<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only
(as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
BENTHOS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[LOGO OF BENTHOS]
January 18, 2000
Dear Stockholder:
We cordially invite you to join us at the 2000 Annual Meeting of
Stockholders of Benthos, Inc. to be held at 9:30 o'clock in the morning on
Friday, March 3, 2000. The meeting will be held at Wyndham Boston Hotel, 89
Broad Street, Boston, Massachusetts 02110. Your Board of Directors and
management look forward to greeting those stockholders able to attend.
This year, in addition to electing two class I directors and approving the
appointment of the auditors, you are being asked to approve the Benthos, Inc.
2000 Stock Incentive Plan. These proposals are more fully discussed in the
attached proxy statement which you are urged to read carefully. The Board of
Directors unanimously recommends that you vote FOR these proposals.
It is important that your shares be represented at the meeting. Accordingly,
whether or not you expect to attend the meeting, please sign, date and promptly
return the enclosed proxy card in the enclosed envelope provided.
Sincerely,
/s/ Stephen D. Fantone
Stephen D. Fantone
Chairman of the Board of Directors
Benthos, Inc., 49 Edgerton Drive, North Falmouth, Massachusetts 02556 USA
<PAGE>
[BENTHOS LOGO APPEARS HERE]
BENTHOS, INC.
----------------
Notice of Annual Meeting of Stockholders
Friday, March 3, 2000
9:30 a.m.
----------------
To Benthos Stockholders:
The Annual Meeting of Stockholders of Benthos, Inc. will be held on Friday,
March 3, 2000 at 9:30 a.m., local time, at the Wyndham Boston Hotel, 89 Broad
Street, Boston, Massachusetts, for the following purposes:
1. To elect two Class I members of the Board of Directors of the Company
to serve until the 2003 Annual Meeting of Stockholders and until their
successors are duly elected.
2. To consider and act upon a proposal to approve the appointment of
Arthur Andersen LLP as the Company's auditors for the 2000 fiscal year.
3. To consider and act upon a proposal to approve the Benthos, Inc. 2000
Stock Incentive Plan as described in the accompanying Proxy Statement.
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only stockholders of record at the close of business on January 6, 2000 are
entitled to notice of and to vote at this meeting.
By Order of the Board of Directors
John T. Lynch, Clerk
North Falmouth, Massachusetts
January 18, 2000
IMPORTANT
It is important that your shares be represented at the meeting.
Accordingly, whether or not you expect to attend the meeting, please
sign, date and promptly return the attached proxy in the enclosed
envelope.
49 Edgerton Drive, North Falmouth, Massachusetts 02556-2826 USA
Tel: (508) 563-1000 Fax: (508) 563-6444
<PAGE>
BENTHOS, INC.
PROXY STATEMENT
Annual Meeting of Stockholders
March 3, 2000
This proxy statement and the accompanying Notice of Annual Meeting of
Stockholders is furnished to stockholders of Benthos, Inc., a Massachusetts
corporation (the "Company"), in connection with the solicitation by the Board
of Directors of proxies to be used at the Annual Meeting of Stockholders of
the Company to be held on March 3, 2000 at the time and place set forth in the
accompanying notice and at any and all adjournments thereof. The approximate
date on which this proxy statement and accompanying proxy form are being sent
to stockholders is January 18, 2000.
INFORMATION AS TO VOTING SECURITIES
Only stockholders of record at the close of business on January 6, 2000
(the "record date") will be entitled to vote at the meeting. On that date, the
Company had outstanding and entitled to vote 1,375,294 shares of Common Stock.
Each share of Common Stock outstanding on the record date is entitled to one
vote. Under the Company's By-Laws, the presence in person or by proxy of a
majority in interest of all shares of Common Stock issued, outstanding and
entitled to vote at the meeting shall constitute a quorum. When a quorum is
present, a director may be elected by a plurality of the votes properly cast.
The approval of the auditors and the approval of the Benthos, Inc. 2000 Stock
Incentive Plan will require the favorable vote of a majority of the votes
properly cast. Votes withheld from any nominee for election as a director,
abstentions and broker "non-votes" are counted as present or represented for
purposes of determining the presence of a quorum for the meeting. Therefore,
abstentions and broker "non-votes" will have the effect of "against" votes.
Broker "non-votes" occur when a nominee holding shares for a beneficial owner
votes on one proposal, but does not vote on another proposal because the
nominee does not have discretionary voting power and has not received
instructions from the beneficial owner. Usually, this would occur when brokers
holding stock in "street name" have not received any instructions from
clients, in which case the brokers (as holders of record) are permitted to
vote on "routine" proposals but not on non-routine matters. The election of
directors and auditors are considered routine matters. The approval of the
Benthos, Inc. 2000 Stock Incentive Plan is considered a non-routine matter
because that plan authorizes the issuance of options in an amount which
exceeds 5% of the total number of shares of Common Stock outstanding. Missing
votes on non-routine matters are "broker non-votes."
PROXY SOLICITATION
The expenses of solicitation of proxies will be borne by the Company. It is
expected that the solicitation will be made primarily by mail, but officers
and employees of the Company may also solicit proxies by telephone, fax and in
person. Arrangements will be made to furnish copies of proxy materials to
fiduciaries, custodians and brokerage houses for forwarding to beneficial
owners of the Company's Common Stock.
The Company's principal executive offices are at 49 Edgerton Drive, North
Falmouth, Massachusetts 02556-2826.
Any person giving a proxy in the form accompanying this statement has the
power to revoke it at any time before its exercise. It may be revoked by
filing with the Clerk of the Company an instrument of revocation or a duly
executed proxy bearing a later date. It may also be revoked by attendance at
the meeting and election to vote in person.
1
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The current directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Samuel O. Raymond.......... 71 Chairman Emeritus of the Board of Directors
and Director of Research
John L. Coughlin........... 48 President and Chief Executive Officer and
Director
Stephen D. Fantone......... 46 Chairman of the Board of Directors
A. Theodore Mollegen, Jr... 62 Director
Thurman F. Naylor.......... 80 Director
Gary K. Willis............. 54 Director
Arthur L. Fatum............ 47 Director
Francis E. Dunne, Jr....... 53 Treasurer and Chief Financial Officer
Robert C. Prescott......... 57 Vice President, Engineering
Robert A. Catalano......... 45 Vice President, Operations
</TABLE>
The Company's board of directors is classified into three classes, with the
members of the respective classes serving for staggered three-year terms. The
first class, consisting of Messrs. Coughlin and Willis, is eligible for re-
election at the 2000 annual meeting; the second class, consisting of Mr.
Mollegen and Dr. Fantone, is eligible for re-election at the 2001 annual
meeting; the third class, consisting of Messrs. Raymond, Naylor and Fatum, is
eligible for re-election at the 2002 annual meeting. Officers of the Company
serve at the pleasure of the Board of Directors.
The following information is provided with respect to the business
experience of each director and executive officer of the Company:
Mr. Raymond founded the Company in 1962 and served as its President for
twenty years. He previously served as Chairman of the Board from 1965-1982 and
from 1989 to January 1997. Mr. Raymond most recently served as the President
and Chief Executive Officer of the Company from June 1995 to April 1996.
Mr. Raymond has served as a director of the Company since 1965. In January
1997, Mr. Raymond was elected as Chairman Emeritus of the Board of Directors
and Director of Research of the Company. Mr. Raymond has a B.S. in Mechanical
Engineering from M.I.T. and was instrumental in the development and marketing
of many of the Company's original products in both the Company's Undersea
Systems Division and the Container Inspection Systems Division.
Mr. Coughlin has served as President, Chief Executive Officer and a
director of the Company since April 1996 and as Treasurer from October 1996 to
February 1997. Prior to joining the Company, he was President (1993-1996) and
Vice President of Sales and Marketing (1990-1993) of Dynisco Instruments, an
operating division of Dynisco, Inc., a wholly-owned subsidiary of Berwind
Industries. Dynisco Instruments is a manufacturer of pressure and temperature
measurement products for the plastics industry. He holds a B.S. in Physics
from Georgetown University and an M.S. in Physics from Northeastern
University. Mr. Coughlin is President of The Massachusetts Ocean Technology
Network (MOTN) and a member of the Board of Directors of the Cape Cod
Technology Council (CCTC).
Dr. Fantone became a director of the Company in March 1995 and was elected
Chairman of the Board of Directors in January 1997. Since 1982, he has been
President and Chief Executive Officer of Optikos Corporation, an optical
engineering firm which he founded and which specializes in the design and
manufacture of optical products and instrumentation and optical test
equipment. He has B.S. degrees in Electrical Engineering and Management from
M.I.T. and a Ph.D. in optics from the Institute of Optics at the University of
Rochester. Dr. Fantone has been awarded 45 U.S. patents and is the author of
numerous technical papers and articles on optical technology. He is also
currently a Senior Lecturer in the Mechanical Engineering Department at M.I.T.
and Treasurer of the Optical Society of America.
2
<PAGE>
Mr. Mollegen has served as a director of the Company since 1985. He is the
President and Chief Executive Officer of Allied Resources Corporation, a
company which provides technical training, engineering, health management, and
safety management services to industrial firms. Prior to joining Allied
Resources in 1993, Mr. Mollegen was Chairman and Chief Executive Officer of
Analysis & Technology, Inc., a provider of engineering and technical services
to the U.S. Navy. Mr. Mollegen has a B.E. in Electrical Engineering from Yale
University and is the author of over 90 technical papers and reports on
undersea topics. He is a member of the board of Technology for Connecticut
(TECHCONN), Inc. and of Southeast Area Regional Economic Development (SEA-
RED). He is also a member of the Advisory Committee of the University of New
Haven Southeast Branch.
Mr. Naylor is President of Cameras and Images International, Inc. (a dealer
in photographic images and equipment), is the owner and founder of the Naylor
Museum of Photography in Brookline, Massachusetts, and has served as a
director of the Company since 1987. Mr. Naylor is an internationally
recognized authority on photographic history, processes, and technology. Mr.
Naylor is the former Chairman, President and CEO of Standard-Thomson
Corporation, a manufacturer of temperature and pressure controls and
electronic equipment. Mr. Naylor is also the former Chairman, President and
CEO of Thomson International Corporation (1959-1989), a manufacturer of
temperature controls with engineering and manufacturing facilities in twelve
countries. Mr. Naylor has a B.A. in Economics from Fordham University and a
B.S. in Mechanical Engineering from The John Hopkins University. Mr. Naylor is
also a member of the Board of Directors of Analysis & Technology, Inc.,
Sandler Productions, Inc. (motion picture and television production) and
Summit Industries, Inc. (a manufacturer of x-ray equipment).
Mr. Willis was elected as a director on January 23, 1998. Since November
1998, he has been Chairman of the Board of Directors of Zygo Corporation, a
supplier of high precision yield improvement and metrology systems. Mr Willis
has served as a director of Zygo Corporaiton since February 1992 and has also
served as President (1992-1999) and Chief Executive Officer (1993-1999) of
that corporation. Prior to joining Zygo, he was the President and Chief
Executive Officer of The Foxboro Company, a manufacturer of process control
instruments and systems. Mr. Willis is also a director of Rofin-Sinar
Technologies, Inc. (industrial laser systems) and Middlesex Health Services,
Inc., a Connecticut-based health care provider. Mr. Willis has a B.S. in
mechanical engineering from Worcester Polytechnical Institute.
Mr. Fatum was appointed as a director by the Board of Directors on January
6, 2000. Since November 1998 he has been Vice President and Chief Financial
Officer of PictureTel Corporation (a company engaged in the development,
manufacture and support of video conferencing and visual and audio
collaboration solutions). Prior to joining PictureTel Corporation, he was
President and Managing Director of AT&T Capital Europe (1995-1998),
responsible for its pan-European equipment leasing business. Mr. Fatum has a
B.S. in mathematics from State University of New York and is a graduate of GE
Management Development Institute.
Mr. Dunne was appointed Treasurer and Chief Financial Officer of the
Company on February 1, 1997. Prior to joining the Company, he was Chief
Financial Officer of Kinney Vacuum Company, then an operating division of
General Signal Corporation (1993-1996). Kinney Vacuum Company is a
manufacturer of industrial vacuum pumps and pump systems for the food
packaging, chemical and pharmaceutical, heat treating, automotive, and other
industries. Prior to joining Kinney, Mr. Dunne was Director of Planning and
Analysis at General Signal Corporation (1990-1993). General Signal Corporation
was a manufacturer of products serving the process controls, electrical
controls, and industrial technology industries. Mr. Dunne has a B.S. degree in
Accounting from St. John's University, an M.B.A. in Finance from Long Island
University, and is a Certified Public Accountant.
Mr. Prescott was appointed Vice President of Engineering on November 15,
1998. Before joining the Company, he was Consulting Engineer at The Foxboro
Company, a manufacturer of process control instruments and systems (1996-
1998). Prior to joining Foxboro he had been Director of Engineering at Kidde-
Fenwal, Inc., a manufacturer of temperature controls and fire protection
equipment (1992-1995). Mr. Prescott holds a B.A. and a B.E. degree from
Dartmouth College. He is a registered professional engineer in Massachusetts
and has been awarded 13 patents.
3
<PAGE>
Mr. Catalano has served as Vice President of Operations of the Company
since March 15, 1999. Prior to this appointment, Mr. Catalano was the Product
Line Manager for both the acoustic and hydrophone product lines of the Company
from 1987 to 1999. He holds a B.S. in Geology from the University of
Connecticut and an M.B.A. from Northeastern University. He is also a member of
the Society of Exploration Geophysicists.
There are no family relationships among the directors or executive officers
of the Company.
Board and Committee Meetings
Four meetings of the Board of Directors were held during the fiscal year
ended September 30, 1999.
The Audit Committee is a committee of the Board of Directors which reviews
and discusses the plan for and the results of the annual audit with the
Company's independent auditors and approves non-audit services provided by
them. The Audit Committee also reviews the Company's internal control and
accounting system. In addition, the committee makes recommendations to the
Board concerning the selection of the independent auditors. The present
members of the Committee, which met once during the past fiscal year, are
Messrs. Mollegen, Naylor and Willis.
The ESOP Committee is appointed by the Board of Directors and administers
the Company's Employee Stock Ownership Plan. Messrs. Coughlin, Naylor and
Fantone are the current members of the ESOP Committee. There was one meeting
of the ESOP Committee during the past fiscal year.
The Compensation and Stock Option Plan Committee (the "Compensation
Committee") is a committee of the Board of Directors which establishes the
compensation of senior officers and grants options under the Company's
employee stock option plan. The current members of the Compensation Committee
are Messrs. Mollegen, Naylor and Willis. The committee did not formally meet
during the past fiscal year, but rather conducted business by e-mail,
facsimile and telephone.
The Board of Directors serves as the Company's Nominating Committee.
All directors attended 100% percent of the meetings of the Board of
Directors and the committees of which they were members during the fiscal year
ended September 30, 1999.
4
<PAGE>
PRINCIPAL HOLDERS OF VOTING SECURITIES AND
SECURITY OWNERSHIP OF MANAGEMENT
The following information is furnished as of January 6, 2000 with respect
to the beneficial ownership of shares of Common Stock of the Company by the
directors and executive officers of the Company, all of the directors and
officers of the Company as a group and all persons known to be the beneficial
owners of more than five percent of such outstanding stock. Unless otherwise
indicated, each of the persons named below held sole voting and investment
power over the shares listed below as of said date.
In accordance with the rules of the Securities and Exchange Commission,
shares which an individual has the right to acquire pursuant to stock options
which are exercisable within sixty days are considered to be beneficially
owned and, for purposes of calculating the percentage ownership of stock for
an individual who holds exercisable stock options, such shares are also
considered to be outstanding. Reference should be made to the footnotes below
for further information as to each individual listed.
<TABLE>
<CAPTION>
Shares Percent of Outstanding
Name and Address (1) Beneficially Owned Common Stock
-------------------- ------------------ ----------------------
<S> <C> <C>
Samuel O. Raymond.................... 183,499 (2) 13.3%
Ronald K. Church 1996 Trust.......... 128,250 9.3%
Cape Cod Bank and Trust Company,
N.A., Trustee of the Benthos, Inc.
Employee Stock Ownership Plan
("ESOP")(3)......................... 71,043 5.2%
John L. Coughlin..................... 52,940 (4) 3.7%
Stephen D. Fantone................... 57,950 (5) 4.2%
A. Theodore Mollegen, Jr............. 15,500 (6) 1.1%
Thurman F. Naylor.................... 27,500 (7) 2.0%
Gary K. Willis....................... 15,000 (8) 1.1%
Arthur L. Fatum...................... 2,000 0.1%
Francis E. Dunne, Jr................. 13,158 (9) 0.9%
Robert C. Prescott................... 3,900(10) 0.3%
Robert A. Catalano................... 3,468(11) 0.3%
All directors and officers as a group
(10 persons)........................ 374,915(12) 25.5%
</TABLE>
- --------
(1) Except as set forth below, the address of each of the individuals set
forth in the table is c/o Benthos, Inc., 49 Edgerton Drive, North
Falmouth, Massachusetts 02556. The address of the Ronald K. Church 1996
Trust is 46 Riddle Hill Road, Falmouth, Massachusetts 02540. The address
of Cape Cod Bank and Trust Company, N.A. is 307 Main Street, Hyannis,
Massachusetts 02601.
(2) Includes 3,373 shares owned by the Company's ESOP, over which Mr.
Raymond has sole voting power. Also includes 50,243 shares owned by Mr.
Raymond's children, as to which shares Mr. Raymond disclaims beneficial
ownership.
(3) Pursuant to the terms of the plan, plan participants are entitled to
direct the Trustee as to the manner in which all shares allocated to
such participants' accounts are to be voted.
(4) Consists of 6,000 shares owned by Mr. Coughlin's individual retirement
account, 45,750 shares which Mr. Coughlin has the right to acquire
through the exercise of a stock option granted April 8, 1996 with an
unexercised balance of 64,500 shares and 1,190 shares owned by the
Company's ESOP, over which Mr. Coughlin has sole voting power.
(5) Includes 11,250 shares which Dr. Fantone has the right to acquire
through the exercise of a stock option for 11,250 shares granted January
24, 1997.
(6) Includes 5,000 shares which Mr. Mollegen has the right to acquire
through exercise of a stock option for 15,000 shares granted on April 3,
1998.
(7) Includes 5,000 shares which Mr. Naylor has the right to acquire through
exercise of a stock option for 15,000 shares granted on January 22,
1999.
(8) Includes 10,000 shares which Mr. Willis has the right to acquire through
the exercise of a stock option for 15,000 shares granted on January 23,
1998.
5
<PAGE>
(9) Consists of 11,250 shares which Mr. Dunne has the right to acquire
through the exercise of a stock option for 15,000 shares granted January
24, 1997, 1,250 shares which he has the right to acquire through the
exercise of a stock option for 5,000 shares granted on January 22, 1999,
and 658 shares owned by the Company's ESOP, over which Mr. Dunne has
sole voting power.
(10) Includes 3,750 shares which Mr. Prescott has the right to acquire
through the exercise of a stock option for 15,000 shares granted on
January 22, 1999.
(11) Includes 1,593 shares owned by the Company's ESOP, over which Mr.
Catalano has sole voting power.
(12) Includes an aggregate of 93,250 shares which the directors and officers
have the right to acquire through the exercise of certain options.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company for the
Company's last three fiscal years to the Company's chief executive officer
during the Company's fiscal year ended September 30, 1999 and the only other
executive officers who received an annual salary and bonus exceeding $100,000
during that fiscal year.
<TABLE>
<CAPTION>
Annual Shares
Compensation Underlying
Name and Principal Fiscal ----------------- Options All Other
Position Year Salary Bonus Granted Compensation (1)
- ------------------ ------ -------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
John L. Coughlin,........ 1999 $174,919 $ 45,000 -- $ 12,698
President and Chief 1998 170,854 23,000 -- 9,000
Executive Officer 1997 153,769 53,000 -- 94,028
Francis E. Dunne, Jr..... 1999 $114,800 $ 30,000 5,000 $ 10,325
Treasurer and Chief 1998 111,038 16,000 -- 4,505
Financial Officer (2) 1997 82,788 30,000 15,000 --
Robert C. Prescott,...... 1999 $108,173 $ 8,000 15,000 --
Vice President,
Engineering (3)
Robert A. Catalano,...... 1999 $ 82,000 25,000 -- $ 6,332
Vice President, 1998 73,558 10,000 -- 3,784
Operations 1997 67,769 36,000 -- 152,733
All directors and
officers as a group
(4)..................... 1999 $551,892 $108,000 35,000 $120,310
1998 428,835 49,000 30,000 480,718
1997 389,139 119,000 26,250 295,598
</TABLE>
- --------
(1) Includes amounts contributed by the Company to individual accounts with
the Company's ESOP and 401(k) Retirement Plan and amounts realized on
exercise of stock options by officers and directors during fiscal 1997 and
1998.
(2) Mr. Dunne has served as Treasurer and Chief Financial Officer since
February 1, 1997.
(3) Mr. Prescott joined the Company on November 16, 1998.
(4) Consisted of seven persons for fiscal 1997, eight persons for fiscal 1998
and nine persons for fiscal 1999.
6
<PAGE>
Stock Option Tables
The following table sets forth information concerning grants of stock
options during the Company's fiscal year ended September 30, 1999 to the
executive officers named in the table above.
<TABLE>
<CAPTION>
Percentage of
Total Options
Granted to
Number of Shares Employees in Exercise Expiration
Name and Principal Position Underlying Option Fiscal Year Price Date
- --------------------------- ----------------- ------------- -------- ----------
<S> <C> <C> <C> <C>
John L Coughlin,........... -- -- -- --
President and Chief
Executive Officer
Francis E. Dunne, Jr.,..... 5,000 12.9% $6.25 1/22/09
Treasurer and Chief
Financial Officer
Robert C. Prescott,........ 15,000 38.7% 6.25 1/22/09
Vice President,
Engineering
Robert A. Catalano,........ -- -- -- --
Vice President,
Operations
</TABLE>
The following table sets forth information concerning each exercise of
stock options during the Company's fiscal year ended September 30, 1999 by the
executive officers named in the table above and the number and value of shares
underlying those stock options at that date.
<TABLE>
<CAPTION>
Name and Shares Number of Unexercised Value of Unexercised
Principal Acquired on Value Securities Underlying Options In-the-Money Options
Position Exercise Realized(1) At Fiscal Year End At Fiscal Year End(2)
--------- ----------- ---------- ----------------------------- ---------------------
<S> <C> <C> <C> <C>
John L. -- $ -- 45,750(3) $190,627
Coughlin,..
President 18,750(4) 78,125
and Chief
Executive
Officer
Francis E. -- -- 7,500(3) 0
Dunne,
Jr.........
Treasurer 12,500(4) 11,250
and Chief
Financial
Officer
Robert C. -- -- 0(3) 0
Prescott,..
Vice 15,000(4) 33,750
President,
Engineering
Robert A. 1,875 $17,578 -- --
Catalano,..
Vice
President,
Operations
</TABLE>
- --------
(1) Based upon the closing price of the Company's Common Stock on the Nasdaq
SmallCap Market on June 9, 1999.
(2) Based upon the difference between the option exercise price and the
closing price of the Company's Common Stock on the Nasdaq SmallCap Market
on September 30, 1999.
(3) Shares underlying options exercisable as of September 30, 1999.
(4) Shares underlying options not exercisable as of September 30, 1999.
7
<PAGE>
Directors' Compensation
Under the compensation policy adopted by the Board of Directors, each non-
employee director will receive a fee of $6,000 per year plus $1,000 for each
directors' meeting attended and reimbursement for reasonable travel and other
expenses when incurred. Stephen D. Fantone also receives additional
compensation of $5,417 per month for his services as Chairman of the Board of
Directors. Non-employee directors are also eligible to receive stock options
under the Company's 1998 Non-Employee Directors' Stock Option Plan.
Employment Contracts
In 1990, the Company entered into an employment agreement with Samuel O.
Raymond. Under this agreement, as amended, Mr. Raymond will be employed as the
Director of Research of the Company at a salary of $72,000 per year and will
serve as the Chairman Emeritus of the Board of Directors for as long as he is
elected to that position. This agreement commenced on August 1, 1990 and will
expire on July 31, 2005. After the expiration of the initial term, the
agreement will automatically be renewed annually as of August 1, 2005 and each
August 1 thereafter. The agreement also provides that if a change in control
of the Company should occur during the first, second or last five years of the
initial term of the agreement, Mr. Raymond is entitled to receive $427,974,
$335,504, or $199,636, respectively, from the Company. The Company has also
agreed to pay the premiums on a $1,500,000 life insurance policy on Mr.
Raymond's life under a split dollar plan.
The Company has entered into an employment agreement with John L. Coughlin,
effective as of October 1, 1999, pursuant to which Mr. Coughlin agrees to
serve as the President and Chief Executive Officer of the Company for a three-
year period. The agreement provides for an initial base salary of $187,000 per
year, subject to increase from time to time by the Board of Directors and an
annual incentive compensation program for Mr. Coughlin based upon the
attainment of quantitative and qualitative objectives to be set by the Board
of Directors. For the fiscal year ending September 30, 2000, Mr. Coughlin's
quantitative bonus will be equal to 1.2% of the operating income of the
Company up to $2,000,000, plus 1% of the operating income of the Company in
excess of $2,000,000. In the event the Company terminates his employment other
than for cause (as defined in the agreement), Mr. Coughlin will be entitled to
severance benefits equal to 18 months' base salary (24 months in the case of a
change of control), plus continuation of health benefits for 18 months and six
months of outplacement services (twelve months in the case of a change of
control) not to exceed $25,000.
CERTAIN TRANSACTIONS
On July 29, 1997, the Company entered into a License Agreement with a
corporation wholly-owned by Dr. Stephen D. Fantone, Chairman of the Board of
Directors of the Company, with respect to the concept of utilizing optical
technology, for which Dr. Fantone's corporation possesses technical expertise,
for application to certain products currently under development by the
Company. Under the agreement, the Company will pay the development costs to
Dr. Fantone's corporation. During the fiscal year ended September 30, 1999,
the Company paid Dr. Fantone's corporation approximately $20,000 for services
related to this contract. The proprietary rights to the technology will be
owned by Dr. Fantone's corporation, which has granted an exclusive license to
the Company for the use of the technology in certain specified fields of use
upon the terms and conditions set forth in the agreement. The Company's policy
with respect to business relationships with officers, directors, or affiliates
is that any such relationships must be fully disclosed to the Board of
Directors and must be upon terms not less favorable to the Company than those
available from third parties dealing at arm's length.
ELECTION OF DIRECTORS
The Board of Directors of the Company is classified into three classes,
each of which consists of two or three directors. One class of directors is
elected each year for a term of three years. The terms of the Class I
directors, John L Coughlin and Gary K. Willis expire at the 2000 annual
meeting. The Board of Directors has nominated Messrs. Coughlin and Willis to
continue to serve as Class I directors for a term expiring at the 2003 annual
meeting.
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Unless otherwise specified therein, shares represented by the enclosed
proxy will be voted at the stockholders meeting to elect Mr. Coughlin and Mr.
Willis as Class I directors for a three-year term until the 2003 annual
meeting of stockholders and until their successors shall be duly elected. In
the event that either Mr. Coughlin or Mr. Willis is unable to stand for
election (which event is not now contemplated), the holders of the enclosed
proxy will vote for the election of a nominee or nominees acceptable to the
remaining members of the Company's Board of Directors.
The Board of Directors recommends that stockholders vote "FOR" the proposal
to elect Messrs. Coughlin and Willis as directors.
APPROVAL OF AUDITORS
The Board of Directors has appointed Arthur Andersen LLP as independent
public accountants to examine the financial statements of the Company and its
subsidiary for the fiscal year ending September 30, 2000. Representatives of
Arthur Andersen LLP are expected to be present at the stockholders meeting,
will have the opportunity to make a statement if they desire to do so and are
expected to be available to respond to appropriate questions.
The Board of Directors recommends that stockholders vote "FOR" the proposal
to approve the appointment of Arthur Andersen LLP as independent public
accountants.
APPROVAL OF THE BENTHOS, INC.
2000 STOCK INCENTIVE PLAN
On January 6, 2000, the Company's Board of Directors adopted, subject to
approval by the stockholders, the Benthos, Inc. 2000 Stock Incentive Plan (the
"Incentive Plan"). The Incentive Plan provides for awards ("Awards") of up to
300,000 shares of Common Stock (subject to anti-dilution adjustments) in the
form of (i) incentive stock options ("ISOs") which qualify for special Federal
income tax treatment under the Internal Revenue Code of 1986, as amended (the
"Code"), (ii) options which are not qualified for special tax treatment ("Non-
Qualified Stock Options"), and (iii) issuances of Restricted Stock (as
described below). The Plan will be administered by the Company's Board of
Directors or, at the election of the Board, a committee thereof composed of
not less than two non-employee directors (the "Committee"). The Board has
delegated administration of the Incentive Plan to the Compensation Committee.
Under the Incentive Plan, all employees of, and consultants to, the Company or
any of its subsidiaries are eligible to participate. Such participants may
include directors of the Company who are employees, but such participants will
not include any non-employee directors, who are now eligible to receive stock
options under the Company's 1998 Non-Employee Directors' Stock Option Plan.
The full text of the Incentive Plan is set forth in Exhibit A to this Proxy
Statement, and the following summary of the major provisions of the Plan is
qualified in its entirety by this reference.
Prior to December 20, 1999, the Company had in effect a 1990 Stock Option
Plan (the "1990 Plan"), pursuant to which the Company's Board of Directors (or
a committee thereof) was authorized to grant ISOs and Non-Qualified Stock
Options for up to an aggregate of 300,000 shares of Common Stock. The 1990
Plan expired in accordance with its terms on December 20, 1999, which was the
tenth anniversary of the adoption of that Plan by the Company's Board of
Directors. On January 6, 2000, there were outstanding stock options for an
aggregate of 151,625 shares of Common Stock which were granted pursuant to the
1990 Plan and which have exercise prices ranging from $4.33 to $17.54 per
share. The closing price of the Company's Common Stock on the Nasdaq SmallCap
Market on January 5, 2000, was $8.00. An aggregate of 106,625 of the stock
options then outstanding under the 1990 Plan had exercise prices less than
such closing price, and an aggregate of 48,000 of such "in-the-money" options
were then exercisable. All of the outstanding options granted under the 1990
Plan will remain outstanding until they are either exercised or expire in
accordance with their respective terms. However, no additional options may be
granted under the 1990 Plan.
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The Board believes that the use of stock incentives will enhance the
ability of the Company's officers, key employees (including directors who are
key employees), and consultants to acquire or increase their ownership
interest in the Company, thereby increasing their motivation to strive toward
insuring the Company's growth and success. The Board also believes that the
availability of such incentives will be a factor in attracting and retaining
those highly competent individuals upon whose judgment, initiative and
leadership the Company's continuing success depends.
As of January 5, 2000, the Company had a total of 125 employees and six
consultants who will be eligible to participate in the Plan. As described
above, the Company's five current non-employee directors will not be eligible
to participate in the Plan. The granting of Awards under the Incentive Plan
will be discretionary with the Committee, and the Company cannot now determine
the number or type of Awards which the Committee will elect to grant in the
future to any particular person or group. During the Company's fiscal year
ended September 30, 1999, Francis E. Dunne, Jr. and Robert C. Prescott
(executive officers who received salaries and bonuses exceeding $100,000
during such year) received stock options under the 1990 Plan for an aggregate
of 20,000 shares of Common Stock (with a weighted average exercise price of
$6.25 per share) and held as of the end of such fiscal year stock options
granted under the 1990 Plan for an aggregate of 35,000 shares (having an
aggregate "in-the-money" value of $45,000). During such fiscal year, an total
of five employees (exclusive of such two executive officers) received stock
options under the 1990 Plan for an aggregate of 18,750 shares of Common Stock
(with a weighted average exercise price of $6.25 per share), and an aggregate
of 22 current or former employees and consultants (exclusive of such two
executive officers) held as of the end of such fiscal year stock options
granted under the 1990 Plan for an aggregate of 116,625 shares (having an
aggregate "in-the-money" value of $325,231). See "Executive Compensation--
Stock Option Tables" earlier in this Proxy Statement for a further description
of the stock options previously granted to such two executive officers under
the 1990 Plan.
Types of Awards
The Incentive Plan provides that the Committee may grant Awards to
employees (including directors who are employees) and consultants in any of
the following forms:
Options. The Compensation Committee may award ISOs and Non-Qualified
Stock Options (collectively, "Options") and determine the number of shares
to be covered by each Option, the option price therefor, the term of the
Option, and the other conditions and limitations applicable to the exercise
of the Option. As required by the Code, the option price per share of
Common Stock purchasable under an ISO shall not be less than 100% of the
fair market value of the Common Stock on the date of award. Furthermore, if
the grantee of an ISO then owns more than 10% of the voting power of all
classes of the Company's capital stock then outstanding, the option price
per share of Common Stock purchasable under an ISO shall be not less than
110% of the fair market value of the Common Stock on the date of award. The
Incentive Plan provides that the option price per share of Common Stock
purchasable under a Non-Qualified Stock Option shall be determined by the
Committee in its discretion, and such price may be less than, equal to or
greater than the fair market value of the Common Stock on the date of
award. Options may be exercisable for not more than ten years after the
date the Option is awarded.
Restricted Stock. An Award of restricted stock ("Restricted Stock")
entitles the participant to acquire shares of Common Stock subject to such
conditions and restrictions as the Committee shall determine, which will
normally include a right of the Company, during a specified period or
periods, to repurchase such shares at their original purchase price (or to
require forfeiture of such shares) upon the participant's termination of
employment. Subject to the provisions of the Incentive Plan, the Committee
may award shares of Restricted Stock and determine the purchase price
therefor, the duration of the restricted period during which, and the
conditions under which, the shares may be forfeited to or repurchased by
the Company, and the other terms and conditions of such Awards. The
Committee may also thereafter modify or waive the restrictions with respect
to any Restricted Stock. Shares of Restricted Stock may be issued for cash
equal to less than the fair market value of the Common Stock on the date of
Award or no cash
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consideration. A participant shall have all the rights of a stockholder
with respect to the Restricted Stock including voting and dividend rights,
subject to nontransferability restrictions and Company repurchase or
forfeiture rights and any other conditions contained in the Award.
Other Material Provisions of Incentive Plan
Granting of Awards. Each Award may be made alone, in addition to, or in
relation to any other Award. The terms of each Award need not be identical,
and the Committee need not treat participants uniformly. Except as otherwise
provided by the Incentive Plan or a particular Award, any determination with
respect to an Award may be made by the Committee at the time of award or at
any time thereafter. The Committee shall determine whether Awards are settled
in whole or in part, or in cash, Common Stock, other securities of the
Company, or other property. The Committee may permit a participant to defer
all or any portion of a payment under the Plan, including the crediting of
interest on deferred amounts.
Outstanding Awards. Awards may not be made under the Incentive Plan after
January 5, 2010, but outstanding Awards may extend beyond such date. Common
Stock subject to Options which expire or are terminated prior to exercise and
Common Stock which has been forfeited under the terms of Restricted Stock
Awards will be available for future Awards under the Plan. Both treasury
shares and authorized but unissued shares may be used to satisfy Awards under
the Plan. Any proceeds received by the Company from transactions under the
Plan will be used for the general purposes of the Company.
Administration. The Committee will serve as the administrator of the
Incentive Plan. In such capacity, the Committee shall determine, from among
those employees and consultants eligible to receive Awards, those to whom
Awards should be granted and the type of Awards to be granted. In addition,
subject to certain limitations, the Committee will have authority to resolve
any disputes arising under the terms of the outstanding Awards.
Amendment. If the Incentive Plan is approved by the stockholders, the
Company's Board of Directors may thereafter amend, suspend, or terminate the
Plan or any portion thereof at any time. However, no amendment shall be made
without stockholder approval if such approval is necessary to comply with any
applicable tax or regulatory requirement, including any requirements for
exemptive relief under Section 16(b) of the Securities Exchange Act of 1934,
or any successor provision. Accordingly, stockholder approval would be
required for any amendment that increases the number of shares of Common Stock
subject to the Incentive Plan (other than in connection with an adjustment
upon a change in capitalization) or makes any change in the class of employees
or consultants of the Company eligible to be granted Awards by the Committee
under the Incentive Plan.
Certain Tax Information
Incentive Stock Options. For Federal income tax purposes, no taxable income
results to the optionee upon the grant of an ISO or upon the issuance of
shares to the optionee upon the exercise of the option, and no deduction is
allowed to the Company upon either the grant or the exercise of the ISO.
Rather, if shares acquired upon the exercise of an ISO are not disposed of
either within the two-year period following the date the option is granted or
within the one-year period following the date the shares are transferred to
the optionee pursuant to exercise of the option, the difference between the
amount realized on any disposition thereafter and the option price will be
treated as long-term capital gain or loss to the optionee. If a disposition
occurs before the expiration of the requisite holding periods, then the lower
of (i) any excess of the fair market value of the shares at the time of
exercise of the option over the option price or (ii) the actual gain realized
on disposition, will be deemed to be compensation to the optionee and will be
taxed at ordinary income rates. Any excess of the amount realized by the
optionee on disposition over the fair market value of the shares at the time
of exercise will be treated as capital gain. The Incentive Plan requires each
employee granted an ISO under the Incentive Plan to notify the Committee in
the event that the optionee disposes of Common Stock acquired upon exercise of
an ISO either within the two-year period following the date the ISO was
granted or within the one-year period following the date the optionee receives
Common Stock upon the exercise of an ISO. If an optionee is required to
recognize ordinary income as a result of a disqualifying disposition of shares
acquired upon exercise of an ISO, the
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Company will be entitled (subject to certain limitations on employee
remuneration in excess of $1 million under Section 162(m) of the Code) to a
corresponding deduction from its taxable income provided the Company complies
with certain reporting requirements. Any such increase in the taxable income
of the optionee or deduction from the taxable income of the Company
attributable to such disposition is treated as an increase in taxable income
or a deduction from taxable income in the taxable year in which the
disposition occurs.
"Alternative minimum taxable income" in excess of a taxpayer's exemption
amount is subject to the alternative minimum tax, which is currently imposed
at a rate of 26% to 28% on individuals and is payable to the extent it exceeds
the regular income tax. The excess of the fair market value on the date of
exercise over the option price of shares acquired on exercise of ISOs
generally constitutes an item of alternative minimum taxable income for the
purpose of the alternative minimum tax. The optionee's basis for the shares
acquired for regular income tax purposes will not be increased by the amount
of alternative minimum taxable income recognized on exercise, but the optionee
may be able to recover the amount of his or her alternative minimum tax
liability through the alternative minimum tax credit against future gain from
sale of the stock.
If the aggregate fair market value (determined at the time the option is
granted) of the shares of Common Stock covered by ISOs granted to an
individual optionee which become exercisable for the first time in a calendar
year exceeds $100,000, the amount of the excess will not be treated as shares
acquired through exercise of an ISO.
Non-Qualified Stock Options. For Federal income tax purposes, a person who
is granted a Non-Qualified Stock Option will not have taxable income at the
date of grant; however, an optionee who thereafter exercises such an option
will be deemed to have received compensation income in an amount equal to the
difference between the option price and the fair market value of the shares on
the date of exercise. The optionee's basis for such shares will be increased
by the amount which is deemed compensation income. For the year in which a
Non-Qualified Stock Option is exercised, the Company will be entitled (subject
to certain potential limitations under Section 162(m) of the Code) to a
deduction in the same amount as the optionee is required to include in his or
her income provided the Company withholds and deducts as required by law. When
the optionee disposes of such shares, he or she will recognize capital gain or
loss.
Restricted Stock. A recipient of Restricted Stock generally will be subject
to tax at ordinary income rates on the fair market value of the Common Stock
at the time the Common Stock is no longer subject to forfeiture, minus the
amount (if any) paid for such stock. However, a recipient who makes an
election under Section 83(b) of the Code within 30 days of the date of
issuance of the Restricted Stock will realize ordinary income on the date of
issuance equal to the fair market value of the shares of Restricted Stock at
the time (measured as if the shares were unrestricted and could be sold
immediately), minus the amount (if any) paid for such stock. For the year in
which any such ordinary income is realized by the recipient of Restricted
Stock, the Company will be entitled (subject to certain potential limitations
in Section 162(m) of the Code) to a deduction in the same amount as the
recipient is required to include in his or her income, provided the Company
withholds and deducts as required by law. If the election is made, no taxable
income will be realized when the shares subject to such election are no longer
subject to forfeiture. If the shares subject to such election are forfeited,
the recipient will not be entitled to any deduction, refund or loss for tax
purposes with respect to the forfeited shares. Upon sale of the shares after
the forfeiture period has expired, the holding period to determine whether the
recipient has long-term or short-term capital gain or loss begins when the
restriction period expires (or upon earlier issuance of the shares, if the
recipient elected immediate realization of income under Section 83(b) of the
Code).
Other Tax Consequences. The foregoing is a general summary only of the
principal Federal income tax aspects of Awards to be granted under the
Incentive Plan, and tax consequences may vary depending on the particular
circumstances associated with any Award. In addition, the relevant provisions
of the Code and the Regulations thereunder and administrative and judicial
interpretations are subject to change. Furthermore, no information is given
with respect to foreign, state or local taxes that may be applicable in the
case of any Award in addition to, or in lieu of, U.S. Federal income taxes.
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Recommendation by Board of Directors
As described above, the Company's Board of Directors believes that approval
of the Incentive Plan will allow the Company to attract and retain the highly
trained and motivated individuals on which the future success of the Company
depends. Accordingly, the Board recommends that the stockholders vote FOR the
approval of the Incentive Plan. Proxies will be voted in the manner specified
therein with respect to approval and, if no specification is made, in favor of
approval.
OTHER MATTERS COMING BEFORE THE MEETING
As of the date of this Proxy Statement, management does not know of any
matters to be presented to the meeting other than the matters set forth in the
attached Notice of Annual Meeting of Stockholders. If any other matters
properly come before the meeting, the persons named in the enclosed proxy will
vote thereon according to their best judgment.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who beneficially own more than
10% of a registered class of the Company's equity securities, to file reports
of ownership and changes of ownership with the Securities and Exchange
Commission. Copies of those reports are to be furnished to the Company.
Based solely upon a review of Forms 3, 4 and 5 and amendments thereto
furnished to the Company under Rule 16a-3(d) during the fiscal year ended
September 30, 1999, no director, officer, or beneficial owner of more than 10%
of the Company's equity securities failed to file on a timely basis, any
reports required by Section 16(a) of the Securities Exchange Act of 1934,
except that Robert C. Prescott inadvertently omitted to list 150 shares on the
Form 3 filed in February 1999 and Robert A. Catalano was late in filing a Form
3 reporting his appointment as an executive officer and a Form 4 reporting his
exercise of a stock option.
STOCKHOLDER PROPOSALS
Under the By-laws of the Company, written notice to the Clerk stating the
business to be brought by stockholders before an annual meeting of
stockholders or a special meeting in lieu of the annual meeting shall be given
sixty days prior to the anniversary date of the immediately preceding annual
meeting and within ten days of the written notice of any special meeting of
stockholders not in lieu of the annual meeting. Similar written notice to the
Clerk stating stockholder nominations for the election of directors, other
than those recommended by the Board of Directors, shall be given sixty days
prior to the anniversary date of the immediately preceding annual meeting of
stockholders and within ten days of the written notice of any special meeting
of stockholders to elect directors. Proposals which stockholders intend to
present at the 2001 annual meeting must be received by the Company for
inclusion in the Company's proxy statement and form of proxy relating to that
meeting no later than January 2, 2001.
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OTHER MATTERS
THE COMPANY FILES AN ANNUAL REPORT WITH THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-KSB WHICH INCLUDES ADDITIONAL INFORMATION ABOUT THE
COMPANY. A COPY OF THE FORM 10-KSB, INCLUDING THE FINANCIAL STATEMENTS, MAY BE
OBTAINED WITHOUT CHARGE, AND COPIES OF THE EXHIBITS WHICH ARE LISTED THEREIN
WILL BE FURNISHED UPON PAYMENT OF THE COMPANY'S COSTS OF REPRODUCTION AND
MAILING OF SUCH EXHIBITS. ALL SUCH REQUESTS SHOULD BE DIRECTED TO FRANCIS E.
DUNNE, JR., CHIEF FINANCIAL OFFICER, 49 EDGERTON DRIVE, NORTH FALMOUTH,
MASSACHUSETTS 02556 (TEL: 508-563-1000).
By Order of the Board of Directors
John T. Lynch, Clerk
North Falmouth, Massachusetts
January 18, 2000
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EXHIBIT A
BENTHOS, INC.
2000 STOCK INCENTIVE PLAN
Section 1. Purpose
The purpose of the 2000 Stock Incentive Plan (the "Plan") is to enable
Benthos, Inc. (the "Company") and its subsidiaries to attract, retain and
motivate their employees (including directors who are employees) and
consultants, and to enable such employees and consultants to participate in
the long-term growth of the Company by providing for, or increasing the
proprietary interests of such persons in the Company, thereby assisting the
Company to achieve its long-range goals.
Section 2. Definitions
As used in the Plan:
"Act" means the Securities Exchange Act of 1934, as amended.
"Award" means any Option or Restricted Stock awarded under the Plan.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Board" means the Board of Directors of the Company.
"Closing Price" means the closing price of a share of Common Stock
quoted on the Nasdaq SmallCap Market, or on any other national securities
exchange on which the Common Stock is listed.
"Committee" means the Compensation and Stock Option Committee of the
Board, which shall consist of two or more directors each of whom shall be a
"Non-Employee Director" as defined below.
"Company" means Benthos, Inc. and any present or future parent or
subsidiary corporations (as defined in Section 424 of the Code) or any
successor to such corporations.
"Common Stock" or "Stock" means the Common Stock, $.06 2/3 par value, of
the Company.
"Fair Market Value" means, with respect to Common Stock or any other
property, the fair market value as determined by the Committee in good
faith or in the manner established by the Committee from time to time.
"Incentive Stock Option" means an option to purchase shares of Common
Stock awarded to a Participant under the Plan which is intended to meet the
requirements of Section 422 of the Code or any successor provision.
"Non-Employee Director" means a director of the Company who is not an
employee of the Company and who satisfies the requirements of Rule 16b-3(b)
under the Act, or any successor provision thereto.
"Non-Qualified Stock Option" means an option to purchase shares of
Common Stock awarded to a Participant under the Plan which is not intended
to be an Incentive Stock Option.
"Option" means an Incentive Stock Option or a Non-Qualified Stock
Option.
"Participant" means a person selected by the Committee to receive an
Award under the Plan.
"Restricted Period" means the period of time selected by the Committee
during which an award of Restricted Stock may be forfeited to the Company.
"Restricted Stock" means shares of Common Stock awarded to a Participant
under Section 7 which are subject to forfeiture.
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Section 3. Administration
(a) The Plan shall be administered by the Committee. Among other things,
the Committee shall have authority, subject to the terms of the Plan
including, without limitation, to grant Awards, to determine the individuals
to whom, and the time or times at which, Awards may be granted and to
determine the terms and conditions of any Award granted hereunder.
(b) Subject to the provisions of Section 8(a), the Committee shall have
authority to adopt, alter and repeal such administrative rules, guidelines and
practices governing the operation of the Plan as it shall from time to time
consider advisable, to interpret the provisions of the Plan and any Award, and
to decide all disputes arising in connection with the Plan. The Committee's
decisions and interpretations shall be final and binding. Any action of the
Committee with respect to the administration of the Plan shall be taken
pursuant to a majority vote or by the unanimous written consent of its
members.
Section 4. Eligibility
All employees of, and consultants to, the Company, including any director
who is an employee of , or consultant to, the Company, shall be eligible to
participate in the Plan.
Section 5. Stock Available For Awards
(a) Awards may be made under the Plan for up to 300,000 shares of Common
Stock. If any Award in respect of shares of Common Stock expires or is
terminated before exercise or is forfeited for any reason, without a payment
in the form of Stock being made to the Participant, the shares of Common Stock
subject to such Award, to the extent of such expiration, termination or
forfeiture, shall again be available for award under the Plan. Shares of
Common Stock issued under the Plan may consist in whole or in part of
authorized but unissued shares or treasury shares.
(b) In the event that the Committee determines in its sole discretion that
any stock dividend, extraordinary cash dividend, creation of a class of equity
securities, recapitalization, reclassification, reorganization, merger,
consolidation, split-up, spin-off, combination, exchange of shares, warrants
or rights offering to purchase Common Stock at a price substantially below
fair market value, or other similar transaction affects the Common Stock such
that an adjustment is required in order to preserve the benefits or potential
benefits intended to be made available under the Plan to Participants, the
Committee shall have the right to adjust equitably any or all of (i) the
number and kind of shares of stock or securities in respect of which Awards
may be made under the Plan to Participants, (ii) the number and kind of shares
subject to outstanding Awards held by Participants, and (iii) the award,
exercise or conversion price with respect to any of the foregoing held by
Participants, and, if considered appropriate, the Committee may make provision
for a cash payment with respect to an outstanding Award held by a Participant,
provided that the number of shares subject to any Award shall always be a
whole number.
Section 6. Options
(a) Subject to the provisions of the Plan, the Committee may award
Incentive Stock Options and Non-Qualified Stock Options and determine the
number of shares to be covered by each Option, the option price therefor, the
term of the Option, and the other conditions and limitations applicable to the
exercise of the Option. The terms and conditions of Incentive Stock Options
shall be subject to and comply with Section 422 of the Code, or any successor
provision, and any regulations thereunder. Anything in the Plan to the
contrary notwithstanding, no term of the Plan relating to Incentive Stock
Options shall be interpreted, amended or altered, nor shall any discretion or
authority granted to the Committee under the Plan be so exercised, so as to
disqualify the Plan or, without the consent of the optionee, any Incentive
Stock Option granted under the Plan, under Section 422 of the Code.
(b) The option price per share of Common Stock purchasable under an Option
shall not be less than 100% of the Fair Market Value of the Common Stock on
the date of award with respect to Incentive Stock Options
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and shall be the price determined by the Committee, which may be less than,
equal to or greater than the Fair Market Value of the Common Stock on the date
of award but in no event less than the par value of the Common Stock, with
respect to Non-Qualified Stock Options. If the Participant owns or is deemed
to own (by reason of the attribution rules applicable under Section 424(d) of
the Code) more than 10% of the combined voting power of all classes of stock
of the Company or any subsidiary or parent corporation of the Company and an
Incentive Stock Option is granted to such Participant, the option price shall
be not less than 110% of Fair Market Value of the Common Stock on the date of
award.
(c) No Option shall be exercisable more than ten years after the date the
option is awarded. If a Participant owns or is deemed to own (by reason of the
attribution rules of Section 424(d) of the Code) more than 10% of the total
combined voting power of all classes of stock of the Company or any subsidiary
or parent corporation of the Company and an Incentive Stock Option is awarded
to such Participant, such Option shall not be exercisable after the expiration
of five years from the date of award.
(d) No shares shall be delivered pursuant to any exercise of an Option
until payment in full of the option price therefor is received by the Company.
Such payment may be made in whole or in part in cash or by certified or bank
check or, to the extent permitted by the Committee at or after the award of
the Option, by delivery of a note or shares of Common Stock owned by the
Participant, including Restricted Stock, valued at their Fair Market Value on
the date of delivery, or such other lawful consideration as the Committee may
determine.
(e) No Option shall be transferable by the Participant otherwise than by
will or by the laws of descent and distribution, and all Options shall be
exercisable during the Participant's lifetime only by the Participant or the
Participant's duly appointed guardian or personal representative. A
Participant shall notify the Committee in the event that he or she disposes of
Common Stock acquired upon exercise of an ISO within the two-year period
following the date upon which the ISO was granted or within the one-year
period following the date upon which he or she received Common Stock upon the
exercise of an ISO.
(f) The Committee may at any time accelerate the exercisability of all or
any portion of any Option.
Section 7. Restricted Stock
(a) A Restricted Stock Award is an Award entitling the Participant to
acquire shares of Common Stock, subject to such conditions and restrictions,
including, without limitation, a Company right during a specified period or
periods to repurchase such shares at their original purchase price (or to
require forfeiture of such shares) upon the Participant's termination of
employment, as the Committee shall determine.
(b) Subject to the provisions of the Plan, the Committee may award shares
of Restricted Stock and determine the purchase price (if any) therefor, the
duration of the Restricted Period during which, and the conditions under
which, the shares may be forfeited to or repurchased by the Company and the
other terms and conditions of such Awards. Shares of Restricted Stock may be
issued for no cash consideration or such minimum consideration as may be
required by applicable law.
(c) Shares of Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered, except as permitted by the Committee, during
the Restricted Period. Shares of Restricted Stock shall be evidenced in such
manner as the Committee may determine. Any certificates issued in respect of
shares of Restricted Stock shall be registered in the name of the Participant
and, unless otherwise determined by the Committee, deposited by the
Participant, together with a stock power endorsed in blank, with the Company.
At the expiration of the Restricted Period, the Company shall deliver such
certificates to the Participant.
(d) A Participant shall have all the rights of a stockholder with respect
to the Restricted Stock including voting and dividend rights, subject to
restrictions on transferability and Company repurchase or forfeiture rights
described in this Section and subject to any other conditions, determined by
the Committee and contained in the Award.
A-3
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Section 8. General Provisions Applicable to Awards
(a) Notwithstanding any other provisions of the Plan, in order to qualify
for the exemption provided by Rule 16b-3 under the Act, and any successor
provisions, any Common Stock or other equity security offered (other than
pursuant to Options) under the Plan to a Participant subject to Section 16 of
the Act (a "Section 16 Participant") may not be sold for six months after
acquisition, and any Common Stock or other equity security acquired by a
Section 16 Participant upon exercise of an Option may not be sold for six
months after the date of grant of the Option. The Committee shall have no
authority to take any action if the authority to take such action, or the
taking of such action, would disqualify the Plan from the exemption provided
by Rule 16b-3 under the Act, and any successor provision.
(b) Each Award under the Plan shall be evidenced by a writing delivered to
the Participant specifying the terms and conditions thereof and containing
such other terms and conditions not inconsistent with the provisions of the
Plan as the Committee considers necessary or advisable to achieve the purposes
of the Plan or comply with applicable tax and regulatory laws and accounting
principles.
(c) Each Award may be made alone, in addition to, or in relation to, any
other Award. The terms of each Award need not be identical, and the Committee
need not treat Participants uniformly. Except as otherwise provided by the
Plan or a particular Award, any determination with respect to an Award may be
made by the Committee at the time of award or at any time thereafter.
(d) The Committee shall determine whether Awards to Participants are
settled in whole or in part in cash, Common Stock, or other securities of the
Company, Awards or other property. The Committee may permit a Participant to
defer all or any portion of a payment under the Plan, including the crediting
of interest on deferred amounts denominated in cash and dividend equivalents
or amounts denominated in Common Stock.
(e) In the discretion of the Committee, any Award to a Participant under
the Plan may provide the Participant with (i) dividends or dividend
equivalents payable currently or deferred with or without interest and (ii)
cash payments in lieu of or in addition to an Award.
(f) The Committee shall determine the effect on an Award of the disability,
death, retirement or other termination of employment of a Participant and the
extent to which, and the period during which, the Participant's legal
representative, guardian or designated beneficiary may receive payment of an
Award or exercise rights thereunder.
(g) In order to preserve the rights of a Participant under an Award in the
event of a change in control of the Company, the Committee in its direction
may, at the time an Award is made or at any time thereafter, take one or more
of the following actions with respect to any such change of control: (i)
provide for the acceleration of any time period relating to the exercise of
realization of the Award, (ii) provide for the purchase of the Award upon the
Participant's request for an amount of cash or other property that could have
been received upon the exercise or realization of the Award had the Award been
currently exercisable or payable, (iii) adjust the terms of the Award in a
manner determined by the Committee, (iv) cause the Award to be assumed, or new
rights substituted therefor, by another entity, or (v) make such other
provision as the Committee may consider equitable and in the best interests of
the Company.
(h) The Participant shall pay to the Company, or make provision
satisfactory to the Committee for payment of, any taxes required by law to be
withheld in respect of Awards under the Plan no later than the date of the
event creating the tax liability. In the Committee's discretion, such tax
obligations may be paid, in whole or in part, in shares of Common Stock,
including shares retained from the Award creating the tax obligation, valued
at their Fair Market Value on the date of delivery, provided, however, that
with respect to any Participant subject to Section 16(a) of the Act, any such
retention of Shares shall be made in compliance with any applicable
requirements of Rule 16b-3(e) or any successor Rule under the Act. The Company
may, to the extent permitted by law, deduct any such tax obligations from any
payment of any kind otherwise due to the Participant.
A-4
<PAGE>
(i) For purposes of the Plan, the following events shall not be deemed a
termination of employment of a Participant:
(i) a transfer to the employment of the Company from a subsidiary or
from the Company to a subsidiary, or from one subsidiary to another, or
(ii) an approved leave of absence for military service or sickness, or
for any other purpose approved by the Company, if the Participant's right
to reemployment is guaranteed either by a statute or by contract or under
the policy pursuant to which the leave of absence was granted or if the
Committee otherwise so provides in writing.
For purposes of the Plan, employees of a subsidiary of the Company shall be
deemed to have terminated their employment on the date on which such
subsidiary ceases to be a subsidiary of the Company.
(j) The Committee may amend, modify or terminate any outstanding Award held
by a Participant other than a Non-Employee Director, including substituting
therefor another Award of the same or a different type, changing the date of
exercise or realization, converting an Incentive Stock Option to a Non-
Qualified Stock Option, and modifying or waiving the restrictions with respect
to any Restricted Stock, provided that the Participant's consent to such
action shall be required unless the Committee determines that the action,
taking into account any related action, would not materially and adversely
affect the Participant.
Section 9. Miscellaneous
(a) No Person shall have any claim or right to be granted an Award, and the
grant of an Award shall not be construed as giving a Participant the right to
continued employment. The Company expressly reserves the right at any time to
dismiss a Participant free from any liability or claim under the Plan, except
as expressly provided in the applicable Award.
(b) Nothing contained in the Plan shall prevent the Company from adopting
other or additional compensation arrangements for its employees, directors and
consultants.
(c) Subject to the provisions of the applicable Award, no Participant shall
have any rights as a stockholder with respect to any shares of Common Stock to
be distributed under the Plan until he or she becomes the holder thereof. A
Participant to whom shares of Common Stock are awarded shall be considered the
holder of the Shares at the time of the Award except as otherwise provided in
the applicable Award.
(d) Subject to the approval of the stockholders of the Company, the Plan
shall be effective on January 6, 2000. Prior to such approval, Awards may be
made under the Plan expressly subject to such approval.
(e) The Board may amend, suspend or terminate the Plan or any portion
thereof at any time, provided that no amendment shall be made without
stockholder approval if such approval is necessary to comply with any
applicable tax or regulatory requirement, including any requirements for
exemptive relief under Section 16(b) of the Act, or any successor provision.
(f) Awards may not be made under the Plan after January 5, 2010, but then
outstanding Awards may extend beyond such date.
A-5
<PAGE>
BENTHOS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Annual Meeting of Stockholders
to be held on March 3, 2000
The undersigned holder of Common Stock of BENTHOS, INC. (the "Corporation")
acknowledges receipt of the Notice of Annual Meeting of Stockholders dated
January 18, 2000 and the accompanying Proxy Statement and hereby appoints John
L. Coughlin, Francis E. Dunne, Jr. and John T. Lynch and each of them, proxies,
agents and attorneys-in-fact of the undersigned (with full power of
substitution) to attend the above stockholders meeting and all adjournments
thereof (the "Meeting") and there to vote all shares of Common Stock of the
Corporation that the undersigned would be entitled to vote, if personally
present, in regard to all matters which may come before the Meeting, ratifying
and confirming all that said proxies or their substitutes may lawfully do in
place of the undersigned as indicated on the reverse hereof.
IMPORTANT: SIGNATURE REQUIRED ON REVERSE SIDE.
A [x] Please mark your vote as in this example.
1. To elect as Class I directors of the Company: John L. Coughlin and
Gary K. Willis
[ ] FOR ALL NOMINEES [ ] WITHHOLD AUTHORITY TO
VOTE FOR ALL NOMINEES
INSTRUCTIONS: To withhold authority to vote for election of one of the two
---
nominees listed above, mark FOR above and cross out the name of the person
as to whom authority is withheld.
2. To approve Arthur Andersen LLP as independent public accountants of
the Company for the 2000 fiscal year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To approve the Benthos, Inc. 2000 Employee Stock Incentive Plan as
described in the accompanying proxy statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The undersigned hereby confers upon the Proxies and each of them,
discretionary authority with respect to other matters properly presented for
consideration at the Meeting.
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER SPECIFIED HEREIN.
IF NO SPECIFICATION IS MADE, THE PROXIES INTEND TO VOTE FOR THE ELECTION OF THE
---
LISTED NOMINEES AND FOR EACH OF THE PROPOSALS 2 AND 3 IDENTIFIED ABOVE.
Dated: ___________________
_____________________________
_____________________________
IF HELD JOINTLY
Note: For shares held jointly, each joint
owner should personally sign. If signing as
executor, or in any other representative
capacity, or as an officer of a corporation,
please indicate your full title as such.
