount" means the amount credited or allocated to a
Participant in excess of the limits allowable under Section 7.2 or 7.3.
(d) "Limitation Year" means the Plan Year.
(e) "Minimum Accrued Benefit" means a Participant's accrued benefit
under a defined benefit retirement plan maintained by the Company or other
members of the Affiliated Group in which he is a participant determined as of
the end of the last Limitation Year of such plan beginning before 1987, computed
without regard to any changes in the provisions of such plan after May 5, 1986,
and without regard to any subsequent cost of living adjustments under the plan.
(f) "Projected Annual Retirement Benefit" means the annual benefit,
actuarially adjusted in the case of a benefit that is payable in a form other
than a life annuity or qualified joint and survivor annuity, to which a
Participant would be entitled under the provisions of a defined benefit
retirement plan maintained by the Company or any member of the Affiliated Group
in which he is a participant, based on the assumptions that he continues
employment until his normal retirement age, that his Earnings continue at the
same rate as in effect in the plan's Limitation Year under consideration until
his normal retirement age, and that all other relevant factors used to determine
benefits under the plan as of the current Limitation Year of such plan remain
constant for all such future Limitation Years.
(g) "Social Security Retirement Age" means a Participant's retirement
age under Section 216(1) of the Social Security Act determined without regard to
the age increase factor under that Section as if the early retirement age under
paragraph (2) thereof were 62.
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SECTION 7.2 ANNUAL ADDITIONS LIMITATION
The maximum Annual Additions credited to any Participant for any Limitation
Year beginning after 1986, under this Plan and any other qualified defined
contribution retirement plan maintained by the Company or any other members of
the Affiliated Group, shall not exceed an amount equal to the lesser of: (a) 25%
of the Participant's Earnings for the Limitation Year; or (b) the greater of
$30,000 or 25% of the adjusted dollar limitation referred to in Section
7.3(b)(ii). Anything herein to the contrary notwithstanding, for Limitation
Years beginning prior to July 12, 1989 the dollar limit referred to in the
preceding sentence shall be increased by the Annual Additions credited on behalf
of a Participant, but not in excess of twice such dollar limit, provided not
more than 1/3 of the aggregate Annual Additions for such Limitation Year are
credited on behalf of highly compensated participants described in Section
414(q) of the Code.
SECTION 7.3 COMBINED BENEFIT LIMITATIONS
Effective for Limitation Years beginning after 1986, if any Participant is
covered at any time under a qualified defined benefit retirement plan maintained
by the Company or other members of the Affiliated Group, the sum of the defined
contribution fraction as described in (a) below and the defined benefit fraction
as described in (b) below shall not exceed 1.0:
(a) Except as otherwise provided in this Section 7.3, the numerator
of the defined contribution fraction shall be the sum of the Annual Additions
credited to the Participant for all Limitation Years (determined with respect to
each year under rules which governed the crediting of Annual Additions for such
year) determined as of the end of the Limitation Year, and the denominator shall
be the sum of the lesser of the following amounts computed for each Limitation
Year as of the end of the Limitation Year, including Limitation Years when he
was not a Participant either because he was not eligible to participate or
because the Company did not maintain a defined contribution plan: (i) 125% of
the defined contribution dollar limitation in effect for such Limitation Year;
or (ii) 35% of the Participant's Earnings for the Limitation Year.
(b) The numerator of the defined benefit fraction shall be the
Participant's Projected Annual Retirement Benefit under any qualified defined
benefit retirement plan of the Company, or of other members of the Affiliated
Group, determined as of the end of the Limitation Year, and the denominator
shall be the greater of: (i) the Participant's Minimum Accrued Benefit; or (ii)
the lesser of 125% of $90,000
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(or, for purposes of benefits commencing before or after the Social Security
Retirement Age, the actuarial equivalent of such amount), as adjusted under
Section 7.4, or, subject to Section 7.4, 140% of the Participant's projected
average Earnings for his three consecutive highest paid Limitation Years.
(c) The numerator of the defined contribution fraction as computed
under Section 7.3(a) shall be reduced by an amount specified under Regulations
so that the sum of the defined benefit fraction and the defined contribution
fraction does not exceed 1.0; provided the defined contribution and defined
benefit plans maintained by the Company and other members of the Affiliated
Group satisfied the requirements of Section 415 of the Code for the last
Limitation Year beginning before 1987.
SECTION 7.4 ADJUSTED DOLLAR LIMITS
(a) The dollar limitation referred to in Section 7.3(b)(ii) shall be
adjusted after 1987 in accordance with Regulations for increases in the cost of
living using the last calendar quarter of 1986 as the base period.
(b) In the case of a Participant who has terminated his employment
with the Company, the amount of his average Earnings described in Section
7.3(b)(ii) shall be annually adjusted by multiplying that amount by a fraction
with a numerator equal to the adjusted dollar limitation set forth in Section
7.3(b) for the Limitation Year in which this adjustment is being made and the
denominator equal to the adjusted dollar limitation under Section 7.3(b) for the
Limitation Year in which he terminated employment. When an adjustment is made
hereunder in the case of a Participant who terminated employment prior to 1974,
the denominator utilized in the applicable fraction shall be determined in
accordance with rules prescribed by the Commissioner of Internal Revenue.
(c) If the Company or other members of the Affiliated Group maintain
a qualified defined benefit retirement plan which provides for any post-
retirement ancillary benefits (other than a qualified joint and survivor annuity
with the Participant's spouse), the denominator referred to in Section 7.3(b)
shall be adjusted in accordance with Regulations.
(d) If a Participant has less than 10 years of participation, the
dollar limit referred to in Section 7.3(b)(ii) shall be reduced by multiplying
such limit by a fraction, the numerator of which is the number of years of
participation, and the denominator of which is 10. If a
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Participant has less than 10 years of employment, the average Earnings limit
referred to in Section 7.3(b)(ii) shall be reduced by multiplying such limit by
a fraction, the numerator of which is the number of years of employment, and the
denominator of which is 10.
SECTION 7.5 CORRECTING EXCESS AMOUNTS
If an Excess Amount is determined for any Limitation Year due to an
erroneous estimation of Compensation, forfeitures or such other reasons as
permitted by Regulations, such Excess Amount shall be treated as follows:
(a) First, any non-deductible voluntary contributions made to any
qualified retirement plan maintained by any member of the Affiliated Group, to
the extent that the return thereof would reduce such Excess Amount, shall be
returned to the Participant.
(b) Any remaining Excess Amount shall be attributed to, and treated
in accordance with provisions of, the qualified retirement plan or plans
maintained by the Company or other members of the Affiliated Group in the
following order:
(i) any qualified defined benefit plan;
(ii) any qualified stock bonus plan;
(iii) any qualified profit sharing plan;
(iv) any qualified money purchase plan;
(v) any qualified 401(k) plan.
(c) Any Excess Amount which is attributed to this Plan shall be
treated as follows:
(i) If the Company's contribution for the Limitation Year has
not been made, the amount that would otherwise be
contributed to the Plan shall be reduced by such Excess
Amount;
(ii) If the Company's contribution for the Limitation Year has
been made, any remaining excess amount which is contributed
under conditions described in Article XIV shall be returned
to the Company in accordance with said Article XIV. Any
Excess Amount which remains attributed to this Plan after
the return of contributions to the Company shall
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be set aside in a separate account. The amount placed in the
such account and any earnings or losses thereon shall be
allocated to the Plan Participants during the next
Limitation Year, and for each succeeding Limitation Year, as
necessary, until exhausted.
A R T I C L E VIII
RETIREMENT AND DISABILITY BENEFITS
SECTION 8.1 COMMENCEMENT OF BENEFITS
(a) Upon a Participant's attaining his Normal Retirement Age, or upon
his becoming a Disabled Participant, he shall become entitled to the total value
of his Account. The amount to which the Participant is entitled shall be paid as
provided in this Article VIII as soon as practical following his Normal
Retirement Date or, if later, his actual retirement date, but shall in no event
commence later than the earlier of 60 days after the end of the Plan Year in
which he retires unless the Participant elects to defer the commencement of
benefits pursuant to subsection (b), or his Required Distribution Date. A
Participant who elects or is deemed to have elected to receive his benefits
under this paragraph 8.1(a) shall receive a distribution of 10 percent of the
value of his Account balance determined as of the Valuation Date preceding his
retirement, not later than the date in the preceding sentence. The balance of
his Account shall be distributed as soon as practicable following the last day
of the end of the Plan Year in which the Participant retired and the amount of
the subsequent distribution shall be determined as of the Valuation Date
occurring on the last day of such Plan Year.
(b) A Participant who retires on or after attaining his Normal
Retirement Age may file an election with the Administrative Committee on an
Application for Benefits to defer the commencement of his benefit payments until
at the latest, his Required Distribution Date. A Participant whose Benefit
Starting Date is deferred pursuant to this subsection may at any time file an
Application for Benefits with the Administrative Committee directing that
benefits commence on the date specified by the Participant, but not earlier than
60 days after the Application is submitted to the Committee. If the Participant
fails to submit an Application for Benefits at least 60 days prior to the date
that benefits must commence, the Administrative Committee shall distribute the
Participant's
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benefit in a lump sum in whole Shares with fractional Shares paid in cash.
(c) The amount to which a Disabled Participant is entitled shall be
distributed in accordance with the provisions of this Article VIII as soon as
practical after the approval of an Application for Benefits as though the last
day of the month in which he terminated employment had been his Normal
Retirement Date.
SECTION 8.2 FORM OF BENEFIT PAYMENTS
The total amount which a Participant is entitled to receive shall be valued
on the Valuation Date immediately preceding or coinciding with his Benefit
Starting Date and applied for his benefit paid in a single lump sum payment, in
whole Shares, with the value of any fractional Shares to be paid in cash.
SECTION 8.3 MINIMUM RETIREMENT AND DISABILITY DISTRIBUTIONS
Distributions to Participants under Section 8.2 shall be subject to the
following rules on the Participant's Required Distribution Date, which shall not
expand the form of payment set forth in Sections 8.1 and 8.2, but shall operate
as a limitation required by statute to be set forth herein.
(a) The entire interest of a Participant shall be distributed, in
accordance with applicable Regulations, over a period not extending beyond
either the life expectancy of the Participant or the joint and last survivor
life expectancy of the Participant and any designated Beneficiary.
(b) The minimum distribution that must be made each year to a
Participant with a nonspouse Beneficiary must be determined in accordance with
the requirements contained in Section 1.401(a)(9)-2 of the proposed Regulations
or any Regulations which supersede such Section.
(c) If the Participant dies after distributions are required to
begin, the Beneficiary must receive benefit payments under a method of
distribution which is at least as rapid as that method under which the
Participant was receiving benefit payments.
(d) The life expectancy of a Participant or Beneficiary will be based
on the individual's attained age in the year in which the Participant attains
age 70 1/2. Life expectancies shall be determined by using Tables V and VI
contained in Section 1.72-9 of the Regulations. The life
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expectancy of the Participant or his spouse or the joint and last survivor life
expectancy of the Participant and his spouse may be recalculated. The
Participant must make an election to recalculate life expectancy in accordance
with the rules of the Administrative Committee no later than the date on which
distributions begin. Once payments begin, the election becomes irrevocable. If
the Participant has elected to recalculate life expectancy, life expectancy will
be based upon the attained age of the individual in each succeeding year in
which a distribution occurs. In the event the Participant fails to make an
election, life expectancy will not be recalculated. When life expectancy is not
recalculated , life expectancy will be determined at the time when distributions
first commence, and payments required for any calendar year will be based on
that determination reduced by the number of entire years that have elapsed since
distributions first commenced.
(e) After the first distribution to a Participant in accordance with
any periodic payment method selected by the Participant (if periodic payments
are permitted), subsequent periodic payments must be made in annual or more
frequent payments no later than the following December 31st of each year;
provided, however, that if the first required distribution to a Participant
occurs in the year following the Participant's attainment of age 70 1/2, the
next required minimum distribution must be made before the end of the same year.
(g) In determining the required minimum distributions, benefit
payments may not be based on the life expectancy of the Beneficiary unless the
Beneficiary is one or more individuals or a trust that satisfies the following:
(i) the trust is a valid trust under applicable state law; (ii) the trust is
irrevocable; (iii) the Beneficiary of the trust who would be a Beneficiary with
respect to the trust's interest under this Plan is identifiable from the trust
instrument; and (iv) a copy of the trust instrument is provided to the
Administrative Committee. If more than one individual is designated as a
Beneficiary, then the individual with the shortest life expectancy will be
considered the Beneficiary for purposes of determining the applicable life
expectancy.
A R T I C L E IX
DEATH BENEFITS
SECTION 9.1 DEATH BENEFITS
(a) If a Participant dies before his Benefit Starting Date while
employed by the Company, the Participant's
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Beneficiary shall be entitled to receive 100% of the value of his Account. If an
Inactive Participant dies before his Benefit Starting Date, such Participant's
Beneficiary shall be entitled to receive an amount equal to the vested
percentage of his Account. The value of the death benefit shall be determined as
of the Valuation Date preceding or coinciding with the Benefit Starting Date.
(b) The Beneficiary of a married Participant or a married Inactive
Participant shall be the surviving spouse. If there is no surviving spouse or if
the surviving spouse consents to the designation of another Beneficiary in the
manner required under Section 9.2, the individual's designated Beneficiary shall
be entitled to the death benefit.
SECTION 9.2 DEATH BENEFIT WAIVER
(a) The spouse of a married Participant or a married Inactive
Participant must consent to the designation of any other Beneficiary, except a
contingent Beneficiary. The spouse 5 consent must be in writing, acknowledge the
effect of the designation and payment election, and be witnessed by a notary
public.
(b) Spousal consent shall not be required if it is established to the
satisfaction of the Administrative Committee that it cannot be obtained because
there is no spouse, the spouse cannot be located, or because of such other
circumstances as may be prescribed by Regulations.
(c) A Beneficiary designation may be revoked in writing at any time
before the Benefit Starting Date without spousal consent.
(d) The death benefit shall be paid to or applied for the surviving
spouse in accordance with Section 9.3 in the absence of a nonspousal Beneficiary
designation or, if there is no surviving spouse, the death benefit shall be paid
to the Participant's estate in a lump sum.
(e) The Administrative Committee shall provide each Participant with
a written explanation of the spousal death benefit containing the information
described above at the time an Employee becomes a Participant and at the request
of any Participant or Inactive Participant.
SECTION 9.3 ALTERNATE FORMS OF DEATH BENEFIT PAYMENTS
(a) Except as provided in Section 12.7, death benefits payable under
this Article IX shall be paid or applied
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for the Beneficiary in a single lump sum payment in whole Shares with fractional
Shares paid in cash. In the event that the Companys contribution for the Plan
Year in which death occurs is allocated after payment of the above benefits, the
amount of such contribution to which the Participant is entitled shall be paid
to his Beneficiary in a lump sum in whole Shares with fractional shares paid in
cash as soon as practical.
(c) The amount to which the Beneficiary is entitled shall be
available for distribution to the Beneficiary as soon as practical following the
last day of the Plan Year in which the Participant's death occurs. The
Beneficiary shall designate the time that the benefit to which the Beneficiary
is entitled shall be paid on an Application for Benefits within 90 days
following the end of the Plan Year in which the Participant's death occurs in
accordance with the distribution requirements of Section 9.4. If the Beneficiary
fails to file a timely Application for Benefits indicating the time at which the
death benefit shall commence, the Administrative Committee shall direct the
Trustee to distribute the entire value of the deceased Participant's Account in
a lump sum in whole Shares with fractional Shares paid in cash as soon as
practical following the end of the Plan Year in which the Participant's death
occurs. Anything herein to the contrary notwithstanding, if the value of the
death benefit payable under this Article IX does not exceed $3,500, the
Administrative Committee shall direct the Trustee to distribute the entire value
of the deceased Participant's Account in a lump sum payment in whole Shares with
fractional Shares paid in cash as soon as practical following the end of the
Plan Year in which the Participant's death occurs.
(d) If the death of a Participant or an Inactive Participant occurs
after the Benefit Starting Date, the death benefit, if any, payable to his
Beneficiary shall depend upon the terms of the benefit payment option in effect
at the time of such death.
SECTION 9.4 MINIMUM DEATH BENEFIT DISTRIBUTIONS
(a) This Section 9.4 shall not expand the form of payment set forth
in Section 9.3, but shall operate as a limitation required by statute to be set
forth herein. Death benefits payable under this Article IX shall be distributed
by the end of the calendar year that includes the fifth anniversary of the date
of death; provided, however:
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(i) Death benefits may be distributed over a period not
extending beyond the life expectancy of the Beneficiary.
(ii) Death benefits payable over a period not exceeding the life
expectancy of the Beneficiary pursuant to this Section
9.4(a) shall begin no later than the end of the calendar
year immediately following the year of the Participant's
death. Alternatively, if the Beneficiary is the
Participant's surviving spouse, distributions may begin by
the end of the calendar year in which the decedent would
have attained age 70 1/2.
(iii) If the Beneficiary is the surviving spouse and the surviving
spouse dies prior to the date that death benefit payments
are required to commence, death benefit payments shall: (A)
be distributed by the end of the calendar year that includes
the fifth anniversary of the date of the spouse's death, or
(B) commence no later than the end of the calendar year
immediately following the year of the spouse's death over a
period not exceeding the life expectancy of the spouse's
Beneficiary.
(b) The life expectancy of the Beneficiary shall be based on the
Beneficiary's attained age in the calendar year in which distributions are
required to begin. Life expectancies shall be determined by using Tables V and
VI contained in Section 1.72-9 of the Regulations. If the Beneficiary is the
spouse, the spouse's life expectancy may be redetermined on an annual basis. An
election to recalculate life expectancy must be made prior to the benefit
commencement date in accordance with the rules of the Administrative Committee.
Once payments begin, this election becomes irrevocable. In the event no such
election is made with respect to the spouse, the spouse's life expectancy will
not be recalculated. If life expectancy is not to be recalculated, life
expectancy will be determined at the time when distributions first begin, and
payments required for any calendar year will be based on that determination
reduced by the number of entire years that have elapsed since distributions
first commenced.
SECTION 9.5 BENEFICIARY DESIGNATION
(a) Subject to the spousal death benefit requirements of Sections 9.1
and 9.2, each Participant shall have the
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unrestricted right to designate the Beneficiary to receive the death benefits
which are payable hereunder and the manner in which such death benefits shall be
paid, and to change any such designations on a form furnished by and filed with
the Administrative Committee.
(b) Death benefit payments may not be based on the life expectancy of
the Beneficiary unless the Beneficiary is one or more individuals or a trust
that satisfies the following: (i) the trust is a valid trust under applicable
state law; (ii) the trust is irrevocable; (iii) the Beneficiary of the trust who
would be a Beneficiary with respect to the trust's interest under this Plan is
identifiable from the trust instrument; and (iv) a copy of the trust instrument
is provided to the Administrative Committee.
(c) If more than one individual is designated as a Beneficiary, then
the individual with the shortest life expectancy will be considered the
Beneficiary for purposes of determining the applicable life expectancy.
A R T I C L E X
TERMINATION BENEFITS
SECTION 10.1 VESTED BENEFITS
(a) An Inactive Participant whose employment is terminated for any
reason other than death, disability or retirement at or after attaining his
Normal Retirement Age shall receive only those benefits provided in this Article
X.
(b) A Participant shall be vested with the following percentages of
the value of his Investment Account and Share Account attributable to the
Company's contributions:
For Participants Who do Not Perform an Hour of Service
in Plan Years Beginning After 1988:
<TABLE>
<S> <C>
Less than 2Years of Service................. 0%
At least 2Years of Service................. 15%
At least 3 Years of Service................. 30%
At least 4 Years of Service................. 40%
At least 5 Years of Service................. 50%
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
At least 6 Years of Service................. 60%
At least 7 Years of Service................. 70%
At least 8 Years of Service................. 80%
At least 9 Years of Service................. 90%
At least 10 Years of Service................ 100%
</TABLE>
For Participants Who Perform an Hour of Service
in Plan Years Beginning After 1988:
<TABLE>
<S> <C>
Less than 1 Year of Service................. 0%
At least 1 Year of Service.................. 20%
At least 2 Years of Service................. 40%
At least 3 Years of Service................. 60%
At least 4 Years of Service................. 80%
At least 5 Years of Service................. 100%
</TABLE>
An Inactive Participant whose employment is terminated for reasons other than
those specified in subsection (a) and who is not 100% vested shall forfeit
immediately upon termination of employment an amount equal to the nonvested
portion of his Account attributable to Company contributions. Any such
forfeitures shall be charged against the Participant's Share Account only after
the balance of his Investment Account has been exhausted. Subject to the
provisions of Section 10.2(b), if an Inactive Participant is reemployed prior to
the occurrence of five consecutive Breaks in Service, such forfeited amounts
shall be restored to his Accounts.
(c) The vested portion of an Inactive Participant's Account
attributable to Company contributions shall be determined in accordance with the
formula P(A+D)-D if such Participant received a distribution from the Plan while
employed by the Company at a time when he was less than 100% vested in his
Account. For purposes of applying this formula, "A" is the portion of the
current value of the Account attributable to Company Contributions, "D" is the
amount of the prior distribution, and "P" is the vested percentage of the
Participant's Account determined in accordance with subsection (b).
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<PAGE>
SECTION 10.2 DISTRIBUTION OF BENEFITS
(a) If the vested value of the Account of an Inactive Participant
whose employment terminated before attaining Normal Retirement Age does not
exceed $3,500, the Administrative Committee shall direct the Trustee to
distribute the vested value to such Participant in a lump sum in whole Shares
with fractional Shares paid in cash without the consent of the Participant.
Subject to the requirements of Section 12.7, this distribution shall be made as
soon as practical following the end of the Plan Year in which the Inactive
Participant incurs a Break in Service. If the vested value of the Account of an
Inactive Participant whose employment terminated before attaining his Normal
Retirement Age exceeds $3,500, the Participant may elect to have the vested
value paid to him or applied for his benefit in accordance with the provisions
of Article VIII as soon as practical following the end of the Plan Year in which
he incurs a Break in Service or at anytime thereafter. The vested value of the
Inactive Participant's Account shall be determined as of the Valuation Date
immediately preceding or coinciding with his Benefit Starting Date.
(b) If an Inactive Participant who has received a lump sum
distribution pursuant to subsection (a) resumes his employment, he shall be
given the opportunity (to be exercised before the earlier of (i) five years
after the date of reemployment, or (ii) the close of the first period of five
consecutive Breaks in Service commencing after the lump sum distribution) to
recontribute the full amount of the distribution. If the individual fails to
recontribute the full amount of the lump sum distribution, any previously
forfeited amounts which would otherwise be restored to his Account pursuant to
the provisions of Section 10.1(b) shall not be restored.
(c) The vested value of an Inactive Participant's Account that is not
distributed pursuant to the provisions of subsection (a) shall be held by the
Trustee until the individual's Normal Retirement Age, and shall be paid in
accordance with the provisions of Article VIII at that time unless an election
is made to defer the commencement of benefits pursuant to Section 8.1(b).
SECTION 10.3 REINSTATEMENT OF VESTING SERVICE
Except as otherwise provided herein, an Inactive Participant's
nonforfeitable Account balance shall be determined on the basis of all of his
Years of Service. If an
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Inactive Participant again becomes a Participant after five or more consecutive
Breaks in Service, all Years of Service after such Breaks in Service shall be
disregarded for purposes of determining the vested portion of his Account
attributable to Company contributions that accrued before such Breaks in
Service. The vested portion of such Participant's Account attributable to
Company contributions that accrue after a Break in Service shall be determined
in accordance with the following provisions:
(a) If the Inactive Participant had achieved any percentage of
vesting in his Account attributable to Company contributions prior to his Break
in Service, all of his Years of Service shall be aggregated for purposes of
determining his vested benefit pursuant to this Article X.
(b) If the Inactive Participant had not achieved any percentage of
vesting in his Account attributable to Company contributions prior to incurring
a Break in Service, and if the number of consecutive years of his Breaks in
Service is either less than (i) five years, or (ii) his aggregate Years of
Service prior to such Breaks in Service, all of his Years of Service shall be
aggregated for purposes of determining his vested benefit pursuant to this
Article X.
(c) If the Inactive Participant had not achieved any percentage of
vesting in his Account attributable to Company contributions prior to incurring
a Break in Service, and if the number of consecutive years of his Breaks in
Service equals or exceeds both (i) five years, and (ii) his aggregate Years of
Service prior to such Breaks in Service, all of his Years of Service prior to
such Breaks in Service shall be disregarded for purposes of this Article X. If
any Years of Service are not required to be taken into account by reason of a
period of Breaks in Service, such years shall not be taken into account in
applying this Section to a subsequent period of Breaks in Service.
SECTION 10.4 VESTING AMENDMENTS
In the event the Company shall adopt an amendment changing the vesting
schedule described in Section 10.1(b), or any other amendment which directly or
indirectly affects the computation of a Participant's vested Account, any
Participant who has completed at least three Years of Service may elect to have
his vested Account determined in accordance with the vesting schedule in effect
immediately prior to the effective date of the amendment. Notwithstanding the
preceding sentence, no election need be provided for any Participant whose
vested Account under the Plan, as amended, at any time cannot be less
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than such Account determined without regard to such amendment. Such election
must be in writing and be filed with the Administrative Committee by the latest
of (a) 60 days after the amendment is adopted, (b) 60 days after the amendment
becomes effective, or (c) 60 days after written notice of the amendment is
issued to the Participant by the Administrative Committee. The Participant must
have completed the required three Years of Service by the latest date on which
an election may be filed hereunder. Anything in Section 10.1(b) to the contrary
notwithstanding, an Inactive Participant's vested Account shall be at least
equal to that which he would have been entitled had he terminated employment
immediately prior to the date such amendment is adopted or the effective date of
such amendment, whichever is later.
A R T I C L E XI
APPLICATION FOR BENEFITS
SECTION 11.1 APPLYING FOR BENEFITS
(a) An Application for Benefits must be filed with the Administrative
Committee as provided in this Article XI so that benefits may be paid to a
Participant, Inactive Participant, or Beneficiary in the manner selected by or
on behalf of such individual.
(b) No less than 30 days and no more than 90 days prior to an
individual's Benefit Starting Date, the Administrative Committee shall provide
the individual with an Application for Benefits. At the same time, the
individual shall be provided with an explanation and general description of the
material features and the relative values of the available methods of
distribution under Articles VIII and IX. If benefits are to be paid to an
individual who has attained his Normal Retirement Age and the individual fails
to file an Application for Benefits, the total amount to which he is entitled
shall be paid as soon as practical following his Normal Retirement Date as
provided in Article VIII.
SECTION 11.2 RETIREMENT BENEFITS
The Application for Benefits required for the payment of retirement
benefits under Article VIII must be filed within 90 days prior to the Benefit
Starting Date. The election regarding the method of benefit payment on the
Application for Benefits may be revised by filing a new Application for Benefits
up to the Benefit Starting Date.
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<PAGE>
SECTION 11.3 DISABILITY BENEFITS
The Application for Benefits required for the payment of disability
benefits under Article VIII must be filed no later than one year following a
Participant's separation from service with the Company. In addition, proof of
disability in the form of a written certification by a licensed physician
approved by the Administrative Committee, and such other proof required by the
Committee, must be filed with the Committee within a reasonable time thereafter.
SECTION 11.4 DEATH BENEFITS
The Application for Benefits required for the payment of death benefits
under Article IX must be filed by the Beneficiary of a deceased Participant or
the legal representative of his estate and must be accompanied by a death
certificate.
SECTION 11.5 TERMINATION BENEFITS
If the payment of termination benefits under Article X is to be made at an
individual's election prior to his Normal Retirement Age, an Application for
Benefits must be filed no later than 90 days following the individual's receipt
of an Application from the Administrative Committee. If the individual does not
then file an Application for Benefits in any case in which his vested benefits
exceed $3,500, his failure to file an Application shall be. treated as an
election to defer the commencement of benefits until his Normal Retirement Date.
SECTION 11.6 DENIAL OF BENEFITS
(a) If any person claiming benefits under the Plan is denied benefits
by the Administrative Committee, no later than 90 days after the receipt of his
claim by the Committee (or within 180 days if special circumstances require an
extension of time for processing the claim and if written notice of such
extension and circumstances is given to such person within the initial 90-day
period), he shall be furnished with written notification from the Committee
stating: (i) the specific reason(s) for the denial; (ii) specific references to
pertinent Plan provisions on which the denial is based; (iii) a description of
any additional material or information necessary for the claimant to perfect his
claim and the reason why such material or information is necessary; and (iv) the
procedure for submitting his claim for review.
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<PAGE>
(b) After denial of his claim, a claimant shall be entitled to review
pertinent documents and to submit to the Administrative Committee in writing any
issues or comments he may have regarding his claim for benefits under the Plan.
If the claimant cannot settle his dispute with a representative of the
Committee, he may request a review of his claim by the full Administrative
Committee. Such request must be made by the claimant in writing within 90 days
after receipt of notice that his claim has been rejected by the Committee.
Within 60 days after filing such request, the claimant, at the discretion of the
Administrative Committee, may be granted a hearing. The Administrative Committee
shall advise the claimant in writing of the disposition of his appeal within 60
days (or within 120 days if special circumstances require an extension of time
for processing the request, such as an election by the Administrative Committee
to hold a hearing, and if written notice of such extension and circumstances is
give to such person within the initial 60-day period after the request for a
review of the claim is first received by the Committee), and shall give specific
reasons for its decision and specific references to the pertinent Plan
provisions on which the decision is based.
SECTION 11.7 MISSING PARTICIPANTS AND BENEFICIARIES
(a) An individual for whom benefits are being held by the Trustee
shall keep the Administrative Committee notified of his current mailing address.
The Administrative Committee and the Company shall be discharged from any
liability resulting from the failure to pay benefits as they become due if
reasonable effort has been made to contact the individual at his last address of
record.
(b) If benefits are to be paid under this Plan to an individual who
cannot be located, the individual's Account shall be forfeited and applied as
provided in Article IV. If the individual is located after the forfeiture, the
vested portion of the Account will be reinstated and distributed in accordance
with the terms of the Plan.
SECTION 11.8 PAYMENTS TO INCOMPETENTS OR MINORS
If the Administrative Committee receives satisfactory evidence that any
person entitled to receive a benefit is, at any time when such benefit becomes
payable, either a minor or physically or mentally incompetent to receive such a
benefit, and that any other person or institution is then maintaining or has
custody of said person, and that no guardian, committee or other representative
of the estate of such person shall have been duly appointed, the Administrative
Committee may authorize
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<PAGE>
the payment of the benefit, otherwise payable to such person, to such other
person or institution, and the release of such other person or institution shall
constitute a valid and complete discharge for the payment of such benefit.
SECTION 11.9 ELIGIBLE ROLLOVER DISTRIBUTIONS
(a) This Section applies to distributions made on or after January 1,
1993. Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a Distributee's election under this Section 11.9, a Distributee
may elect, at the time and in the manner prescribed by the Plan Administrator,
to have any portion of an Eligible Rollover Distribution paid directly to an
Eligible Retirement Plan specified by the Distributee in a Direct Rollover.
(b) Definitions.
(i) Eligible Rollover Distribution: An Eligible Rollover
Distribution is any distribution of all or any portion of the balance to the
credit of the Distributee, except that an Eligible Rollover Distribution does
not include: any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the life (or life
expectancy) of the Distributee or the joint lives (or joint life expectancies)
of the Distributee and the Distributee's designated Beneficiary, or for a
specified period of ten years or more; any distribution to the extent such
distribution is required under section 401(a)(9) of the Code; and the portion of
any distribution that is not includible in gross income (determined without
regard to the exclusion for net unrealized appreciation with respect to employer
securities).
(ii) Eligible Retirement Plan: An Eligible Retirement Plan is an
individual retirement account described in section 408(a) of the Code, an
individual retirement annuity described in section 408(b) of the Code, an
annuity plan described in section 403(a) of the Code, or a qualified trust
described in section 401(a) of the Code, that accepts the Distributee's Eligible
Rollover Distribution. However, in the case of an Eligible Rollover Distribution
to the surviving spouse, an Eligible Retirement Plan is an individual retirement
account or individual retirement annuity.
(iii) Distributee: A Distributee includes an Employee or former
Employee. In addition, the Employee's or former Employee's surviving spouse and
the Employee's or former Employee's. spouse or former spouse who is the
alternate payee under a qualified domestic relations order, as defined in
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<PAGE>
section 414(p) of the Code, are Distributees with regard to the interest of the
spouse or former spouse.
(iv) Direct Rollover: A Direct Rollover is a payment by the Plan
to the Eligible Retirement Plan specified by the Distributee.
(c) If a distribution is one to which sections 401(a)(ii) and 417 of
the Internal Revenue Code do not apply, such distribution may commence less than
30 days after the notice required under section l.411(a)-ii(c) of the Income Tax
Regulations is given, provided that:
(i) the Plan Administrator clearly informs the Participant that
the Participant has a right to a period of at least 30 days after receiving the
notice to consider the decision of whether or not to elect a distribution (and,
if applicable, a particular distribution option), and
(ii) the Participant, after receiving the notice, affirmatively
elects a distribution.
A R T I C L E XII
RIGHTS OF PARTICIPANTS
SECTION 12.1 PARTICIPANT STATUS
(a) The adoption and maintenance of this Plan shall not be construed
as creating any contract of employment between the Company and any Employee.
This Plan shall not affect the right of the Company to deal with its Employees
in all respects, including their hiring, discharge, compensation, and conditions
of employment.
(b) The sole rights of a Participant, or Inactive Participant, under
this Plan shall be to have this Plan administered according to its provisions,
to receive whatever benefits he may be entitled to hereunder, and, subject to
any spousal death benefit requirements, to name the Beneficiary to receive any
death benefits to which such person may be entitled.
(c) No individual shall be discharged, fired, suspended, expelled,
disciplined, or discriminated against for exercising any right under this Plan
or for giving information or testimony in any inquiry or proceeding relating to
the administration of this Plan.
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<PAGE>
SECTION 12.2 LEAVE OF ABSENCE
(a) An Employee may be granted a Leave of Absence under policies
established by the Board of Directors. Any such Leave of Absence must be given
in advance and may be canceled at any time in the discretion of the Company. In
granting or canceling any such Leave of Absence, the Company shall treat all
individuals in similar circumstances alike.
(b) For purposes of this Plan, any Employee shall be deemed not to
have incurred a Break in Service during the period of his Leave of Absence. Any
contributions of the Company on behalf of a Participant who is on a Leave of
Absence shall be based on the Compensation paid by the Company to the
Participant for the periods during which his Leave of Absence continues. He
shall continue to share proportionately in the net earnings and the losses and
expenses of the Trust Fund during his Leave of Absence.
(c) If any Employee enters the Armed Forces of the United States of
America, such individual shall be treated as on a Leave of Absence which may not
be canceled by the Company, provided:
(i) The individual left employment for the purpose of entering
the Armed Forces of the United States;
(ii) The individual returns to employment within 90 days after
his discharge or separation from the Armed Forces of the
United States;
(iii) The individual has received a certificate from the Armed
Forces of the United States stating satisfactory completion
of his military service;
(iv) The individual serves not more than four years in the Armed
Forces of the United States (plus any period of additional
service imposed pursuant to law); and
(v) The circumstances of the Company have not changed since such
individual left employment for the purpose of entering the
Armed Forces of the United States so as to make it
impossible or unreasonable for the Company to continue his
employment.
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(d) If an individual fails to return to employment with the Company
immediately following the termination of his Leave of Absence, his employment
with the Company shall be considered terminated as of the first day of his Leave
of Absence.
SECTION 12.3 ASSIGNMENT AND ALIENATION
The Trust Fund is established for the purpose of providing for the support
of the Participants upon their retirement and for the support of their families.
Except as provided in a Qualified Domestic Relations Order, no right or interest
of any individual in any part of the Trust Fund shall be transferable or
assignable or be subject to alienation, anticipation, or encumbrance, and no
such right or interest shall be subject to garnishment, attachment, execution,
or levy of any kind.
SECTION 12.4 QUALIFIED DOMESTIC RELATIONS ORDERS
(a) The requirements of Section 12.3 shall not apply to a Qualified
Domestic Relations Order. A "Qualified Domestic Relations Order" shall mean any
judgment, decree, or order (including approval of a property settlement
agreement) which creates or recognizes the existence of an alternate payee 5
right to receive all or a portion of the benefits of a Participant, or Inactive
Participant, hereunder pursuant to a state's domestic relations law relating to
the provision of child support, alimony payments, or marital property rights to
a spouse, former spouse, child or other dependent of such individual; provided,
however, that such order specifically provide:
(i) The name and last known mailing address of the Participant,
or Inactive Participant, and of each alternate payee covered
by such order;
(ii) The amount or percentage of the Participant's, or Inactive
Participant's, benefits to be paid by the Plan to each
alternate payee or the manner in which such amount or
percentage is to be determined;
(iii) The number of payments or the period to which such order
applies; and
(iv) The name of each Plan to which such payment applies.
(b) The Administrative Committee shall establish reasonable written
procedures to determine the qualified status
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of domestic relations orders and to administer distributions made thereunder in
a manner consistent with the following requirements:
(i) The Administrative Committee shall promptly notify the
Participant, or Inactive Participant, and any named
alternate payee of the receipt of a domestic relations order
and the Plan procedures used for determining whether such
order is a Qualified Domestic Relations Order.
(ii) The Plan Administrative Committee shall, within a reasonable
period following receipt, determine whether such order is
qualified and notify the Participant, or Inactive
Participant, and each alternate payee of such determination.
(iii) During the period beginning when the order is received and
ending with the earlier of the date of determination of its
qualified status or the expiration of 18 months, the
Administrative Committee shall separately account for the
amounts which will be payable to the alternate payee if the
domestic relations order is determined to be qualified.
(iv) If, within 18 months of receipt, the order is determined to
be qualified, the Administrative Committee shall pay the
amounts described in subparagraph (iii) to the alternate
payee pursuant to the terms of the order. If, within 18
months of receipt, the order is determined not to be
qualified or the order's status is unresolved, the
Administrative Committee shall pay the amounts described in
subparagraph (iii) to the person or persons who would be
entitled to such amounts if no order had been received.
(v) A determination that a domestic relations order is qualified
which is made later than 18 months after the receipt of such
order shall operate prospectively only.
(c) Distributions made pursuant to this Section 12.4 shall completely
discharge the Plan of its obligations with respect to the Participant, or
Inactive Participant, and each alternate payee to the extent of any such
distributions.
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SECTION 12.5 DISTRIBUTION OF SHARES
The Trustee will make distributions from the Trust Fund to Participants and
their Beneficiaries as provided in Articles V111, IX and X as directed by the
Administrative Committee. Distributions from a Participant's Account shall
normally be made in whole Shares with the value of any fractional Shares paid in
cash. Anything herein to the contrary notwithstanding, if the Company's Shares
are not readily tradable on an established market on the Benefit Starting Date
and the charter or by-laws of the Company restrict the ownership of
substantially all stock of the Company to current employees and the Trustee, a
Participant or Beneficiary shall not be entitled to receive a distribution of
Shares of the Company under any circumstances. To the extent that the
distribution of Shares is permitted, the following rules shall apply:
(a) Before any Participant, Beneficiary or other owner of Shares
distributed hereunder sells such Shares to a third party from whom he has
received a bona fide offer for the purchase of such Shares, he shall first
notify the Administrative Committee in writing of the price and terms of the
proposed sale. The Company may purchase, or the Administrative Committee may
direct the Trustee to purchase, all or part of such Shares at such price and
upon such terms which are not less favorable than those offered by the
prospective purchaser, provided. that the Company's right to purchase and the
Committee's right to direct the Trustee to purchase such Shares shall lapse
unless, no later than 14 days after the Administrative Committee receives notice
of the proposed sale, the Committee gives notice to the prospective seller that
such right to purchase or to direct the Trustee to purchase is to be exercised.
If this right of first refusal is exercised, the purchase of the Shares by the
Company or the Trustee shall be consummated within 30 days following the
Committee's notice to the seller of intention to exercise the right. To the
extent such notice is not given within such 14 days, the proposed sale may be
consummated, but the Shares so sold shall continue to be subject to this
subsection (a). If such sale to a third party is not consummated within 30 days
following the first date on which it may be consummated, such Shares shall
continue to be subject to this subsection (a), and neither the proposed sale nor
any other sale may be consummated unless and until the owner complies with the
provisions of this subsection (a) as if he had not previously done so. This
subsection (a) shall not apply to Shares that are publicly traded at the time
the Company's right may be exercised. The amount paid for such Shares by the
Company or the Trustees
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shall not be less than the Fair Market Value of the Shares on the date of the
transaction.
(b) Shares distributed to a Participant or Beneficiary hereunder
shall be subject to a put option if they are not publicly traded when
distributed or if they are subject to a trading limitation when distributed. A
Share is subject to a trading limitation if it is subject to a restriction under
any Federal or state securities law, any regulation thereunder, or an agreement
(not otherwise prohibited by this subsection (b)) affecting the Share which
would make the Share not as freely tradable as ones not subject to such
restriction. The put option with respect to a Share shall be exercisable only by
a Participant, by his donees, or by a person (including an estate or its
distributee) to whom the Share passes by reason of the Participant's death.
Under the put option, the Participant, Beneficiary or other holder shall have
the right to sell his Shares to the Company; provided, that the duty of the
Company with respect to the put option may be exercised by any other person
designated by the Company (including the Trustee if the purchase of such Shares
would otherwise be appropriate). The put option shall be exercisable during the
15-month period that begins on the date the Shares subject to the put option are
distributed by the Plan. In the case of Shares that are publicly traded without
restriction when distributed, but cease to be so traded within 15 months after
distribution, such Shares shall become subject to a put option as described
above for the duration of the 15-month period that began on the date the Shares
were distributed (or such longer period designated by the Company). The
Administrative Committee shall notify each person holding such Shares in writing
on or before the tenth day after the date the Shares becomes subject to a
trading limitation that the Shares are subject to such a put option. If such
notice is not given by such tenth day, the number of days between such tenth day
and the date notice is actually given shall be added to the period of the put
option (to the extent such option does not already extend beyond the 15-month
period described above). The period during which a put option is exercisable
does not include any time when a distributee is unable to exercise it because
the party bound by the put option is prohibited from honoring it by applicable
Federal or state law. To exercise the put option, the holder shall notify the
Administrative Committee in writing that the put option is being exercised and
the transaction shall be consummated within 30 days next succeeding such notice
of exercise. The price at which a put option shall be exercisable shall be the
Fair Market Value of the Shares as of the Valuation Date immediately preceding
exercise of the put option; provided, however, if a put option is exercised by
an individual who is a disqualified person
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within the meaning of Section 4975(e)(2) of the Code, the price at which the put
option shall be exercisable is the Fair Market Value as of the date of the
transaction. The provisions for payment under the put option shall be determined
by the Administrative Committee, shall be reasonable and may include deferral of
payment if adequate security and a reasonable interest rate are provided and if
the cumulative payments at any time are no less than the aggregate of reasonable
periodic payments as of such time. Payments will generally be made in
substantially equal annual installments, beginning within 30 days after the date
the put option is exercised, and extend over a period of not more than 5 years
after the date the put option is exercised. The put option described in this
Subsection (b) shall continue to apply to Shares distributed by the Plan even if
the Exempt Loan is repaid or the Plan ceases to be an employee stock ownership
plan.
(c) The certificate evidencing ownership of any Shares distributed
from the Trust Fund shall bear a legend stating, as applicable, that
transferability of the Shares is restricted and that the Shares are subject to a
right of first refusal.
SECTION 12.6 VOTING OF SHARES
(a) If the Company's Shares are registered under Section 12 of the
Securities Exchange Act of 1934 (or would otherwise be required to be registered
except for the exemption provided in subsection (g)(2)(H) of Section 12 thereof)
or were acquired in connection with an Exempt Loan to which the provisions of
Section 133 are applicable, each Plan Participant (or Beneficiary of a deceased
Participant) shall have the right to direct the Trustee in writing as to the
manner in which the Shares held by the Trustee which have been allocated to his
Share Account under the Plan shall be voted at each meeting of the shareholders
of the Company and the Trustee shall vote such Shares in accordance with such
directions. The Administrative Committee shall notify each Plan Participant (or
Beneficiary) and distribute to him such information as the Company distributes
to its shareholders pertaining to the exercise of such voting rights within a
reasonable time before the time of exercise of such rights. To the extent the
Trustee does not receive instructions with respect to voting such Shares, the
Trustee shall not vote such Shares. Shares held by the Trustee which have not
been allocated to the Accounts of Plan Participants shall be voted by the
Trustee.
(b) If the Company's Shares are not registered under Section 12 of
the Securities Exchange Act of 1934 (and are not
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exempt from registration as provided in subsection (g)(2)(H) of Section 12
thereof) and were not acquired in connection with an Exempt Loan to which the
provisions of Section 133 are applicable, the Trustee shall vote all Shares held
by it, including Shares allocated to Participant Accounts, at each meeting of
the shareholders of the Company. The foregoing provisions of this Section
12.6(b) notwithstanding, with respect to any Company matter which requires
shareholder approval in connection with a corporate merger or consolidation,
recapitalization, reclassification, liquidation, dissolution, sale of
substantially all assets of the Company, or such similar transactions as may be
prescribed by Regulations, the Administrative Committee shall establish a
procedure whereby each Participant (or Beneficiary of a deceased Participant) in
the Plan shall direct the voting of the number of Shares (including fractional
Shares, where possible, through aggregation of similarly voted fractions) equal
to the number of Shares then allocated to any Share Account under the Plan. In
such event, the Trustee shall not vote such Shares, but they shall, instead, be
voted at the direction of Participants (or Beneficiaries) in accordance with the
procedure established by the Administrative Committee. In the event a
Participant (or Beneficiary) does not give the Trustee timely instructions with
respect to the voting of any Shares allocated to his Share Account, the Trustee
shall not vote such Shares.
(c) Each Plan Participant (or Beneficiary of a deceased Participant)
shall have the right to direct the Trustee in writing as to the manner in which
to respond to a tender or exchange offer with respect to the number of Shares
allocated to his Account under the Plan and the Trustee shall respond in
accordance with such direction. The Company shall promptly distribute to each
Plan Participant (or Beneficiary) such information as is distributed to
shareholders of the Company in connection with such tender or exchange offer.
Shares which have not been allocated to the accounts of any Plan Participant as
well as any allocated Shares with respect to which the Trustee has not received
timely instructions shall or shall not be tendered or exchanged by the Trustee
in its discretion.
(d) The instructions received by the Trustee pursuant to subsections
(a), (b), and (c) above shall be held by the Trustee in confidence and shall not
be divulged or released to any person, including non-Trustee officers or other
employees of the Company. The Company shall provide the Trustee with such
information and assistance as the Trustee shall reasonably request to enable it
to implement the provisions of this Section 12.6.
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(e) The Trustee shall not incur any liability or other damage on
account of any action taken by it in accordance with the written directions of
Plan Participants (and Beneficiaries) and the provisions of this Section 12.6,
each such Plan Participant (and Beneficiary) being deemed to be a named
fiduciary under the Plan for the limited purpose of directing the Trustee with
respect to the voting, tender, or exchange of the number of Shares allocated to
his Account under the Plan.
A R T I C L E XIII
ADMINISTRATION OF THE PLAN
SECTION 13.1 ADMINISTRATIVE COMMITTEE
The Administrative Committee shall supervise and administer the operation
of this Plan and shall have all powers necessary to accomplish that purpose,
including the power to make rules and regulations pertaining to the
administration of this Plan. The members of the Administrative Committee shall
be appointed from time to time by, and shall serve at the pleasure of, the Board
of Directors. Any member of the Administrative Committee may resign by
delivering written notice to the Board of Directors. Until such time as the
Board of Directors shall have appointed the members of the Administrative
Committee, or in the event that all Committee members have resigned, the Company
shall serve as the Committee.
SECTION 13.2 ORGANIZATION AND PROCEDURES
(a) The Administrative Committee shall elect from its members a
chairperson and may appoint a secretary who need not be a member of the
Committee. The Committee shall hold meetings at such times and places and upon
such notice as it shall from time to time determine. The Committee may make and
from time to time revise the rules and regulations covering the conduct of its
proceedings, it may designate one of its members to sign on behalf of the
Committee, and shall at all times maintain complete records of its proceedings
which records shall at all reasonable times be open to inspection by all members
of the Committee.
(b) The Administrative Committee may delegate all or part of its
duties which do not involve the management of Plan assets to others. The
Administrative Committee shall not be liable for any acts or omissions of the
persons to whom such duties have been delegated, provided that the Committee
acted
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prudently and in the interests of the Participants and Beneficiaries in
selecting and retaining such persons.
(c) A majority of the Administrative Committee shall constitute a
quorum for the transaction of business. No member, however, shall take part in
any action relating solely to himself or his rights or benefits under the Plan.
SECTION 13.3 DUTIES AND POWERS
The Administrative Committee shall have complete control of administering
the Plan, with all powers necessary to enable it to carry out its duties in that
respect. In exercising its discretion, the Committee shall do so in a uniform
and nondiscriminatory manner, treating all persons in similar circumstances
alike. Not in limitation, but in amplification of the foregoing:
(a) The Committee shall have complete authority to determine any
question regarding an Employee's participation and benefits, to interpret and
construe in its sole discretion the provisions of the Plan, and to make
decisions in all disputes involving the rights of any person interested in the
Plan.
(b) The Committee shall file such reports and Plan descriptions with
the Department of Labor and the Department of the Treasury as may be required by
law.
(c) The Committee shall notify the Internal Revenue Service of the
termination of this Plan, any change in the name of the Plan or the name and
address of the Committee, and any merger or division of this Plan.
(d) The Committee shall provide each Participant, Inactive
Participant and current Beneficiary with a summary of the latest annual report
of the Plan and summary Plan descriptions in the form and within the time limits
as may be required by law.
(e) The Committee shall furnish statements of vested benefits to each
Participant, Inactive Participant or current Beneficiary in the form and within
the time limits as may be required by law.
(f) The Committee shall make available to each Participant, Inactive
Participant and Beneficiary during business hours at its principal office copies
of this Plan and the Trust Agreement, the summary Plan description, the latest
annual report, and any other documents pertaining to the
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establishment and operation of this Plan. Upon request, such individual shall
be furnished copies of any such documents, provided that he shall be required to
pay any reasonable expense incurred in duplicating such documents.
SECTION 13.4 CONSULTATION BY THE COMMITTEE
In carrying out its responsibilities under the Plan, the Administrative
Committee may employ counsel and agents, and obtain such clerical, accounting,
and other assistance as it may deem advisable. All administrative expenses of
the Plan, as well as expenses incurred by the Administrative Committee in the
performance of its duties hereunder, shall be paid from the Trust Fund unless
otherwise paid by the Company. Until otherwise paid, the Trustee shall at all
times be liable for the payment of all administrative expenses, and the election
of the Company to pay any such expense shall not be construed as creating any
such liability on the part of the Company.
SECTION 13.5 FINALITY OF ACTION
To the extent permitted by law, all acts and determinations of the
Administrative Committee shall be binding and conclusive upon Participants,
Inactive Participants, Beneficiaries, Employees, and the Trustee. The Company
may deem its records conclusively to be correct as to the matters reflected
therein with respect to information furnished by an Employee.
SECTION 13.6 INDEMNIFICATION
The Company agrees to indemnify and defend to the fullest extent permitted
by law all persons who are, were, or may be employees of the Company against any
liabilities, damages, costs and expenses (including attorney's fees and amounts
paid in settlement of any claim approved by the Company) occasioned by their
occupying or having occupied an administrative position in connection with the
Plan except when due to their willful misconduct or gross negligence.
SECTION 13.7 COMPENSATION AND EXPENSES OF EMPLOYEES
No employee shall be compensated for his services performed in connection
with the administration of the Plan. However, all reasonable expenses of
employees incurred in connection with the administration of the Plan shall be
paid from the Trust Fund unless otherwise paid by the Company. Until otherwise
paid, the Trustee shall at all times be liable for the payment of all
administrative expenses, and the election of the Company to pay any such expense
shall not be construed as creating any such liability on the part of the
Company.
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A R T I C L E XIV
THE TRUST FUND
SECTION 14.1 THE TRUSTEE
The Company, by action of its Board of Directors, shall select a Trustee to
hold, invest and distribute any assets of the Plan which are held in the Trust
Fund in accordance with the terms of the Trust Agreement which shall be executed
on behalf of the Company and by the Trustee under such terms and conditions, not
in contravention of the provisions of this Plan, as the Company may elect. The
fiduciary responsibilities of the Trustee shall be as set forth in the Trust
Agreement entered into by and between the Company and the Trustee. The Company
from time to time may change the Trustee and the Trust Agreement.
SECTION 14.2 THE TRUST FUND
The Trust Fund shall be used only to pay benefits as provided in the Plan
and such other payments as directed by the Administrative Committee. All
reasonable and necessary expenses incurred in the administration of the Plan and
Trust Fund shall be paid from the Trust Fund to the extent that such costs and
expenses are not paid by the Company.
SECTION 14.3 PURCHASES OF SHARES AND LOANS TO THE TRUST FUND
(a) Trust assets will be invested by the Trustees primarily in Shares
of the Company in accordance with directions from the Administrative Committee.
Company contributions (and other Trust Fund assets) may be used to acquire
Shares of the Company from any Company shareholder or from the Company. The
Trustee may also invest Trust Fund assets in such other prudent investments as
the Administrative Committee deems to be desirable for the Trust Fund as
provided in the Trust Agreement. All purchases of Company Shares by the Trustee
shall be made only as directed by the Administrative Committee and only at
prices which do not exceed the Fair Market Value of Company Shares.
(b) The Administrative Committee may direct the Trustee to incur an
Exempt Loan from time to time to finance the acquisition of Company Shares or to
repay a prior Exempt Loan. An installment obligation incurred in connection
with the purchase of Company Shares shall be treated as an Exempt
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Loan. An Exempt Loan shall be for a specific term, shall bear a reasonable rate
of interest and shall not be payable on demand except in the event of default.
An Exempt Loan may be secured by a pledge of the Shares so acquired (or acquired
with the proceeds of a prior Exempt Loan which is being refinanced). No other
Trust Fund assets may be pledged as collateral for an Exempt Loan, and no lender
shall have recourse against Trust Fund assets other than any Shares remaining
subject to pledge. If the lender is a disqualified person as defined in Section
4975(e)(2) of the Code, the Exempt Loan must provide for a transfer of Trust
Fund assets on default only upon and to the extent of the failure to meet the
payment schedule of the Exempt Loan. Any pledge of Shares must provide for the
release of the Shares so pledged as payments on the Exempt Loan are made by the
Trustee and such Shares are allocated to Participants' Share Accounts under
Article V. Payments of principal and/or interest on any Exempt Loan shall be
made by the Trustee (as directed by the Administrative Committee) only from
Company contributions paid in cash to enable the Trustee to repay such Exempt
Loan, from earnings attributable to such Company contributions and from any cash
dividends received by the Trustee on such Shares. Except as provided in Section
12.5 herein, no Shares acquired with an Exempt Loan shall be subject to a put,
call, other option, buy-sell or similar arrangement while held by and
distributed from the Plan whether or not the Plan remains an employee stock
ownership plan. The preceding protections shall be nonterminable and shall
continue even if the Exempt Loan is repaid or the Plan ceases to be an employee
stock ownership plan.
(c) Any Shares acquired by the Trustee with the proceeds of an Exempt
Loan shall initially be credited to a Suspense Account and will be allocated to
the Share Accounts of Participants only as payments on the Exempt Loan are made
by the Trustee. The number of Shares to be released from the Suspense Account
for allocation to Participants' Share Accounts for each Plan Year shall be
determined by the Administrative Committee (as of each allocation date) as
follows:
(i) The number of Shares held in the Suspense Account
immediately before the release for the current Plan Year
shall be multiplied by a fraction. The numerator of the
fraction shall be the amount of principal and interest paid
on the Exempt Loan for that Plan Year. The denominator of
the fraction shall be the sum of the numerator plus the
total payments of principal and interest on the Exempt Loan
projected to be paid for all future Plan
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Years. For this purpose, the interest to be paid in future
years is to be computed by using the interest rate in effect
as of the current allocation date.
(ii) The Administrative Committee may elect (at the time an
Exempt Loan is incurred) or the provisions of the Exempt
Loan may provide for the release of Shares from the Suspense
Account based solely on the ratio that the payments of
principal for each Plan Year bear to the total outstanding
principal amount of the Exempt Loan. This method may be used
only to the extent that: (A) the Exempt Loan provides for
annual payments of principal and interest at a cumulative
rate that is not less rapid at any time than level annual
payments of such amounts for ten years; (B) interest
included in any payment on the Exempt Loan is disregarded
only to the extent that it would be determined to be
interest under standard loan amortization tables; and (C)
the entire duration of the Exempt Loan does not exceed ten
years, even in the event of a renewal, extension, or
refinancing.
SECTION 14.4 REVERSION OF ASSETS
(a) Except as provided by the terms of this Section 14.4, no assets
of the Trust Fund shall ever revert to, or be used or enjoyed by, the Company or
any successor of the Company, nor shall any such funds or assets ever be used
other than for the benefit of Participants, Inactive Participants or
Beneficiaries.
(b) In the event the Administrative Committee determines that the
Company has contributed any amount under Article IV to the Trustee by mistake of
fact, the Administrative Committee shall direct the Trustee in writing to return
to the Company, within one year after the payment of the contribution, the
lesser of the amount actually contributed by such mistake of fact or its then
current value.
(c) All contributions hereunder are made on the condition that this
Plan and the Trust Agreement initially qualify under Sections 401(a), 4975(e)(7)
and 501(a) of the Code. If, pursuant to the Company's request for a
determination letter prior to the end of the remedial amendment period, the
Internal Revenue Service shall determine that this Plan and the Trust Agreement
do not initially qualify, the
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Administrative Committee shall direct the Trustee to return to the Company the
then current value of any contributions made by the Company. Such contributions
shall be returned within one year following the denial of initial qualification.
(d) All contributions hereunder are also made on the condition that
they are deductible under Section 404 of the Code. If the Internal Revenue
Service shall determine that any portion of the Company's contribution under
Article IV for a Plan Year is not deductible, to the extent that the deduction
is disallowed, the Administrative Committee shall direct the Trustee to return
the lesser of such amount or its then current value to the Company within one
year following the disallowance of the deduction.
(e) Upon termination of the Plan after satisfaction of all fixed and
contingent liabilities or obligations to persons entitled to benefits upon
termination of the Plan, any fund or property remaining in the Trust Fund shall
revert to the Company, provided such reversion does not contravene any provision
of law.
ARTICLE XV
PLAN FIDUCIARIES
SECTION 15.1 NAMED FIDUCIARIES
"Named Fiduciaries" with respect to the Plan and Trust Agreement shall be
the Company, the Administrative Committee, the Trustee, and the Board of
Directors. The Fiduciaries of this Plan and Trust Agreement shall have only
those powers, duties, responsibilities and obligations as are specifically
provided for by the Plan and Trust Agreement.
SECTION 15.2 BONDING REQUIREMENTS
Each of the Plan Fiduciaries shall be bonded to the extent required by
ERISA. Such bond shall provide protection to the Plan and Trust Fund against
loss by reason of direct or indirect acts of fraud or dishonesty on the part of
the Plan Fiduciaries. Unless paid by the Employer, any expense incurred in
maintaining such bond shall be paid from the Trust Fund.
SECTION 15.3 PROHIBITED TRANSACTIONS
Except as otherwise permitted by applicable law, no Fiduciary shall engage,
or cause the Plan to engage, in any transaction in which the Trust Fund directly
or indirectly
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sells, exchanges, or leases any part of the Trust Fund to; lends money or
otherwise extends credit to; furnishes goods, services or facilities to;
transfers any assets of the Trust Fund to; or permits any such assets to be used
by or for the benefit of a party in interest as defined by Section 3(14) of
ERISA. In addition, except as otherwise provided by this Plan and applicable
law, no Fiduciary shall deal with any assets of the Trust Fund for his own
interest or account; act in his individual capacity in any transaction involving
the Trust Fund on behalf of a party whose interests are adverse to the interests
of the Trust Fund and of the Participants; nor receive any consideration for his
own account from any party dealing with the Trust Fund in connection with a
transaction involving the assets of the Trust Fund. Anything to the contrary
notwithstanding, whenever a bank or trust company is a Trustee hereunder, the
foregoing prohibitions shall not apply to the investment of assets of part of
the Trust Fund in one or more deposits in the savings department of said bank or
trust company, provided said deposits bear a reasonable interest rate, or to the
holding of uninvested cash in its commercial department.
SECTION 15.4 FIDUCIARY RESPONSIBILITIES
(a) The Trustee shall hold the assets of the Trust Fund in trust and
shall be responsible for all functions specifically assigned to it by the Plan
and Trust Agreement.
(b) The Company shall be responsible for all functions assigned or
reserved to it under the Plan and Trust Agreement. Any authority so assigned or
reserved to the Company shall be exercised by resolution of its Board of
Directors, and shall become effective with respect to the Trustee, upon written
notice to the Trustee signed by a majority of the Administrative Committee
advising the Trustee of such exercise. By way of illustration, and not by
limitation, the Company shall have authority and responsibility for (i) the
design of the Plan; (ii) the qualification under applicable law of the Plan and
Trust Agreement and any amendments thereto; (iii) the funding of the Plan; (iv)
the designation of Named Fiduciaries; (v) the appointment, removal and
replacement of the Trustee; and (vi) the exercise of all fiduciary functions
provided in the Plan and Trust Agreement or necessary to the operation of the
Plan, except such functions as are assigned to other Named Fiduciaries.
(c) The Administrative Committee shall have responsibility and
authority to control the operation and administration of the Plan and as further
set forth in Article XIII.
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<PAGE>
(d) The Board of Directors shall be responsible for all functions
assigned to it under the Plan and Trust Agreement, including the appointment of
the Administrative Committee.
(e) This Section 15.4 is intended to allocate to each Named Fiduciary
the individual responsibility for the prudent execution of the functions
assigned to it, and none of such responsibilities or any other responsibilities
shall be shared by two or more of such Named Fiduciaries unless such sharing is
provided by a specific provision of the Plan and Trust Agreement. Whenever one
Named Fiduciary is required to follow the directions of another Named Fiduciary,
the two Named Fiduciaries shall not be deemed to have been assigned a shared
responsibility, but the responsibility of the Named Fiduciary giving the
directions shall be deemed his sole responsibility, and the responsibility of
the Named Fiduciary receiving those directions shall be to follow them insofar
as such instructions are on their face proper under applicable law. A Named
Fiduciary may employ one or more persons to render advice concerning
responsibility such Named Fiduciary has been allocated under the Plan and Trust
Agreement. The compensation of any person so employed shall be paid from the
Trust Fund unless, at the election of the Company, such compensation is
otherwise paid by the Company.
SECTION 15.5 INVESTMENT MANAGERS
The Board of Directors may appoint a qualified Investment Manager to manage
any portion or all of the assets of the Trust Fund. For the purpose of this Plan
and Trust Agreement, a qualified "Investment Manager" means an individual, firm
or corporation that has been so appointed to serve as Investment Manager
hereunder and that is and has acknowledged in writing that it is (a) a Fiduciary
with respect to the Plan, (b) bonded as required by ERISA, and (c) is either (i)
registered as an investment adviser under the Investment Advisers Act of 1940 or
(ii) a bank as defined in the Investment Advisers Act of 1940. Any such
appointment shall be by a vote of the Board of Directors Committee naming the
Investment Manager so appointed and designating the portion of the Trust Fund to
be managed and controlled by such Investment Manager. Said vote shall be
evidenced by a certificate in writing signed by the secretary of the Board of
Directors and shall become effective on the date specified in such certificate,
but not before delivery to the Trustee of a copy of such certificate together
with a written acknowledgment by such Investment Manager of the facts specified
in this Section 15.5. Any Investment Manager so appointed shall have sole
responsibility for the investment of
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<PAGE>
the portion of the Trust Fund to be managed and controlled by such Investment
Manager.
A R T I C L E XVI
AMENDMENT, TERMINATION AND MERGER
SECTION 16.1 PLAN AMENDMENT
(a) The Company shall have the right to amend this Plan at any time
and from time to time by vote of its Board of Directors. Any such amendment may
be made retroactively effective to the extent permitted by applicable law.
(b) Except to the extent required to qualify this Plan and the Trust
Agreement under Sections 401(a), 4975(e)(7) and 501(a) of the Code, or as a
condition of continued qualification thereunder, no amendment shall be made
which would have any of the following effects:
(i) Deprive any Participant, Inactive Participant or Beneficiary
of the right to receive any benefits or options attributable
to service before the amendment to which such individual may
be entitled.
(ii) Except as provided in Article XIV, permit any part of the
Trust Fund to revert to the Company or permit any part of
the Trust Fund, other than such part as may be required to
pay taxes or administration expenses, to be used for or
diverted for any purpose other than the exclusive benefit of
Employees or their Beneficiaries .
SECTION 16.2 PLAN TERMINATION
(a) Although the Company expects to continue the Plan and the
contributions to the Trust Fund indefinitely, the Company may, by action of its
Board of Directors, terminate the Plan and all further contributions to the
Trust Fund for any reason and at any time. The liability of the Company shall
automatically terminate upon its being legally dissolved, upon the filing of a
petition in bankruptcy (either voluntarily or involuntarily) or upon its making
any general assignment for the benefit of creditors.
(b) Upon the termination of the Plan, the complete discontinuance of
contributions to the Trust Fund, or the
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<PAGE>
termination of the liability of the Company to contribute to the Trust Fund, the
Administrative Committee shall so notify the Trustee of such event in writing.
The Trust Fund shall continue until all funds are distributed in accordance with
the terms of this Plan. All provisions of the Plan and Trust Agreement shall
remain in force, other than the provisions relating to Company contributions,
until all funds are distributed from the Trust Fund. Each affected Participant
shall be vested with all rights to any funds in his Account as of the date of
such termination or discontinuance.
(c) In the event of the partial termination of the Plan, the rights
of each Participant affected by such partial termination to the amounts credited
to his Account as of the date of such partial termination shall be
nonforfeitable. Such amounts shall be distributed in accordance with the
provisions of this Plan.
(d) Any unallocated funds held in the Trust Fund as provided in
Article VII at the time of the termination of the Plan or discontinuance of
contributions shall be allocated among the Participants for whom an Account is
being held in the manner set forth in Article V to the extent such allocation
does not exceed the limits of Article VII.
(e) Anything herein to the contrary notwithstanding, the Trustee and
the Administrative Committee may, at any time after the Plan has been
terminated, terminate the Trust Fund. Upon termination of the Trust Fund, the
amount credited to the Account of each Participant, Inactive Participant, and
Beneficiary shall be distributed to the individual absolutely and free of trust,
either in a lump sum or in an annuity Contract, in accordance with the
applicable provisions of Article VIII or IX. Any such termination shall not
deprive any Participant, Inactive Participant or Beneficiary of the rights
provided in Section 12.7 after such termination.
(f) The Trustee's fees and expenses of administering the Trust Fund
and other expenses incident to the termination and distribution of the Trust
Fund incurred after the termination of this Plan and the Trust Agreement shall
be paid from the Trust Fund unless otherwise paid by the Company. Until
otherwise paid, the Trustee shall at all times remain solely liable for the
payment of all fees and expenses incident to the termination.
(g) If any individual who is entitled to benefits cannot be located,
the Account of the individual shall be removed from the Trust Fund and applied
in accordance with the escheat provisions under the applicable laws of the
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<PAGE>
Massachusetts.
SECTION 16.3 PLAN MERGER
Unless otherwise permitted by law or regulations, this Plan shall not be
merged into, or consolidated with, nor shall any assets or liabilities be
transferred to, any pension or retirement plan under circumstances resulting in
a transfer of assets or liabilities from this Plan to any other plan unless
immediately after any such merger, consolidation or transfer each Participant
would (if the Plan then terminated) receive a benefit after the merger,
consolidation or transfer which would be equal to or greater than the benefit he
would have been entitled to receive immediately before such merger,
consolidation or transfer (if the Plan had then terminated).
A R T I C L E XVII
MISCELLANEOUS PROVISIONS
SECTION 17.1 INTERPRETATION
(a) The Administrative Committee shall have complete authority to
determine any question regarding an Employee's participation and benefits, to
interpret and construe in its sole discretion the provisions of the Plan, and to
make decisions in all disputes involving the rights of any person interested in
the Plan. To the extent permitted by law, all acts and determinations of the
Administrative Committee shall be binding and conclusive upon Participants,
Inactive Participants, Beneficiaries and Employees.
(b) If any provision of this Plan or the Trust Agreement may be
susceptible to more than one interpretation, then that one shall always be given
to such provision which will be consistent with this Plan and the Trust
Agreement being an employees' stock ownership plan and trust agreement within
the meaning of Sections 401(a), 4975(e)(7) and 501 of the Code, as amended, or
as replaced by any sections of like intent and purpose.
(c) In case any provisions of this Plan shall be held illegal or
invalid for any reason, said illegality or invalidity shall not affect the
remaining provisions of this Plan, and this Plan shall be construed and enforced
as if said illegal or invalid provisions had never been inserted herein.
(d) Unless the context otherwise requires, words denoting the
singular number may, and where necessary shall, be
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<PAGE>
construed as denoting the plural number, and pronouns in the masculine gender
include the feminine gender and pronouns in the neuter gender include the
masculine and feminine gender.
SECTION 17.2 LIABILITY FOR EMPLOYEE REPRESENTATIONS
The Company, the Administrative Committee, and the Trustee shall be
discharged from any liability in acting upon any representations by any
individual of any fact affecting his status under this Plan or upon any notice,
request, consent, letter, telegram, or other document believed by them, or any
of them, to be genuine, and to have been signed or sent by the proper person.
SECTION 17.3 DESCRIPTIVE HEADINGS
The headings of the Plan are inserted for convenience of reference only and
shall have no effect upon the meaning of the provisions hereof.
SECTION 17.4 CONSTRUCTION
The Plan shall be construed, regulated and administered under the laws of
the Massachusetts, except that if any such laws are superseded by any applicable
Federal law or statute, such Federal law or statute shall apply.
SECTION 17.5 MULTIPLE ORIGINALS
This Plan is executed in several counterparts, each of which shall be
deemed an original and shall constitute but one and the same instrument and this
Plan may be evidenced by any one counterpart.
A R T I C L E XVIII
TOP-HEAVY PROVISIONS
SECTION 18.1 TOP-HEAVY DEFINITIONS
For purposes of this Article XVIII, the following terms shall have the
meaning set forth below:
(a) "Top-Heavy Plan" means this Plan for any Plan Year beginning
after 1983 in which, as of the Determination Date:
(i) it is not included in an Aggregation Group and the
aggregate value of all accounts for
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<PAGE>
eligible Key Employees exceeds 60% of such amounts for all
eligible Employees and their beneficiaries; or
(ii) it is required to be included in a Top-Heavy Group.
Except as otherwise provided in this subsection, the preceding sentence shall be
applied by taking into account distributions made to any employee or beneficiary
during the five-year period ending on the Determination Date and any amount
distributed under a terminated plan which would have been required to be
included in the Aggregation Group, but shall disregard any deductible voluntary
contributions; any account balance of a former Key Employee (or his beneficiary)
for all Plan Years beginning with the Plan Year he is no longer described as a
Key Employee; for Plan Years beginning after December 31, 1984, any account
balance of any individual who has not performed service for the Affiliated Group
at any time during the five-year period ending on the Determination Date; any
employer contributions rolled over or transferred to a plan after December 31,
1983, provided such contributions were originally made to a qualified retirement
plan maintained by an employer other than a member of the Affiliated Group, and
were rolled over or transferred into the Trust Fund at the discretion of the
individual; and benefits paid on account of death, to the extent such benefits
exceed the present value of the individual's accrued benefits existing
immediately prior to death.
(b) "Top-Heavy Group" means the Aggregation Group which, if viewed as
a single plan, would be a Top-Heavy Plan. In determining whether the Aggregation
Group is Top-Heavy, the accrued benefits or the account balances of all plans
shall be valued as of the Determination Dates for such plans that fall within
the same calendar year. The accrued benefit of any Non-Key Employee shall be
determined for years beginning after 1986 under the method, if any, that
uniformly applies for accrual purposes under all defined benefit plans
maintained by the Aggregation Group or, if there is no such method, as if such
benefit accrued not more rapidly than under the slowest accrual rate permitted
under the fractional accrual rate of Section 411(b)(l)(C) of the Code.
(c) "Determination Date" means, for this Plan and any other plan
included in the Aggregation Group, the last day of such plan's preceding plan
year, or in the case of the first plan year of the plan, the last day of such
plan year.
(d) "Aggregation Group" means:
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<PAGE>
(i) Each qualified defined benefit retirement plan and defined
contribution retirement plan of the Affiliated Group in
which a Key Employee is or was a participant within the
last five plan years preceding the Determination Date;
(ii) Each other qualified defined benefit retirement plan and
defined contribution retirement plan of the Affiliated
Group which enables any plan described in subsection
(d)(i) to meet the tax qualification rules of Section 410
of the Code;
(iii) All other qualified defined benefit retirement plans or
defined contribution retirement plans of the Affiliated
Group elected by the Administrative Committee which do not
cause the Aggregation Group to violate the tax
qualification rules of the Code; and
(iv) As used in this subsection (d), a qualified retirement
plan shall include frozen plans and those terminated plans
which were maintained within the last five years ending on
the Determination Date.
(e) "Key Employee" means any employee who, at any time during the
plan year containing the Determination Date, or during any of the four plan
years immediately preceding such plan year, is:
(i) An officer of any member of the Affiliated Group whose
Earnings exceed 50% of the dollar limitation in effect
under Section 415(b)(l)(A) of the Code for the calendar
year in which such plan year ends;
(ii) An employee or a self-employed individual as described in
Section 401(c)(l) of the Code having Earnings from the
Affiliated Group exceeding the dollar limitation in effect
under Section 415(c)(1)(A) of the Code for the calendar
year in which such plan year ends and owning an interest
in the Affiliated Group that is both more than a one-half
percent interest in value and one of the ten largest such
interests in the Affiliated Group;
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<PAGE>
(iii) An owner of more than a 5% interest in a member of the
Affiliated Group; or
(iv) An owner of more than a 1% interest in a member of the
Affiliated Group whose Earnings from the members exceed
$150,000 for the plan year.
For purposes of this subsection (e), the term employee includes a terminated,
retired, disabled, deceased, leased, or part-time employee. A beneficiary of an
individual described in this subsection (e) will be considered to be a Key
Employee. For purposes of subparagraph (i) of subsection (e), if there are more
than three officers of the Affiliated Group, no more than 10% of all employees
of the Affiliated Group, based on the highest number of employees within the
last five plan years preceding the Determination Date, to a maximum of 50, shall
be treated as officers. In addition, for purposes of subparagraph (i) of
subsection (e), individuals performing executive functions for sole
proprietorships, partnerships, associations and trusts which are members of the
Affiliated Group shall be treated as officers. For purposes of subparagraph
(ii) of this subsection (e), if two employees or self-employed individuals have
the same ownership interest in the Affiliated Group, the employee or self-
employed individual having the larger annual compensation for the year during
any part of which that ownership interest existed shall be treated as having a
larger ownership interest. In determining ownership, the constructive ownership
provisions of Section 318 of the Code shall be applied by utilizing a 5% test in
lieu of the 50% test set forth in subsection (a)(2)(C) thereof. The aggregation
rules of Section 414(b), (c), (m) or (o) of the Code shall not apply for
purposes of determining ownership.
(f) "Non-Key Employee" means any employee who is not a Key Employee.
(g) "Earnings" shall be defined as amounts paid or accrued by any
member of the Affiliated Group for a Limitation Year, including salary and
wages, overtime pay, bonuses, commissions, and taxable fringe benefits; but
shall not include amounts contributed by the Company (including elected amounts
deferred under an arrangement described in Section 401(k) of the Code) under the
Plan or any other plan of the Affiliated Group or any nonqualified fringe
benefits which are nontaxable to employees. Except for purposes of determining
status as a Key Employee under Section 18.1(e), an employee's Earnings for any
year shall be deemed not to exceed $200,000, subject to any adjustments to
reflect increases in the cost of living determined by the Secretary of Treasury
and, for Plan Years
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<PAGE>
beginning after 1988, after applying the family aggregation rules pursuant to
Section 401(a)(17) of the Code.
(h) "Average Earnings" means the average of a Participant's Earnings
for his five consecutive years of service which produce the highest average. In
determining Average Earnings, any year in the five consecutive year period in
which a Year of Service was not earned shall not be counted. If a Participant
has worked less than five Years of Service, the average of his Earnings for his
total Years of Service shall be used. All Years of Service shall be taken into
account for purposes of determining a Participant's Average Earnings.
(i) "Defined Benefit Minimum" means an annual retirement benefit
(expressed as a single life annuity beginning at normal retirement age with no
ancillary benefits) derived from contributions from the Affiliated Group equal
to 2% of such Non-Key Employee's Average Earnings multiplied by the number of
his Years of Service (not to exceed 10). There shall be taken into account only
those Years of Service during which the defined benefit retirement plan or plans
in which such Non-Key Employee Participants are included in a Top-Heavy Group.
(j) "Year of Service" means the period of service used to determine
the vested percentage of a Participant's benefits under a defined benefit or
defined contribution retirement plan of any member of the Affiliated Group.
SECTION 18.2 TOP-HEAVY BENEFITS
(a) Subject to the provisions of subsection (b), each Non-Key
Employee who is a Participant in this Plan and who has not separated from
service at the end of the Plan Year shall, for any Plan Year in which this Plan
is a Top-Heavy Plan, have allocated to his Account Company contributions in an
amount equal to at least 3% of his Earnings for such Plan Year or, if smaller,
the percentage of Earnings required to be allocated to the Key Employee
receiving the highest such percentage for the Plan Year, including amounts
allocated to a Key Employee pursuant to his election under 402(g) of the Code,
under this and all other defined contribution retirement plans required to be
included in an Aggregation Group. This smaller percentage amount shall not be
utilized if this Plan and a defined benefit retirement plan are required to be
included in an Aggregation Group and if this Plan enables such other plan to
meet the qualification requirements of the Code. Effective for Plan Years
beginning on or after January 1, 1989, Company contributions attributable to any
amounts deferred under an
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<PAGE>
arrangement described under Section 401(k) of the Code shall not be taken into
account for purposes of satisfying the requirements of this Section 18.2.
(b) If a Non-Key Employee participates in two or more Top-Heavy
defined contribution retirement plans of the Affiliated Group, the minimum
contribution requirements of subsection (a) may be met by combining the
contributions provided under such plans. If during any Plan Year a Non-Key
Employee participates in one or more Top-Heavy defined benefit retirement plans
and one or more Top-Heavy defined contribution retirement plans of the
Affiliated Group, such Non-Key Employee will receive in lieu of the amount
indicated in subsection (a) allocations provided under such defined contribution
retirement plan or plans equal to at least 5% of his Earnings.
SECTION 18.3 ADJUSTED BENEFIT LIMITATIONS
(a) If the requirements set forth in subsection (b) are not
satisfied, the dollar limitations in the fractions under Section 7.3(a)(i) and
(ii) shall not be multiplied by 125% but shall be multiplied by 100%.
(b) The requirements of this subsection are satisfied if:
(i) a Participant who participates in one or more Top-Heavy
defined benefit plans and one or more Top-Heavy defined
contribution plans of the Aggregation Group does not
accrue a benefit or receive an Annual Addition under such
plan for any Limitation Year beginning or ending within
the Plan Year for which such plans are Top Heavy, unless
such accrual or Annual Addition would not cause the sum of
such Participant's defined benefit and defined
contribution fractions, as modified by subsection (a), to
exceed 1.0; or
(ii) (A) the present value of the combined accrued benefits
and account balances for all Key Employees under all
qualified retirement plans sponsored by any member of the
Aggregation Group exceeds 60% of the total of such amounts
for all employees but does not exceed 90%; and
(B) 3% is substituted for 2% in subsection (i) of Section
18.1, and 4% is substituted for 3% in subsection (a) of
Section 18.2.
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<PAGE>
SECTION 18.4 ELIGIBILITY FOR ALLOCATIONS
For purposes of Section 18.2, the eligibility of Non-Key Employees who are
Participants in the Plan for an allocation under said Section shall be
determined without regard to whether they (a) have completed 1,000 Hours of
Service during the applicable Plan Year or (b) are excluded from participating
or receive no benefit for a Plan Year because their Compensation is less than a
stated amount or because they fail to make mandatory contributions or elective
deferral contributions for such Plan Year. For any Plan Year beginning prior to
1989 for which this Plan is a Top-Heavy Plan, the Compensation of any
Participant that is in excess of $200,000 shall be disregarded.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed in the
name of and on behalf of the Company by its duly authorized officer this
___________ day of __________, 19 _____.
BENTHOS, INC.
By:_____________________________________
Title:
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<PAGE>
FIRST AMENDMENT
TO THE
BENTHOS, INC. EMPLOYEE STOCK OWNERSHIP PLAN
WHEREAS, Benthos, Inc. (hereinafter referred to as the "Company") adopted
the Benthos, Inc. Employee Stock Ownership Plan (hereinafter referred to as the
"Plan"), effective August 17, 1979; and
WHEREAS, the Company desires to amend the provisions of the Plan affecting
the extent to which a Participant is vested in his accrued benefit attributable
to Company contributions; and
WHEREAS, by Article XVI of the Plan the Company reserved the right to amend
the Plan at any time;
NOW, THEREFORE, effective as of October 1, 1989, solely with respect to
Participants who complete an Hour of Service on or after such date, the Plan is
hereby amended as follows:
Article X of said Plan is hereby amended by deleting Section 10.1 thereof
and substituting therefor the following:
"10.1 General. A percentage of the amount credited to a Participant's
-------
Account shall become vested and non-forfeitable on the basis of his
completed Years of Service with the Company according to the following
schedule:
<TABLE>
<S> <C>
Less than 1 Year of Service..................................... 0%
At least 1 Year of Service..................................... 20%
At least 2 Years of Service.................................... 40%
At least 3 Years of Service.................................... 60%
</TABLE>
<PAGE>
<TABLE>
<S> <C>
At least 4 Years of Service.................................... 80%
At least 5 Years of Service.................................... 100%"
</TABLE>
IN WITNESS WHEREOF, the Company has caused this First Amendment to be
executed in the name of and on behalf of the Company by its duly authorized
officer this __________ day of ___________ , 1990.
BENTHOS, INC.
By:________________________________
Title
- 2 -
<PAGE>
SECOND AMENDMENT
TO THE
BENTHOS, INC. EMPLOYEE STOCK OWNERSHIP PLAN
Following Amendment adopted by the Board of Directors on January 31, 1992,
effective as of October 1, 1991:
That the Benthos, Inc. Employee Stock Ownership Plan be and it hereby
is amended, effective as of October 1, 1991, to include within the
definition of "compensation" pay for overtime, calculated at the
participant's base rate, and that the President or other appropriate
officer be and he hereby is authorized and directed to execute and
deliver a Second Amendment to the Benthos, Inc. Employee Stock
Ownership Plan effecting such amendment, in such form as he, upon
advice of counsel, shall deem appropriate.
<PAGE>
THIRD AMENDMENT
TO THE
BENTHOS, INC. EMPLOYEE STOCK OWNERSHIP PLAN
Following Amendment adopted by the Board of Directors on April 8, 1996:
That the Employee Stock Ownership Plan of the Corporation, in the form
submitted to the Board of Directors and forming a part of the records
of the Directors, together with such changes as the President of the
Corporation may deem appropriate, be and it hereby is adopted an
amendment and restatement of the Employee Stock Ownership Plan of the
Corporation, effective as of October 1, 1987, to incorporate such
changes as are required by the Internal Revenue Service in order to
obtain a favorable determination letter.
<PAGE>
ADOPTION AGREEMENT #006
NONSTANDARDIZED CODE (S)4O1(K) PROFIT SHARING PLAN
The undersigned, BENTHOS, INC.
- --------------------------------------------------------------------------------
("Employer), by executing this Adoption Agreement elects to become a
participating Employer in the IDS Financial Services Inc. Defined Contribution
Prototype Plan (basic plan document #01) by adopting the accompanying Plan and
Trust in full as if the Employer were a signatory to that Agreement The Employer
makes the following elections granted under the provisions of the Prototype
Plan.
- --------------------------------------------------------------------------------
PREAMBLE
- --------------------------------------------------------------------------------
Employer Name: BENTHOS, INC.
------------------------------------------------------------------
EIN Number: 04-2381876
---------------------------------------------------------------------
Address of Employer's Principal Office: 49 EDGERTON DRIVE
-----------------------------------------
Street
NORTH FALMOUTH MA 02556-2826
- --------------------------------------------------------------------------------
City State Zip
Employer's Telephone Number: (508) 563-1000
---------------------------------------------------
Name of Trustee: IDS BANK & TRUST
----------------------------------------------------------------
Address:________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
THE EMPLOYER SHALL BE THE PLAN ADMINISTRATOR UNLESS A DIFFERENT PLAN
ADMINISTRATOR IS DESIGNATED.
Plan Administrator Name (if other than Employer):
Name:___________________________________________________________________________
Address:________________________________________________________________________
Street
________________________________________________________________________________
City State Zip
Plan Administrator's Telephone Number: ( )
_________________________________________
- --------------------------------------------------------------------------------
ARTICLE I. DEFINITIONS
- --------------------------------------------------------------------------------
1.02 CUSTODIAN/TRUSTEE.
The Custodian/Trustee executing this Adoption Agreement will administer
this Plan and Trust as Trustee.
- --------------------------------------------------------------------------------
1.03 PLAN.
The name of the Plan as adopted by the Employer is: BENTHOS, INC. 401(k)
----------------------
RETIREMENT PLAN
---------------------------------------------------------------------------
The Plan Number is: # 2.
--------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
1.07 EMPLOYEE
The following Employees are not eligible to participate in the Plan:
[_] (a) No exclusions.
[x] (b) Collective bargaining employees (as defined in Section 1.07 of
the Plan). [Note; If the Employer excludes union employees from
the Plan, the Employer must be able to provide evidence that
retirement benefits were the subject of good faith bargaining.]
[x] (c) Nonresident aliens who do not receive any earned income (as
defined in Code (S)911(d)(2)) from the Employer which constitutes
United States source income (as defined in Code (S)861(a)(3)).
[x] (d) Commission Salesmen.
[_] (e) Other (specify)__________________________________________________
_________________________________________________________________
Leased Employees. Any Leased Employee treated as an Employee under Section
1.31 of the Plan, is: (Choose one)
[x] (f) Not eligible to participate in the Plan, irrespective of whether
he otherwise would be eligible to participate by reason of this
Adoption Agreement Section 1.07.
[_] (g) Eligible to participate in the Plan unless excluded by reason of
an exclusion classification elected under this Adoption Agreement
Section 1.07.
Related Employers. If any member of the Employer's related group (as
defined in Section 1.30 of the Plan) executes a Participation Agreement to
this Adoption Agreement, such member's Employees are eligible to
participate in the Plan, unless excluded by reason of an exclusion
classification elected under this Adoption Agreement Section 1.07. In
addition: (Choose one)
[x] (h) No other related group member's Employees are eligible to
participate in the Plan:
[_] (i) The following nonparticipating related group member's Employees
are eligible to participate in the Plan unless excluded by reason
of an exclusion classification elected under this Adoption
Agreement Section 1.07.
_________________________________________________________________
- --------------------------------------------------------------------------------
1.12 COMPENSATION.
"Compensation" includes elective contributions made by the Employer on the
Employee's behalf.
Special definition for salary reduction contributions. An Employee's salary
reduction agreement, as described in Adoption Agreement Section 3.01,
applies to his Compensation, as defined in this Adoption Agreement Section
1.12, determined prior to the reduction authorized by that salary reduction
agreement, with the following exceptions:
[x] (a) No exceptions.
[_] (b) The following exemptions apply:__________________________________
______________________________________________________________________
______________________________________________________________________
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2
<PAGE>
- --------------------------------------------------------------------------------
1.17 PLAN YEAR/LIMITATION YEAR.
Plan Year means: ((a) is mandatory; (b)is optional)
[x] (a) The 12 consecutive month period ending every September 30th.
-------------------.
[_] (b) The first Plan Year of the Plan is (specify)_____________________
--------------------------------------------------------------------------.
The Limitation Year is the Plan Year.
The Fiscal Year Is the Employer's fiscal year: the 12 consecutive month
period ending every September 30th .
--------------------
- --------------------------------------------------------------------------------
1.18 EFFECTIVE DATE.
New Plan. The "Effective Date" of the Plan is ___________________________.
Restated Plan. The restated Effective Date is 11/5/93 . This Plan is a
-------------
substitution and amendment of an existing retirement plan originally
established 7/1/87, amended and restated as 10/1/91 and amended and
--------------------------------------------------------------
restated as of 10/1/92
- --------------------------------------------------------------------------------
1.19 PLAN ENTRY DATE.
"Plan Entry Date" means the Effective Date and: (Choose One)
[_] (a) Semi-annual Entry Dates. The first day of the Plan Year and the
first day of the seventh month of the Plan Year.
[_] (b) The first day of the Plan Year.
[x] (c) Other (specify entry dates, at least one of which must be the
first day of the Plan Year) Monthly .
------------------------------------
[Note: The Employer may elect Option (b) only if the age requirement under
Option (a)(1) of this Adoption Agreement Section 2.01 does not exceed 20
1/2, if the service requirement under Option (b)(2) of this Adoption
Agreement Section 2.01 does not exceed 6 months, or if Option (b)(1) under
this Adoption Agreement Section 2.01 is not selected.]
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
1.27 HOUR OF SERVICE.
The Advisory Committee will credit Hours of Service on the basis of:
(Choose (a) or (b))
[x] (a) The actual method.
[_] (b) The following equivalency method: (Choose one)
[_] (1) Daily.
[_] (2) Weekly.
[_] (3) Semi-monthly payroll periods.
[_] (4) Monthly.
- --------------------------------------------------------------------------------
1.29 SERVICE FOR PREDECESSOR EMPLOYER.
In addition to the predecessor service the Plan must credit by reason of
Section 1.29 of the Plan, the Plan credits Service with the following
predecessor employer(s):
(Choose one)
[x] (a) No other predecessor employer.
[_] (b) Name of Predecessor Employer(s)__________________________________
________________________________________________________________.
(Choose at least one)
[_] (1) For purposes of participation under Article II.
[_] (2) For purposes of vesting under Article V.
[_] (3) Except Service credited before
[Note: If the Employer is designating more than one predecessor
employer, it may attach a schedule to this Adoption Agreement
Option (b), designating additional predecessor employers and the
applicable service crediting elections.]
- --------------------------------------------------------------------------------
1.31 LEASED EMPLOYEES. NOT APPLICABLE
If a Leased Employee is a Participant in the Plan and also participates in
a defined contribution plan maintained by the leasing organization: (Choose
one).
[_] (a) The Advisory Committee will determine the Leased Employee's
allocation of Employer contributions under Article III without
taking into account the Leased Employee's allocation, if any,
under the leasing organizations plan.
[_] (b) The Advisory Committee will reduce a Leased Employee's allocation
of Employer nonelective contributions (other than designated
qualified nonelective contributions) under this Plan by the
Leased Employee's allocation under the leasing organization's
plan, but only to the extent that allocation is attributable to
the Leased Employee's service provided to the Employer. The
leasing organization's plan:
[_] (1) Must be a money purchase plan which would satisfy the
definition under Section 1.31 of a safe harbor plan,
irrespective of whether the safe harbor exception
applies.
[_] (2) Other (specify required features of plan and, if a
defined benefit plan, the method of determining this
reduction)______________________________________________
________________________________________________________
_______________________________________________________.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
ARTICLE II. EMPLOYEE PARTICIPANTS
- --------------------------------------------------------------------------------
2.01 ELIGIBILITY
Eligibility conditions. To become a Participant in the Plan, an Employee
must satisfy the following eligibility conditions:
(a) Age requirement. (Choose (1) or (2))
[x] (1) Age 19 (specify age, not exceeding 21).
-------
[_] (2) No age requirement.
(b) Service requirement. (Choose one of (1), (2)or (3); (4) applies to the
non-401(k) portion of the plan and is optional in addition to the
preceding elections)
[_] (1) One Year of Service.
[_] (2) ___________ months (not exceeding 12) following the
Employee's Employment Commencement Date.
[x] (3) One Hour of Service.
[_] (4) Solely for purposes of participation in the allocation of:
(Choose one or both)
[x] (i) Employer discretionary contributions (including
designated qualified nonelective contributions) and
Participant forfeitures.
[x] (ii) Employer matching contributions.
The service requirement of Options (1), (2) or (3), as
elected, does not apply. For participation in such
allocations, the service requirement is: (Choose one)
[x] (A) One (one or two) Year(s) of Service,
------------------
without an intervening Break in Service (as described
in Section 2.03(A) of the Plan) if the requirement is
two Years at Service.
[_] (B)________________ months (not exceeding 24) following
the Employee's Employment Commencement Date.
Entry Date. An Employee will become a Participant, unless excluded from
participation under Adoption Agreement Section 1.07, on the Plan Entry Date
(if employed on that date) coincident with or immediately following the
date the Employee completes the eligibility conditions described in Options
(a) and (b) or this Adoption Agreement Section 2.01.
[Note: If the first day of the Plan Year is the only Plan Entry Date,
(i.e., Option 1.19(b) is selected): The Employer may not elect (b)(4)(B)
with more than 6 months, if the Employer selects a graduated vesting
schedule under Section 5.03; the Employer may not elect (b)(4)(A) with more
than one Year of Service or (b)(4)(13) with more than 18 months, if the
Employer selects 100% immediate vesting under Section 5.03.1
Dual eligibility. The eligibility conditions of this Section 2.01 apply to:
(Choose (c) or (d))
[x] (c) All Employees of the Employer.
[_] (d) Solely to an Employee employed by the Employer after_____________
If the Employee was employed by the specified date, the Employee
will become a Participant: (Choose (1) or (2))
[_] (1) On the latest of the Effective Date, his Employment
Commencement Date or the date he attains age ___________
(not to exceed 21).
[_] (2) Under the eligibility conditions in effect under the
Plan prior to the restated Effective Date:
(specify)_________________ The eligibility condition
under this Option (2) for participation in the Code
(S)401(k) arrangement under this Plan is one Year of
Service for Plan Years beginning after December 31,
1988. (for restated plans only)
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
2.02 YEAR OF SERVICE - PARTICIPATION.
After the initial 12 consecutive month period described in Section 2.02 of
the Plan, the Plan measures Years of Service and Break in Service under
Article H by reference to: (Choose (a) or (b))
[_] (a) The 12 consecutive month period beginning with each anniversary
of in Employee's Employment Commencement Date.
[x] (b) The Plan Year, beginning with the Plan Year which includes the
first anniversary of the Employee's Employment Commencement Date.
An Employee who receives credit for 1,000 Hours of Service during
the initial 12 consecutive month period and during the first Plan
Year described in this Option (b), will receive credit for two
Years of Service under Article II.
- --------------------------------------------------------------------------------
2.03 BREAK IN SERVICE - PARTICIPATION.
The Break in Service rule described in Section 2.03(B) of the Plan does not
apply to the Employer's Plan. A Participant whose employment has terminated
reenters the Plan on the date of reemployment.
- --------------------------------------------------------------------------------
ARTICLE III EMPLOYER CONTRIBUTIONS AND FORFEITURES
- --------------------------------------------------------------------------------
3.01 AMOUNT.
The Employer's annual contribution to the Trust will equal the total amount
of deferral contributions, matching contributions, qualified nonelective
contributions and discretionary contributions, as determined under this
Section 3.01.
Salary Reduction Arrangement. The Employer must contribute the amount by
which the Participants have reduced their Compensation for the Plan Year,
pursuant to their salary reduction agreements on file with the Advisory
Committee. A reference in the Plan to salary reduction contributions is a
reference to these amounts.
Matching contributions. (Choose (a) or (b))
[_] (a) The Employer will not make matching contributions.
[x] (b) The Employer will make matching contributions in accordance with
the formula(s) elected in this Option (b):(Choose at least one)
[_] (1) An amount equal to_______________% of each Participants
Salary reduction contributions for the Plan Year.
[_] (2) An amount equal to___ ___ % of each Participant's salary
reduction contributions for the Plan Year that do not
exceed ______________ % of Compensation (as defined in
Adoption Agreement Section 1.12) for the Plan Year; plus
the following matching percentage(s) for Salary
reduction contributions exceeding the specified
percentage of the Participant's Compensation for the
Plan Year: -0- .
-----------------------------
[x] (3) An amount equal to 25 % of the first $ 4,000 of each
-------- -------
Participant's Salary reduction contributions for the
Plan Year; plus the following matching percentage(s) of
the Participant's Salary reduction contributions for the
Plan Year exceeding the specified dollar amount:
________________________________________________________
________________________________________________________
[Note: Under Options (2) or (3), the matching percentage for any subsequent
tier of reduction contributions may not exceed the matching percentage for
any prior tier.]
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
[x] (4) Discretionary formula. An amount (or additional amount)
equal to a matching percentage the Employer from time to
time may deem advisable of: (Choose one)
[_] (i) the Participant's Salary reduction contributions
for the Plan Year.
[_] (ii) each Participant's Salary reduction contributions
for the Plan Year that do not exceed ________ % of
the Participant's Compensation (as defined in
Adoption Agreement Section 1.12) for the Plan
Year.
[x] (iii) the first $4,000 of each Participant's Salary
------
reduction contributions for the Plan Year.
Net profits. To make the matching contributions described in Option (b), the
Employer need not have net profits.
Designated qualified nonelective contributions. The Employer, in its sole
discretion, may contribute an amount which it designates as a qualified
nonelective contribution.
Discretionary contribution. The additional amount the Employer may from time to
time deem advisable.
[_] (c) Special rules for Code (S)401(k) Arrangement.
The following rules and restrictions apply to an Employee's salary
reduction agreement: (Make a selection under (1), (2), (3) and (4))
(1) Limitation on amount. The Employee's salary reduction
contributions: (Choose at least one)
[x] (i) May not exceed 20% of Compensation for the Plan Year,
---
subject to the annual additions limitation described
in Part 2 of Article III the Plan.
[_] (ii) No maximum limitation other than the annual additions
limitation.
(2) An Employee may revoke, on a prospective basis, a salary
reduction agreement: (Choose one)
[_] (i) Once during any Plan Year but not later than_______ of
the Plan Year.
[_] (ii) As of any an Entry Date.
[_] (iii) As of the first day of any month.
[x] (iv) Other (specify, but must be at least once per Plan
Year) _________.
First day of any payroll period
---------------------------------------------------.
(3) An Employee who revokes his salary reduction agreement may file a
new salary reduction agreement with an effective date: (Choose
one)
[_] (i) No earlier an the first day of the next Plan Year
[_] (ii) As of any Subsequent Plan Entry Date.
[_] (iii) As of the of first day of any month subsequent to the
month in which he revoked an Agreement.
[x] (iv) Other (specify, but must be at least once per Plan Year
following the Plan Year of revocation) _______________
First day of each quarter
----------------------------------------------.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
(4) A Participant may increase or may decrease, on a prospective
basis, his salary reduction percentage or dollar amount:
[_] (i) As of the beginning of each payroll period.
[_] (ii) As of the first day of each month.
[_] (iii) As of any Plan Entry Date
[x] (iv) Other (specify, but must permit an increase or a
decrease at least once per Plan Year)__________________
First day of each quarter
--------------------------------------------------
________________________________________________________________________________
3.04 CONTRIBUTION ALLOCATION
The Advisory Committee will allocate deferral contributions, matching
contributions and qualified nonelective contributions in accordance with
Section 14.06 of the Plan and the elections under this Adoption Agreement
Section 3.04.
Allocation Account for Matching Contributions. The Advisory Committee will
allocate matching contributions to a Participant's (Choose one)
[_] (i) Deferral Contribution Account.
[x] (ii) Employer Contribution Account.
Special Allocation Dates for Deferral Contributions/Matching Contributions.
The Advisory Committee will allocate salary reduction contributions and
matching contributions for each Plan Year as of the Accounting Date and as
of any date specified below:
(1) Salary Reduction Contribution: As soon as administratively
---------------------------------.
(2) Matching Contributions: possible following receipt
----------------------------------------.
(3) Discretionary: by Trustee
-------------------------------------------------.
As of an allocation date, the Advisory Committee will credit all salary
reduction contributions relating to an Employee's salary reduction election
for the relevant allocation period. For matching contributions allocable on
the basis of salary reduction contributions or Participant no deductible
contributions, the Advisory Committee will apply the allocation formula in
Section 14.06 with reference to eligible contributions credited for the
allocation period.
Method of Allocation - Discretionary Contribution. Subject to any
restoration allocation required under Section 5.04, the Advisory Committee
will allocate and credit each annual Employer discretionary contribution
(and Participant forfeitures, if any) to the Employer Contribution Account
of each Participant who satisfies the conditions of Section 3.06, in
accordance with the method selected under Option (b). If the Employer also
selects Option (a), the Advisory Committee first will complete the
allocation described in Option (a) and then will apply the allocation
method selected under Option (b), only if Employer discretionary
contributions (and Participant forfeitures) remain unallocated after the
application of Option (a).
[_] (a) Top Heavy Minimum Allocation. Under this Option (a), the Advisory
Committee will allocate the annual Employer discretionary
contributions (and Participant forfeitures) in the same ratio
that each Participant's Compensation for the Plan Year bears to
the total Compensation of all Participants for the Plan Year, but
not exceeding 3% of each Participant's Compensation.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Solely for purposes of applying this Option (a), "Participant"
means, in addition to any Participant who satisfies the
requirements of Section 3.06 for the Plan Year, any other
Participant who is entitled to a top heavy minimum allocation
under Section 3.04(A) of the Plan In addition, "Compensation"
does not include any exclusions elected by the Employer under
Adoption Agreement Section 1.12. For a Participant who became a
Participant or resumed participation in the Plan during the Plan
Year, Compensation under this Option (a) means Compensation for
the entire Plan Year.
[x] (b) Nonintegrated Allocation Formula. The Advisory Committee will
allocate the annual Employer discretionary contributions (and
Participant forfeitures) in the same amount for each Participant
for the Plan Year.
Top Heavy Minimum Allocation - Method or Compliance. The Plan will satisfy
the top heavy minimum allocation requirement of Section 3.04(A): (Choose
one)
[x] (c) By having the Employer make any necessary additional contribution
to the Participant's Account, as described in Section 3.04(A)(3)
of the Plan.
[_] (d) By guaranteeing the top heavy minimum allocation under the
following plan(s) maintained by the Employer,
________________________. This Plan does not provide the top
heavy minimum allocation, except the Employer will make any
necessary additional contribution to satisfy the top heavy
minimum allocation for Non-Key Employees covered only under this
Plan and not under the other plan(s) maintained by the Employer.
If the Employer maintains another plan, the Employer may provide in an
addendum to this Adoption Agreement, numbered Section 3.04, any
modifications to the Plan necessary to satisfy the top heavy requirements
under Code (S)416.
Related employers. If two or more related employers (as defined in Section
1.30) contribute to this Plan, the Advisory Committee must allocate all
Employer contributions and forfeitures to each Participant in the Plan, in
accordance with the elections in this Adoption Agreement Section 3.04:
Not applicable
[_] (e) Without regard to which Contributing related group member employs
the Participant.
[_] (f) Only to the Participants directly employed by the contributing
Employer. If a Participant receives Compensation from more than
one contributing Employer, the Advisory Committee will determine
the allocations under this Adoption Agreement Section 3.04 by
prorating the Participant's Compensation and, if applicable, the
taxable wage base applicable to the Participant, among the
participating Employers.
- --------------------------------------------------------------------------------
3.05 FORFEITURE ALLOCATION
Subject to any restoration allocation required under Sections 5.04 or 9.14,
the Advisory Committee will allocate a Participant forfeiture in accordance
with Section 3.04: (Choose one)
[x] (a) As an Employer discretionary contribution for the Plan Year in
which the forfeiture occurs, as if the Participant forfeiture
were an additional discretionary contribution for that Plan Year.
[_] (b) To reduce the Employer contribution (other than deferral
Contributions) for the Plan Year in which the forfeiture occurs.
[Note: If the employer's Adoption Agreement provides for
integration/permitted disparity, forfeitures must b e allocated in accordance
with the method of allocation selected by the Employer in Section 3.04.]
- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
Allocation of forfeited excess aggregate contributions. In lieu of the
preceding paragraph the Advisory Committee will allocate any forfeited
excess aggregate contributions (as described in Section 14.09):
[x] (c) To reduce Employer matching contributions for the Plan Year
following the Plan Year for which the Employer made the matching
contributions.
[_] (d) As Employer discretionary matching contributions for the Plan
Year following the Plan Year for which the Employer made the
matching contribution, except the Advisory Committee will not
allocate these forfeitures to the Highly Compensated Employees
who incurred the forfeitures.
- --------------------------------------------------------------------------------
3.06 ACCRUAL OF BENEFIT.
Compensation taken into account For the Plan Year in which the Employee
first becomes a Participant, the Advisory Committee will determine the
allocation under Option (b), of Adoption, Agreement Section 3.04 by taking
into account: (Choose one)
[_] (a) The Employee's Compensation for the entire Plan Year.
[x] (b) The Employee's Compensation for the portion of the Plan Year in
which the Employee actually is a Participant in the Plan.
This election regarding Compensation also applies to the allocation of the
designated qualified nonelective contribution.
Hours of Service requirement. The minimum number of Hours of Service a
Participant must complete during a Plan Year in order to receive an
allocation of the matching contributions, designated qualified nonelective
contribution, discretionary contributions and Participant forfeitures, if
any, or the Plan Year is:
[x] (c) One Hour of Service.
[_] (d) 1,000 Hours of Services.
[_] (e) Other (specify, but the number may not exceed 1,000) ____________
________________________________________________________________.
[x] (f) No Hour of Service requirement if the Participant terminates
employment during the Plan Year on account of;
[x] (1) Death.
[x] (2) Disability.
[x] (3) Early Retirement if applicable). Or attainment of
Normal Retirement Age in the current Plan Year or in a
prior Plan Year
[Note: The Employer may use Option (e) to designate a different Hours of
Service condition for a particular type of Employer contribution.]
Employment Requirement. A Participant who, during a particular Plan Year,
completes the Hour of Service condition selected under this Adoption
Agreement Section 3.06: (Choose at least one)
[x] (g) Will share in the allocation of Employer contributions and
Participant forfeitures, if any, for that Plan Year without
regard to whether he is employed by the Employer on the
Accounting Date of that Plan Year, except for the allocation of:
[_] (1) No exceptions.
[_] (2) Matching contributions (including forfeitures applied
to reduce Employer matching contributions).
[x] (3) Discretionary contributions and Participant forfeitures
(other than forfeitures applied to reduce Employer
matching contributions).
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
[x] (h) Will not share in the allocation for that Plan Year of the
contributions (and forfeitures) to which Option (g) does not
apply, as elected by the Employer, if he terminates employment
with the Employer prior to the Accounting Date of that Plan Year
for any reason other than:
[_] (1) No exceptions
[x] (2) Death.
[x] (3) Disability.
[x] (4) Early Retirement (if applicable), or attainment of
Normal Retirement Age in the current Plan Year or in a
prior Plan Year,
Additional accrual requirements for matching contributions. If the Employer
elects in Adoption Agreement Section 3.04 to allocate matching
contributions on two or more allocation dates for a Plan Year, the Advisory
Committee will apply the Hours of Service requirement in this Adoption
Agreement Section 3.06 to each allocation period by dividing the required
Hours of Service on a prorata basis to the allocation periods included in
that Plan Year. Furthermore, a Participant who satisfies the conditions
described in this Adoption Agreement Section 3.06 will receive an
allocation of matching contributions (and forfeitures applied to reduce
matching contributions) only if the Participant satisfies the following
additional condition(s):
[x] (i) No additional conditions
[_] (j) The Participant does not revoke his salary reduction agreement
effective during the Plan Year.
[_] (k) The Participant is not a Highly Compensated Employee for the Plan
Year. This Option (k) applies to; (Choose one or both options)
[_] (1) Fixed Matching contributions.
[_] (2) Discretionary matching contributions.
[_] (1) (Specify)________________________________________________________
_________________________________________________________________
_________________________________________________________________
Recharacterization. Participant nondeductible contributions are allowed
only to the extent they are recharacterized pursuant to Section 14.04 of
the Plan.
- --------------------------------------------------------------------------------
3.15 MORE THAN ONE PLAN LIMITATION.
If the provisions of Section 3.15 apply, the Excess Amount attributed to
this Plan equals: (Choose one)
[x] (a) The total Excess Amount.
[_] (b) None of the Excess Amount.
[_] (c) The product of:
[_] (i) the total Excess Amount allocated as of such date
(including any amount which the Advisory Committee
would have allocated but for the limitations of Code
(SS)415), times
[_] (ii) the ratio of (1) the amount allocated to the
Participant as of such date under this Plan divided by
(2) the total amount allocated as of such date under
all qualified defined contribution plans (determined
without regard to the limitations of code (S)415).
[Note: Section 3.17 applies only to Participants who, in addition to this
plan, participate in one or more qualified plans which are qualified
defined contribution plans other than a Master Or Prototype plan maintained
by the Employer during the Limitation Year.]
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
3.17 SPECIAL ALLOCATION LIMITATION WHERE EMPLOYER HAS ANOTHER PLAN.
The amount of Annual Additions which the Advisory Committee may allocate
under this Plan on behalf of any Participant are limited in accordance with
the provisions of Section 3.11 through 3.16 of the Plan, as though the
other plan were a Mater or Prototype plan, unless the Employer completes
this section by setting forth other limitations in an addendum to the
Adoption Agreement, numbered Section 3.17.
Completion of this Section 3.17 is optional. However, if Section 3.17 of
the Plan applies to an Employer, the Employer's failure to complete this
section may adversely affect the qualification of the Plan the Employer
maintains.
- --------------------------------------------------------------------------------
3.18 DEFINED BENEFIT PLAN LIMITATION.
Application of limitation. The limitation under Section 3.18 of the Plan:
(Choose (a) or (b))
[x] (a) Does not apply to the Employer's Plan because the Employer does
not maintain and never has maintained a defined benefit plan
covering any Participant in this Plan.
[_] (b) Applies to the Employer's Plan. To the extent necessary to
satisfy the limitation under Section 3.18, the Employer will
reduce:
[_] (1) The Participant's projected annual benefit under the
defined benefit plan under which the Participant
participates.
[_] (2) Its contribution or allocation on behalf of the
Participant to the defined contribution plan under
which the Participant participates and then, if
necessary, the Participant's projected annual benefit
under the defined benefit plan under which the
Participant participates.
[Notes: If the Employer selects (a), the remaining options in this Section
3.18 do not apply to the Employer's Plan.
Coordination with top heavy minimum allocation. The Advisory Committee will
apply the top heavy minimum allocation provisions of Section 3.04(A) of the
Plan by making the following modifications:
[_] (c) For Non-Key Employees participating only in this Plan, the top
heavy minimum allocation is the minimum allocation described in
Section 3.04(A) of the Plan: (Choose one)
[_] (1) Without modification.
[_] (2) By substituting 4%" for 3% except: (Choose one)
[_] (i) No exceptions.
[_] (ii) Plan Years in which the top heavy ratio
exceeds 90%.
[_] (d) For Non-Key Employees also participating in the defined benefit
plan, the top heavy minimum is: (Choose one)
[_] (1) As described in Section 3.04(A) of the Plan, without
modification.
[_] (2) 5% of Compensation (as determined under Section 3.04(A)
or the Plan) irrespective of the contribution rate of
any Key Employee, except: (Choose one)
[_] (i) No exceptions.
[_] (ii) Substituting "7 1/2%" for "5%" if the top
heavy ratio does not exceed 90%.
[_] (3) No top heavy minimum allocation. [Note: The Employer may not
select this Option (3) unless the defined benefit plan
satisfies the top heavy minimum benefit requirements of Code
416 for these Non-Key Employees.]
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Actuarial Assumptions for Top Heavy Calculation. To determine the top
heavy ratio, the Advisory Committee will use the following interest rate
and mortality assumptions to value accrued benefits under a defined
benefit plan:_____________________________________________________________
If the elections under this Section 3.18 are not appropriate to satisfy
the limitations of Section 3.18, or the top heavy requirements under Code
416, the Employer must provide the appropriate provisions in an addendum
to this Adoption Agreement.
- --------------------------------------------------------------------------------
3.19 DEFINITIONS ARTICLE III
For purposes of Section 3.19(b), Compensation will mean all of each
participant's:
[x] (a) Section 3121(a) wages
[_] (b) Section 3401(a) wages
[_] (c) 415 safe-harbor compensation
- --------------------------------------------------------------------------------
ARTICLE IV. PARTICIPANT CONTRIBUTIONS
- --------------------------------------------------------------------------------
4.01 Participant Nondeductible Contributions.
The Plan:
[_] (a) Does not permit Participant nondeductible contributions.
[_] (b) Does permit Participant nondeductible contributions, pursuant to
Section 14.04 of the Plan.
[_] (i) Contributions shall be received once each Plan Year.
[_] (ii) Contributions shall be received periodically during each
Plan Year as determined by the Advisory Committee.
Allocation dates. The Advisory Committee will allocate nondeductible
contributions for each Plan Year as of the Accounting Date.
As of an allocation date the Advisory Committee will credit all
nondeductible contributions made for the relevant allocation period. A
nondeductible contribution relates to an allocation period only if
actually made to the Trust no later than 30 days after that allocation
period ends.
- --------------------------------------------------------------------------------
ARTICLE V. TERMINATION OF SERVICE - PARTICIPANT VESTING
- --------------------------------------------------------------------------------
5.01 NORMAL RETIREMENT.
Normal Retirement Age under the Plan is: (Choose one)
[x] (a) 59-1/2 [State age, but may not exceed age 65.]
[_] (b) The later of the date the Participant attains
_______________________________(__) years of age or
the__________________________________(__) anniversary of the
first day of the Plan Year in which the Participant commenced
participation in the Plan. (The age selected may not exceed age
65 and the anniversary selected may not exceed the 5th)
Early Retirement. Means, prior to a Participant's Normal Retirement (check
and complete one):
[x] (c) the first day of the month coinciding with or next following the
data on which a Participant attains age 55
---------------------
and after completion of at least -0-years (not to
---------------------
exceed 5) of employment with Employer.
[_] (d) no Early Retirement provision provided.
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
5.03 VESTING SCHEDULE.
Deferral Contributions Account/Mandatory Contributions Account. A
Participant has a 100% Nonforfeitable interest at all times in his
Deferral Contribution Account and in his Mandatory Contributions Account.
Employer Contribution Account, With respect to a Participant's Employer
Contribution Account, the Employer elects the following vesting schedule:
(Choose one)
[_] (a) Immediate vesting 100% Nonforfeitable at all times. [Note: The
Employer must elect Option (a) if the eligibility conditions under
Adoption Agreement Section 2.01(b) require 2 years of service or
more than 12 months of employment.]
[x] (b) Graduated Vesting Schedules.
<TABLE>
<CAPTION>
Top Heavy Schedule Non-Top Heavy Schedule
(Mandatory) (Optional)
Years of Nonforfeitable Years of Nonforfeitable
Service Percentage Service Percentage
-------------- ------------------ -------------- -----------------
<S> <C> <C> <C>
Less than 1... ___________ Less than 1... ___________
1............. 20% 1............. ___________
-----------
2............. 40 2............. ___________
-----------
3............. 60 3............. ___________
-----------
4............. 80 4............. ___________
-----------
5............. 100 5............. ___________
-----------
6 or more..... 100% 6............. ___________
7 or more..... 100%
</TABLE>
[Note: Under Option (b),the Employer must complete a Top Heavy Schedule.
The Top Heavy Schedule must satisfy either the "6-year graded" vesting
standard or the "3-year cliff" vesting standard. If the Employer elects to
follow the "6-year graded" standard, If percentages must equal at least
20% for year 2, 40% for year 3, 60% for year 4 and 80% for year 5, with 0%
or any percentage not exceeding the percentage for year 2 permissible in
the first two blanks. If the Employer elects to follow the "3-year cliff"
standard, the percentages must equal at least 100% for years 3,4 and 5,
with 0% or any greater percentage permissible in the first three blanks.
The Employer, at its option, may complete a Non Top Heavy Schedule. The
Non Top Heavy Schedule must satisfy either the "7-year graded" vesting
standard or the "5-year cliff" vesting standard. If the Employer elects to
follow the "7-year graded" standard, the percentages must equal at least
20% for year 3, 40% for year 4, 60% for year 5 and 80% for year 6, with 0%
or any percentage not exceeding the percentage for year 3 permissible in
the first three blanks. If the Employer elects to follow the "5-year
cliff" standard, the percentages must equal 100% for years 5 and 6, with
0% or any greater percentage permissible in the first five blanks. Also
see Section 7.05 of the Plan.]
Application of Vesting Schedule. The Advisory Committee will apply:
(Choose one)
[x] (c) The selection under Option (a) or under Option (b) in all Plan
Years. [Note: this election is not available if the Employer
selected a Non Top Heavy Schedule under Option (b).]
[_] (d) The Top Heavy Schedule under Option (b):(Choose one)
[_] (1) Only in a Plan Year for which the Plan is top heavy.
[_] (2) In the Plan Year for which the Plan first is top heavy and
then in all subsequent Plan Years.
Life Insurance Investments. The Participant's Accrued Benefit attributable
to insurance contracts purchased on his behalf under Article XI is subject
to the vesting election under Options (a) or (b).
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
5.04 CASH-OUT DISTRIBUTIONS TO PARTIALLY-VESTED PARTICIPANTS/RESTORATION OF
FORFEITED ACCRUED BENEFIT.
The deemed cash-out rule described In Section 5.04(C) of the Plan: (Choose
one)
[_] (a) Does not apply.
[x] (b) Will apply to determine the timing of forfeitures for 0% vested
Participants.
A Participant is not a 0% vested Participant if he has a Deferral
Contributions Account.
- --------------------------------------------------------------------------------
5.08 INCLUDED YEARS OF SERVICE - VESTING.
The Employer specifically excludes the following Years of Service: (Choose
at least one)
[x] (a) None other than as specified in Section 5.08 (a) of the Plan.
[_] (b) Any Year of Services before the Participant attained the age
of_____________, (__). [Note: The age selected may not exceed age
18.]
[_] (c) Any Year of Service during the period the Employer did not
maintain this Plan or a predecessor plan.
- --------------------------------------------------------------------------------
ARTICLE VI. TIME AND METHOD OF PAYMENTS OF BENEFITS
- --------------------------------------------------------------------------------
Code S411(d)(6) Protected Benefits. The election under this Article VI may
not eliminate Code S411(d)(6) protected benefits. To the extent the
elections would eliminate a Code S411(d)(6) protected benefit, see Section
13.02 Of the Plan. Furthermore, if the elections liberalize the optional
forms of benefit under the Plan, the more liberal options apply on the
later of the adoption date or the effective Date of this Adoption
Agreement.
- --------------------------------------------------------------------------------
6.01 TIME OF PAYMENT OF ACCRUED BENEFIT.
Nonforfeitable Accrued Benefit Not Exceeding $3,500. Subject to the
limitation of Section 6.01(A)(1), the distribution date for distribution
of a Nonforfeitable Accrued Benefit not exceeding $3,500 is: (Choose one)
[_] (a) The first distribution date is the_________ Plan Year beginning
after the Participant's Separation from Service.
[x] (b) The first distribution date following the Participant's Separation
from Service
Nonforfeitable Accrued Benefit Exceeds $3,500. See the elections under
Section 6.03.
Disability. The distribution date, subject to the limitations of Section
6.01(A)(3), is determined in accordance with Paragraphs (1) and (2) under
Section 6.O1(A) of the Plan.
Hardship. (Choose one)
[x] (c) The Plan does not permit a hardship distribution to a Participant
who has separated from Service.
[_] (d) The Plan permits a hardship distribution to a Participant who has
separated from Service in accordance with the hardship
distribution policy stated in Section 6.01(A)(4) of the Plan.
- --------------------------------------------------------------------------------
6.02 METHOD OF PAYMENT OF ACCRUED BENEFIT. THE ADVISORY COMMITTEE WILL APPLY
SECTION 6.02 OF THE PLAN WITH NO MODIFICATIONS.
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
6.03 BENEFIT PAYMENT ELECTIONS.
Participant Elections After Termination of Employment. A Participant who
is eligible to make distribution elections under Section 6.03 of the Plan
may elect to commence distribution of his Nonforfeitable Accrued Benefit:
(Choose at least one)
[_] (a) As of any distribution date, but not earlier than the first
distribution date of the _______________ Plan Year following the
Participant's Separation from Service.
[_] (b) As of any distribution date after the close of the Plan Year in
which the Participant attains Normal Retirement Age. A Participant
who has a Separation from Service also may elect to commence
distribution as of the following date(s): (Choose at least one)
[_] (1) No other election options.
[x] (2) Any distribution date following his Separation from
Service with the Employer.
[_] (3) Any distribution date in the _________ Plan Year(s)
following his Separation from Service.
[_] (4) Any distribution date in the Plan Year after the
Participant incurs __________ Break(s) in Service (as
defined in Article V).
[_] (5) Any distribution date following attainment of age
______________________.
[_] (6) (Specify)_________________________________________________
__________________________________________________________
[_] (c) (Specify)_________________________________________________________
__________________________________________________________________
The distribution events described in the election(s) made under Options
(a), (b) or (c) apply equally to the Deferral Contributions Account and to
the Employer Contribution Account, unless otherwise specified in Option
(c).
Participant Elections Prior to Separation from Service - Employer
Contribution Account. Subject to the restrictions of Article VI, the
following distribution options apply to a Participant's Employer
Contribution Account prior to his Separation from Service; (Choose at
least one of (d) through (h))
[_] (d) No distribution options prior to Separation from Service.
[x] (e) Attainment of Specified Age Until he retires, the Participant has
a continuing election to receive all or any portion of his
Employer Contribution Account after he attains:
[_] (1) Normal Retirement Age
[x] (2) 59-1/2 years of age and is 100% vested in his Accrued
----------
Benefit.
[_] (f) After a Participant has participated in the Plan for a period of
not less than 5 years and he is 100% vested in his Accrued Benefit
until he retires, the Participant has a continuing election to
receive all or any portion of his Accrued Benefit.
[_] (g) Hardship. A Participant may elect a hardship distribution prior to
his Separation from Service in accordance with the hardship
distribution policy:
[_] (1) Under Section 6.O1(a)(4) of the Plan.
[_] (2) Under Section 14.11 of the Plan.
[_] (3) Provided in the addendum to this Adoption Agreement,
Numbered Section 6.03.
In no event may a Participant receive a hardship distribution under this
Option (g) before he is 100% vested in his Employer Contribution Account.
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
[_] (h) (Specify)_________________________________________________________
__________________________________________________________________
[Note: The Employer may use an addendum. numbered 6.03, to provide
additional language authorized by Options (b)(6),(c),(g)(3) or (h) of this
Adoption Agreement Section 6.03.]
Participant Elections Prior to Separation from Service - Deferral
Contributions Account. Subject to the restrictions of Article VI. the
following distribution options apply to a Participant's Deferral
Contributions Account prior to his Separation from Service: (Choose at
least one)
[_] (i) No distribution options prior to Separation from Service.
[x] (j) Until he retires, the Participant has a continuing election to
receive all or any portion of his Deferral Contributions Account
after he attains:
[_] (1) The later of Normal Retirement Age or age 59 1/2.
[x] (2) Age 59-1/2 (at least 59 1/2).
--------
[x] (k) Hardship. A Participant may elect a hardship distribution prior to
this Separation from Service in accordance with the hardship
distribution policy under Section 14.11 of the Plan.
Sale of trade or business/subsidiary. If the Employer sells substantially
all of the assets (within the meaning of Code (S)409(d)(2)) used in a
trade or business or sells a subsidiary (within the meaning 0f Code
(S)409(d)(3)), a Participant who continues employment with the acquiring
corporation is eligible for distribution from his Deferral Contributions
Account: (Choose one)
[_] (l) Only as described in this Adoption Agreement Section 6.03 for
distributions prior to Separation from Service.
[x] (m) As if he has a Separation from Service. After March 31,1988, a
distribution authorized solely by reason of this Option (m) must
constitute a lump sum distribution,, determined in a manner
consistent with Code (S)401(k)10) and the applicable Treasury
regulations.
- --------------------------------------------------------------------------------
6.04 ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING SPOUSES.
The annuity distribution requirements of Section 6.04: (Choose one)
[x] (a) Do not apply to any Participant, except a Participant described in
Section 6.04(E) of the Plan (relating to the profit sharing
exception to the joint and survivor requirements).
[_] (b) Apply to all Participants.
- --------------------------------------------------------------------------------
ARTICLE VIII. PARTICIPANT ADMINISTRATIVE PROVISIONS
- --------------------------------------------------------------------------------
8.02 NO BENEFICIARY DESIGNATION.
If the Employer wishes to override the priority of Section 8.02, it must
attach an addendum to this Adoption Agreement, numbered section 8.02,
which states the priority of Beneficiaries in the absence of a Participant
designation. If the Employer elects Option (a) under Adoption Agreement
Section 6.04, the Employer may not elect an alternative priority under
this Adoption Agreement Section 8.02 unless the Participants surviving
spouse is the first in the order of priority.
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
8.10 PARTICIPANT DIRECTION OF INVESTMENT
[_] (a) A Participant has no right to direct the investment of assets
comprising the Participant's individual Account.
[x] (b) A Participant has the right to direct the Trustee with respect to
the investment or re-investment of assets comprising the
Participant's individual Account pursuant to Sections 4.03, 8.10
and 10.03(A) of the Plan except for the following amounts:
[x] (1) No exceptions
[_] (2) Those amounts attributable to the Participant's Employer
Contribution Account.
- --------------------------------------------------------------------------------
ARTICLE IX ADVISORY COMMITTEE - DUTIES WITH RESPECT TO PARTICIPANT'S ACCOUNTS
- --------------------------------------------------------------------------------
9.04 LOANS TO PARTICIPANTS.
[X] (a) Loans may be made to any active Participant pursuant to the loan
policy described in Section 9.04 of the Plan.
[_] (b) Loans to Participants shall not be made
- --------------------------------------------------------------------------------
9.11 ALLOCATION AND DISTRIBUTION OF NET INCOME GAIN OR LOSS.
Pursuant to Section l4.12. to determine the allocation at net income. gain
or loss:
[x] (a) For salary reduction contributions, the Advisory Committee will:
(Choose one)
[_] (1) Apply Section 9.11 without modification.
[x] (2) Apply the allocation method described in the addendum to
this Adoption Agreement numbered 9.11(a).
[x] (b) For matching contributions, the Advisory Committee will: (Choose
one)
[_] (1) Apply Section 9.11 without modification.
[x] (2) Apply the allocation method described in the addendum to
this Adoption Agreement numbered 9.11(b).
[x] (c) For Participant nondeductible contributions, the Advisory
Committee will: (Choose one)
[_] (1) Apply Section 9.11 without modification.
[x] (2) Apply the allocation method described in the addendum to
this Adoption agreement numbered 9.11 (c).
- --------------------------------------------------------------------------------
ARTICLE XI. PROVISIONS RELATING TO INSURANCE AND INSURANCE COMPANY
- --------------------------------------------------------------------------------
11.01 INSURANCE BENEFIT.
The Plan is: (Choose one)
[x] (a) Not exempt from the incidental insurance benefit percentage
limitations.
[_] (b) Exempt from the incidental insurance benefit percentage
limitations by restricting the purchase of life insurance only
from Employer contributions accumulated in the Participant's
Account for at least two years.
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
EFFECTIVE DATE ADDENDUM (RESTATED PLANS ONLY)
- --------------------------------------------------------------------------------
The Employer must complete this addendum only if the restated Effective Date
specified in Adoption Agreement Section 1.18 is earlier than January 1, 1989,
and a different restated effective date applies to at least one of the
provisions listed in this addendum.
Identification of special effective dates. In lieu of the restated Effective
Date in Adoption Agreement Section 1.18, the following special effective dates
apply: (Choose whichever elections apply)
[_] (a) Compensation definition. The Compensation definition of Section
1.12 (other than the $200,000 limitation) Is effective for Plan
Years beginning after ____________. [Note; May not be effective
later than the first day of the first Plan Year beginning after
the Employer executes this Adoption Agreement to restate the Plan
for the Tax Reform Act of 1986.]
[_] (b) Eligibility conditions. The eligibility conditions specified in
Adoption Agreement Section 2.01 are effective for Plan Years
beginning after_________________. [Note: The date specified may
not be later than December 31, 1988.]
[_] (c) Suspension of Years of Service. The suspension of Years of Service
rule elected under Adoption Agreement Section 2.03 is effective
for Plan Years beginning after ________________. [Note: The date
specified may not be later than December 31, 1988.]
[_] (d) Contribution/allocation formula. The contribution formula elected
under Adoption Agreement Section 3.01 and the method of allocation
elected under Adoption Agreement Section 3.04 is effective for
Plan Years beginning after ________________. [Note: The date
specified may not be later than December 31.1988.]
[_] (e) Elimination of net profits. The requirement for the Employer not
to have net profits to contribute to this Plan is effective for
Plan Years beginning after_______________. [Note: The date
specified may not be earlier than December 31, 1985.]
[_] (f) Vesting Schedule. The vesting schedule elected under Adoption
Agreement Section 5.03 is effective for Plan Years beginning after
December 31.1988.
[_] (g) Allocation of Earnings. The special allocation provisions elected
under Adoption Agreement Section 9.11 are effective for Plan Years
beginning after___________________.
For Plan Years prior to the special Effective Date, the terms of the Plan
prior to it. restatement under this Adoption Agreement will control for
purposes of the designated provisions.
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
EXECUTION PAGE
- --------------------------------------------------------------------------------
The Trustee, by executing this Adoption Agreement, accepts its position and
agrees to all of the obligations, responsibilities and duties imposed upon the
Trustee under the Prototype Plan and Trust. The Employer hereby agrees to the
provisions of this Plan and Trust, and in witness of its agreement, the Employer
by its duly authorized officers, has executed this Adoption Agreement, and the
trustee signified its acceptance, on this fifth day of November, 1993.
------- --------- ----
Benthos, Inc.
Attest: [SIGNATURE ILLEGIBLE] By: [SIGNATURE ILLEGIBLE]
------------------------- -------------------------------
Employer
Benthos Inc.
[SIGNATURE ILLEGIBLE]
Accepted:_______________________ ----------------------------------
(Date) "Plan Administrator"
Accepted:_______________________ __________________________________
(Date) "Trustee"
- --------------------------------------------------------------------------------
Use of Adoption Agreement. Failure to complete properly the elections in this
Adoption Agreement may result in disqualification of the Employer's Plan. The 3-
digit number assigned to this Adoption Agreement (See page 1) is solely for the
Prototype Plan Sponsors recordkeeping purposes and does not necessarily
correspond to the plan number the Employer assigns to its Plan for ERISA
reporting purposes.
Prototype Plan Sponsor. The Prototype Plan Sponsor identified on the first page
of the basic plan document will notify all adopting employers of any amendment
of this Prototype Plan or of any abandonment or discontinuance by the Prototype
Plan Sponsor of its maintenance of this Prototype Plan. For inquiries regarding
the adoption of the Prototype Plan, the Prototype Plan Sponsor's intended
meaning of any plan provisions or the effect of the opinion letter issued to the
Prototype Plan Sponsor, please contact the Prototype Plan Sponsor at the
following address and telephone number: IDS Financial Services Inc, IDS Tower
10, Minneapolis, MN 55440; (612) 671-2608.
Reliance on Opinion Letter. The adopting employer may not rely on an opinion
letter issued by the National Office of the Internal Revenue Service as evidence
that the plan is qualified under section 401 of the Internal Revenue Code. In
order to obtain reliance with respect to plan qualification the employer must
apply to the appropriate key district office for a determination letter. This
adoption agreement may be used only in conjunction with basic plan document #01.
-----------------------------------------------------------------------------
IDS Financial Services Inc. and Its sales representatives are not
authorized to give advice as to the legal aspects of adoption of the Plan
by you and its effect upon you and your Employees. The Plan is a legal
Instrument and its adoption will result in legal consequences to both the
Employer and his or her Employees, some of which May be beneficial or
adverse to the interest of both parties. You should therefore consult your
own legal counsel and tax adviser before adopting this Plan.
-----------------------------------------------------------------------------
- --------------------------------------------------------------------------------
20
<PAGE>
RESOLUTION APPOINTING UNION BANK AND TRUST TRUSTEE OF
RETIREMENT PLAN AND UNIVERSAL PENSIONS, INC. AS SUCCESSOR
RECORDKEEPER
Name of Employer Benthos, Inc. (hereinafter referred to as the "Corporation")
------------------
Address 49 Edgerton Drive
-----------------------------------------------------------------
City N. Falmouth State MA Zip 02556
------------------------------- ------------ -----------------
Telephone 608) 563-1000 Fax( 508) 563-6444
------------------------ -----------------------
At a [xx] regular [_] special meeting of the board of directors of the
Corporation duly held on 23 of February 19 96 in accordance with the Bylaws of
------- ----
the Corporation, the following resolution was made, seconded and passed:
WHEREAS, the Corporation currently maintains a retirement plan for the
exclusive benefit of its employees and their beneficiaries of
Benthos 40l(k) Retirement Plan
------------------------------
(name of the Plan)
WHEREAS, American Express Trust Company (formerly known as IDS Trust
Company) currently serves as trustee of the Plan; and
WHEREAS, American Express Trust Company currently provides certain
administrative and recordkeeping services to the Plan pursuant to an
agreement with the Corporation; and
WHEREAS, American Express Trust Company will no longer serve as trustee of
the Plan; and
WHEREAS, the rights and responsibilities to provide administrative and
recordkeeping services to the Corporation is transferring from American
Express Trust Company to Universal Pensions, Inc.
NOW THEREFORE BE IT RESOLVED:
1. That the Corporation hereby removes American Express Trust Company as
trustee of the Plan and appoints Union Bank: and Trust of Minneapolis,
Minnesota as sole nondiscretionary trustee of the Plan effective at such
time as administratively feasible,
2. That the Corporation understands that American Express Trust Company will
transfer its rights and responsibilities under its agreement to provide
administrative and recordkeeping services for the Plan to Universal
Pensions, Inc. and that Universal Pensions, Inc. will provide services
which are substantially similar to those provided by American Express Trust
Company.
3. That the Corporation understands that it will be necessary to have a black
out period with respect to the Plan of up to 14 days during which time Plan
participants will not be able to access current information about their
Plan accounts or make investment changes, and the Corporation hereby
consents to the imposition of such black out period.
4. That the officers of the Corporation be empowered to take whatever steps
are necessary to effect the changes described above.
CERTIFICATION
I, the undersigned Secretary of the Corporation, do hereby certify that the
foregoing is a true, exact and correct copy of a resolution adopted at a
lawfully, held meeting of the Corporation's Board of Directors on the 23rd day
of February 1996
-------------
(Signed) [SIGNATURE ILLEGIBLE]
-----------------------
clerk
<PAGE>
ACCEPTANCE OF TRUSTEE
UNION BANK AND TRUST, MINNEAPOLIS, MINNESOTA HEREBY ACCEPTS ITS APPOINTMENT AS
TRUSTEE OF THE BENTHOS, INC. 401(K) RETIREMENT PLAN. WE FURTHER AGREE TO
FAITHFULLY DISCHARGE THE DUTIES AS TRUSTEE UNTIL SUCH TIME AS A SUCCESSOR HAS
BEEN DULY APPOINTED AND QUALIFIED. IT IS UNDERSTOOD AND AGREED THAT UNION BANK
AND TRUST WILL BE HELD HARMLESS FOR ACTIONS OF ALL PREVIOUS TRUSTEES AND ALL
PREVIOUS TRUSTEES WILL BE HELD HARMLESS FOR ACTIONS OF UNION BANK AND TRUST.
THIS ACCEPTANCE SHALL BE EFFECTIVE AS OF MAY 9, 1996.
UNION BANK AND TRUST
[SIGNATURE ILLEGIBLE]
-------------------------
AUTHORIZED SIGNATURE
EMPLOYEE BENEFITS OFFICER
--------------------------
TITLE
MAY 9.1996 DATE
------------------------
DATE
<PAGE>
BENTHOS, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Pursuant to a resolution of its Board of Directors, BENTHOS, INC., a
Massachusetts corporation having its principal place of business in North
Falmouth, Massachusetts, hereinafter referred to as the "Company", has adopted
the following supplemental retirement plan for the benefit of a select group of
management and highly compensated employees and which is not intended to be
covered by Parts 2 through 4 of Subtitle B of Title I of the Employee Retirement
Income Security Act of 1974. The purpose of this Plan is to enable participants
to exclude from gross income elective amounts paid on their behalf by the
Company for supplemental retirement benefits.
ARTICLE I
---------
NAME AND EFFECTIVE DATE
-----------------------
Section 1.1 This Plan shall be known as the Benthos, Inc. Supplemental
Executive Retirement Plan."
Section 1.2 This Plan shall be effective as of the first day of August
1, 1990.
ARTICLE II
----------
DEFINITIONS
-----------
When used in this Plan, the following terms have the meanings set forth
below unless a different meaning is plainly required by the context:
"Account" means the individual account established in the name of each
Participant reflecting his deferred Compensation elections pursuant to Article
IV and the net earnings or losses thereon.
"Administrative Committee" or "Committee" means the committee appointed by
the Board of Directors of the Company to administer the Plan as set forth in
Article VII. If no such committee is appointed by the Board of Directors, the
Board shall serve as the Administrative Committee.
"Beneficiary" means any individual, trust, estate, or other recipient
entitled to receive death benefits payable hereunder, on either a primary or
contingent basis.
<PAGE>
"Board of Directors" means the board of directors of the Company as shall
be serving from time to time.
"Code" means the Internal Revenue Code of 1986, as now in effect and as
thereafter amended, and any regulations issued thereunder.
"Compensation" means gross compensation paid to an Employee during the
applicable Plan Year, including the Employee's annual bonus, if any.
"Compensation Reduction Agreement" means an agreement whereby an electing
Participant has reduced his Compensation pursuant to the provisions of Article
IV.
"Company" means Benthos, Inc., a corporation organized under the laws of
the Commonwealth of Massachusetts, and any other corporation or business
organization which shall assume the obligations of this Plan with respect to its
eligible employees.
"Disability" means the inability to engage in any substantial or gainful
activity by reason of any medically determinable physical or mental impairment.
A Participant shall not be considered to be disabled unless he furnishes proof
of the existence thereof in such manner as the Administrative Committee may
require.
"ERISA" means the Employee Retirement Income Security Act of 1974, as now
in effect and as thereafter amended, and any regulations issued thereunder.
"Effective Date" means the first day of August 1, 1990.
"Employee" means an individual employed by the Company as a common-law
employee.
"Participant" means an eligible Employee of the Company who has elected to
participate in the Plan under the terms of Article III.
"Plan" means the Benthos, Inc. Supplemental Executive Retirement Plan as of
its Effective Date, including any amendments thereto.
"Plan Year" means the 12-month period ending on each December 31st;
provided, however, the first Plan Year shall commence on the Effective Date and
end on December 31, 1990.
- 2 -
<PAGE>
"Valuation Date" means the date as of which the assets of the Trust Fund
are valued and the Account maintained on behalf of each Participant or
Beneficiary is adjusted to reflect any net increase or decrease as of such date.
The Trust Fund shall be valued on the last day of each Plan Year and on such
other dates as the Administrative Committee shall deem appropriate.
ARTICLE III
-----------
EMPLOYEES ENTITLED TO PARTICIPATE
---------------------------------
Section 3.1 Such Employees as shall be designated by the Board of
Directors may elect to participate in this Plan by filing written notice with
the Administrative Committee in the form and manner prescribed by the Committee.
Section 3.2 An eligible Employee, or former Employee, who elects to
participate in this Plan will cease to be a Participant as of the earlier of:
(a) the date on which the Plan terminates, as provided in Article IX;
or
(b) the date on which the individual has received all payments of any
supplemental retirement benefits provided hereunder.
ARTICLE IV
----------
COMPENSATION DEFERRALS
----------------------
Section 4.1 Subject to the limitations of this Article IV, a Participant
may elect under this Plan to have a portion of his Compensation paid by the
Company for supplemental retirement benefits. If a Participant makes such an
election, the Participant's cash Compensation will be reduced, in accordance
with Section 4.2, and an amount equal to the reduction will be credited by the
Company to a supplemental retirement Account in accordance with the terms of
Article V.
Section 4.2 Approximately 30 days prior to the beginning of each Plan
Year, the Administrative Committee shall provide a Compensation Reduction
Agreement to each Participant whereby the Participant may elect to have his
Compensation reduced and paid for supplemental retirement benefits. The amount
of any reduction in the Participant's Compensation for a Plan Year shall be the
amount elected by the Participant, subject to the limitations of this Plan, and
shall be effective as of the
- 3 -
<PAGE>
first day of the Plan Year. Participants must complete the agreements and
return them to the Administrative Committee in accordance with the procedures
established by the Committee, but no later than the beginning of the Plan Year
for which the Participant's Compensation Reduction Agreement will be effective.
Section 4.3 If a Participant does not complete and return the
Compensation Reduction Agreement to the Administrative Committee within the
deadline established by the Committee, the Participant shall be deemed not to
have elected to reduce his Compensation pursuant to Section 4.1, and therefore
not to have any portion of his Compensation applied to pay for supplemental
retirement benefits pursuant to the terms of this Plan for the applicable Plan
Year.
Section 4.4 An election by a Participant pursuant to this Article IV
shall be irrevocable during the Plan Year for which it is in effect; provided,
however, any election made in accordance with the terms of this Plan shall be
revoked on the date on which an individual ceases to be an Employee.
ARTICLE V
---------
SUPPLEMENTAL RETIREMENT ACCOUNTS
--------------------------------
Section 5.1 A supplemental retirement Account will be established for
each Participant who elects to have a portion of his Compensation paid by the
Company for supplemental retirement benefits pursuant to Section 4.1. The
Administrative Committee shall credit to each such Account for each Plan Year,
as of each date Compensation is paid to the Participant in such Plan Year, a
proportionate amount of the reduction to be made in the Participant's Plan Year
Compensation in accordance with the Participant's Compensation Reduction
Agreement completed in accordance with the terms of Article IV.
Section 5.2 The Company shall establish a grantor trust within the
meaning of Section 671 of the Code to be known as the Benthos, Inc. Supplemental
Executive Retirement Trust Fund, hereinafter referred to as the "Trust Fund",
and shall transfer, or cause to be transferred to the Trust Fund, on an annual
or more frequent basis, an amount equal to the elective deferrals made by
Participants pursuant to Article IV. The existence of the Trust Fund shall not
alter the characterization of the retirement benefits provided under the Plan as
unfunded, and any amounts held therein shall be subject to the claims of the
Company's creditors in the event of the Company's insolvency.
- 4 -
<PAGE>
Section 5.3 Except as otherwise provided in Section 5.4, the
Administrative Committee shall adjust the Account of each Participant to reflect
any increase or decrease in the net worth of the Trust Fund as of each Valuation
Date. Such adjustment shall be made to the Account in proportion to its balance
as of the Valuation Date bears to the aggregate values of all Accounts;
provided, however, that in accordance with nondiscriminatory procedures
established by the Administrative Committee, the allocation of any increase or
decrease in the net worth of the Trust Fund shall be adjusted for amounts
credited to Accounts since the preceding Valuation Date with appropriate credit
given for the period during which such amounts were credited to the Account.
Section 5.4 A Participant shall, by providing written instructions to
the Administrative Committee, be entitled to direct the Trustee as to the
percentage of his Account to be invested in one or more equity, fixed income or
similar investment funds made available to Participants by the Administrative
Committee. The Administrative Committee shall have sole discretion to determine
the different investment fund choices available to Participants. Upon receipt of
the Participant's written directions, the Administrative Committee shall direct
the Trustee, in writing, to invest the applicable portion of the Trust Fund in
accordance with the Participant's instructions as soon as practical following
the receipt of such instructions. A Participant's investment directions shall
remain in effect until receipt by the Trustee from the Administrative Committee
of a Participants request changing or revoking the directions then in effect.
The portion of the net earnings or losses of each Account which has been
invested at the Participant's direction shall be allocated by the Administrative
Committee directly to the Participant for whom such Account was maintained
during the year as of each Valuation Date. Any expense incurred in connection
with the Participant's investment directions shall be charged against the
Participant's Account. To the extent that a Participant does not direct the
investment of his Account, either by failing to file written directions with the
Administrative Committee or revoking written instructions then in effect, his
Account, or the applicable portion thereof, shall be invested by the Trustee
pursuant to the Trust Agreement. The Administrative Committee shall from time to
time establish such rules and procedures which it determines are necessary or
appropriate for the proper administration of the investment options available to
Participants. The Administrative Committee shall not be liable for any
investments made in compliance with a Participant's written directions and shall
be under no duty or obligation to review, evaluate or reevaluate such
investments.
- 5 -
<PAGE>
Section 5.5 The Administrative Committee shall furnish on an annual
basis, or in more frequent intervals as determined by the Committee, a statement
to each Participant and Beneficiary of the net earnings or losses credited to or
charged against his Account, the amount of any deferral contributions allocated
to such Account, and the total value of such Account.
ARTICLE VI
----------
PAYMENT OF SUPPLEMENTAL RETIREMENT BENEFITS
-------------------------------------------
Section 6.1 If a Participant's employment hereunder is terminated on or
after the Participant shall have attained age 55, the Company shall pay him in
10 substantially equal annual installments an amount equal to the fair market
value of the assets credited to his Account as of such date, appropriately
increased or decreased each year as the case may be to reflect the appreciation
or depreciation in value and the net income or loss on the funds which remain
invested in the Account during the term of the payments. If the Participant
should die on or after attaining age 55 and before the 10 annual payments are
made, the unpaid balance will continue to be paid in installments for the
unexpired portion of such 10 year period to his designated Beneficiary in the
same manner as set forth above. At the sole discretion of the Board of
Directors, any remaining payments to be paid to the Participant's Beneficiary in
the event of the Participant's death after the commencement of benefit payments
hereunder may be paid to the Beneficiary in a single lump sum payment valued as
of the Valuation Date preceding or coinciding with the Participants date of
death as soon as practical following the Participant's death.
Section 6.2 If a Participant's employment hereunder is terminated for
any reason other than death or Disability but before the Participant shall have
attained age 55, the amount credited to the Participant's supplemental
retirement Account shall continue to be invested as provided in the Plan and
Trust Agreement and no payments shall be made until the Participant shall have
attained age 55, at which time payments shall be made in the same manner and to
the same extent as set forth in Section 6.1. Notwithstanding the foregoing, at
the sole discretion of the Board of Directors the amount credited to the
Participant's supplemental retirement Account as of the Valuation Date preceding
or coinciding with the date his employment terminated may be paid to the
Participant in a single lump sum payment as soon as practical following the
Participant's termination of employment.
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<PAGE>
Section 6.3 If a Participant's employment is terminated because of
Disability or death before he has attained age 55 and while he is in the employ
of the Company, the Company shall make 10 annual payments to the Participant (in
the event of his Disability) or his designated Beneficiary (in the event of his
death) in the same manner and to the same extent as provided in Section 6.1.
Notwithstanding the foregoing, at the sole discretion of the Board of Directors
the amount credited to the Participant's supplemental retirement Account as of
the Valuation Date preceding or coinciding with the date his employment
terminated may be paid to the Participant (or his Beneficiary in the event of
his death) in a single lump sum payment as soon as practical following the
Participant's termination of employment because of Disability or death.
Section 6.4 The installment payments to be made to the Participant under
Sections 6.1 and 6.3 shall commence on the first day of the month next following
the date of his termination of employment and the installment payments to be
made to the Participant under Section 6.2 above shall commence on the first day
of the month next following the date on which the Participant shall have
attained age 55. The installment payments to be made to the designated
Beneficiary under the provisions of this Article VI shall commence on a date to
be selected by the Administrative Committee, but within six months from the date
of death of the Participant. Subsequent payments shall be made on the
anniversary of such date.
Section 6.5 The Beneficiary referred to in this Plan may be designated
or changed by the Participant (without the consent of any prior Beneficiary) on
a form provided by the Administrative Committee and delivered to the Committee
before his death. If no such Beneficiary shall have been designated, or if no
designated Beneficiary shall survive the Participant, the installment payments
payable hereunder shall be payable to the Participant's estate.
Section 6.6 Anything herein to the contrary notwithstanding, prior to
the first Plan Year for which a Participant's Compensation Reduction Agreement
shall be effective the Participant may designate in writing to the
Administrative Committee an alternative manner and time for paying the amounts
credited to his Account pursuant to this Article VI. Any such designation shall
be irrevocable as of the first Plan Year for which the Participant's
Compensation Reduction Agreement shall be effective and shall be subject to such
rules and procedures which the Administrative Committee determines are necessary
and appropriate for the proper administration of the payment of supplemental
retirement benefits to Participants.
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<PAGE>
Section 6.7 In the event that an applicant's participation or request
for supplemental retirement benefit payments shall be denied, the Administrative
Committee shall furnish a written notification which shall include the reasons
for the denial; specific references to the Plan provisions on which the denial
is based; a description of any additional material or information necessary for
the applicant to perfect the request for benefits, including an explanation of
why such material or information is necessary; and an explanation of the review
procedure.
Section 6.8 In the event an applicant has received a written denial of
his request to participate or receive supplemental retirement benefit payments,
he may appeal such denial by filing with the Administrative Committee a written
request for review. Such request must be made within 60 days following the
receipt of the written denial. In connection with any request for review, the
applicant may at any time review pertinent documents and may submit issues and
comments in writing. The Administrative Committee shall notify the applicant of
its determination within 60 days following receipt of the request for review.
ARTICLE VII
-----------
ADMINISTRATION OF THE PLAN
--------------------------
Section 7.1 The Administrative Committee shall supervise and control the
operation of this Plan and shall have all powers necessary to accomplish that
purpose, including the power to make rules and regulations pertaining to the
administration of this Plan. The Administrative Committee's principal duty
shall be to see that the Plan is operated and maintained, in accordance with its
terms, for the exclusive benefit of the Participants. The Administrative
Committee shall have the power to administer the Plan, subject to any applicable
requirements of law. The Administrative Committee's powers include, but shall
not be limited to, the following:
(a) to establish rules and regulations which it determines to be
necessary for the proper administration of the Plan;
(b) to interpret and resolve, in its sole discretion, any and all
questions with respect to the operation and the administration of the Plan and
the eligibility of any person to participate in the Plan; and
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(c) to delegate all or part of its duties and to designate other
persons to carry out any of its duties under the Plan, which designation or
delegation must be in writing. The Administrative Committee shall not be liable
for any acts or omissions of the persons to whom such duties have been
delegated, provided that the Administrative Committee acted prudently and in the
interests of the Participants in selecting and retaining such persons.
Section 7.2 The Board of Directors of the Company shall have the power
to designate the Administrative Committee. If no Committee has been designated,
then the Board of Directors shall serve as the Administrative Committee.
Section 7.3 If more than one person is serving as the Administrative
Committee, such persons may allocate among themselves by written agreement the
responsibilities under this Plan. Except as provided by law, if
responsibilities have been allocated among the persons serving as the
Administrative Committee, then only that person to whom a specific
responsibility has been allocated shall be liable for his acts or omissions in
carrying out such responsibility.
Section 7.4 If more than one person is serving as the Administrative
Committee, any act which this Plan authorizes or requires the Administrative
Committee to do may be done by a majority of such persons; and the action of
such majority expressed from time to time by a vote at a meeting, or in writing
without a meeting, shall constitute the action of the Administrative Committee.
Section 7.5 The Administrative Committee shall provide Participants with
reasonable notification of the availability of benefits provided under the Plan
and shall make available to each Participant copies of the Plan and any other
documents related to the Plan's operation that pertain to the Participant for
examination at reasonable times during normal business hours.
Section 7.6 The Administrative Committee may, to the extent permitted by
law, rely conclusively on information which may be furnished by, or act in
accordance with the instructions of, counsel or other experts consulted by the
Administrative Committee.
Section 7.7 The Administrative Committee, in exercising its discretion,
shall do so in a uniform and nondiscriminatory manner, treating all Employees in
similar circumstances alike.
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<PAGE>
Section 7.8 The Administrative Committee shall have the power to
designate the agent for service of legal process for the Plan.
Section 7.9 The Company shall pay all expenses of the Administrative
Committee, including fees paid to agents, counsel, accountants, consultants and
other persons hired to assist the Administrative Committee.
Section 7.10 To the extent permitted by law, the Company shall indemnify
and hold harmless any Employee serving as the Administrative Committee, or as a
member of a committee designated as the Administrative Committee, from and
against any and all claims, losses, damages, expenses (including reasonable
counsel fees), and liability (including reasonable amounts paid in settlement
with the Company's approval) to which the Employee may be subjected by reason of
any act done or omitted except where such act or omission is finally adjudicated
to be due to willful misconduct or negligence by the Employee.
ARTICLE VIII
------------
FUNDING
-------
Section 8.1 Nothing contained in this Plan and no action taken pursuant
to the provisions of this Plan shall create or be construed to create a
fiduciary relationship between the Company and the Participant, his designated
Beneficiary or any other person. Any funds which may be invested under the
provisions of this Plan shall continue for all purposes to be a part of the
general funds of the Company and no person other than the Company shall by
virtue of the provisions of this Plan have any interest in such funds. To the
extent that any person acquires a right to receive payments from the Company
under this Plan, such right shall be no greater than the right of any unsecured
general creditor of the Company.
Section 8.2 A Participant, his Beneficiary, or any other person claiming
through the Participant shall have no rights or beneficial ownership interest in
any general asset the Company may acquire or use to satisfy its financial
obligations under this Plan.
Section 8.3 A Participant shall have no right, title, or interest
whatever in or to any investments which the Company may make to aid it in
meeting its obligations under the Plan. The Participant's participation in the
acquisition of any such general asset for the Company shall not constitute a
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<PAGE>
representation to the Participant, his Beneficiary, or any person claiming
through the Participant that any of them has a special or beneficial interest in
such general asset.
ARTICLE IX
----------
AMENDMENT AND TERMINATION OF THE PLAN
-------------------------------------
Section 9.1 The Company, by action of its Board of Directors, shall have
the right to amend this Plan at any time and from time to time. Any such
amendment may be made retroactively effective.
Section 9.2 Anything herein to the contrary notwithstanding, no
amendment shall be made which would deprive any Participant, or former
Participant, of the right to receive the benefits to which such individual is
already entitled under the terms of this Plan.
Section 9.3 Although the Company expects to continue the Plan
indefinitely, the Company may, by action of its Board of Directors, terminate
the Plan at any time for any reason. Upon such termination, any payments of
supplemental retirement benefits on behalf of Participants as of the date of
termination shall be made to Participants in accordance with this Plan
notwithstanding such termination.
Section 9.4 The fees and expenses of administering the Plan and the
expenses incident to the termination of the Plan, which may be incurred after
the termination of the Plan, shall be paid by the Company.
ARTICLE X
---------
MISCELLANEOUS PROVISIONS
------------------------
Section 10.1 Participants shall be bound by the decisions of the
Administrative Committee with respect to the operation and administration of the
Plan, and shall provide the Administrative Committee with such information, and
sign such documents, that the Administrative Committee deems appropriate for the
purpose of administering the Plan.
Section 10.2 If any provision in this Plan may be susceptible to more
than one interpretation, then that one shall always be given to such provision
which will be consistent with this Plan being an unfunded supplemental
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<PAGE>
retirement plan for a select group of the Company's management and highly
compensated employees which is not covered by Parts 2 through 4 of subtitle B of
Title I of ERISA.
Section 10.3 The Company and the Administrative Committee shall be
discharged from any liability in acting upon any representations by an Employee
of any fact affecting his status under this Plan or upon any notice, request,
consent, letter, telegram, or other document believed by them, or any of them,
to be genuine, and to have been signed or sent by the proper person.
Section 10.4 The adoption and maintenance of this Plan shall not be
construed as creating any contract of employment between the Company and any
Employee. This Plan shall not affect the right of the Company to deal with its
Employees in all respects, including their hiring, discharge, Compensation, and
conditions of employment.
Section 10.5 The Plan is for the purpose of providing Participants with
supplemental retirement benefits and no right or interest of any Participant to
receive any such shall be transferable or assignable by the Participant or be
subject to alienation, anticipation, or encumbrance by the Participant, and no
such right or interest shall be subject to garnishment, attachment, execution,
or levy of any kind.
Section 10.6 No Participant shall be discharged, fired, suspended,
expelled, disciplined, or discriminated against for exercising any right under
this Plan or for giving information or testimony in any inquiry or proceeding
relating to the administration of this Plan.
Section 10.7 In the event of the merger or consolidation of the Company
with or into any other corporation or entity, or in the event substantially all
of the assets of the Company shall be transferred to another corporation, the
successor corporation resulting from the merger or consolidation, or the
transferee of such assets, as the case may be, shall, as a condition to the
consummation of the merger, consolidation or sale, assume the obligations of the
Company hereunder and shall be substituted for the Company hereunder.
Section 10.8 In case any provisions of this Plan shall be held illegal or
invalid for any reason, said illegality or invalidity shall not affect the
remaining provisions of this Plan, and this Plan shall be construed and enforced
as if said illegal or invalid provisions had never been inserted herein.
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<PAGE>
Section 10.9 Unless the context otherwise requires, words denoting the
singular number may, and where necessary shall, be construed as denoting the
plural number, and pronouns in the masculine gender include the feminine gender
and pronouns in the neuter gender include the masculine and feminine gender.
Section 10.10 The headings of the Plan are inserted for convenience of
reference only and shall have no effect upon the meaning of the provisions
hereof.
Section 10.11 This Plan shall be construed according to the laws of the
Commonwealth of Massachusetts, except as such laws are superseded by federal
law.
Section 10.12 This Plan is executed in several counterparts, each of which
shall be deemed an original and shall constitute but one and the same instrument
and this Plan may be evidenced by any one counterpart.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed in the
name of and on behalf of the Company by its duly authorized officer this 28th
day of August, 1990.
BENTHOS,INC.
By: /s/ [Signature Illegible]
------------------------------
Title:
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<PAGE>
BENTHOS, INC.
STOCK OPTION PLAN
1. Purpose of the Plan.
--------------------
This stock option plan (the "Plan") is intended to encourage ownership of
the stock of Benthos, Inc., (the "Company") by employees and advisors of the
Company and its subsidiaries, to induce qualified personnel to enter and remain
in the employ of the Company or its subsidiaries and otherwise to provide
additional incentive for optionees to promote the success of its business.
2. Stock Subject to the Plan.
--------------------------
(a) The total number of shares of the authorized but unissued or Treasury
shares of the common stock, $.06 2/3 par value, of the Company ("Common Stock")
for which options may be granted under the Plan shall not exceed one hundred
thousand (100,000) shares, subject to adjustment as provided in Section 12
hereof.
(b) If an option granted or assumed hereunder shall expire or terminate for
any reason without having been exercised in full, the unpurchased shares subject
thereto shall again be available for subsequent option grants under the Plan.
(c) Stock issuable upon exercise of an option granted under the Plan may be
subject to such restrictions on transfer, repurchase rights or other
restrictions as shall be determined by the Board of Directors.
<PAGE>
3. Administration of the Plan.
---------------------------
(a) The Plan shall be administered by the Board of Directors of the Company.
No member of the Board of Directors shall act upon any matter exclusively
affecting any option granted or to be granted to himself or herself under the
Plan. A majority of the members of the Board of Directors shall constitute a
quorum, and any action may be taken by a majority of those present and voting at
any meeting. The decision of the Board of Directors as to all questions of
interpretation and application of the Plan shall be final, binding and
conclusive on all persons. The Board of Directors may, in its sole discretion,
grant options to purchase shares of the Company's Common Stock and issue shares
upon exercise of such options as provided in the Plan. The Board shall have
authority, subject to the express provisions of the Plan, to construe the
respective option agreements and the Plan, to prescribe, amend and rescind rules
and regulations relating to the Plan, to determine the terms and provisions of
the respective option agreements, which may but need not be identical, and to
make all other determinations in the judgment of the Board necessary or
desirable for the administration of the Plan. The Board may correct any defect
or supply any omission or reconcile any inconsistency in the Plan or in any
option agreement in the manner and to the extent it shall deem expedient to
carry the Plan into effect and shall be the sole
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and final judge of such expediency. No director shall be liable for any action
or determination made in good faith. The Board of Directors may, in its
discretion, delegate its power, duties and responsibilities to a committee,
consisting of three or more members of the Board of Directors, all of whom are
"disinterested persons" (as hereinafter defined). If a committee is so
appointed, all references to the Board of Directors herein shall mean and relate
to such committee, unless the context otherwise requires.
(b) With respect to the participation of any director in the Plan, his or
her selection as an optionee and the number of option shares to be allocated to
such director shall be determined either (i) by the Board of Directors, of which
a majority, as well as a majority of the directors acting in the matter, shall
be "disinterested persons" (as hereinafter defined) or (ii) by, or only in
accordance with, the recommendations of a committee of three or more persons
having full authority to act in the matter, of which all members of such
committee shall be disinterested persons. For the purposes of the Plan, a
director or member of such committee shall be deemed to be "disinterested" only
if such person qualifies as a "disinterested person" within the meaning of
paragraph (d)(3) of Rule 16b-3 promulgated under the Securities and Exchange Act
of 1934, as such term is interpreted from time to time. The provisions of this
Section 3(b) shall not apply
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<PAGE>
with respect to any option granted prior to the date of the first registration
of an equity security of the Company under Section 12 of the Securities and
Exchange Act of 1934.
4. Type of Options.
----------------
Options granted pursuant to the Plan shall be authorized by action of the
Board of Directors of the Company (or a committee designated by the Board of
Directors) and may be designated as either incentive stock options meeting the
requirements of Section 422A of the Internal Revenue Code of 1986 (the "Code")
or non-qualified options which are not intended to meet the requirements of such
Section 422A of the Code, the designation to be in the sole discretion of the
Board of Directors. Options designated as incentive stock options that fail to
continue to meet the requirements of Section 422A of the Code shall be
redesignated as non-qualified options automatically without further action by
the Board of Directors on the date of such failure to continue to meet the
requirements of Section 422A of the Code.
5. Eligibility.
------------
Options designated as incentive stock options may be granted only to
officers and key employees of the Company or of any subsidiary corporation
(herein called subsidiary" or "subsidiaries"), as defined in Section 425 of the
Code and the Treasury Regulations promulgated thereunder (the "Regulations").
Options designated as non-qualified options
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<PAGE>
may be granted to officers, key employees and advisors of the Company or of any
of its subsidiaries.
Directors who are not otherwise employees of the Company or a subsidiary
shall not be eligible to be granted an option pursuant to the Plan.
In determining the eligibility of an individual or person to be granted an
option, as well as in determining the number of shares to be optioned to any
individual or person, the Board of Directors shall take into account the
position and responsibilities of the individual or person being considered, the
nature and value to the Company or its subsidiaries of his or her or its service
and accomplishments, his or her or its present and potential contribution to the
success of the Company or its subsidiaries, and such other factors as the Board
of Directors may deem relevant.
No option designated as an incentive stock option shall be granted to any
employee of the Company or any subsidiary if such employee owns, immediately
prior to the grant of an option, stock representing more than 10% of the voting
power or more than 10% of the value of all classes of stock of the Company or a
parent or a subsidiary, unless the purchase price for the stock under such
option shall be at least 110% of its fair market value at the time such option
is granted and the option, by its terms, shall not be exercisable more than five
- 5 -
<PAGE>
years from the date it is granted. In determining the stock ownership under
this paragraph, the provisions of Section 425(d) of the Code shall be
controlling. In determining the fair market value under this paragraph, the
provisions of Section 7 hereof shall apply.
6. Option Agreement.
-----------------
Each option shall be evidenced by an option agreement (the "Agreement") duly
executed on behalf of the Company and by the optionee to whom such option is
granted, which Agreement shall comply with and be subject to the terms and
conditions of the Plan. The Agreement may contain such other terms, provisions
and conditions which are not inconsistent with the Plan as may be determined by
the Board of Directors, provided that options designated as incentive stock
options shall meet all of the conditions for incentive stock options as defined
in Section 422A of the Code. No option shall be granted within the meaning of
the Plan and no purported grant of any option shall be effective until the
Agreement shall have been duly executed on behalf of the Company and the
optionee. More than one option may be granted to an individual.
7. Option Price.
-------------
The option price or prices of shares of the Company's Common Stock for
options designated as non-qualified stock options shall be as determined by the
Board of Directors. The
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<PAGE>
option price or prices of shares of the Company's Common Stock for incentive
stock options shall be the fair market value of such Common Stock at the time
the option is granted as determined by the Board of Directors in accordance with
the Regulations promulgated under Section 422A of the Code. If such shares are
then listed on any national securities exchange, the fair market value shall be
the mean between the high and low sales prices, if any, on the largest such
exchange on the date of the grant of the option or, if none, shall be determined
by taking a weighted average of the means between the highest and lowest sales
on the nearest date before and the nearest date after the date of grant in
accordance with Treasury Regulations Section 25.2512-2. If the shares are not
then listed on any such exchange, the fair market value of such shares shall be
the mean between the closing "Bid" and the closing "Ask" prices, if any, as
reported in the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") for the date of the grant of the option, or, if none, shall be
determined by taking a weighted average of the means between the highest and
lowest sales on the nearest date before and the nearest date after the date of
grant in accordance with Treasury Regulations Section 25.2512-2. If the shares
are not then either listed on any such exchange or quoted in NASDAQ, the fair
market value shall be the mean
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<PAGE>
between the average of the "Bid" and the average of the "Ask" prices, if any, as
reported in the National Daily Quotation Service for the date of the grant of
the option. If the fair market value cannot be determined under the preceding
three sentences, it shall be determined in good faith by the Board of Directors.
8. Manner of Payment: Manner of Exercise.
--------------------------------------
(a) Options granted under the Plan may provide for the payment of the
exercise price by delivery of (i) cash or a check payable to the order of the
Company in an amount equal to the exercise price of such options, (ii) shares of
Common Stock of the Company owned by the optionee having a fair market value
equal in amount to the exercise price of the options being exercised, or (iii)
any combination of (i) and (ii), provided, however, that payment of the exercise
price by delivery of shares of Common Stock of the Company owned by such
optionee may be made only upon consent of the Board of Directors. The fair
market value of any shares of the Company's Common Stock which may be delivered
upon exercise of an option shall be determined by the Board of Directors in
accordance with Section 7 hereof.
(b) To the extent that the right to purchase shares under an option has
accrued and is in effect, options may be exercised in full at one time or in
part from time to time, by giving written notice, signed by the person or
persons
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exercising the option, to the Company, stating the number of shares with respect
to which the option is being exercised, accompanied by payment in full for such
shares as provided in subparagraph (a) above. Upon such exercise, delivery of a
certificate for paid-up non-assessable shares shall be made at the principal
office of the Company to the person or persons exercising the option at such
time, during ordinary business hours, after fifteen (15) but not more than
thirty (30) days from the date of receipt of the notice by the Company, as shall
be designated in such notice, or at such time, place and manner as may be agreed
upon by the Company and the person or persons exercising the option.
9. Exercise of Options.
--------------------
Except as otherwise determined from time to time by the Board of
Directors, options granted under the Plan shall, subject to Section 10(b) and
Section 12 hereof, not be exercisable during the first twelve (12) months after
the date of grant. Thereafter, options shall become exercisable as to twenty-
five percent (25%) of the shares covered thereby upon the expiration of twelve
(12) months after the date of grant and as to an additional twenty-five percent
(25%) upon the expiration of each of the next three (3) succeeding twelve (12)
month periods.
To the extent that an option to purchase shares is not exercised by an
optionee when it becomes initially exercisable,
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<PAGE>
it shall not expire but shall be carried forward and shall be exercisable, on a
cumulative basis, until the expiration of the exercise period. No partial
exercise may be made for less than fifty (50) full shares of Common Stock.
10. Term of Options: Exercisability.
--------------------------------
(a) Term.
-----
(1) Each option shall expire not more than ten (10) years from the date
of the granting thereof, but shall be subject to earlier termination as herein
provided.
(2) Except as otherwise provided in this Section 10, an option granted
to any employee optionee who ceases to be an employee of the Company or one of
its subsidiaries shall terminate on the last day of the third month after the
date such optionee ceases to be an employee of the Company or one of its
subsidiaries, or on the date on which the option expires by its terms, whichever
occurs first.
(3) If such termination of employment is because of dismissal for cause
or because the employee is in breach of any employment agreement, such option
will terminate on the date the optionee ceases to be an employee of the Company
or one of its subsidiaries.
(4) If such termination of employment is because the optionee has
become permanently disabled (within the meaning of Section 105(b)(4) of the
Code), such option shall terminate on the last day of the twelfth month from the
date such optionee
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<PAGE>
ceases to be an employee, or on the date on which the option expires by its
terms, whichever occurs first.
(5) In the event of the death of any optionee, any option granted to
such optionee shall terminate on the last day of the twelfth month from the date
of death, or on the date on which the option expires by its terms, whichever
occurs first.
(b) Exercisability.
---------------
(1) Except as provided below, an option granted to an employee optionee
who ceases to be an employee of the Company or one of its subsidiaries shall be
exercisable only to the extent that the right to purchase shares under such
option has accrued and is in effect on the date such optionee ceases to be an
employee of the Company or one of its subsidiaries.
(2) An option granted to an employee optionee who ceases to be an
employee of the Company or one of its subsidiaries because he or she has become
permanently disabled, as defined above, shall be exercisable to the full number
of shares covered by such option.
(3) In the event of the death of any optionee, the option granted to
such optionee may be exercised to the full number of shares covered thereby,
whether or not under the provisions of Section 9 hereof the optionee was
entitled to do so at the date of his or her death, by the estate of such
optionee, or by any person or persons who acquired the right to exercise such
option by bequest or inheritance or by reason of the death of such optionee.
- 11 -
<PAGE>
11. Options Not Transferrable.
--------------------------
The right of any optionee to exercise any option granted to him or her shall
not be assignable or transferrable by such optionee otherwise than by will or
the laws of descent and distribution, and any such option shall be exercisable
during the lifetime of such optionee only by him. Any option granted under the
Plan shall be null and void and without effect upon the bankruptcy of the
optionee to whom the option is granted, or upon any attempted assignment or
transfer, except as herein provided, including without limitation any purported
assignment, whether voluntary or by operation of law, pledge, hypothecation or
other disposition, attachment, trustee process or similar process, whether legal
or equitable, upon such option.
12. Recapitalizations, Reorganizations and the Like.
------------------------------------------------
In the event that the outstanding shares of the Common Stock of the Company
are changed into or exchanged for a different number or kind of shares or other
securities of the Company or of another corporation by reason of any
reorganization, merger, consolidation, recapitalization, reclassification, stock
split-up, combination of shares, or dividends payable in capital stock,
appropriate adjustment shall be made in the number and kind of shares as to
which options may be granted under the Plan and as to which outstanding options
or portions thereof then unexercised shall be exercisable, to the end that the
proportionate interest of the optionee shall be maintained as before the
occurrence of
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<PAGE>
such event; such adjustment in outstanding options shall be made without change
in the total price applicable to the unexercised portion of such options and
with a corresponding adjustment in the option price per share.
In addition, unless otherwise determined by the Board of Directors in its
sole discretion, in the case of any (i) sale or conveyance to another entity of
all or substantially all of the property and assets of the Company or (ii)
Change in Control (as hereinafter defined) of the Company, the purchaser(s) of
the Company's assets or stock may, in his, her or its discretion, deliver to the
optionee the same kind of consideration that is delivered to the shareholders of
the Company as a result of such sale, conveyance or Change in Control, or the
Board of Directors may cancel all outstanding options in exchange for
consideration in cash or in kind which consideration in both cases shall be
equal in value to the value of those shares of stock or other securities the
optionee would have received had the option been exercised (to the extent then
exercisable) and no disposition of the shares acquired upon such exercise been
made prior to such sale, conveyance or Change in Control, less the option price
therefor. Upon receipt of such consideration by the optionee, his or her option
shall immediately terminate and be of no further force and effect. The value of
the stock or other securities the optionee would have received if the option had
been exercised shall be determined in good faith by the Board of Directors of
the Company, and in the case of shares of the
- 13 -
<PAGE>
Common Stock of the Company, in accordance with the provisions of Section 7
hereof. The Board of Directors shall also have the power and right to accelerate
the exercisability of any options, notwithstanding any limitations in this Plan
or in the Agreement upon such a sale, conveyance or Change in Control. Upon such
acceleration, any options or portion thereof originally designated as incentive
stock options that no longer qualify as incentive stock options under Section
422A of the Code as a result of such acceleration shall be redesignated as non-
qualified stock options. A "Change in Control" shall be deemed to have occurred
if any person, or any two or more persons acting as a group, and all affiliates
of such person or persons, who prior to such time owned less than fifty percent
(50%) of the then outstanding Common Stock of the Company, shall acquire such
additional shares of the Company's Common Stock in one or more transactions, or
series of transactions, such that following such transaction or transactions,
such person or group and affiliates beneficially own fifty percent (50%) or more
of the Company's Common Stock outstanding.
Upon dissolution or liquidation of the Company, all options granted under
this Plan shall terminate, but each optionee (if at such time in the employ of
or otherwise associated with the Company or any of its subsidiaries) shall have
the right, immediately prior to such dissolution or liquidation, to exercise his
or her option to the extent then exercisable.
- 14 -
<PAGE>
If by reason of a corporate merger, consolidation, acquisition of property
or stock, separation, reorganization, or liquidation, the Board of Directors
shall authorize the issuance or assumption of a stock option or stock options in
a transaction to which Section 425(a) of the Code applies, then, notwithstanding
any other provision of the Plan, the Board of Directors may grant an option or
options upon such terms and conditions as it may deem appropriate for the
purpose of assumption of the old option, or substitution of a new option for the
old option, in conformity with the provisions of such Section 425(a) of the Code
and the Regulations thereunder, and any such option shall not reduce the number
of shares otherwise available for issuance under the Plan.
No fraction of a share shall be purchasable or deliverable upon the exercise
of any option, but in the event any adjustment hereunder of the number of shares
covered by the option shall cause such number to include a fraction of a share,
such fraction shall be adjusted to the nearest smaller whole number of shares.
13. No Special Employment Rights.
-----------------------------
Nothing contained in the Plan or in any option granted under the Plan shall
confer upon any option holder any right with respect to the continuation of his
or her employment by the Company (or any subsidiary) or interfere in any way
with the right of the Company (or any subsidiary), subject to the
- 15 -
<PAGE>
terms of any separate employment agreement to the contrary, at any time to
terminate such employment or to increase or decrease the compensation of the
option holder from the rate in existence at the time of the grant of an option.
Whether an authorized leave of absence, or absence in military or government
service, shall constitute termination of employment shall be determined by the
Board of Directors at the time.
14. Withholding.
------------
The Company's obligation to deliver shares upon the exercise of any non-
qualified option granted under the Plan shall be subject to the option holder's
satisfaction of all applicable Federal, state and local income and employment
tax withholding requirements. The Company and employee may agree to withhold
shares of Common Stock purchased upon exercise of an option to satisfy the
above-mentioned withholding requirements.
15. Restrictions on Issue of Shares.
--------------------------------
(a) Notwithstanding the provisions of Section 8, the Company may delay the
issuance of shares covered by the exercise of an option and the delivery of a
certificate for such shares until one of the following conditions shall be
satisfied:
(i) The shares with respect to which such option has been exercised
are at the time of the issue of such shares effectively registered or qualified
under applicable Federal
- 16 -
<PAGE>
and state securities acts now in force or as hereafter amended; or
(ii) Counsel for the Company shall have given an opinion, which
opinion shall not be unreasonably conditioned or withheld, that such shares are
exempt from registration and qualification under applicable Federal and state
securities acts now in force or as hereafter amended.
(b) It is intended that all exercises of options shall be effective, and the
Company shall use its best efforts to bring about compliance with the above
conditions within a reasonable time, except that the Company shall be under no
obligation to qualify shares or to cause a registration statement or a post-
effective amendment to any registration statement to be prepared for the purpose
of covering the issue of shares in respect of which any option may be exercised,
except as otherwise agreed to by the Company in writing.
16. Purchase for Investment: Rights of Holder on Subsequent Registration.
---------------------------------------------------------------------
Unless the shares to be issued upon exercise of an option granted under the
Plan have been effectively registered under the Securities Act of 1933, as now
in force or hereafter amended, the Company shall be under no obligation to issue
any shares covered by any option unless the person who exercises such option, in
whole or in part, shall give a written representation and undertaking to the
Company which is satisfactory in form and scope to counsel for the Company and
- 17 -
<PAGE>
upon which, in the opinion of such counsel, the Company may reasonably rely,
that he or she is acquiring the shares issued pursuant to such exercise of the
option for his or her own account as an investment and not with a view to, or
for sale in connection with, the distribution of any such shares, and that he or
she will make no transfer of the same except in compliance with any rules and
regulations in force at the time of such transfer under the Securities Act of
1933, or any other applicable law, and that if shares are issued without such
registration, a legend to this effect may be endorsed upon the securities so
issued. In the event that the Company shall, nevertheless, deem it necessary or
desirable to register under the Securities Act of 1933 or other applicable
statutes any shares with respect to which an option shall have been exercised,
or to qualify any such shares for exemption from the Securities Act of 1933 or
other applicable statutes, then the Company may take such action and may require
from each optionee such information in writing for use in any registration
statement, supplementary registration statement, prospectus, preliminary
prospectus or offering circular as is reasonably necessary for such purpose and
may require reasonable indemnity to the Company and its officers and directors
from such holder against all losses, claims, damages and liabilities arising
from such use of the information so furnished and caused by any untrue statement
of any material fact therein or caused by the
- 18 -
<PAGE>
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
under which they were made.
17. Loans.
------
The Company may not make loans to optionees to permit them to exercise
options.
18. Modification of Outstanding Options.
------------------------------------
The Board of Directors may authorize the amendment of any outstanding option
with the consent of the optionee when and subject to such conditions as are
deemed to be in the best interests of the Company and in accordance with the
purposes of the Plan.
19. Approval of Stockholders.
-------------------------
The Plan shall be subject to approval by the vote of stockholders holding at
least a majority of the voting stock of the Company voting in person or by proxy
at a duly held stockholders' meeting, or by written consent of all of the
stockholders, within twelve (12) months after the adoption of the Plan by the
Board of Directors and shall take effect as of the date of adoption by the Board
upon such approval. The Board of Directors may grant options under the Plan
prior to such approval, but any such option shall become effective as of the
date of grant only upon such approval and, accordingly, no such option may be
exercisable prior to such approval.
- 19 -
<PAGE>
20. Termination and Amendment of Plan.
----------------------------------
Unless sooner terminated as herein provided, the Plan shall terminate ten
(10) years from the date upon which the Plan was duly adopted by the Board of
Directors of the Company. The Board of Directors may at any time terminate the
Plan or make such modification or amendment thereof as it deems advisable;
provided, however, that except as provided in Section 20, the Board of Directors
may not, without the approval of the stockholders of the Company obtained in the
manner stated in Section 19, increase the maximum number of shares for which
options may be granted or change the designation of the class of persons
eligible to receive options under the Plan. Termination or any modification or
amendment of the Plan shall not, without the consent of an optionee, affect his
or her rights under an option theretofore granted to him or her.
21. Reservation of Stock.
---------------------
The Company shall at all times during the term of the Plan reserve and keep
available such number of shares of stock as will be sufficient to satisfy the
requirements of the Plan and shall pay all fees and expenses necessarily
incurred by the Company in connection therewith.
22. Limitation of Rights in the Option Shares.
------------------------------------------
An optionee shall not be deemed for any purpose to be a stockholder of the
Company with respect to any of the options except to the extent that the option
shall have been exercised
- 20 -
<PAGE>
with respect thereto and, in addition, a certificate shall have been issued
theretofore and delivered to the optionee.
23. Notices.
--------
Any communication or notice required or permitted to be given under the Plan
shall be in writing, and mailed by registered or certified mail or delivered by
hand, if to the Company, to its principal place of business, attention:
President, and, if to an optionee, to the address as appearing on the records of
the Company.
- 21 -
<PAGE>
BENTHOS, INC.
1994 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE
-------
The purpose of this Benthos, Inc. 1994 Stock Option Plan for Non-Employee
Directors (the "Plan") is to attract and retain the services of experienced and
knowledgeable independent directors who are not employees (sometimes referred to
herein collectively as "Participants") of Benthos, Inc. ("Benthos") or its
subsidiaries for the benefit of Benthos and its stockholders and to provide
additional incentive for such Participants to continue to work in the best
interests of Benthos and its stockholders through continuing ownership of its
common stock.
2. ELIGIBILITY; GRANT OF OPTION
----------------------------
Options to purchase shares of common stock, par value $.06 2/3 per share of
Benthos shall be granted under the Plan as follows: (i) immediately following
the initial election of any new director of Benthos who is not otherwise an
employee of Benthos or any subsidiary, an option shall be granted to such new
director for the purchase of 15,000 shares of common stock, (ii) in addition,
immediately following the expiration of any option (1) granted under the Plan,
or (2) outstanding on March 1, 1994 and held on that date by a director who is
not an employee of Benthos or any of its subsidiaries, an option for the
purchase of such number of shares of common stock as shall
<PAGE>
not have been purchased under the option then expiring or under a similar option
not granted under the Plan but outstanding on March 1, 1994 and granted to
directors holding office on such date who are not employees of Benthos or any of
its subsidiaries shall be granted to each such director who holds such expiring
option, provided, however, that the maximum number of shares which may be
purchased in the aggregate under the Plan and under any such option in effect on
March 1, 1994 shall not exceed 15,000 shares, subject to adjustment in
accordance with Section 8 hereof. The date of grant of such options shall be
the date of initial election of the director in the case of options granted
under clause (i) of the first sentence of this Section and the day following the
expiration of an option in the case of an option granted under clause (ii). The
options shall be non-qualified options not intended to meet the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
3. OPTION AGREEMENT
----------------
Each option granted under the Plan shall be evidenced by an option
agreement (the "Agreement") duly executed on behalf of Benthos and by the
director to whom such option is granted, which Agreement shall (i) comply with
and be subject to the terms and conditions of the Plan and (ii) provide that the
optionee agrees to continue to serve as a director of Benthos, during the term
for which he or she was elected.
- 2 -
<PAGE>
4. OPTION EXERCISE PRICE
---------------------
Subject to the provisions of Section 8 hereof, the option exercise price
for an option granted under the Plan shall be the fair market value of the
shares of the common stock of Benthos covered by the option on the date of grant
of the option. For the purposes hereof and Section 5(b), the fair market value
of the shares of common stock of Benthos shall, if such shares are listed on any
national securities exchange, be the mean between the high and low sales prices
of the common stock of Benthos, if any, on the largest such exchange on the date
of grant. If the common stock of Benthos did not trade on such date, such fair
market value shall be determined by taking an average of the mean between the
highest and lowest sales on the nearest date before and nearest date after the
date of grant in accordance with Section 25.2512-2 of the Treasury Regulations
under the Code. If such shares are not then listed on any such exchange, the
fair market value of such shares shall be the mean between the closing "Bid" and
the closing "Ask prices, if any, as reported in the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") for the date of the
grant of the option, or, if none, shall be determined by taking an average of
the means between the highest and lowest sales on the nearest date before and
the nearest date after the date of grant in accordance with Treasury Regulations
Section 25.2512-2. If such shares are not
- 3 -
<PAGE>
then either listed on any such exchange or quoted in NASDAQ, the fair market
value shall be the mean between the average of the "Bid" and the average of the
"Ask" prices, if any, as reported in the National Daily Quotation Service for
the date of the grant of the option, or, if none, shall be determined by taking
an average of the mean between the highest and lowest sales on the nearest date
after the date of grant in accordance with Treasury Regulations Section 25.2512-
2. If the fair market value cannot be determined under the preceding three
sentences, it shall be determined in good faith by the Board.
5. TIME AND MANNER OF EXERCISE OF OPTION
-------------------------------------
(a) Options granted under the Plan shall, subject to the provisions of
Section 6 hereof, be exercisable as provided in this Section 5(a). The options
shall not be exercisable prior to the first anniversary date of the date of
grant. Thereafter, the options shall be exercisable as follows:
<TABLE>
<CAPTION>
Percentage of
Shares Becoming Cumulative
Available for Percentage
Exercise Available
--------------- ----------
<S> <C> <C>
On or After First Anniversary
Date and Before Second Anniversary
Date 33 1/3% 33 1/3%
On or After Second Anniversary
Date and Before Third Anniversary
Date 33 1/3% 66 2/3%
On or After Third Anniversary
Date and Before Fourth Anniversary
Date 33 1/3% 100%
</TABLE>
- 4 -
<PAGE>
(b) To the extent that the right to exercise an option has accrued and is
in effect, the option may be exercised in full at one time or in part from time
to time by giving written notice, signed by the person or persons exercising the
option, to Benthos, stating the number of shares with respect to which the
option is being exercised, accompanied by payment in full for such shares, which
payment may be in cash or in whole or in part in shares of the common stock of
Benthos already owned for a period of at least six months by the person or
persons exercising the option, valued at fair market value, as determined under
Section 4 hereof, on the date of exercise. Upon such exercise, delivery of a
certificate for paid-up non-assessable shares shall be made as promptly as
practicable at the principal office of Benthos to the person or persons
exercising the option.
(c) In the event of any (i) sale or transfer of all or substantially all of
the assets of Benthos, (ii) merger of Benthos with another corporation or entity
in which Benthos is not the surviving corporation, or (iii) Change in Control
(as hereinafter defined) of Benthos, the option may be exercised to the full
number of shares covered thereby, whether or not under the provisions of the
option the director is entitled to do so at the date of such sale, transfer,
merger or Change in Control. A "Change in Control" shall be deemed to have
occurred if any person (which term includes corporations,
- 5 -
<PAGE>
trusts and partnerships) or any two or more persons acting as a group, and all
affiliates of such person or persons, who prior to such time owned less than 51%
of the then outstanding Benthos voting stock, shall acquire additional Benthos
voting stock in one or more transactions, or a series of transactions, such that
following such transaction or transactions, such person or group and affiliates
beneficially own 51% or more of Benthos' outstanding voting stock.
6. TERM OF OPTIONS
---------------
(a) Each option shall expire five (5) years from the date of the granting
thereof, but shall be subject to earlier termination as herein provided.
(b) In the event of the death of an optionee, the option granted to such
optionee may be exercised, to the extent the optionee was entitled to do so on
the date of such optionee's death, by the estate of such optionee or by any
person or persons who acquired the right to exercise such option by bequest or
inheritance or otherwise by reason of the death of such optionee. Such option
may be exercised at any time within one (1) year after the date of death of such
optionee, at which time the option shall terminate, or prior to the date on
which the option otherwise expires by its terms, whichever is earlier.
(c) In the event that an optionee ceases to be a director of Benthos, the
option granted to such optionee may be exercised by him or her, but only to the
extent that under
- 6 -
<PAGE>
Section 5 hereof the right to exercise the option has accrued and is in effect.
Such option may be exercised at any time within three (3) months after the date
such optionee ceases to be a director of Benthos, at which time the option shall
terminate, but in any event prior to the date on which the option expires by its
terms, whichever is earlier, unless termination as a director, (a) was by
Benthos for cause, in which case the option shall terminate immediately at the
time the optionee ceases to be a director of Benthos, (b) was because the
optionee has become disabled (within the meaning of Section 22(e)(3) of the
Code), or (c) was by reason of the death of the optionee. In the case of death,
see Section 6(b) above. In the case of disability, the option may be exercised,
to the extent then exercisable under Section 5 hereof, at any time within one
(1) year after the date of termination of the optionee's directorship with
Benthos, at which time the option shall terminate, but in any event prior to the
date on which the option otherwise expires by its terms, whichever is earlier.
7. OPTIONS NOT TRANSFERABLE
------------------------
The right of any optionee to exercise an option granted to him or her under
the Plan shall not be assignable or transferable by such optionee otherwise than
by will or the laws of descent and distribution, or pursuant to a qualified
domestic relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act, or the rules
- 7 -
<PAGE>
thereunder. Any option granted under the Plan shall be exercisable during the
lifetime of such optionee only by him or her. Any option granted under the Plan
shall be null and void and without effect upon any attempted assignment or
transfer, except as herein provided, including without limitation any purported
assignment, whether voluntary or by operation of law, pledge, hypothecation or
other disposition, attachment, trustee process or similar process, whether legal
or equitable, upon such option.
8. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
------------------------------------------
In the event that the outstanding shares of the common stock of Benthos are
changed into or exchanged for a different number or kind of shares or other
securities of Benthos or of another corporation by reason of any reorganization,
merger, consolidation, recapitalization, reclassification, stock split-up,
combination of shares or dividends payable in capital stock, appropriate
adjustment shall be made in the number and kind of shares as to which
outstanding options, or portions thereof then unexercised, shall be exercisable,
to the end that the proportionate interest of the optionee shall be maintained
as before the occurrence of such event, and such adjustment in outstanding
options shall be made without change in the total price applicable to the
unexercised portion of such options and with a corresponding adjustment in the
option price per share.
- 8 -
<PAGE>
In addition, unless otherwise determined by the Board of Directors in its
sole discretion, in the case of any (i) sale or conveyance to another entity of
all or substantially all of the property and assets of Benthos or (ii) Change in
Control (as defined in Section 5 above) of Benthos, the purchaser(s) of Benthos'
assets or stock may, in his, her or its discretion, deliver to the directors
holding options the same kind of consideration that is delivered to the
shareholders of Benthos as a result of such sale, conveyance or Change in
Control, or the Board of Directors may cancel the outstanding options in
exchange for consideration in cash or in kind which consideration in both cases
shall be equal in value to the value of those shares of stock or other
securities each director would have received had his or her option been
exercised in full and no disposition of the shares acquired upon such exercise
been made prior to such sale conveyance or Change in Control, less the option
price therefor. Upon receipt of such consideration by the director, his or her
option shall immediately terminate and be of no further force and effect. The
value of the stock or other securities each director would have received if his
or her option had been exercised shall be determined in good faith by the Board
of Directors of Benthos
9. RESTRICTIONS ON ISSUE OF SHARES
-------------------------------
Notwithstanding the provisions of Section 5 hereof, Benthos may delay the
issuance of shares covered by the exercise of any
- 9 -
<PAGE>
option and the delivery of a certificate for such shares until one of the
following conditions shall be satisfied:
(i) the shares with respect to which an option has been exercised are
at the time of the issue of such shares effectively registered under applicable
Federal and state securities acts now in force or hereafter amended; or
(ii) counsel for Benthos shall have given an opinion, which opinion
shall not be unreasonably conditioned or withheld, that such shares are exempt
from registration under applicable Federal and state securities acts now in
force or hereafter amended.
It is intended that all exercises of options shall be effective.
Accordingly, Benthos shall use its best efforts to bring about compliance with
the above conditions within a reasonable time, except that Benthos shall be
under no obligation to cause a registration statement or a post-effective
amendment to any registration statement to be prepared at its expense solely for
the purpose of covering the issue of shares in respect of which any option may
be exercised, except as otherwise agreed to by Benthos in writing.
10. RIGHTS OF HOLDER ON PURCHASE FOR INVESTMENT; SUBSEQUENT REGISTRATION
--------------------------------------------------------------------
Unless the shares to be issued upon exercise of an option granted under the
Plan have been effectively registered under the Securities Act of 1933, as now
in force or hereafter amended, Benthos shall be under no obligation to issue any
- 10 -
<PAGE>
shares covered by any option unless the person who exercises such option, in
whole or in part, shall give a written representation and undertaking to Benthos
which is satisfactory in form and scope to counsel to Benthos and upon which, in
the opinion of such counsel, Benthos may reasonably rely, that he or she is
acquiring the shares issued pursuant to such exercise of the option for his or
her own account as an investment and not with a view to, or for sale in
connection with, the distribution of any such shares, and that he or she will
make no transfer of the same except in compliance with any rules and regulations
in force at the time of such transfer under the Securities Act of 1933, or any
other applicable law, and that if shares are issued without such registration a
legend to this effect may be endorsed upon the securities so issued. In the
event that Benthos shall, nevertheless, deem it necessary or desirable to
register under the Securities Act of 1933 or other applicable statutes any
shares with respect to which an option shall have been exercised, or to qualify
any such shares for exemption from the Securities Act of 1933 or other
applicable statutes, then Benthos shall take such action at its own expense and
may require from each optionee such information in writing for use in any
registration statement, prospectus, preliminary prospectus or offering circular
as is reasonably necessary for such purpose and may require reasonable indemnity
to Benthos and its officers and directors from such holder
- 11 -
<PAGE>
against all losses, claims, damages and liabilities arising from such use of the
information so furnished and caused by any untrue statement of any material fact
therein or caused by the omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances under which they were made.
11. ADOPTION BY STOCKHOLDERS
------------------------
The Plan shall take effect immediately upon its adoption by the vote of
stockholders holding at least a majority of the voting stock of Benthos voting
in person or by proxy at a duly held stockholders' meeting.
12. EXPENSES OF THE PLAN
--------------------
All costs and expenses of the adoption and administration of the Plan shall
be borne by Benthos, and none of such expenses shall be charged to any optionee.
13. TERMINATION OF THE PLAN
-----------------------
Unless sooner terminated as herein provided, the Plan shall terminate ten
(10) years from the date upon which the Plan was duly adopted by the
stockholders. The Board may at any time terminate the Plan. Termination of the
Plan shall not, without the consent of an optionee, affect such optionee's
rights under an option previously granted to him or her.
14. LIMITATION OF RIGHTS IN THE OPTION SHARES
-----------------------------------------
An optionee shall not be deemed for any purpose to be a stockholder of
Benthos with respect to any of the options except to the extent that the option
shall have been exercised
- 12 -
<PAGE>
and, in addition, a certificate for the shares exercised shall have been issued
and delivered to the optionee.
15. NOTICES
-------
Any communication or notice required or permitted to be given under the
Plan shall be in writing, and mailed by registered or certified mail or
delivered by hand, if to Benthos, to its principal place of business, attention:
Treasurer, and, if to an optionee, to the address as appearing on the records of
Benthos.
16. COMPLIANCE WITH RULE 16b-3.
---------------------------
It is the intention of Benthos that the Plan comply in all respects with
Rule 16b-3 promulgated under Section 16(b) of the Securities Exchange Act of
1934 (the "Act") and that Plan Participants remain disinterested persons for
purposes of administering other employee benefit plans of Benthos and having
transactions under such other plans be exempt from Section 16(b) of the Act.
Therefore, if any Plan provision is found not to be in compliance with Rule 16b-
3 or if any Plan provision would disqualify Plan Participants from remaining
disinterested persons, that provision shall be deemed null and void, and in all
events the Plan shall be construed in favor of its meeting the requirements of
Rule 16b-3. This Section 16 shall not be applicable while Benthos has no class
of securities registered under the Act.
APPROVED BY THE SHAREHOLDERS: _________________________________________________
- 13 -
<PAGE>
PSRF-BENTHOS
------------
LICENSE AGREEMENT
-----------------
This Agreement, effective upon the date of last signature herein, by and
between The Penn State Research Foundation, a nonprofit corporation duly
organized and existing under the laws of the Commonwealth of Pennsylvania and
having an office at 114 Kern Building, University Park, Pennsylvania,
hereinafter referred to as "PSRF", and Benthos, Inc., 49 Edgerton Drive, North
Falmouth, Massachusetts, hereinafter "BENTHOS".
WITNESSETH
----------
WHEREAS, PSRF is dedicated to fostering and advancing scientific research
within the Commonwealth of Pennsylvania and, in particular, within the
Pennsylvania State University (hereinafter "Penn State") and is responsible for
developing inventions made by employees of Penn State by evaluating invention
disclosures, pursuing patents and licensing patents which are obtained thereon;
WHEREAS, PSRF is the owner of certain "Proprietary Rights" as later defined
herein and has the right to grant licenses thereunder;
WHEREAS, said Invention arose out of research performed at Penn State in
its Materials Research Laboratory and in part by the inventor named in the
patent described in Proprietary Rights, which inventor has the capabilities and
experience to exploit Proprietary Rights.
WHEREAS, BENTHOS desires to obtain a non-exclusive license under the
Proprietary Rights upon the terms and conditions hereinafter set forth;
NOW, therefore, in consideration of the premises and mutual covenants
contained herein, and with intent to be legally bound, the parties hereto agree
as follows:
ARTICLE I - DEFINITIONS
-----------------------
For purpose of this Agreement, the following words and phrases shall have
the following meanings:
1.1 "BENTHOS" shall refer solely to the corporate entity BENTHOS, Inc., and
all companies in which it owns more than fifty percent (50%) equity interest.
1.2.1 "PROPRIETARY RIGHTS" shall mean all of the following PSRF
intellectual property:
<PAGE>
a. United States patent No. 4,999,819 thereon;
b. Any reissues, extensions, divisional applications, continuations,
or continuations in part of the patent described in (a) above, and any
patents issuing thereon; and
c. All foreign counterparts to the items described in (a) and (b)
above.
1.3 A "LICENSED PRODUCT" shall mean any product or material which is
covered in whole or in part by Proprietary Rights, or is manufactured using a
process which is covered in whole or in part by Proprietary Rights, that is
manufactured by or for BENTHOS for Commercial Sale.
1.4 A "LICENSED PROCESS" shall mean any process which is covered in whole
or in part by Proprietary Rights.
1.5 "NET SELLING PRICE" shall mean the actual gross selling price of
LICENSED PRODUCTS collected by BENTHOS upon its COMMERCIAL SALE by BENTHOS,
excluding all packaging, instructional, shipping, insurance, taxes or other
charges made to purchaser, and also excluding customary trade discounts,
commissions to sales representatives and refunds or credits allowed or taken by
the purchaser on account of returns or defective articles.
1.6 "COMMERCIAL SALE" shall mean any transaction which transfers to a
purchaser physical possession of and title to Licensed Products, after which
transfer the seller has no right or power to determine purchaser's resale price,
if any.
ARTICLE II - GRANT
------------------
2.1 PSRF hereby grants to BENTHOS the non-exclusive right and license to
make, have made, use, lease and sell the LICENSED PRODUCTS, and to practice the
LICENSED PROCESSES throughout the world throughout the life of PROPRIETARY
RIGHTS, with the right to sublicense, and subject to the terms and conditions
contained in this Agreement.
2.2 PSRF represents that it neither owns nor controls nor is aware of
patent rights or other proprietary rights to technology which would prevent
BENTHOS from enjoying the benefits of the rights granted to BENTHOS herein.
2.3 BENTHOS shall use reasonable commercial efforts to bring Licensed
Products or LICENSED PROCESSES to market.
2.4 BENTHOS agrees that manufacturing of LICENSED PRODUCTS shall occur in
the United States.
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<PAGE>
2.5 BENTHOS agrees that any improvements it develops to the Proprietary
Rights during the term of this Agreement shall be disclosed to PSRF and Penn
State. PSRF and Penn State shall hold the same in strict confidence and use the
same solely for internal research purposes. In the event BENTHOS intends to
protect said improvements by filing patents, it shall provide prior notice to
PSRF. Where the practice of resulting patent applications and patents would
infringe PROPRIETARY RIGHTS, BENTHOS shall provide to PSRF and Penn State a non-
exclusive, perpetual, royalty-free license to be used solely within PSRF and
Penn State for research purposes only.
ARTICLE III - EXPORT CONTROLS
------------------------------
3.1 It is understood that PSRF is subject to United states laws and
regulations controlling the export of technical data, computer software,
laboratory prototypes and other commodities, and that its obligations hereunder
are contingent on compliance with applicable United States export laws and
regulations. The transfer of certain technical data and commodities may require
a license from the cognizant agency of the United States Government and/or
written assurances by BENTHOS that BENTHOS shall not export data or commodities
to certain foreign countries without prior approval of such agency. PSRF
neither represents that a license shall not be required nor that, if required,
it shall be issued. BENTHOS shall be responsible for payment of all reasonable
costs attendant to securing said licenses.
ARTICLE IV - ROYALTIES AND REPORTING
------------------------------------
4.1 For the rights, privileges and license granted hereunder, BENTHOS
shall pay royalties to PSRF in the manner hereinafter provided to the end of the
term of the Proprietary Rights, which shall be until the last patent to expire
of all patents included within PROPRIETARY RIGHTS, or until this Agreement shall
be terminated as hereinafter provided:
(A) License Issue fee in the amount of Fifteen Thousand Dollars
($15,000.00);
(B) Running Royalties in the amount of five percent (5%) of the total
of Net Selling Price for each Commercial Sale of LICENSED PRODUCTS or LICENSED
PROCESSES by BENTHOS or its sublicensees, said royalty payable upon delivery of
the report due pursuant to Paragraph 4.5 hereof. In the event a Commercial Sale
of Licensed Products occurs together with the sale of a system or other product,
(a) such royalty shall be calculated solely on the LICENSED PRODUCT, as no
royalty shall be payable with respect to any other portion of such system or
product; and (b) in the event the Net Selling Price of the LICENSED PRODUCT is
not separately
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<PAGE>
stated, the royalty shall be calculated based upon the Net Selling Price from
the most recent prior Commercial Sale of a separate LICENSED PRODUCT.
4.2 No multiple royalties shall be payable because any LICENSED PRODUCT,
its manufacture, use, lease or sale are or shall be covered by more than one
patent application, patent or certificate of registration licensed under this
Agreement.
4.3 Royalty payments shall be paid in United States dollars in State
College, Pennsylvania, or at such other place as PSRF may reasonably designate.
4.4 BENTHOS shall keep full, true and accurate books of account and
records containing all particulars that may be necessary for the purposes of
showing the amounts payable to PSRF hereunder. Said books of account shall be
kept at BENTHOS's principal place of business or the principal place of business
of the appropriate division of BENTHOS to which this Agreement relates. Said
books and the supporting data shall be open at all reasonable times for three
(3) years following the end of the calendar year to which they pertain, to the
inspection of independent CPAs approved by BENTHOS, said approval not to be
unreasonably withheld for the purpose of verifying BENTHOS's royalty statement
or compliance in other respects with this Agreement, such inspection to occur no
more than once each calendar year upon reasonable prior notice to BENTHOS.
4.5 BENTHOS shall on February 1, and August 1, of each year, deliver to
PSRF true and accurate reports, giving such particulars of the business
conducted by BENTHOS during the six-month period under this Agreement ending
thirty (30) days prior to such date as shall be pertinent to an accounting
hereunder.
4.6 The royalty payments set forth in this Agreement shall, if overdue,
bear interest until payment at a per annum rate equal to the prime rate in
effect at the Chase Manhattan Bank on the due date. The payment of such interest
shall not foreclose PSRF from exercising any other rights it may have as a
consequence of the lateness of any payment.
ARTICLE V - INFRINGEMENT
------------------------
5.1 Enforcement of Patent Rights. In the event BENTHOS alleges that a
----------------------------
third party is infringing a right contained within PROPRIETARY RIGHTS, BENTHOS
shall immediately notify PSRF of said alleged infringement. PSRF shall, in its
sole discretion, determine whether an infringement is occurring and shall take
whatever actions it deems necessary to enforce PROPRIETARY RIGHTS. PSRF shall,
within thirty (30) days after notice thereof, inform BENTHOS how and to what
extent it is pursuing such third party. In the event BENTHOS deems
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<PAGE>
such action to be insufficient, BENTHOS shall have the right, in PSRF's name, to
pursue such infringe as BENTHOS may reasonably deem appropriate; provided,
however, that in the event BENTHOS takes such action in PSRF's name, it shall
provide PSRF prior written notice thereof, shall keep PSRF fully informed of the
progress thereof and shall act in a reasonable manner at all times in connection
with the prosecution thereof. In the event PSRF recovers any amounts from such
third party as a result of any action taken by PSRF, PSRF shall deduct therefrom
the out-of-pocket legal and related expenses it incurred in obtaining such
amount, retain five percent (5%) of the remainder and remit the rest to BENTHOS
In the event BENTHOS recovers any amounts from such third party as a result of
any action taken by BENTHOS, such amounts shall be treated as a Net Selling
Price hereunder, provided that BENTHOS shall deduct therefrom the out-of-pocket
legal and related expenses it incurred in obtaining such amounts prior to paying
royalties thereon.
5.2 Prosecution. PSRF shall, at its expense, diligently prosecute any
-----------
patent applications included within PROPRIETARY RIGHTS.
5.3 Third Party Actions. In the event a third party at any time brings a
-------------------
claim against BENTHOS alleging that BENTHOS' exercise of the Proprietary Rights
infringe any rights of such third party, BENTHOS shall, with the reasonable
cooperation of PSRF, defend such claim. BENTHOS shall have the right to deduct
all costs of defending such claim, together with all royalty or other amounts
BENTHOS may be required to pay to such third party, from royalties otherwise
payable by BENTHOS to PSRF hereunder.
ARTICLE VI - LIABILITY AND INSURANCE
-------------------------------------
6.1 BENTHOS shall at all times during the term of this Agreement, and
thereafter indemnify, defend and hold Penn State and PSRF, their trustees,
officers, employers and affiliates harmless against any claims, liabilities,
judgments and expenses arising out of the death of or injury to any person or
persons or out of any damage to property and against any other claim of any kind
resulting from the production, manufacture, sale, advertising, lease or transfer
of LICENSED PRODUCTS or LICENSED PROCESSES, or from sublicenses pursuant to this
Agreement. PSRF shall give prompt written notice to BENTHOS of any matter
asserted by PSRF to be covered by this Section 6.1. BENTHOS shall have the sole
right to defend any matter covered by this Section 6.1.
6.2 EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, PSRF MAKES
NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR
IMPLIED, INCLUDING
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<PAGE>
BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, AND VALIDITY OR NON-INFRINGEMENT OF PATENT RIGHT CLAIMS WHICH ARE
ISSUED OR PENDING.
6.3 The only rights being granted pursuant to this Agreement are those
specifically set forth in Article II herein and this Agreement is not to be
construed or implied in any way to create any additional rights, or options to
any rights with regard to the licensing of PROPRIETARY RIGHTS.
6.4 BENTHOS agrees it has obtained liability insurance with coverage in an
amount no less than $1,000,000.00 per occurrence. Both parties agree that
adequate evidence of the required coverages has or will be provided by BENTHOS
to Penn State's Risk Management Office, 411 Rider Building, 120 S. Burroughs
Street, University Park, PA 16801, and BENTHOS agrees to keep said office
informed of any changes in coverage or carriers.
ARTICLE VII - NON-USE OF NAMES
------------------------------
7.1 BENTHOS shall not use the names of Penn State or PSRF nor of any of
their employees, nor any adaptation thereof, in any advertising, promotional or
sales literature without prior written consent obtained from Penn State and/or
PSRF in each case, except that BENTHOS may state that it is licensed by PSRF
under one or more of the patents and/or applications comprising the Proprietary
Rights. PSRF shall make no use of the BENTHOS name of any nature whatsoever.
ARTICLE VIII - ASSIGNMENT
-------------------------
8.1 Except as provided below, this Agreement is not assignable and any
attempt to do so shall be void.
8.2 If BENTHOS sells or transfers all assets of its business to another
entity, this License Agreement may be assigned to the purchaser or acquirer
thereof only after BENTHOS has obtained the prior written approval of PSRF, said
approval not to be unreasonably withheld.
ARTICLE IX - PATENT MAINTENANCE
-------------------------------
9.1 So long as BENTHOS is generating royalties hereunder, PSRF shall
diligently maintain during the term of this Agreement the Proprietary Rights at
its expense.
ARTICLE X - TERMINATION
-----------------------
10.1 If BENTHOS shall cease to carry on its business, this Agreement shall
terminate upon notice by PSRF.
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<PAGE>
10.2 Upon any material breach or default of this Agreement by BENTHOS, PSRF
shall have the right to terminate this Agreement and the rights, privileges and
license granted hereunder by sixty (60) days' notice to BENTHOS. Such
termination shall become immediately effective upon the expiration of said sixty
(60) day period, unless BENTHOS shall have cured any such breach or default
prior thereto, or has demanded resolution under Article XI prior thereto.
10.3 BENTHOS shall have the right to terminate this Agreement, in whole or
in part, at any time on two (2) months' notice to PSRF, and upon payment of all
amounts due PSRF through the effective date of the termination.
10.4 Termination under this Article shall not relieve BENTHOS of its
obligation to pay royalties due and owing at the time of said termination or as
otherwise due and owing under this Agreement.
ARTICLE XI - ARBITRATION
------------------------
11.1 Binding Arbitration. All controversies and/or disputes arising out of
-------------------
this agreement shall be decided by three (3) arbitrators. Written notice of any
dispute shall be given by the aggrieved party, clearly specifying the nature of
the dispute and the relief requested, including the paragraph of this agreement
in question, if any. If the dispute cannot be amicably resolved (evidenced by
writing signed by both parties) within thirty (30) days of such notice, either
party may serve the other with a written demand for arbitration pursuant to this
Article. Where BENTHOS has demanded the arbitration under paragraph 10.2, the
thirty (30) day period shall be inapplicable.
11.2 Procedure. 11.2.1 Each party shall be responsible for one half of the
---------
cost of the arbitrators. The arbitrators shall be selected as follows:
11.2.1.1 The party demanding arbitration shall, together with its
demand for arbitration, submit the name of one arbitrator.
11.2.1.2 Within twenty (20) days thereafter the party receiving
such demand shall respond with the name of an additional arbitrator.
11.2.1.3 The two arbitrators so selected shall, within twenty
(20) days after the selection of the second arbitrator, select a third
arbitrator.
11.2.2 All pre-hearing, hearing, and post-hearing procedures shall be
governed by the Commercial Arbitration Rules of the American Arbitration
Association then in effect, except as modified in this Agreement.
-7-
<PAGE>
11.2.3 The situs of the arbitration proceedings pursuant to this
article shall be Boston, Massachusetts if commenced by PSRF and Philadelphia,
Pennsylvania if commenced by BENTHOS.
11.2.4 All decisions of the arbitrators shall be by majority vote. The
arbitrators shall be bound to make specific findings of fact and reach
conclusions of law, based upon the submissions and evidence of the parties, and
shall issue a written decision explaining the basis for the decision and award.
Proceedings shall be concluded within sixty (60) days of the date the arbitrator
is selected.
11.3 Court Actions. During the pendency of any proceeding under Section
-------------
11.1 or 11.2, neither party will commence any litigation relating to any dispute
under this Agreement and any litigation commenced prior to commencement of any
proceeding under Sections 11.1 or 11.2 shall be stayed pending the outcome
thereof. The parties agree to fully abide by the terms of any arbitration award
hereunder as final and binding. Judgment upon any award may be entered and
enforced by either party in any court of competent jurisdiction.
ARTICLE XII - MISCELLANEOUS PROVISIONS
--------------------------------------
12.1 This Agreement shall be construed, governed, interpreted and applied
in accordance with the laws of the Commonwealth of Pennsylvania.
12.2 The parties hereto acknowledge that this Agreement sets forth the
entire agreement and understanding of the parties hereto as to the subject
matter hereof, and shall not be subject to any change or modification except by
the execution of a written instrument subscribed to by the parties hereto.
12.3 The provisions of this Agreement, other than Article II, are
severable, and in the event that any provisions of this Agreement shall be
determined to be invalid or unenforceable under any controlling body of the law,
such invalidity or unenforceability shall not in any way affect the validity or
enforceability of the remaining provisions hereof.
12.4 BENTHOS agrees to mark the LICENSED PRODUCTS sold in the United States
with all applicable United States patent numbers. All LICENSED PRODUCTS shipped
to or sold in other countries shall be marked in such a manner as to conform
with the patent laws and practice of the country of manufacture or sale.
12.5 The failure of either party to assert a right hereunder or to insist
upon compliance with any term or condition of this Agreement shall not
constitute a waiver of
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<PAGE>
that right or any other right hereunder and shall not excuse a similar
subsequent failure to perform any such term or condition by the other party.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals and
duly executed this Agreement the day and year set forth below.
THE PENN STATE RESEARCH FOUNDATION
By: /s/ R.D. Nargi
--------------------------
Name: R.D. Nargi
------------------------
Title: Treasurer Date: December 13, 1993
----------------------- -----------------
Date:
BENTHOS, INC.
By: /s/ Lawrence W. Gray
--------------------------
Name: Lawrence W. Gray
------------------------
Title: President and CEO Date: 24 November 1993
----------------------- ----------------
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<PAGE>
[BENTHOS Logo Appears Here]
TECHNICAL CONSULTANCY AGREEMENT
BETWEEN:
Benthos, Inc. (BENTHOS)
North Falmouth, Massachusetts
AND:
William D. McElroy (The Consultant)
Falmouth, Massachusetts
DATED: July 12, 1994
Benthos. Inc.
49 Edgerton Drive. North Falmouth MA O2556-2826 USA
Telephone 508-563-1000 500-446-1222 Telex 820673 Fax 508-563-6444
<PAGE>
A. RELATIONSHIP
1. This Agreement supersedes all previous agreements, defines the terms and
conditions under which, upon execution hereof, the Consultant shall act as
such for BENTHOS and defines the rights and obligations of the parties under
such relationship.
2. The Consultant has no authority to commit BENTHOS in any matter, cause, or
undertaking whatever, without the prior written consent of BENTHOS; and,
similarly, BENTHOS has no authority to commit the Consultant in any matter,
cause or undertaking whatever, without the prior written consent of the
Consultant.
3. The relationship of the Consultant to BENTHOS is that of an independent
contractor and not that of an employee of BENTHOS and the Consultant agrees
that he shall not hold himself out as an employee of BENTHOS. All expenses
for the operation of the Consultant's offices and activities, as such
independent contractor, shall be borne by the Consultant, and the Consultant
shall be solely responsible for the payment of same, except as described
herein. BENTHOS agrees to pay the expenses of trips requiring air travel
and/or overnight travel. Said expenses must be approved by BENTHOS in advance
of the trip taking place.
4. The Consultant has no authority to make, vary, alter, enlarge, or limit
contracts or letters of intent, or to make representations or guarantees not
specifically authorized in writing by BENTHOS. The Consultant has no
authority to bind BENTHOS to any contract of employment, no authority to
receipt for monies payable to BENTHOS, and the Consultant is solely
responsible for the Consultant's employees and for their acts and the things
done by them.
5. The Consultant represents that (a) he has described his background truly and
completely to BENTHOS; (b) his engagement by the Company does not and will
not violate or interfere with any other obligation or agreement to which the
Consultant is subject; and (c) the Consultant did not and will not bring to
BENTHOS or use in his work any confidential material or any documents or
other property of any former employer or person for whom the Consultant has
performed services.
6. Upon a breach of any of the terms and conditions of this Agreement by either
party, or should either party become insolvent, bankrupt, make an assignment
or trust mortgage for the benefit of creditors, or enter into a receivership,
this Agreement may be terminated immediately at the option of the other
party, by written notice to the other.
7. The failure of either party to enforce at any time, or for any period of
time, provisions of the Agreement shall not be construed as a waiver of such
provisions or of the right of such party thereafter to enforce each and every
such provision.
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<PAGE>
B. DURATION OF AGREEMENT
This Agreement is effective August 19, 1994 and remains effective for three
years. It is the intention of the parties to renew this agreement for an
additional three year period. Written notice shall be provided from one party to
the other at least one year prior to the termination date in the event that
party does not wish to renew the agreement.
C. TASKS
The Consultant agrees to act upon the behalf of BENTHOS as defined and set forth
on the attached Schedule A, entitled "Scope of Responsibilities". Said Schedule
A may be amended at any time with the prior written agreement of both parties,
and shall be included as an amendment to this contract.
D. REMUNERATION
BENTHOS agrees to remunerate the Consultant at the base rate of $1,390 per week
for the life of the Agreement. The base weekly remuneration will be increased 5%
at each anniversary of the execution of the Agreement. This remuneration shall
be the extent of BENTHOS' responsibility. THE CONSULTANT ACKNOWLEDGES THAT, AS
------------------------------------
AN INDEPENDENT CONTRACTOR, ALL OTHER COSTS ASSOCIATED WITH THIS AGREEMENT IN THE
- -------------------------
FORM OF STATE AND FEDERAL INCOME TAXES, INSURANCE OF ANY KIND, AND PERSONAL
LIABILITIES ARE THE SOLE RESPONSIBILITY OF THE CONSULTANT.
E. OTHER PRINCIPLES
BENTHOS is not desirous of limiting the potential of its representatives,
agents, or Consultants. In the interest of good business practice, a firm
requirement of this Agreement is the prior written approval by BENTHOS of any
additional consultancies which the Consultant may entertain. Guidelines for non-
approval of additional consultant agreements shall include competitive products
or services or other conflicts of interest.
F. NON-ASSIGNMENT
A consideration of this Agreement is the personal reputation, qualifications and
abilities of the Consultant. Accordingly, the obligations of the Consultant
hereunder are not subject to assignment or delegation without the prior written
consent of BENTHOS.
G. AMENDMENTS
1. The Agreement may be modified, abridged or amended only by a document or
documents in writing executed by both parties hereto.
2. It is agreed that this Agreement shall be construed as a Massachusetts
contract and is governed by the internal laws of Massachusetts without giving
effect to the conflicts of law principles thereof.
3
<PAGE>
H. REPORTS
During the first week of each month the Consultant shall submit to BENTHOS a
Written report of his activities with respect to BENTHOS for the preceding
month. This will include comments and insights pertaining to the "Scope of
Responsibilities" as outlined in Schedule A.
I. CONFIDENTIAL INFORMATION
1. The Consultant agrees and acknowledges that in the course of rendering
services to BENTHOS and its clients he has had and may have in the future
access to and has become and will become acquainted with confidential
information about the professional, business, technical and financial affairs
of BENTHOS and its clients and may have contributed to or may in the future
contribute to such information. The Consultant further recognizes that
BENTHOS is engaged in a highly competitive business, and that the success of
BENTHOS in the marketplace depends upon its good will and reputation for
quality and dependability. The Consultant agrees and acknowledges that
reasonable limits on his ability to engage in activities competitive with
BENTHOS are warranted to protect its substantial investment in developing
such status in the marketplace, reputation and good will. The Consultant
recognizes that in order to guard the legitimate interests of BENTHOS it is
necessary for it to protect all such confidential information, good will and
reputation.
2. In the course of his engagement by BENTHOS, the Consultant may have had or
may have in the future access to confidential know-how, business documents or
information, marketing data, client lists and trade secrets which are
confidential. Such information shall hereinafter be called "Proprietary
Information" and shall include any and all items enumerated in the preceding
sentence as well as New Developments as defined in paragraph "K" above which
come within the scope of the business activities of BENTHOS as to which the
Consultant has had or may have access, whether previously existing, now
existing or arising hereafter, whether conceived or developed by others or by
the Consultant alone or with others during the period of his service to
BENTHOS. "Proprietary Information" shall not include any information which is
in the public domain during the period of service by the Consultant, provided
such information is not in the public domain as a consequence of disclosure
by the Consultant in violation of this Agreement.
3. The Consultant agrees and acknowledges that Proprietary Information is of
critical importance to BENTHOS and a violation of this paragraph would
seriously and irreparably impair and damage the business of BENTHOS. The
Consultant therefore agrees to keep all Proprietary Information in a
fiduciary capacity for the sole benefit of BENTHOS.
4. The Consultant shall not disclose, directly or indirectly (except as required
by law), any Proprietary Information to any person other than (a) BENTHOS,
(b) authorized employees thereof at the time of such disclosure, or (c) such
other persons to whom the Consultant has been instructed to make disclosure
by the President of BENTHOS, and in all such cases only to the extent
required in the course of the Consultant's services to BENTHOS hereunder. At
the termination of his engagement by BENTHOS, the Consultant shall deliver to
BENTHOS all
4
<PAGE>
notes, letters, documents and records which may contain Proprietary
Information which are then in his possession or control and shall not retain
or use any copies or summaries thereof.
J. RIGHTS IN CONSULTANT'S PRODUCT DEVELOPMENTS
As a condition of this agreement, the Consultant agrees to grant Benthos, Inc.,
the right of first refusal to acquire the rights to any products developed by
the Consultant that the Consultant wishes to sell and which are not New
Developments as defined in paragraph "M".
K. USE OF BENTHOS STOCKROOM
The Consultant may purchase mechanical, electrical, and electronic components
from the Benthos stockroom at Benthos' standard cost plus a 10% handling fee.
Purchases to paid for in cash at the time of withdrawal from the stockroom.
Purchases to be approved by Benthos Materials Manager to ensure non-interference
with Benthos' operations. Items purchased from the Benthos stockroom are for the
Consultant's use in his product development efforts and are not for resale.
L. USE OF BENTHOS PRESSURE TEST AND TEST POOL FACILITIES
The Consultant may use the Benthos pressure test facility or the Benthos test
pool on a not to interfere basis. The only charge for the use of these
facilities will be for technician services which will be charged at the current
published rate. A technician is required for the operation of the pressure test
facility. A technician is not required for the use of the test pool facility.
M. NEW DEVELOPMENTS
1. The Consultant shall promptly and fully disclose in writing to BENTHOS, or
such other person as BENTHOS may designate, all ideas, designs, programs,
methods, inventions, improvements, discoveries and writings, including any
modifications or improvements of products, new products or applications
thereof, whether or not patentable or copyrightable, and whether or not
reduced to practice, made or conceived by him (either solely or in
collaboration with others) during the term of his engagement by BENTHOS,
whether or not during regular working hours. All of such ideas, designs,
programs, methods, inventions, improvements, modifications, applications,
discoveries and writings described in this paragraph shall be herein referred
to as "New Developments." The Consultant acknowledges that all such New
Developments are the exclusive property of BENTHOS and hereby assigns all
right, title and interest in and to such New Developments to BENTHOS.
2. The term "New Developments" shall not include, and the foregoing paragraphs
shall not apply to, any development conceived by the Consultant for which no
equipment, supplies, facility or trade secret information of BENTHOS was used
and which was developed entirely on the Consultant's own time, unless the
invention results from any work performed by the Consultant for BENTHOS.
5
<PAGE>
3. The Consultant will, during the term of his engagement by BENTHOS and
thereafter, at the request of BENTHOS, cooperate in the procurement in the
name of BENTHOS of patent, utility model, design and copyright protection to
cover New Developments, including the execution of domestic, foreign,
continuing and reissue applications for letters patents, utility models,
designs and copyright registrations and assignments thereof, and execute all
documents, make all rightful oaths, testify in all proceedings in
governmental offices or in the courts concerning New Developments, and
generally do everything possible to aid BENTHOS in obtaining, enjoying and
enforcing proper protection on New Developments.
4. All of the Consultant's rights in and to any New Developments, including the
right to publish or not publish any New Developments, and his rights in and
to all letters patent and copyright. registrations and applications for
letters patent, utility models, designs and copyright registrations and
convention and other priority rights relating thereto, hereby are assigned to
BENTHOS and shall become and remain the property of BENTHOS, unless released
in writing by BENTHOS.
N. NON-COMPETITION AND NON-SOLICITATION
1. The Consultant covenants and agrees that during the term of his engagement by
BENTHOS (the "Restrictive Covenant Period"), the Consultant shall not,
whether for his own account or for any other person or organization, directly
or indirectly engage, within the Restricted Market (as hereinafter defined)
in the business of, or render service to, any enterprise which carries on the
business in which BENTHOS is principally engaged at the time of the
Consultant's termination of engagement by BENTHOS (collectively, the
"Competitive Businesses"). The parties hereto acknowledge and agree that the
business in which BENTHOS is principally engaged as of the date hereof
consists of: the design, development and manufacture of underwater products
and systems for use in the oceanographic research, government, offshore
energy, nuclear, and related markets and; the design, development and
manufacture of products and systems for use in the inspection of sealed
containers of all kinds. The Consultant further agrees that, during the
Restrictive Covenant Period, he shall not knowingly call upon, solicit,
divert, attempt to solicit or divert, or conduct or carry on any business
with any of the former clients, current clients or potential clients of
BENTHOS known to the Consultant as the result of his work for BENTHOS with
respect to any business similar to any of the Competitive Businesses or any
other business conducted by BENTHOS during the Restrictive Covenant Period.
Nothing herein shall be construed to prohibit the Consultant from making a
passive investment of less than 5% in the outstanding shares of capital stock
of a corporation engaged in the Competitive Businesses whose securities are
registered pursuant to the Securities Exchange Act of 1934, as amended.
2. The Consultant further agrees that, during the Restrictive Covenant Period,
he will not knowingly, directly or indirectly, (i) solicit the employment or
engagement for his own account or for others, nor hire, any employee, agent,
consultant or business contact of BENTHOS who was such at any time during the
last twelve (12) months of the Consultant's engagement by BENTHOS, or (ii)
induce any employee of BENTHOS to leave the employ of BENTHOS, unless in each
case the Consultant obtains the prior written consent of BENTHOS.
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3. The parties agree and acknowledge that the duration, scope and geographic
area of the covenant not to compete described in this paragraph are fair;
reasonable and necessary in order to protect the good will and other
legitimate interests of BENTHOS, that adequate consideration has been
received by the Consultant for such obligations, and that these obligations
do not prevent the Consultant from earning a livelihood. If, however, for any
reason any court determines that the restrictions in this paragraph are not
reasonable, that consideration is inadequate or that the Consultant has been
prevented unlawfully from earning a livelihood, such restrictions shall be
interpreted, modified or rewritten to include as much of the duration, scope
and geographic area identified in this paragraph as will render such
restrictions valid and enforceable.
4. It being acknowledged and agreed by the Consultant that BENTHOS distributes
its products and performs services throughout the [world), the term
"Restricted Market" shall mean and refer to the entire world.
O. REMEDIES
The Consultant acknowledges that he has carefully read and considered the terms
of this Agreement and knows them to be essential to induce BENTHOS to enter into
this Agreement and that any breach of the provisions contained herein will
result in serious and irreparable injury to BENTHOS. Therefore, in the event of
a breach of this Agreement, BENTHOS shall be entitled, in addition to any other
remedy at law or in equity to which BENTHOS may be entitled, to (i) an
accounting and repayment of all profits, compensation, remuneration or other
benefits that the Consultant may realize arising from or related to any such
breach, (ii) recovery of all payments made by the Company to the Consultant
hereunder, and (iii) equitable relief against the Consultant, including, without
limitation, an injunction to restrain the Consultant from such breach and to
compel compliance with this Agreement in protecting or enforcing its rights and
remedies and enforcement of specific performance by the Consultant of this
Agreement.
P. SIGNATURES
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed
by their duly authorized officers of representatives, and have caused their
seals to be hereto affixed as of the day and year first below written.
ATTEST BY DATE
Benthos, Inc. /s/ [SIGNATURE ILLEGIBLE 18 JUL 94
------------------------ ---------
William D. McElroy /s/ William D. McElroy 7/18/94
----------------------- ---------
7
<PAGE>
SCHEDULE A
SCOPE OF RESPONSIBILITIES
1. The primary responsibility of the Consultant under the terms of this
Agreement is to provide technical support to BENTHOS in support of its
ongoing projects and programs. The Consultant agrees to provide such
electronic engineering and design services as may from time to time be
requested by BENTHOS and agreed to by the Consultant. Such services shall
include, but are not limited to:
Electronic/electrical design
Software design
Systems design
Circuit/system troubleshooting
Proposal/technical writing Pricing/costing of products and projects
2. It is intended that the services required to fulfill this Agreement will be
performed either at the offices of the Consultant, or the offices of BENTHOS.
In either event, the work would be carried out in or near the town of
Falmouth, MA. If, from time to time, travel is requested by BENTHOS to better
serve their needs, it will be scheduled by mutual agreement.
3. BENTHOS understands that the Consultant will be providing consulting services
only, and that any material and or special test equipment required to
accomplish the tasks detailed by BENTHOS as part of this contract will either
be supplied by BENTHOS or paid for by BENTHOS at the Consultant's cost plus
10% for handling. No such material commitments will be made by the Consultant
without the approval of BENTHOS. Any material or special equipment paid for
by BENTHOS will become the property of BENTHOS.
4. BENTHOS is contracting with the Consultant for services at a rate prescribed
in paragraph D of the Agreement. It is the intent that for this fee the
Consultant will provide services 24 hours per week. It is understood by
BENTHOS that the actual scheduling of the tasks will be made by mutual
agreement with the Consultant. The Consultant will provide an average of 24
hours per week of engineering services. If effort above the level contracted
for in this Agreement is required to meet the needs of BENTHOS, additional
hours can be authorized by BENTHOS, with the consent of the Consultant, at
the rate prescribed in section D.
8
<PAGE>
GENERAL RELEASE AND SETTLEMENT AGREEMENT
AGREEMENT made this 8 day of February, 1996 between LAWRENCE W. GRAY, of
323 Hatchville Road, East Falmouth, Massachusetts 02536 ("Gray") and BENTHOS,
INC., a Massachusetts corporation with a usual place of business situated at 49
Edgerton Drive, North Falmouth, Massachusetts 02556 ("Benthos").
W I T N E S S E T H:
WHEREAS, Gray was employed by Benthos from December 31, 1974 through June
5, 1995;
WHEREAS, Gray is the owner of 12,948 shares of the common capital stock of
Benthos;
WHEREAS, Gray and Benthos are desirous of executing and delivering a
mutually satisfactory agreement with respect to the resolution of any issues
regarding certain stock options related to the stock of Benthos which options
were issued by Benthos to Gray, severance benefits of Gray, and the terms and
conditions to be satisfied by Gray and Benthos in connection therewith;
WHEREAS, Gray and Benthos want to reduce their agreement with respect to
such arrangement to writing.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Gray and Benthos hereby mutually agree as follows:
1 . Gray hereby acknowledges that Benthos requested that Gray resign as
President of Benthos. Benthos informed Gray that if Gray did not resign Gray
will be removed forthwith as President by the Board of Directors of Benthos. As
an accommodation to Benthos and to eliminate the need for a Board of Directors
meeting, Gray resigned as President of Benthos effective June 5, 1995 (The
"Termination Date"). On the date hereof, Gray will execute and deliver his
resignation as a Director of Benthos to the President of Benthos, the form of
which resignation is attached hereto as Exhibit A. Gray hereby waives any rights
he may have had or now has, if any, and releases Benthos from any and all claims
under or with respect to any stock options issued to Gray by Benthos with
respect to the stock of Benthos, including without limitation those certain
Stock Option Agreements, dated October 26, 1990 and March 4, 1994, and hereby
acknowledges that after the date hereof he will have no equity interest of any
kind in Benthos.
1
<PAGE>
2. Subject to the conditions of this Agreement, Benthos shall:
(a) Pay Gray the sum of One Hundred Seventy-One Thousand Five Hundred
and no/100 ($171,500.00) Dollars as follows:
(i) Benthos has previously paid to Gray and Gray hereby
acknowledges
receipt of the sum of Twenty One Thousand Five Hundred and no/100 ($21,500.00)
dollars during the period from June 5, 1995 to August 14, 1995.
(ii) Gray hereby acknowledges that Benthos paid one half of
Gray's health
and dental insurance coverage ("Coverage") from June 5, 1995 through August 14,
1995. After August 14, 1995, Gray shall be solely responsible for the payment of
the premiums for his Coverage.
(iii) The balance of $150,000.00 will be paid to Gray by Benthos in
seventeen (17) consecutive equal monthly installments of $8,823.53 each,
commencing of that date which is the eighth (8th) day after the date hereof,
with like payments on the same day of each month thereafter until fully paid,
provided that Gray has not revoked this Agreement pursuant to Paragraph 9 (e)
hereof. The acceptance and negotiation by Gray of the check representing the
first monthly installment shall be conclusive of the waiver by Gray of his
revocation rights set forth in Paragraph 9 (c).
(b) Redeem the 12,948 shares of the common capital stock of Benthos
currently held by Gray at a redemption price of $7.00 per share for an aggregate
redemption price of $90,636.00. On the date hereof, Gray will endorse and
deliver all stock certificates representing said shares in blank, and execute
and deliver such other documents as Benthos may reasonably request to effectuate
the transfer of the shares from Gray to Benthos. The transferred shares and a
check from Benthos in the sum of $70,000.00 in immediately available funds
payable to the order of Gray will be held in escrow by John T. Lynch, Esq., of
the law firm of Davis, Malm & D'Agostine. P. C., One Boston Place, Boston,
Massachusetts 02108 ("Lynch"). On the eighth (8th) day following the date
hereof, provided that Gray has not revoked this Agreement pursuant to Paragraph
9 (e) hereof, then Lynch will release from escrow the transferred shares to
Benthos, and the check ill the sum of $70,000.00 to Gray. The remaining sum of
$20,636.00 which represents the proceeds of the redemption of 2,948 shares of
ESOP stock shall be transferred directly to an Individual Retirement Account
pursuant to the written instructions of Gray. Benthos shall have no obligation
with respect to the transfer of said sum to the Individual Retirement Account
other than complying with the written instructions of Gray. In the event that
Gray shall have revoked this Agreement pursuant to Paragraph 9 (c), Lynch will
return the check to Benthos and the shares to Gray. Benthos and Gray will
indemnify and hold Lynch harmless with respect to acting as escrow agent
hereunder provided that Lynch acts in good faith in accordance with the terms
and provisions hereof.
(c) Transfer the ownership of the following Benthos personal property
from
2
<PAGE>
Benthos to Gray, all of which property is currently in the possession of Gray:
<TABLE>
<CAPTION>
Personal Property Cost to Benthos
----------------- ---------------
<S> <C>
LaserJet 2P Printer $879.00
Delrina Software $ 94.45
Modem $146.49
CD/ROM w/sound card $290.85
Telephone Autoswitch $165.00
-------
$1,575.79
</TABLE>
Benthos may withhold any taxes or other amounts which are required to be
withheld from all payments made by Benthos to Gray hereunder.
All payments being made hereunder shall continue until fully paid, provided
that, in the event of the breach of any of the terms and conditions of this
Agreement by Gray, Benthos, in its sole discretion shall have the right to
terminate all payments to Gray hereunder and Gray shall be required to refund
all monies to Benthos which have been paid hereunder prior to any such breach.
If Gray does not agree that a breach has occurred, then Gray may by written
request to Benthos request that the issue of the existence or nonexistence of a
breach be resolved by arbitration. Such arbitration shall be held in Boston,
Massachusetts in accordance with the Commercial Arbitration rules of the
American Arbitration Association before three arbitrators who shall have
experience in general business and commercial matters. The decision of the
arbitrators shall be final, conclusive and binding on the parties. Judgement may
be entered on the arbitrators' decision in any court having jurisdiction. Gray
and Benthos shall each pay one half of the costs and expenses of the
arbitrators. Gray and Benthos will be responsible for their own legal fees and
costs.
3. For a period of two (2) years commencing on the date hereof, Gray will
not, whether as a director, officer, agent, employee, stockholder or consultant,
engage in any business or commercial activity which is or may be competitive
with products and services being developed, marketed, distributed, sold, or
licensed by Benthos as of the Termination Date.
4. Gray shall not slander, libel or otherwise disparage Benthos, its
officers, employees, directors, agents or assigns. Gray shall keep the terms and
conditions of this Agreement strictly confidential and shall not disclose the
same, other than on an as-needed basis to his attorney, accountants, tax
advisers, or as required by government regulation or court order. To the extent
that Gray intends to disclose the terms of this Agreement in accordance with the
preceding sentence, Gray shall inform the recipients of the information of the
need for strict confidentiality and shall obtain appropriate written assurances
from them to maintain the confidentiality or such information.
3
<PAGE>
5. Gray represents and warrants that, with the exception of the personal
property listed in Paragraph 2 (c), he has returned to Benthos all property and
materials of Benthos, including but not limited to, all confidential or
proprietary information, and that he no longer has possession, custody or
control of any such property or materials. Gray acknowledges that during the
term of his employment he learned information of a secret or confidential nature
which is proprietary to Benthos. Gray represents and warrants that he has never
breached or interfered with, and will not breach or interfere with in the
future, the intellectual property rights of Benthos. Confidential information
consists of all information pertaining to the business of Benthos which is not
generally known to the public at the time made known to Gray. It includes, but
is not limited to, trade secrets; secret and confidential information of Benthos
and of third parties; personal, financial and account information regarding
Benthos customers or employees; business, pricing, and marketing plans; leasing
information and terms; development and growth plans; contract terms; employee,
customer, vendor, supplier, and prospect lists; and all information specifically
designated as "Proprietary, or "Confidential." Gray shall not disclose, use,
copy or retain any confidential business information, employee records or trade
secrets belonging to Benthos. Benthos' customers or Benthos' suppliers and
represents that he has returned all copies of any such information to Benthos
prior to the execution of this Agreement.
6. With the sole exception of his right to enforce the terms of this
Agreement, Gray hereby fully, forever, irrevocably and unconditionally release,
remises and discharges Benthos, its predecessors, subsidiaries, affiliates,
current and former officers, directors, stockholders, agents and employees, from
any and all claims, charges, complaints, demands, actions, causes of action,
suits, rights, debts, sums of money, costs, accounts, reckoning, covenants,
contracts, agreements, promises, doings, omissions, damages, executions,
obligations, liabilities and expenses (including attorneys' fees and costs), of
every kind and nature, which Gray ever had or now has against Benthos, its
predecessors, subsidiaries, affiliates, current and former officers, directors,
stockholders, agents and employees, including, but not limited to, all claims
arising out of his employment and all claims with respect to any rights Gray may
have under any kind of bonus plan, stock option agreement or equity plan with
Benthos. This general release of claims includes, but is not limited to, any and
all claims for wrongful discharge, wrongful termination or wrongful dismissal;
any and all claims for breach of an express or implied contract, covenant or
agreement; any and all claims for unlawful discrimination (including, but not
limited to, claims allegedly based on race, sex, sexual preference, religion,
creed, age, handicap, national origin, ethnic history, ancestry, veteran status
or retaliation, and any and all claims arising under Title VII of the Civil
Rights Act, 42 U.S.C. (S) 2000 et seq., M.G.L. c. 151B, (S) 1 et seq., or based
------ ------
on any other protected classification); any and all claims under the Age
Discrimination in Employment Act. as amended; and all claims for damages arising
Out of any such claim. Gray further acknowledges and affirms that he does riot
intend to assert causes of action or claims against any other individuals not
specifically named herein who are now or were formerly affiliated with Benthos.
7. Gray represents and warrants that:
4
<PAGE>
(a) he has not filed any complaints, charges, or claims for
relief against Benthos, its officers, directors, stockholders, agents, employees
or former employees with any local, state or federal court, administrative
agency or other body which currently are outstanding, and that no has no
knowledge of, and has not encouraged, such filings by others;
(b) the 12,948 shares of Benthos that are being redeemed by
Benthos from Gray are free and clear of all liens and encumbrances, and
constitute all of the stock of Benthos owned by Gray; and
(c) he is not a party to any agreement, or subject to any court
order, decree, legal restraint or otherwise which would prohibit him from
transferring the 12,948 shares of stock to Benthos or enterning into this
Agreement and carrying out the provisions hereof.
8. It is understood and agreed by the parties hereto that this Agreement
is a settlement agreement and does not constitute any admission of liability or
wrongdoing. Benthos and Gray specifically deny any intentional, willful or
deliberate misconduct toward each other as well as any liability, for any other
person's intentional, willful or deliberate misconduct toward the other party,
if any.
9. In consideration of the promises by Benthos contained in this
Agreement, Gray hereby knowingly and voluntarily waives all rights and claims he
may have under the Age Discrimination in Employment Act, as amended, against
Benthos, its predecessors, subsidiaries, affiliates, current and former
officers, directors, stockholders, agents and employees. In doing so, Gray
acknowledges that:
(a) This waiver does not apply to any rights Gray may have that
arise after the date of his signature below;
(b) This Agreement provides Gray with certain benefits of value
to Gray that are in addition to benefits to which Gray would have been entitled
in the absence of this Agreement:
(c) Gray has been represented by legal counsel since on or about
June 5, 1995 in connection with the matters set forth herein arid specifically
with respect to the execution and delivery of this Agreement;
(d) Gray has had at least twenty-one (21) days to consider the
terms of this Agreement; and
(e) Gray has a period of seven (7) days from the date hereof in
which he may revoke this Agreement, and that this Agreement will not become
effective unless and until the revocation period has expired without his having
exercised his right to revoke the Agreement and this waiver. Gray will be deemed
to have waived such right of revocation if written notice of
5
<PAGE>
revocation has not been received by Benthos and Lynch prior to the eighth (8th)
day after the date of this Agreement.
10. For a period of ten (10) years after the date hereof, Gray will not own
directly or indirectly any stock of Benthos, seek to be or be employed by
Benthos, attempt to be or be engaged as a consultant by Benthos, or attempt to
be elected to or serve as a member of the Board of Directors of Benthos Gray
hereby withdraws any stockholder proposals or stockholder nominations for the
Board of Directors of Benthos which Gray may have heretofore made and hereby
acknowledges that any such outstanding proposals or nominations, if any, are
hereby withdrawn and shall he void. Gray will execute and deliver any such
documents or instruments as may be reasonably requested by Benthos to confirm
the withdrawal and/or waiver by Gray of any such proposal or nomination.
11. Gray and Benthos shall be responsible for their own attorneys' fees in
connection with this Agreement.
12. This Agreement shall be binding upon the parties and may not be
abandoned, supplemented, changed or modified in any manner, orally or otherwise,
except by an instrument in writing of concurrent or subsequent date signed by a
duly authorized representative of the parties hereto.
13. Should any provision of this Agreement be declared or he determined by
any court of competent jurisdiction to be illegal or invalid, the validity of
the remaining parts, terms or provisions shall not be affected thereby and said
illegal or invalid part, term or provision shall be deemed not to be a part of
this Agreement.
14. This Agreement contains and constitutes the entire understanding and
agreement between the parties hereto with respect to the settlement of this
matter and cancels all previous oral and written negotiations, agreements,
commitments, understandings and writings in connection herewith.
15. The parties affirm that no other promises or agreements of any kind
have been made 10 or with them by any person or entity whatsoever to cause them
to sign this Agreement, and that they fully understand the meaning and intent of
this Agreement. The parties state and represent that they have had an
opportunity to fully discuss and review the terms of this Agreement with their
respective attorneys. They further state and represent that they have carefully
read this Agreement, understand the contents hereof, freely and voluntarily
assent to all of the terms and conditions hereof, and sign the Agreement as
their free act.
16. Notices: Any notice, request, instruction or other document given
-------
hereunder by either party hereto to the other party hereto shall be in writing
and delivered personally or sent by registered, certified mail, postage prepaid,
6
<PAGE>
if to Benthos, to:
Benthos, Inc.
49 Edgerton Drive
North Falmouth, MA 02556
Attention: Samuel O. Raymond, President
with a copy to:
John T. Lynch, Esq.
Davis, Malm & D'Agostine, P.C.
One Boston Place
Boston, MA 02108
if to Gray, to:
Lawrence W. Gray
323 Hatchville Road
East Falmouth, MA 023S6
with a copy to:
Richard W. Kearney, Esq.
Kearney & Silverman
210 Jones Road
Falmouth, MA 02540
or such other address as shall be specified by like notice. Any notice that is
delivered personally in the manner provided herein shall he deemed to have been
duly given to the party to whom it is directed upon actual receipt by such
party. Any notice that is addressed and mailed, postage prepaid, in the manner
herein provided shall be conclusively presumed to have been duly given to the
party to which it is addressed at the close of business, local time of the
recipient on the fourth business after the day it is so placed in the mail. Any
notice sent by overnight mail service, will be presumed to have been duly given
to the party on the next subsequent day after such overnight mail is sent.
17. This Agreement may be executed in two or more counterparts each of
which shall be signed as an original but all or which together shall constitute
one and the same instrument.
18. This Agreement has been entered into in the Commonwealth of
Massachusetts, shall he interpreted in accordance with the law of the
Commonwealth of Massachusetts and shall take effect as a sealed instrument.
7
<PAGE>
IN WITNESS WHEREOF. Benthos and Gray have executed this document on the day
and year first above written.
[SIGNATURE ILLEGIBLE] /s/Lawrence W. Gray
- ---------------------- ---------------------
Witness Lawrence W. Gray
BENTHOS, INC.
______________________ By ____________________________
Witness Samuel O. Raymond, President
8
<PAGE>
IN WITNESS WHEREOF, Benthos and Gray have executed this document on the day
and year first above written.
_____________________ ______________________________
Witness Lawrence W. Gray
BENTHOS, INC.
[SIGNATURE ILLEGIBLE] By /s/Samuel O. Raymond
- --------------------- -----------------------------
Witness Samuel O. Raymond, President
9
<PAGE>
EXHIBIT A
February 8, 1996
Samuel O. Raymond, President
Benthos, Inc.
49 Edgerton Drive
North Falmouth, Massachusetts 02556
Dear Sam:
I, the undersigned Lawrence W. Gray, at the request of Benthos hereby
resign as a Director of Benthos, Inc. effective as of the date hereof.
Sincerely,
/s/ L W. Gray
Lawrence W. Gray
10
<PAGE>
[LETTERHEAD CCB&T APPEARS HERE]
LINE OF CREDIT
LOAN AGREEMENT
To: Benthos, Inc.
--------------------------
Edgerton Drive
--------------------------
N. Falmouth, MA 02556
--------------------------
CAPE COD BANK and TRUST Co. (THE "BANK") is pleased to confirm that we may, in
our sole discretion, make loans to BENTHOS, INC.
--------------------------------------------
(The "Borrower" from time to time, on the following terms and conditions.
In consideration of the mutual covenants contained in this Loan Agreement dated
this 24th day of September , 1990, and other good and valuable
---- --------- ----
consideration, receipt of which is hereby acknowledged, the parties represent,
warrant. covenant and agree as follows:
1. LINE OF CREDIT: You may borrow, repay and reborrow from us such amounts
(Individually, a "Loan" and collectively, the "Loans") as you may from time
to time request, but not exceeding the Line of Credit (the "Line")
established in the amount of ($1,500,000.00) One Million Five Hundred
---------------------------------------
Thousand Dollars.
--------
The Loans shall be evidenced by a single demand note (the "Note") in the
principal amount of the Line of Credit. The unpaid principal of the Note
shall bear interest (computed on the basis of the actual number of days
elapsed over a 360 day year) prior to demand for the payment thereof at *
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx After demand, the unpaid principal
of the Note shall bear Interest until paid at a rate which at all times is
three (3%) percentage points above the rate of interest otherwise payable
hereunder.
*First National Bank of Boston Prime Rate
You will be required to pay an annual Line of Credit fee of Line fee is
------------------
waived of our loan commitment or $100.00, whichever is greater. This fee must
------
be paid at time of execution of this Line of Credit Loan Agreement and
annually thereafter.
2. INSTRUCTIONS TO MAKE ADVANCES: You hereby authorize us to make Loan advances
to you by crediting your account (the "Account") number 311 134 2 01
--------------------
maintained with the Cape Cod Bank and Trust Company upon receipt of
information as to the amount of the loan request communicated to us by draft
or by telephone or by other oral request from any one of the individuals
listed in Exhibit A attached hereto ("Authorized Persons"). Each such request
shall be confirmed in writing by you, over the signature(s) of the necessary
Authorized Persons and shall indicate the date and the amount of the Loan
advanced and the revised principal balance of the Note. Your written and
acknowledged confirmation must be returned to us not later than three (3)
business days after the date of the request.
3. MAKING OF PAYMENTS: You authorize us to charge your Account for monthly
interest payments due under the Note and this Loan Agreement, such charges to
be made as payments become due,
Any Loan advances may be repaid in whole or in part at any lime and from time
to time prior to demand, upon advice to us by telephone or other oral request
from any one of the Authorized Persons. Upon receipt of such advice,
repayment will be effected by charging your Account for the principal amount
of such payment. You agree to confirm such telephone or other oral
instructions by delivering to us no later than three (3) business days after
said advice a confirmation setting forth the amount of such payment, the date
of the transaction and the revised principal balance of the Note and signed
by an Authorized Person.
<PAGE>
PAGE 2
LINE OF CREDIT
LOAN AGREEMENT
4. AMOUNT OF ADVANCES/PAYMENTS: All borrowing under the "Line will be in the
amount of $5,000 (Five Thousand Dollars) or more.
5. ELECTION TO MAKE ADVANCES: You agree that your compliance with your
performance of the provisions of this Agreement shall not obligate us to
make any Loan advances and that we shall make the Loan advances in our sole
and absolute discretion. You agree further that the records of advances
against and payments to the Note maintained by Cape Cod Bank and Trust
Company shall be conclusive evidence of all such payments and Loan advances.
6. PAYMENT OF EXPENSES: You will be responsible for all expenses in connection
with the negotiation, preparation, execution, administration, amendment or
enforcement of this Loan Agreement and the making, collection and issue of
all Loans, including, without limitation, the reasonable fees and
disbursements of our legal counsel.
7. FINANCIAL STATEMENTS: You agree to deliver or cause to be delivered to us
not more than one hundred twenty (120) days after the close of each fiscal
year, a complete set of financial statements for your business to include
such detail, reports and supporting schedules as are satisfactory to us in
our sole and absolute discretion.
The individuals and/or officers agrees to provide the "Bank" with their
personal financial statements on an annual basis to coincide with the
anniversary date of the "Line."
Such financial statements may include, but are not limited to the following:
Balance sheets, statements of income, surplus accounts, statements of
changes in financial position, a certificate signed by the chief executive
officer and chief financial officer of the Company indicating whether the
Company has observed, performed and fulfilled all of these obligations under
this agreement, copies of all reports to or from any government or agency,
written notice of any litigation, arbitrations, or any proceedings before
governmental agency which would materially affect the company or any
subsidiary, any information respecting the business, operation and financial
condition of the company or any subsidiary, and all tax information,
assessments, and governmental charges upon or against the company or its
subsidiaries.
8. RIGHT TO PAYMENT ON DEMAND: The "Bank" shall have. the right to have this
Line of Credit payable on demand for any reason it deems necessary.
9. SECURITY INTEREST: The "Bank" may require security for this Line of Credit
Loan at any time.
10. RIGHT TO PAYMENT FOR (30) CONSECUTIVE DAYS: The "Bank" shall have the right
to payment of the Line of Credit in full for at least (30) consecutive days
during any one year period.
II. LIEN: SET OFF BY BANK: The Company hereby grants to the Bank a continuing
lien for all Indebtedness of the Company to the Bank for all monies,
securities, and any other property of the Company and the proceeds thereof,
now or hereinafter held or received by the Bank from or for the Company.
Upon the occurrence of any Default, the Bank is hereby authorized at any
time and from time to time, without notice to the Company, to set off,
appropriate, and apply any or all Items hereinabove referred to against all
indebtedness of the Company to the Bank, whether under this Agreement, the
Note, or otherwise, and whether now existing or hereinafter arising.
12. DEFAULT: If any one or more of the following events shall occur for any
reason, that is:
A. if you or your Company or any Subsidiary shall fail to make a payment
when due of the principal or Interest of the Note:
B. If default shall be made in the performance or observance of, or shall
occur under, any covenant, agreement, or other provision of this agreement
or In any instrument or document delivered to the "Bank" in connection with
or pursuant to this Agreement, or if any such Instrument or document shall
terminate or become void or unenforceable without the written consent of the
"Bank";
C. If default shall occur in any payment with respect to any Indebtedness
for borrowed money of the Company or any Subsidiary or under any agreement
or Instrument under or pursuant to which any Indebtedness may have been
Issued, created, assumed, or guaranteed by the company or any subsidiary,
and If any such Indebtedness snail be declared due and payable prior to the
stated maturity thereon;
**Unless otherwise consented to in writing by the Bank, the borrower hereby
covenants as follows:
I. At the end of any fiscal year of the borrower, the borrower will not
commit the ratio of consolidated current assets to consolidated current
liabilities to be less than one to one.
II. The borrower will not at any time permit the ratio of consolidated
indebtedness to consolidated tangible net worth to be more than 1.5 to
1.
<PAGE>
PAGE 3
LINE OF CREDIT
LOAN AGREEMENT
D. If default shall occur in the payment of the principal, interest, or
premium with respect to any Indebtedness for borrowed money with this
"Bank" or any Subsidiary of this "Bank";
E. if any representation or any other statement of facts herein or in any
writing furnished to the "Bank" pursuant to or in connection with this
Agreement1 shall be false or misleading in any material respect;
F. If the Company or any Subsidiary admits in writing or otherwise the
inability to pay its debts;
G. If the Company or any Subsidiary shall become insolvent, subject to
bankruptcy proceedings, or the court enters an order appointing a
receiver, trustee, liquidator, or conservator of the Company, or any
Subsidiary;
H. If any judgment against the Company or any Subsidiary or any attachment
or execution against any of its property for any amount remains unpaid,
unstayed, or undismissed;
I. In the event that the "Bank" has taken security, if the ownership of
such security becomes Encumbered in any way;
J. If the Company or any Subsidiary exceeds its credit line;
K. If at any time the "Bank" shall discover a material change in the
financial condition or business prospects of the Company or any
Subsidiary;
L. If at any time the "Bank" shall consider the Indebtedness of the Company
to the "Bank" insecure and the Company shall not on demand furnish other
security or make payment on account, satisfactory to the "Bank";
Then and In the event of any of the above listed defaults, the "Bank" may, at
its option, declare the Note to be due and payable, without presentment,
demand, protest, or notice of any kind, all of which are hereby expressly
waived.
13. CERTAIN DOCUMENTS AND OTHER ITEMS: Prior to requesting the Initial Loan
advance, you shall furnish us with each of the following, each duly
executed and dated the date of your acceptance of this Loan Agreement.
A. RESOLUTIONS: A copy, duly certified by your Clerk/Secretary, of:
(1) the resolutions of your Board of Directors authorizing the
borrowings hereunder and the execution and delivery of this Loan
Agreement and the Note, as In Exhibit B (2) all documents
evidencing other necessary corporate action and other approvals or
consents, if any, with respect hereto.
B. NOTE: Your Note payable to our order.
C. AGREEMENTS: If the "Borrower" is a Trust or Partnership, a copy of
the recorded Declaration of Trust Agreement and Schedule of Trust
Beneficiaries. A copy of the Partnership Agreement and all
documents pertaining to said Partnership Agreement.
D. INCUMBENCY: A certificate of your Secretary/Clerk certifying the
names of the officers authorized to sign this Loan Agreement, the
Note and any other documents and certificates to be delivered by
you hereunder, together with the true signatures of such officers.
E. OPINION: We may, at our sole and absolute discretion, require legal
counsel opinions addressed to us, to the effect that; (1) you are a
corporation duly organized, validly existing and in good standing
under the laws of the Commonwealth of Massachusetts; (2) you have
full power to borrow monies hereunder, to execute and deliver this
Loan Agreement and the Note and that all such actions have been
duly authorized by all necessary corporate action, and are not in
conflict with any provision of law or of your charter or bylaws;
(3) this Loan Agreement and the Note are your legal and binding
obligations, enforceable in accordance with their terms.
14. GENERAL
A. AMENDMENTS: TERMINATION: This Loan Agreement may be amended only by
a written statement signed by both parties hereto. This Loan
Agreement may be terminated at any time by either of us by written
notice to the other, but no such termination shall all affect or
impair the obligations theretofore incurred by you hereunder.
B. EXPIRATION/RENEWAL: The "Line" will be subject to an ANNUAL REVIEW
upon receipt of the required annual financial statements. All
borrowings under the "Line" must be paid out in full for a minimum
of 30 days during each twelve month period. The "Bank" reserves the
right to REVOKE a Line of Credit at its sole discretion in any
event of default or upon 30 days from a written notice to the
"Borrower" as defined in the promissory note or loan agreement.
<PAGE>
PAGE 4
LINE OF CREDIT
LOAN AGREEMENT
C. DEPOSITORY ACCOUNT: The "Borrower" will be required to maintain
their principal deposit accounts with the "Bank."
15 GOVERNING LAW: This Loan Agreement, the Note and all documents and
Instruments in connection herewith shall be governed by and interpreted
in accordance with the laws of The Commonwealth of Massachusetts.
If the foregoing is acceptable, please indicate your agreement therewith by
signing the copy hereof where indicated below.
Very truly yours
CAPE COD BANK and TRUST COMPANY
By: /s/James M. McEvoy
---------------------------------
James M. McEvoy
Title: Senior Vice President
-----------------------------
The foregoing is agreed to this 24th day of September , 1990 .
---- ---------------- --------
/s/ L. W. Gray /s/ Richard L. Mappes
- ----------------------------- ---------------------------------------
Lawrence W. Gray, President Richard L. Mappes, Treasurer
_____________________________ ______________________________________
_____________________________ ______________________________________
_____________________________ ______________________________________
<PAGE>
[LETTERHEAD OF CCB&T APPEARS HERE]
April 4, 1996
J. Luke Sabella, C.F.O.
Benthos, Inc.
49 Edgerton Road
North Falmouth, MA 02556-2826
Dear Luke:
I am pleased to inform you that Cape Cod Bank and Trust has renewed your
$1,500,000 Line of Credit with the following terms and conditions:
I. TERMS OF LINE OF CREDIT
Borrower: Benthos, Inc.
Amount: $1,500,000.00.
Rate: National Prime.
Expiration Date/Renewal: January 31, 1997. Your Line of Credit may be
renewed on an annual basis. The renewal will be subject to a satisfactory
review of the company's year end audit, interim financial statements and
projected cash flow.
Repayment: Interest only.
Security: Unsecured.
II. ADDITIONAL COVENANTS AND CONDITIONS
Minimum current ratio of 1.1 to 1.
Maximum debt to worth ratio of 1.5 to 1.
Debt service coverage no less than 1.3X.
<PAGE>
Representation: All representations made by the borrower to the bank in
conjunction with this loan are deemed to be material and have been relied
upon by the bank issuing this commitment.
Line Clearance: The secured Line of Credit will clear for a minimum of
thirty (30) consecutive days in the course of one year from the date of
its
Financial Reporting: Receipt of C.P.A. audit within 120 days from the
company's fiscal year-end. Monthly, management prepared, interim
financials and cash flow projected budget.
This commitment is conditional upon the acceptance of these terms and conditions
by signing and returning the enclosed copy of this leffer by April 24, 1996.
Sincerely,
CAPE COD BANK & TRUST COMPANY
Timothy F. Kelleher
Vice President
/s/T.J. Kelleher
Benthos, Inc. accepts the terms and conditions of this letter.
Benthos, Inc.
Date 4/12/96 By /s/J. Luke Sabella
------- ---------------------------------
J. Luke Sabella, C.F.O.
<PAGE>
COMMERCIAL MORTGAGE LOAN
------------------------
EXTENSION AND MODIFICATION AGREEMENT
------------------------------------
July 6, 1994
Cape Cod Bank and Trust Company, a Massachusetts banking company
(hereinafter the Bank), is the holder of a certain Commercial Mortgage Loan
(hereinafter the Loan) dated
September 24, 1990 from
Benthos, Inc., a corporation organized under the laws of the Commonwealth
of Massachusetts with a principal office at Edgerton Drive, North Falmouth,
Massachusetts,
collectively called the Borrower, in the original principal amount of
$1,000,000.00 with an outstanding balance as of the date hereof of $914,954.42;
and
WHEREAS, the Loan is secured by, among other collateral, a Mortgage
(hereinafter the Mortgage) concerning premises known as and numbered Lots 1, 2
and 3 Edgerton Drive, North Falmouth, Massachusetts, more particularly described
in the Mortgage (hereinafter the Premises) dated September 24, 1990 and recorded
with the Barnstable County Registry of Deeds in Book 7300, Page 344, and
registered with the Barnstable Registry District of the Land Court as Document
No. 514232; and
WHEREAS, the Loan is, or will become, due and payable in full on February
24, 1997, and the Bank is willing to extend the time for repayment to:
1) July 24, 2004,
upon the terms and conditions contained herein; and the Borrower is desirous to
extend the time for repayment of the Loan.
NOW, THEREFORE, for good and valuable consideration paid, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree that the
Loan, Mortgage, and any and all other agreements, instruments or documents
executed or delivered in connection with the establishment of the Loan
arrangement (hereinafter the Loan Documents) are amended as follows:
I. INTEREST RATE
-------------
The interest rate to be in effect with respect to the Loan commencing July
24,1994 shall be that rate (calculated based upon a 360-day year and actual days
elapsed) which is:
1) Fixed at the rate of nine and one-quarter (9.25 %) percent per annum
for ten years.
1
<PAGE>
II. PAYMENTS: EXTENDED MATURITY DATE
--------------------------------
Commencing on August 24, 1994 and continuing on the same day of each month
thereafter, the Borrower shall repay the Loan by making:
1) Based on a 195-month amortization, consecutive equal monthly
installments of principal and interest, each of which, but the last,
shall be in the amount of $9,085.34.
UNDER OPTION 1
The FINAL PAYMENT, equal to the entire unpaid principal balance of the Loan
and all accrued and unpaid interest thereon, together with any unpaid fees,
costs and expenses shall be due and payable on July 24, 2004, (Extended Maturity
Date).
The Bank has no obligation to the Borrower or Guarantors to extend or renew
the Loan beyond the Extended Maturity Date.
III. FEES & EXPENSES
---------------
The Borrower shall pay all expenses in connection with the preparation,
execution and enforcement of this Agreement.
IV. ACCESS TO PREMISES
------------------
The Borrower, if required, shall provide complete access to the Bank or its
agents for the purposes of obtaining one additional real estate appraisal during
the term of the Loan or performing environmental analysis, including on-site
environmental testing. Borrower shall cooperate fully with any representatives
of the Bank in connection with any such action or request, and pay any fees
related thereto.
V. REPRESENTATIONS AND WARRANTIES
------------------------------
The undersigned hereby warrants and represents as follows:
(1) The Borrower is the owner of the Premises, free and clear of all
voluntary and involuntary liens and encumbrances, except for the
Mortgage.
(2) All taxes and any other fees due and payable with respect to the
Premises have been paid in full as evidenced by documentation provided
to the Bank herewith.
(3) Copies of all current insurance policies, including general liability
coverage, have been furnished to the Bank. All insurance premiums have
been paid in full.
(4) The Borrower and Guarantors will immediately furnish any missing
documents or information required by the Bank.
2
<PAGE>
VI. COVENANTS
---------
(1) Furnish Bank monthly within 20 days after the close of each monthly
period a balance sheet and income and surplus statement reflecting the
financial condition of Borrower at the end of each such period and the
results of its operation during each such period. Said statements must
be satisfactory to the Bank.
(2) Furnish Bank annually, within 90 days after the close of each fiscal
year, a balance sheet and income and surplus statement reflecting the
financial condition of Borrower at the end of each such fiscal year
and the results of its operation during each fiscal year. Each such
balance sheet and income and surplus statement is to be audit quality
prepared by an independent certified public accountant satisfactory to
the Bank.
(3) The Borrower will furnish the Bank (if any) with executed copies of
all leases and inform the. Bank of any changes in occupancy or lease
terms at the Premises. No lease terms will be committed to that would
cause a negative impact on tenancy or the value of the Premises.
(4) The Borrower shall maintain, as of the end of each fiscal year, debt
service coverage of not less than 1.3 to 1. Said coverage ratio will
be determined as follows: From the income statement, the aggregate of
net profit after taxes plus interest expense plus one hundred (100%)
percent of the physical plants' depreciation plus fifty (50%) percent
of other depreciation divided by the aggregate of interest expense
plus the current maturity of principal for the year.
(5) There shall be no subordinate liens, voluntary or involuntary,
permitted on the Property without the written consent from the
Mortgagee.
(6) If, at the time of prepayment (in whole or in part), the Mortgagee's
Prime Rate of Interest is lower than the initial Prime Rate, the
prepayment penalty will be the difference between the initial Prime
Pate and the current Prime Pate times the amount prepaid times the
time remaining to the maturity of the note.
3
<PAGE>
Except as amended and modified herein, all other terms and conditions of
the Loan Documents remain in full force and effect.
Executed as a sealed instrument as of the date first set forth above.
Bentos, Inc.
/s/ Lawrence W. Gray
-----------------------------------
Lawrence W. Gray, President
/s/ J. Luke Sabella
-----------------------------------
J. Luke Sabella, Treasurer
CAPE COD BANK AND TRUST COMPANY
BY: /s/ James M. McEvoy BY: /s/Christopher Wells
--------------------------- ---------------------------
James M. McEvoy Christopher Wells
Senior Vice President Vice President
4
<PAGE>
COMMONWEALTH OF MASSACHUSETTS
Barnstable ss. July 21, 1994
Then personally appeared the above named L.W. Gray and acknowledged the
foregoing to be his/her free act and deed, before me,
/s/ Kathryn Busa
----------------------------------------
Notary Public
My Commission Expires: _________________
KATHRYN BUSA, Notary Public
My Commission Expires January 24, 1997
COMMONWEALTH OF MASSACHUSETTS
Barnstable ss. July 21, 1994
Then personally appeared the above named J. Luke Sabella and acknowledged
the foregoing to be his/her free act and deed, before me,
/s/ Kathryn Busa
----------------------------------------
Notary Public
My Commission Expires: _________________
KATHRYN BUSA, Notary Public
My Commission Expires January 24, 1997
COMMONWEALTH OF MASSACHUSETTS
Barnstable ss. July 21, 1994
Then personally appeared the above named James M. McEvoy, Senior Vice
President, and Christopher Wells, Vice President, aforesaid, and acknowledged
the foregoing instrument to be the free act and deed of Cape Cod Bank and Trust
Company, before me,
/s/ Catherine T. Crowley
----------------------------------------
Notary Public
My Commission Expires: 10-10-97
5
<PAGE>
BENTHOS, INC. AND SUBSIDIARY
Computation of Earnings per Share
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
YEARS ENDED SEPTEMBER 30, JULY 2, JUNE 30,
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
Net income $367,150 $205,025 $161,807 $238,181 $957,530
-------- -------- -------- -------- --------
Weighted average common shares outstanding 865,672 866,151 817,597 825,676 789,882
Common stock equivalents outstanding, pursuant
to the treasury stock method 26,694 5,260 72,514 57,433 86,409
-------- -------- -------- -------- --------
Weighted average number of common and common
equivalent shares outstanding 892,366 871,411 890,111 883,109 876,291
======== ======== ======== ======== =======
Net income per common and common
equivalent share outstanding $.41 $.24 $.18 $.27 $1.09
==== ==== ==== ==== =====
</TABLE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Benthos International, Inc., a U.S. Virgin Islands corporation
<PAGE>
[Letterhead of Arthur Andersen LLP appears here]
Exhibit 23
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
registration statement.
Arthur Andersen LLP
Boston, Massachusetts
December 16, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF BENTHOS, INC. CONTAINED ELSEWHERE IN THIS
REGISTRATION STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS:
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> SEP-30-1995 SEP-30-1996
<PERIOD-START> OCT-01-1994 OCT-01-1995
<PERIOD-END> SEP-30-1995 JUN-30-1996
<CASH> 17,461 958,630
<SECURITIES> 0 0
<RECEIVABLES> 996,299 1,094,047
<ALLOWANCES> 71,000 140,000
<INVENTORY> 3,303,156 3,865,089
<CURRENT-ASSETS> 4,666,925 6,414,554
<PP&E> 4,291,220 4,438,022
<DEPRECIATION> 2,797,798 3,045,298
<TOTAL-ASSETS> 6,384,122 8,054,298
<CURRENT-LIABILITIES> 1,462,056 2,259,942
<BONDS> 868,658 841,251
0 0
0 0
<COMMON> 65,482 66,149
<OTHER-SE> 3,987,926 4,886,941
<TOTAL-LIABILITY-AND-EQUITY> 6,384,122 8,054,283
<SALES> 8,014,416 8,874,204
<TOTAL-REVENUES> 8,014,416 8,874,204
<CGS> 4,033,704 3,988,587
<TOTAL-COSTS> 3,009,931 2,888,844
<OTHER-EXPENSES> 597,798 441,301
<LOSS-PROVISION> 69,500 21,175
<INTEREST-EXPENSE> 125,792 83,676
<INCOME-PRETAX> 247,807 1,473,530
<INCOME-TAX> 86,000 516,000
<INCOME-CONTINUING> 161,807 957,530
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 161,807 957,530
<EPS-PRIMARY> .18 1.09
<EPS-DILUTED> .18 1.09
</TABLE>
