<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended March 30, 1997
[_] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ____________ to ______________
Commission file number 0-28932
BENTHOS, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Massachusetts 04-2381876
(State or Other Jurisdiction of (I.R.S. Employer
Corporation or Organization) Identification No.)
49 Edgerton Drive, North Falmouth, Massachusetts 02556
(Addresses of Principal Executive Offices) (Zip Code)
(508) 563-1000
Issuer's Telephone Number Including Area Code
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
-------- ----------
State the number of shares outstanding of each of the issuer's classes of Common
equity as of the latest practicable date:
Common Stock par value $.0667 832,653
(Class) (Outstanding stock at May 5, 1997)
Traditional Small Business Disclosure Format (check one):
Yes X No
-------- --------
1
<PAGE>
BENTHOS, INC. AND SUBSIDIARY
INDEX
Page No.
Face Sheet 1
Index 2
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 3
March 30, 1997 (unaudited) and
September 30, 1996
Consolidated Statements of Earnings (unaudited) 4
Thirteen Weeks Ended
March 30, 1997 and
March 31, 1996
Consolidated Statements of Earnings (unaudited) 5
Twenty-Six Weeks Ended
March 30, 1997 and
March 31, 1996
Consolidated Statements of Cash Flow (unaudited) 6
March 30, 1997 and
March 31, 1996
Other Financial Information 7
Item 2. Management's Discussion and Analysis 8-10
of Financial Condition and Results
of Operations
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
Signature 11
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
Benthos, Inc. and Subsidiary
Consolidated Balance Sheets
Assets March 30, 1997 September 30, 1996
(unaudited)
<S> <C> <C>
Cash and Cash Equivalents $ 946,450 $ 751,357
Accounts Receivable 2,025,557 1,519,142
Inventories 2,995,589 3,551,258
Prepaid Expenses 354,599 70,039
Deferred Tax Asset 516,000 516,000
--------- ---------
Total Current Assets 6,838,195 6,407,796
Property, Plant and Equipment:
Land 127,339 127,339
Building and Improvement 1,845,303 1,845,303
Equipment and Fixtures 2,377,964 2,220,045
Demonstration Equipment 1,461,455 1,348,204
Construction in Progress 51,320 18,042
--------- ---------
5,863,381 5,558,933
Less Accumulated Depreciation 3,852,582 3,567,862
--------- ---------
2,010,799 1,991,071
Other Assets 230,776 215,077
--------- ---------
$9,079,770 $8,613,944
========== ==========
Liabilities and Stockholders' Investment
Current Maturities of Long-term Debt $32,542 $29,646
Accounts Payable 534,754 490,909
Accrued Expenses 1,104,322 1,680,893
Customer Deposits 189,901 275,911
--------- ---------
Total Current Liabilities 1,861,519 2,477,359
Long-term Debt, Net of Current Maturities 805,728 824,242
Common Stock 68,567 67,150
Capital in Excess of Par Value 869,029 807,555
Retained Earnings 6,321,666 5,335,733
Treasury Stock, at Cost (846,739) (898,095)
--------- ---------
Total Stockholders' Investment 6,412,523 5,312,343
--------- ---------
$9,079,770 $8,613,944
========== ==========
</TABLE>
3
<PAGE>
Benthos, Inc. and Subsidiary
Consolidated Statements of Earnings
(unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
March 30, 1997 March 31, 1996
<S> <C> <C>
Net Sales $ 4,431,393 $ 3,002,334
Cost of Sales 1,996,776 1,296,429
----------- -----------
Gross Profit 2,434,617 1,705,905
Selling, General & Administrative Expenses 1,333,818 971,315
Research and Development Expenses 360,505 183,441
----------- -----------
Income from Operations 740,294 551,149
----------- -----------
Interest Income 2756 56
Interest Expense (19,991) (33,952)
----------- -----------
Income before Provision for Income Taxes 723,059 517,253
Provision for Income Taxes 291,177 184,000
----------- -----------
Net Income $ 431,882 $ 333,253
=========== ===========
Net Income Per Common and Common
Equivalent Share Outstanding $ 0.48 $ 0.39
=========== ===========
Weighted Average Common and Common
Equivalent Share Outstanding 906,000 852,000
</TABLE>
4
<PAGE>
Benthos, Inc. and Subsidiary
Consolidated Statements of Earnings
(unaudited)
<TABLE>
<CAPTION>
Twenty-Six Weeks Ended
March 30, 1997 March 31, 1996
<S> <C> <C>
Net Sales $ 9,275,649 $ 5,398,421
Cost of Sales 4,152,516 2,393,106
----------- -----------
Gross Profit 5,123,133 3,005,315
Selling, General & Administrative Expenses 2,838,735 1,678,479
Research and Development Expenses 602,972 328,063
----------- -----------
Income from Operations 1,681,426 998,773
----------- -----------
Interest Income 8849 81
Interest Expense (39,625) (60,982)
----------- -----------
Income before Provision for Income Taxes 1,650,650 937,872
Provision for Income Taxes 664,717 328,000
----------- -----------
Net Income $ 985,933 $ 609,872
=========== ===========
Net Income Per Common and Common
Equivalent Share Outstanding $ 1.08 $ 0.71
=========== ===========
Weighted Average Common and Common
Equivalent Share Outstanding 914,000 857,000
</TABLE>
5
<PAGE>
Benthos, Inc. and Subsidiary
Consolidated Statements of Cash Flow
(unaudited)
<TABLE>
<CAPTION>
Twenty-Six Weeks Ended
March 30, 1997 March 31, 1996
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 985,933 $ 609,872
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 340,793 238,579
Changes in Assets and Liabilities:
Accounts Receivable (506,415) (658,310)
Inventories 555,669 (668,284)
Prepaid Expenses (284,560) 18,392
Accounts Payable & Accrued Expenses (532,726) 706,568
Customer Deposits (86,010) (194,984)
---------- ---------
Net Cash Provided by Operating Activities 472,684 51,833
Cash Flows from Financing Activities:
Purchase of Property, Plant & Equipment (191,196) (305,308)
Increase in Other Assets (70,777) (27,240)
---------- ---------
Net Cash Used in Investing Activities (261,973) (332,548)
Cash Flows from Financing Activities:
Increase in Demand Note Payable 0 300,000
Payments on long-term debt, net (15,618) (15,570)
---------- ---------
Net Cash Provided by (Used in) Financing Activities (15,618) 284,430
---------- ---------
Net Increase in Cash and Cash Equivalents 195,093 3715
Cash and Cash Equivalents, Beginning of Period 751,357 17,461
---------- ---------
Cash and Cash Equivalents, End of Period $ 946,450 $ 21,176
========== =========
Supplemental Disclosure of Cash Flow Information:
Interest Paid $ 19,991 $ 60,983
Income Taxes Paid $1,555,392 $ 142,079
</TABLE>
6
<PAGE>
Other Financial Information
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared by Benthos, Inc. pursuant to the rules and regulations of the
Securities and Exchange Commission regarding interim financial reporting.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements
and should be read in conjunction with the consolidated financial statements and
notes thereto for the fiscal year ended September 30, 1996, included in the
Company's previously filed Form 10-KSB. The accompanying condensed consolidated
financial statements reflect all adjustments (consisting solely of normal,
recurring adjustments) which are, in the opinion of management, necessary for a
fair presentation of results for the interim periods presented. The results of
operations for the thirteen week and twenty-six week periods ended March 30,
1997 and March 31, 1996, are not necessarily indicative of the results to be
expected for the full fiscal year.
2. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market and
consist of the following:
<TABLE>
<CAPTION>
March 30,1997 September 30, 1996
<S> <C> <C>
Raw Material $ 136,565 $ 203,314
Work-in-Process 2,823,721 3,226,405
Finished Goods 35,303 121,539
----------- -----------
$ 2,995,589 $ 3,551,258
</TABLE>
7
<PAGE>
Item 2.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Results of Operations -- Second quarter of fiscal year 1997 compared with second
quarter of fiscal year 1996.
The following table presents, for the periods indicated, the percentage
relationship of Consolidated Statements of Earnings items to total sales:
<TABLE>
<CAPTION>
Benthos, Inc. and Subsidiary
Consolidated Statements of Earnings
(unaudited)
Thirteen Weeks Ended
March 30, 1997 March 31, 1996
<S> <C> <C>
Net Sales 100.0% 100.0%
Cost of Sales 45.1% 43.2%
-------- --------
Gross Profit 54.9% 56.8%
Selling, General & Administrative Expenses 30.1% 32.4%
Research and Development Expenses 8.1% 6.1%
-------- --------
Income from Operations 16.7% 18.3%
Interest Expense, Net (0.4%) (1.1%)
-------- --------
Income Before Provision for Income Taxes 16.3% 17.2%
-------- --------
Provisions for Income Taxes 6.5% 6.1%
-------- --------
Net Income 9.8% 11.1%
======== ========
</TABLE>
Sales. Total sales increased by 47.6% in the second quarter of fiscal year 1997
to $4,431,000 as compared to $3,002,000 in the second quarter of fiscal year
1996. Sales of the Undersea Systems Division increased by 118.3% to $2,912,000
in the second quarter of fiscal year 1997 as compared to $1,334,000 in the
second quarter of fiscal year 1996. The increase in Undersea Systems Division
sales was largely the result of increased shipments of hydrophones used for off
shore oil exploration as well as an overall increase in the sales of the
Company's acoustic and glass flotation product lines. Sales in the Container
Inspection Systems Division were $1,519,000 in the second quarter of fiscal year
1997 as compared to $1,668,000 in the second quarter of fiscal year 1996. This
8.9% decrease resulted primarily from the shipments to Miller Brewing in the
1996 period which were not entirely repeated in the 1997 period.
Gross Profit. Gross Profit increased by 42.7% to $2,435,000 for the second
quarter of fiscal year 1997 as compared to $1,706,000 for the second quarter of
fiscal year 1996. As a percentage of sales, gross profit was 54.9% in the second
quarter of fiscal year 1997 as compared to 56.8% for the second quarter of
fiscal year 1996. The decrease in gross profit percentage was attributed to a
higher sales mix in the Undersea Systems Division which was partially offset by
overhead efficiencies related to the increased sales volume.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by 37.3% to $1,334,000 for the second quarter
of fiscal year 1997 as compared to $971,000 in the second
8
<PAGE>
quarter of fiscal year 1996. The increase in total expenses was a result of
higher selling expenses coinciding with the increased volume, non recurring
expenses relating to obtaining the Company's listing on the Nasdaq SmallCap
Market, higher legal expenses in connection with the Company's proxy
solicitation in the second quarter of fiscal year 1997, and additional personnel
necessary to support the Company's growth . As a percentage of sales, selling,
general and administrative expenses decreased to 30.1% in the second quarter of
fiscal year 1997 as compared to 32.4.% for the second quarter of fiscal year
1996.
Research and Development Expenses. Research and development expenses increased
96.5% to $361,000 in the second quarter of fiscal year 1997 as compared to
$183,000 in the second quarter of fiscal year 1996. As a percentage of sales,
research and development expenses increased to 8.1% in the second quarter of
fiscal year 1997 from 6.1% in the first quarter of fiscal year 1996. The
increase in the overall level of expenditures is consistent with the Company's
current operational plans.
Interest Expense. Interest expense, net, decreased by 49.2% to $17,200 in the
second quarter of fiscal year 1997 as compared to $33,900 in the second quarter
of fiscal year 1996. The decreased level of interest expense, net, was a result
of decreased borrowing under the credit line and improved interest income.
Results of Operations - First half of fiscal year 1997 compared with first half
of fiscal year 1996.
The following table presents, for the periods indicated, the percentage
relationships of Consolidated Statements of Earnings items to total sales:
<TABLE>
<CAPTION>
Benthos, Inc. and Subsidiary
Consolidated Statements of Earnings
(unaudited)
Twenty-Six Weeks Ended
March 30, 1997 March 31, 1996
<S> <C> <C>
Net Sales 100.0% 100.0%
Cost of Sales 44.8% 44.3%
-------- --------
Gross Profit 55.2% 55.7%
Selling, General & Administrative Expenses 30.6% 31.1%
Research and Development Expenses 6.5% 6.1%
-------- --------
Income from Operations 18.1% 18.5%
Interest Expense, Net (0.3%) (1.1%)
-------- --------
Income Before Provision for Income Taxes 17.8% 17.4%
-------- --------
Provisions for Income Taxes 7.2% 6.1%
-------- --------
Net Income 10.6% 11.3%
</TABLE>
Sales. Total sales increased by 71.8% in the first half of fiscal year 1997 to
$9,276,000 as compared to $5,398,000 in the first half of fiscal year 1996.
Sales in the Container Inspection Systems Division increased by 16.8% to
$3,557,000 in the first half of fiscal year 1997as compared to $3,046,000 in the
first half of fiscal year 1996. This results from the company's continued
penetration of the food and beverage market and the domestic and international
brewery industries. Sales of the Undersea Systems Division increased by 143.2%
to $5,719,000 in the first half of fiscal year 1997 as compared to $2,352,000 in
the first
9
<PAGE>
half of fiscal year 1996. The increase in sales of the Undersea Systems Division
was largely the result of increased shipments of hydrophones used for off shore
oil exploration as well as an increase in sales of the Company's acoustic and
glass flotation product lines.
Gross Profit. Gross Profit increased by 70.5% to $5,123,000 for the first half
of fiscal year 1997 as compared to $3,005,000 for the first half of fiscal year
1996. As a percentage of sales, gross profit was 55.2% in the first half of
fiscal year 1997 as compared to 55.7% for the first half of fiscal year 1996.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by 69.1% to $2,839,000 for the first half of
fiscal year 1997 as compared to $1,678,000 in the first half of fiscal year
1996. The increase in total expenses was a result of higher selling expenses
coinciding with the increased volume, investments in staff necessary to support
the company's growth, expenses relating to the registration of the Company's
securities, expenses related to obtaining the Company's listing on the Nasdaq
SmallCap Market, and legal expenses in connection with the Company's proxy
solicitation in the first half of fiscal year 1997. As a percentage of sales,
selling, general and administrative expenses decreased slightly to 30.6% in the
first half of fiscal year 1997 as compared to 31.1% for the first half of fiscal
year 1996.
Research and Development Expenses. Research and development expenses increased
83.8% to $603,000 in the first half of fiscal year 1997 as compared to $328,000
in the first half of fiscal year 1996. As a percentage of sales, research and
development expenses increased to 6.5% in the first half of fiscal year 1997
from 6.1% in the first half of fiscal year 1996. The increase in the percentage
of sales and dollars expended is consistent with the Company's current
operational plans.
Interest Expense. Interest expense, net, decreased by 49.5% to $31,000 in the
first half of fiscal year 1997 as compared to $61,000 in the first half of
fiscal year 1996. The decreased level of interest expense, net, was a result of
decreased borrowing under the credit line and improved interest income.
Liquidity and Capital Resources. The Company's cash and cash equivalents
increased $195,000 from September 30, 1996 to March 30, 1997. This increase
resulted primarily from cash generated from operations of $473,000. Accounts
receivable increased $506,000 to support the increased sales volume while asset
management programs were able to decrease inventories by $556,000. Customer
deposits decreased by $86,000 as the orders related to these deposits were
shipped. Cash flow from investing activities was a use of $262,000 and resulted
primarily from purchases of property, plant and equipment of $191,000. The
Company believes it is well positioned to finance future working capital
requirements and capital expenditures during the next twelve months through
current earnings and available credit facilities.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995.
The statements in this Quarterly Report on Form 10-QSB and in oral statements
which may be made by representatives of the Company relating to plans,
strategies, economic performance and trends and other statements that are not
descriptions of historical facts may be forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Forward-looking information is inherently subject to risks and
uncertainties, and actual results could differ materially from those currently
anticipated due to a number of factors which include: competitive factors,
shifts in customer demand, government spending, economic cycles, availability of
financing as well as the factors described in this report. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results or outcomes may vary materially from those described
herein as anticipated, believed, estimated, expected or intended.
10
<PAGE>
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits set forth in the
Exhibit Index on the following page
are filed herewith as a
part of this report.
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BENTHOS, INC
By /s/ Francis E. Dunne, Jr.
Francis E. Dunne, Jr
Chief Financial Officer
and Treasurer
(Principal Financial and Accounting Officer)
DATE: May 5, 1997
11
<PAGE>
EXHIBIT INDEX
Exhibit
3.1 Restated Articles of Organization (1)
3.2 Articles of Amendment dated April 28, 1997.
3.3 By-Laws (1)
4.1 Common Stock Certificate (1)
10.1 Employment Contract with Samuel O. Raymond (1)
10.2 Third Amendment to Employment Contract with Samuel O.
Raymond
10.3 Employment Contract with John L. Coughlin (1)
10.4 Employee Stock Ownership Plan (1)
10.5 First Amendment to Employee Stock Ownership Plan
10.6 401(k) Retirement Plan (1)
10.7 First Amendment to 401(k) Retirement Plan
10.8 Second Amendment to 401(k) Retirement Plan
10.9 Supplemental Executive Retirement Plan (1)
10.10 1990 Stock Option Plan (1)
10.11 Stock Option Plan for Non-Employee Directors(1)
10.12 License Agreement between the Company and The Penn State
Research Foundation dated December 13, 1993 (1)
10.13 Technical Consultancy Agreement between the Company and
William D. McElroy dated July 12, 1994 (1)
10.14 General Release and Settlement Agreement between the Company
and Lawrence W. Gray dated February 8, 1996(1)
10.15 Line of Credit Loan Agreement between the Company and Cape
Cod Bank and Trust Company dated September 24, 1990, as
amended(1)
10.16 Commercial Mortgage Loan Extension and Modification
Agreement between the Company and Cape Cod Bank and Trust
Company, dated July 6, 1994(1)
<PAGE>
Exhibit
11 Computation of Earnings Per Share
21 Subsidiaries of the Registrant (1)
27 Financial Data Schedule
(1) Previously filed as an exhibit to Registrant's Registration Statement
on Form 10-SB filed with the Commission on December 17, 1996 (File No. 0-28932)
and incorporated herein by this reference.
<PAGE>
FEDERAL IDENTIFICATION
NO. 04-2381876
-------------------
EXHIBIT 3.2
The Commonwealth of Massachusetts
- -----------
Examiner William Francis Galvin
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
- -----------
Name
Approved
We, John L. Coughlin , *President/
-------------------------------------
and John T. Lynch , *Clerk/
---------------------------------------
of Benthos, Inc. ,
------------------------------------------------------------------
(Exact name of corporation)
located at 49 Edgerton Drive, Falmouth ,
----------------------------------------------------------
(Street address of corporation in Massachusetts)
certify that these Articles of Amendment affecting articles numbered:
6
--------------------------------------------------------------------
(Number those articles 1, 2, 3, 4, 5 and/or 6 being amended)
of the Articles of Organization were duly adopted at a meeting held
on April 11 , 1997, by vote of:
------------ -----
623,637 shares of Common Stock of 824,060 shares outstanding,
------- ------------------- --------
(type, class & series, if any)
shares of of shares outstanding, and
------- ------------------ -----
(type, class & series, if any)
shares of of shares outstanding,
------- ------------------ --------
(type, class & series, if any)
C
P /1/**being a majority of each type, class or series outstanding and
M entitled to vote thereon:/ or /2/**being at least two-thirds of each
R.A. type, class or series outstanding and entitled to vote thereon and of
each type, class or series of stock whose rights are adversely
affected thereby:
*Delete the inapplicable words. **Delete the inapplicable clause.
/1/For amendments adopted pursuant to Chapter 156B, Section 70.
/2/For amendments adopted pursuant to Chapter 156B, Section 71.
Note: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on one side only of
- ---------- separate 8 1/2 x 11 sheets of paper with a left margin of at least 1
P.C. 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>
To change the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue, fill in the
following:
The total presently authorized is:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common: Common:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Preferred: Preferred:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Change the total authorized to:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common: Common:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Preferred: Preferred:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
CONTINUATION SHEET 6A
ONE: All corporate powers of the Corporation shall be exercised by the
Board of Directors except as otherwise provided by law. In furtherance and not
in limitation of the powers conferred by statute, the Board of Directors is
expressly authorized to make, amend or repeal the By-Laws of the Corporation in
whole or in part, except with respect to any provision thereof which by law or
the By-Laws requires action by the stockholders, and subject to the power of the
stockholders to amend or repeal any By-Law adopted by the Board of Directors.
TWO: Meetings of the stockholders of the Corporation may be held anywhere
within the United States.
THREE: The Corporation may be a partner in any business enterprise which
it would have power to conduct by itself.
FOUR: In the absence of fraud, no contract or other transaction of the
Corporation shall be affected or invalidated by the fact that any of the
directors of the Corporation are in any way interested in or connected with any
other party to such contract or transaction or are themselves parties to such
contract or transaction, provided that the interest in any such contract or
transaction of any such director shall at the time be fully disclosed or
otherwise known to the Board of Directors. Any director of the Corporation may
be counted in determining the existence of a quorum at any meeting of the Board
of Directors which shall authorize such contract or transaction and may vote and
act upon any matter, contract or transaction between the Corporation and any
other person without regard to the fact that he is also a stockholder, director
or officer of, or has any interest in, such other person with the same force and
effect as if he were not such stockholder, director or officer or not so
interested. Any contract or other transaction of the Corporation or of the
Board of Directors or of any committee thereof which shall be ratified by a
majority of the holders of the issued and outstanding stock entitled to vote at
any annual meeting or any special meeting called for that purpose shall be as
valid and as binding as though ratified by every stockholder of the Corp
oration; provided, however, that any failure of the stockholders to approve or
ratify such contract or other transaction, when and if submitted, shall not be
deemed in any way to render the same invalid or deprive the directors and
officers of their right to proceed with such contract or other transaction.
<PAGE>
Article Six of the Corporation's Articles of Organization is hereby
amended by adding thereto the provisions contained in Continuation
Sheet 6A annexed hereto. No change is made to the other provisions of
said Article Six or of the Articles of Organization
The foregoing amendment(s) will become effective when these Articles of
Amendment are filed in accordance with General Laws, Chapter 156B, Section 6
unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
Later effective date:______________________.
SIGNED UNDER THE PENALTIES OF PERJURY, this 28 day of April,1997,
/s/ [SIGNATURE APPEARS HERE] , President
- -------------------------------------------------
/s/ [SIGNATURE APPEARS HERE] , Clerk
- -------------------------------------------------
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
============================================================
I hereby approve the within Articles of Amendment and, the
filing fee in the amount of $_______ having been paid, said
articles are deemed to have been filed with me this ____ day
of _____________ 19__.
Effective date:_____________________________________________
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
William P. Griffin, Jr.
------------------------------------------------------------
Davis, Malm & D'Agostine, P.C.
------------------------------------------------------------
One Boston Place
------------------------------------------------------------
Boston, MA 02108
(617) 367-2500
<PAGE>
EXHIBIT 10.2
THIRD AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------------
AGREEMENT made as of January 24, 1997 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 first amended by instrument dated
November 30, 1993, and further amended by instrument dated December 16, 1996
(the "Agreement"); and
WHEREAS, the Company and the Executive 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 Company and the Executive hereto mutually
agree as follows:
1. All references in the Agreement to the title "Chief Scientist" are
hereby deleted and the title "Director of Research" is substituted therefore.
2. Effective as of the date hereof, the Agreement is hereby amended by
deleting in its entirety the second paragraph of the first amendment to the
Agreement, dated November 30, 1993, which second paragraph begins with the words
"NOW THEREFORE", and substituting the following paragraph therefore:
"Subject to the provisions of this Agreement, the Company shall pay to
Executive for all services to be performed by Executive as Chairman
Emeritus and Director of Research, during the term of this Agreement a
salary of $72,000.00 per year."
4. The Company and the Executive do hereby confirm, approve and ratify
the
<PAGE>
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.
COMPANY: BENTHOS, INC.
By: JOHN L. COUGHLIN
----------------
John L. Coughlin, President
EXECUTIVE: SAMUEL O. RAYMOND
-----------------
Samuel O. Raymond
<PAGE>
FIRST AMENDMENT TO
BENTHOS, INC. employee stock ownership PLAN
as Amended and Restated Effective as of October 1, 1987
AMENDMENT adopted this 11th day of April 1997, by Benthos, Inc.
----
(hereinafter referred to as the "Company"):
WITNESSETH:
----------
WHEREAS, the Company has heretofore adopted a defined contribution plan
known as the "Benthos, Inc. employee stock ownership Plan", which was amended
and restated effective as of July 1, 1987 (the "Plan") and
WHEREAS, the Company, pursuant to Section 16.1 of the Plan, has reserved
the right to amend the Plan at any time by vote of its Board of Directors; and
WHEREAS, the Company wishes to amend further the Plan to make a technical
modification to the provisions pertaining to the limit on "annual additions."
NOW, THEREFORE, effective as of October 1, 1996 the Plan is hereby amended
as follows:
Section 7.5(b) is amended to read as follows:
(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 401(k) plan;
(iii) any qualified stock bonus plan;
(iv) any qualified profit sharing plan;
(v) any qualified money purchase plan.
-1-
<PAGE>
In all other respects the terms of the Plan remain unchanged and in full
force and effect.
IN WITNESS WHEREOF, the undersigned Company has caused this Amendment to be
executed by its duly authorized officer as of the day and year set forth above.
Benthos, Inc.
By: /S/ JOHN L. COUGHLIN
---------------------
-2-
<PAGE>
EXHIBIT 10.7
FIRST AMENDMENT TO
BENTHOS, INC. 401(K) RETIREMENT PLAN
as Amended and Restated Effective as of November 5, 1993
AMENDMENT adopted this 11th day of April 1997, by Benthos, Inc.
(hereinafter referred to as the "Company"):
WITNESSETH:
----------
WHEREAS, the Company has heretofore adopted a defined contribution plan
known as the "Benthos, Inc. 401(k) Retirement Plan", originally effective as of
July 1, 1987 and subsequently amended and restated said Plan in the form of the
IDS Nonstandardized (S)401(k) Profit Sharing Plan Prototype, most recently
effective as of November 5, 1993 (hereinafter referred to as the "Plan"); and
WHEREAS, the Company, pursuant to Section 13.02 of the Plan, has reserved
the right to amend the Plan at any time by vote of its Board of Directors; and
WHEREAS, the Company wishes to amend further the Plan in order to change
the eligibility requirements for a reemployed participant.
NOW, THEREFORE, effective as of October 1, 1996, the Plan is hereby amended
as follows:
1. Section 2.03 of the Adoption Agreement and the Basic Plan document shall
not apply and the following Section 2.03 shall be substituted therefor:
2.03 Break in Service - Participation
- -------------------------------------
(a) A Participant whose employment has terminated and who recommences
employment without incurring a Break in Service shall be eligible to participate
immediately in the Plan as of the date on which he first subsequently renders an
Hour of Service.
(b) A Participant who has terminated employment and incurred a Break in
Service will be eligible to commence Deferral Contributions immediately upon his
re-employment.
(c) (i) For purposes of determining the eligibility of a re-employed former
Participant who has incurred a Break in Service to share in Employer matching
contributions, designated qualified nonelective contributions, discretionary
contributions and allocation of Participant forfeitures, Years of Service prior
to the Break in Service will not be taken into account until the former
Participant has completed a Year of Service after returning to employment. The
Employee will receive credit for a Year of Service following re-employment if,
during the 12-consecutive month period beginning on the Employee's "re-
employment commencement
-1-
<PAGE>
date" the Employee is credited with 1,000 Hours of Service. If the Participant
fails to complete 1,000 Hours of Service within such period, the re-employed
Participant will be credited with a Year of Service if, during any Plan Year
beginning with the Plan Year which includes the first anniversary of the "re-
employment commencement date", he or she is credited with 1,000 Hours of
Service.
(ii) The "re-employment commencement date" is the first day on which the
employee is credited with an Hour of Service for the performance of duties after
the first eligibility computation period in which the Employee incurs a one year
Break in Service.
(iii) If a former Participant who has incurred a Break in Service
completes a Year of Service in accordance with this paragraph (c), his or her
eligibility to share in Employer matching contributions, designated qualified
nonelective contributions, discretionary contributions and allocation of
Participant forfeitures will begin as of first Entry Date following the
completion of such Year of Service.
2. Section 3.06 of the Adoption Agreement is amended to read as set forth
on the following page:
-2-
<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 contributions, discretionary contributions and Participant
forfeitures, if any, for the Plan Year is:
[_] (c) One Hour of Service.
[_] (d) 1,000 Hours of Service.
[X] (e) Other (specify, but the number may not exceed 1,000) one Hour of
Service for matching contributions and 1,000 Hours of Service for designated
qualified non-elective contributions, discretionary contributions and
participant forfeitures.
[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).
<PAGE>
In all other respects the terms of the Plan remain unchanged and in full
force and effect.
IN WITNESS WHEREOF, the undersigned Company has caused this First Amendment
to be executed by its duly authorized officer as of the day and year set forth
above.
BENTHOS, INC.
By: /s/ JOHN L. COUGHLIN
----------------------------------
<PAGE>
Exhibit 10.8
SECOND AMENDMENT TO
BENTHOS, INC. 401(K) RETIREMENT PLAN
as Amended and Restated Effective as of November 5, 1993
AMENDMENT adopted this 11th day of April, 1997, by Benthos, Inc.
(hereinafter referred to as the "Company") :
WITNESSETH:
----------
WHEREAS, the Company has heretofore adopted a defined contribution plan
known as the "Benthos, Inc. 401(k) Retirement Plan", originally effective as of
July 1, 1987 and subsequently amended and restated said Plan in the form of the
IDS Nonstandardized (S)401(k) Profit Sharing Plan Prototype, most recently
effective as of November 5, 1993 (hereinafter referred to as the "Plan"); and
WHEREAS, the Company has previously amended said amended and restated Plan;
and
WHEREAS, at a meeting duly held on July 12, 1996 the Board of Directors
voted that a Company contribution equal to a match of 50% of the employee
contribution to the 401(k) plan up to a 3% limit for the Company contribution,
solely at the direction of the Company, in the fiscal year 1997, be approved;
and
WHEREAS, the Company, pursuant to Section 13.02 of the Plan, has reserved
the right to amend the Plan at any time by vote of its Board of Directors; and
WHEREAS, the Company wishes to amend further the Plan in order to clarify
the foregoing July 12, 1996 amendment and to make certain other technical
changes, principally relating to the limit on annual additions and the date on
which distributions to a terminated participant or beneficiary may commence.
NOW, THEREFORE, effective as of October 1, 1996 unless otherwise specified
herein, the Plan is hereby amended as follows:
1. The Amendment adopted by the Board of Directors on July 12, 1996 is
clarified to reflect the Board's intent that (a) required matching contributions
to the Plan be eliminated; (b) the formula for allocating discretionary matching
contributions be revised; and (c) the discretionary matching contribution
formula for the Plan Year beginning October 1, 1996 be set at 50% of each
Participant's Salary reduction contributions that do not exceed 6% of his or her
Compensation (so that the maximum matching contribution which a Participant may
receive in such Plan Year is 3% of his or her Compensation). Accordingly,
Section 3.01(b)(3) of the Adoption Agreement is no longer checked, Section
3.01(b)(4)(iii) is no longer checked and Section 3.01(b)(4)(ii) now reads as
follows:
-1-
<PAGE>
Discretionary formula. An amount (or additional amount) equal to a matching
percentage the Employer may from time to time deem advisable of (ii) each
Participant's Salary reduction contributions for the Plan Year that do not
exceed 6% of the Participant's Compensation (as defined in Adoption
Agreement Section 1.12) for the Plan Year.
2. Section 1.19 of the Adoption Agreement is amended, effective as of the
date of adoption to provide: "Plan Entry Date" means the Effective Date and the
first day of each calendar quarter (i.e., January 1, April 1, July 1 and October
1).
3. Section 1.28 of the Plan document is amended by deleting the
parenthetical "(or is unable to engage in any substantial gainful activity)"
from the first sentence thereof.
4. Section 3.17 of the Adoption Agreement is amended by adding the
following Addendum thereto:
If an Excess Amount is determined to exist for any Limitation Year due to
an erroneous estimate of Compensation, forfeitures, reasonable error in
determining the amount of Salary reduction contributions, or such other
reason as permitted by Treasury regulations,
First, any non-deductible voluntary contributions made to any qualified
retirement plan maintained by the Employer, to the extent that the
return thereof would reduce such Excess Amount, shall be returned to
the Participant.
Second, any Salary reduction contributions made to any qualified
retirement plan maintained by the Employer, to the extent that the
return thereof would reduce such Excess Amount, shall be returned to
the Participant.
Any remaining Excess Amount shall be treated in accordance with the
provisions of Section 3.17.
5. Section 5.01 of the Adoption Agreement is amended to eliminate
paragraph (c), Early Retirement, effective as of the date of adoption; provided
that any Participant who has either attained age 55 or is credited with at least
three Years of Service for vesting purposes shall become fully vested upon
attainment of age 55. In lieu of paragraph (c), paragraph (d) is checked, so
that there is no Early Retirement.
6. Section 6.01 of the Plan document is amended by deleting the fourth
sentence thereof and substituting the following therefor:
A distribution date shall be the last day of the calendar quarter on or
after retirement, death, disability, death or other termination of
employment (as applicable) selected by the Participant or beneficiary.
-2-
<PAGE>
The Adoption Agreement, as herein modified and in effect as of the date of
adoption, is attached hereto and incorporated herein.
In all other respects the terms of the Plan remain unchanged and in full
force and effect.
IN WITNESS WHEREOF, the undersigned Company has caused this Second
Amendment to be executed by its duly authorized officer as of the day and year
set forth above.
BENTHOS, INC.
By: /s/ JOHN L. COUGHLIN
----------------------
-3-
<PAGE>
Adoption Agreement #006
Nonstandardized Code (S)401(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: UNION 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 this 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:
---------------------------------
--------------------------------------------------------------------
.
-------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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 4/11/97 . This Plan
------------------
is a substitution and amendment of an existing retirement plan originally
established 7/1/87, amended and restated as of 10/1/91, 10/1/92 and
--------------------------------------------------------------
11/5/93, although specific provisions may have a different Effective
Date, as set forth in the First and Second Amendments.
- --------------------------------------------------------------------------------
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) First day of each calendar quarter
-------------------------------------
(i.e., January 1, April 1, July 1 and October 1)
-----------------------------------------------------------------
[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.]
- --------------------------------------------------------------------------------
<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 Services 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 organization's 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 of 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) of 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)(B) with more than 18 months, if
the Employer selects 100% immediate vesting under Section 5.03.]
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 Breaks in Service under
Article II by reference to:
(Choose (a) or (b))
[_] (a) The 12 consecutive month period beginning with each anniversary of
an 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.
See Addendum #2.03
- --------------------------------------------------------------------------------
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.
[_] (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 Participant's 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:
------------.
[_] (3) An amount equal to % of the first $ 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.]
- --------------------------------------------------------------------------------
6
<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.
[x] (ii) each Participant's Salary reduction contributions for the
Plan Year that do not exceed 6% of the Participant's
----
Compensation (as defined in Adoption Agreement Section
1.12) for the Plan Year.
[_] (iii) the first $________ 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 of 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 Plan 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 than the first day of the next Plan Year.
[_] (ii) As of any subsequent Plan Entry Date.
[_] (iii) As of the 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 calendar 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 calendar 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 nondeductible
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 of 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 be 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 contributions, 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 contributions, discretionary contributions and Participant
forfeitures, if any, for the Plan Year is:
[_] (c) One Hour of Service.
[_] (d) 1,000 Hours of Service.
[X] (e) Other (specify, but the number may not exceed 1,000) one Hour of
Service for matching contributions and 1,000 Hours of Service
for designated qualified non-elective contributions,
discretionary contributions and participant forfeiture.
[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).
- --------------------------------------------------------------------------------
<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. Futhermore, 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 (S)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 limitation 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 Master 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. See Addendum 3.17
- --------------------------------------------------------------------------------
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.
[Note: 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.]
- --------------------------------------------------------------------------------
12
<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 definite 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:
[x] (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):
[_] (c) the first day of the month coinciding with or next following the
date on which a Participant attains age and after
----------------
completion of at least years(not to exceeding 5)
----------------
of employment with Employer.
[x] (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, the 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).
- --------------------------------------------------------------------------------
<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 Service before the Participant attained the age of
________________ (_______). [Note: The age selected may not
exceed 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 (S)411(d)(6) Protected Benefits. The elections under this Article
VI may not eliminate Code (S)411(d)(6) protected benefits. To the extent
the elections would eliminate a code (S)411(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
limitations 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 6.01(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.
[X] (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 6.01(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 of 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 alternate priority under this
Adoption Agreement Section 8.02 unless the Participant's surviving spouse
is first in the order of priority.
- --------------------------------------------------------------------------------
<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 14.12, to determine the allocation of 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 its 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 11th day of April, 1997.
Attest: By: [SIGNATURE]
----------------------- -----------------------------
"Employer"
Accepted: 4/11/97 [SIGNATURE]
--------------------- ------------------------------
(Date) "Plan Administrator"
Accepted: 4/11/97 [SIGNATURE]
--------------------- ------------------------------
(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 Sponsor's 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>
Addendum #2.03
2.03 Break in Service - Participation
- -------------------------------------
(a) A Participant whose employment has terminated and who recommences
employment without incurring a Break in Service shall be eligible to participate
immediately in the Plan as of the date on which he first subsequently renders an
Hour of Service.
(b) A Participant who has terminated employment and incurred a Break in
Service will be eligible to commence Deferral Contributions immediately upon his
re-employment.
(c) (i) For purposes of determining the eligibility of a re-employed
former Participant who has incurred a Break in Service to share in Employer
matching contributions, designated qualified nonelective contributions,
discretionary contributions and allocation of Participant forfeitures, Years of
Service prior to the Break in Service will not be taken into account until the
former Participant has completed a Year of Service after returning to
employment. The Employee will receive credit for a Year of Service following re-
employment if, during the 12-consecutive month period beginning on the
Employee's "re-employment commencement date" the Employee is credited with 1,000
Hours of Service. If the Participant fails to complete 1,000 Hours of Service
within such period, the re-employed Participant will be credited with a Year of
Service if, during any Plan Year beginning with the Plan Year which includes the
first anniversary of the "re-employment commencement date", he or she is
credited with 1,000 Hours of Service.
(ii) The "re-employment commencement date" is the first day on which the
employee is credited with an Hour of Service for the performance of duties after
the first eligibility computation period in which the Employee incurs a one year
Break in Service.
(iii) If a former Participant who has incurred a Break in Service
completes a Year of Service in accordance with this paragraph (c), his or her
eligibility to share in Employer matching contributions, designated qualified
nonelective contributions, discretionary contributions and allocation of
Participant forfeitures will begin as of first Entry Date following the
completion of such Year of Service.
<PAGE>
Addendum #3.17
3.17 If an Excess Amount is determined to exist for any Limitation Year due to
an erroneous estimate of Compensation, forfeitures, reasonable error in
determining the amounts of Salary reduction contributions, or such other reason
as permitted by Treasury regulations,
First, any non-deductible voluntary contributions made to any qualified
retirement plan maintained by the Employer, to the extent that the return
thereof would reduce such Excess Amount, shall be returned to the
Participant.
Second, any Salary reduction contributions made to any qualified retirement
plan maintained by the Employer, to the extent that the return thereof
would reduce such Excess Amount, shall be returned to the Participant.
Any remaining Excess Amount shall be treated in accordance with the
provisions of Section 3.17.
<PAGE>
- --------------------------------------------------------------------------------
Income Gain or Loss Addendum to Adoption Agreement
- --------------------------------------------------------------------------------
(Use this Addendum for plans using Non-standardized Adoption Agreement #006,
with daily participant accounting)
Pursuant to Section 9.11 of this Adoption Agreement, the Advisory Committee
shall determine the allocation of net income gain or loss according to the
following method:
The shares/units held by each investment account are valued daily by multiplying
the number of shares/units by the value of each respective share/unit as of the
end of that business day. For each business day on which a valuation is
performed, this value reflects market gains or losses for that business day.
This Addendum shall apply to Section 9.11(a)
This Addendum shall apply to Section 9.11(b)
This Addendum shall apply to Section 9.11(c)
The Employer has adopted this Addendum on this 11th
____
day of April, 1997.
_____ __
/s/ John L. Coughlin
--------------------------------------
Employer
4/11/97
--------------------------------------
Date
- --------------------------------------------------------------------------------
22
<PAGE>
Exhibit 11
BENTHOS, INC. AND SUBSIDIARY
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Thirteen Weeks Twenty-Six Weeks
Ended Ended
March 30, 1997 March 31, 1996 March 30, 1997 March 31, 1996
Net Income $431,882 $333,253 $985,933 $609,872
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Weighted average common shares 821,000 785,000 813,600 785,000
outstanding
Common stock equivalents outstanding 85,000 67,000 100,400 72,000
pursuant to the treasury stock method ------ ------ ------- ------
Weighted average number of common and 906,000 852,000 914,000 857,000
common equivalent shares outstanding ======= ======= ======= =======
Net income per common and common $.48 $.39 $1.08 $.71
equivalent share outstanding ===== ==== ===== ====
</TABLE>
<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
QUARTERLY REPORT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-30-1997
<CASH> 946,450
<SECURITIES> 0
<RECEIVABLES> 2,025,557
<ALLOWANCES> 194,764
<INVENTORY> 2,995,589
<CURRENT-ASSETS> 6,838,195
<PP&E> 5,863,381
<DEPRECIATION> 3,852,582
<TOTAL-ASSETS> 9,079,770
<CURRENT-LIABILITIES> 1,861,519
<BONDS> 805,728
0
0
<COMMON> 68,567
<OTHER-SE> 6,343,956
<TOTAL-LIABILITY-AND-EQUITY> 9,079,770
<SALES> 9,275,649
<TOTAL-REVENUES> 9,275,649
<CGS> 4,152,516
<TOTAL-COSTS> 2,838,735
<OTHER-EXPENSES> 602,972
<LOSS-PROVISION> 67,764
<INTEREST-EXPENSE> 39,625
<INCOME-PRETAX> 1,650,650
<INCOME-TAX> 664,717
<INCOME-CONTINUING> 985,933
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 985,933
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.08
</TABLE>
