-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TbqtxohXlRWX9SXGTHyp4Wq+FDJQ2d0bonR2WfaYZMHNLAXvoi9VD5C5QYyrTFNL g0gDrzBV4mK44RKXKEllkg== 0000927016-97-002303.txt : 19970814 0000927016-97-002303.hdr.sgml : 19970814 ACCESSION NUMBER: 0000927016-97-002303 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BENTHOS INC CENTRAL INDEX KEY: 0000011390 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS MANUFACTURING INDUSTRIES [3990] IRS NUMBER: 042381876 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-29024 FILM NUMBER: 97658346 BUSINESS ADDRESS: STREET 1: 49 EDGARTON DRIVE CITY: NORTH FALMOUTH STATE: MA ZIP: 02556 BUSINESS PHONE: 5085631000 MAIL ADDRESS: STREET 1: 49 EDGERTON DR CITY: NORTH FALMOUTH STATE: MA ZIP: 02556 10QSB 1 FORM 10-QSB 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 June 29, 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 848,403 (Class) (Outstanding stock at August 11, 1997) Traditional Small Business Disclosure Format (check one): Yes X No ___ --- 2 BENTHOS, INC. AND SUBSIDIARY INDEX
Page No. Face Sheet 1 Index 2 PART I FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets (unaudited) 3 June 29, 1997 and September 30, 1996 Condensed Consolidated Statements of Earnings (unaudited) 4 Thirteen Weeks Ended June 29, 1997 and June 30, 1996 Condensed Consolidated Statements of Earnings (unaudited) 5 Thirty-Nine Weeks Ended June 29, 1997 and June 30, 1996 Condensed Consolidated Statements of Cash Flow (unaudited) 6 June 29, 1997 and June 30, 1996 Notes to Financial Statements 7-8 Item 2. Management's Discussion and Analysis 9-12 of Financial Condition and Results of Operations PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 13 Signature 13
3 PART I - FINANCIAL INFORMATION Item 1. Financial Statements Benthos, Inc. and Subsidiary Condensed Consolidated Balance Sheets (unaudited)
Assets June 29, 1997 September 30, 1996 Cash and Cash Equivalents $2,068,584 $ 751,357 Accounts Receivable 1,467,158 1,519,142 Inventories 2,658,524 3,551,258 Prepaid Expenses 328,882 70,039 Deferred Tax Asset 516,000 516,000 ---------- ---------- Total Current Assets 7,039,148 6,407,796 Property, Plant and Equipment: Land 127,339 127,339 Building and Improvements 1,845,303 1,845,303 Equipment and Fixtures 2,528,042 2,220,045 Demonstration Equipment 1,462,556 1,348,204 Construction in Progress 0 18,042 ---------- ---------- 5,963,240 5,558,933 Less Accumulated Depreciation 3,992,003 3,567,862 ---------- ---------- 1,971,237 1,991,071 Other Assets 235,671 215,077 ---------- ---------- $9,246,056 $8,613,944 ========== ========== Liabilities and Stockholders' Investment Current Maturities of Long-term Debt $ 33,300 $ 29,646 Accounts Payable 388,591 490,909 Accrued Expenses 1,135,212 1,680,893 Customer Deposits 124,443 275,911 ---------- ---------- Total Current Liabilities 1,681,546 2,477,359 Long-term Debt, Net of Current Maturities 797,204 824,242 Common Stock, $.0667 par value- Authorized - 2,500,000 shares Issued - 1,039,285 and 1,006,785 shares at June 29, 1997 and September 30, 1996, respectively 69,318 67,150 Capital in Excess of Par Value 925,481 807,555 Retained Earnings 6,619,246 5,335,733 Treasury Stock, at Cost (846,739) (898,095) ---------- ---------- Total Stockholders' Investment 6,767,306 5,312,343 ---------- ---------- $9,246,056 $8,613,944 ========== ==========
4 Benthos, Inc. and Subsidiary Condensed Consolidated Statements of Earnings (unaudited)
Thirteen Weeks Ended June 29, 1997 June 30, 1996 Net Sales $3,913,430 $3,475,783 Cost of Sales 1,787,695 1,664,530 ---------- ---------- Gross Profit 2,125,735 1,811,253 Selling, General & Administrative Expenses 1,278,536 1,104,366 Research and Development Expenses 404,846 150,188 ---------- ---------- Income from Operations 442,353 556,699 Interest Income 6,802 1,654 Interest Expense (19,490) (22,695) ---------- ---------- Income before Provision for Income Taxes 429,665 535,658 Provision for Income Taxes 132,085 188,000 ---------- ---------- Net Income $ 297,580 $ 347,658 ========== ========== Net Income Per Common and Common Equivalent Share $0.33 $0.39 Weighted Average Common and Common ========== ========== Equivalent Shares Outstanding 913,000 898,000
5 Benthos, Inc. and Subsidiary Condensed Consolidated Statements of Earnings (unaudited)
Thirty-Nine Weeks Ended June 29, 1997 June 30, 1996 Net Sales $13,189,079 $8,874,204 Cost of Sales 5,940,211 4,057,636 ----------- ---------- Gross Profit 7,248,868 4,816,568 Selling, General & Administrative Expenses 4,117,272 2,782,845 Research and Development Expenses 1,007,819 478,251 ----------- ---------- Income from Operations 2,123,777 1,555,472 Interest Income 15,654 1,734 Interest Expense (59,116) (83,676) ----------- ---------- Income before Provision for Income Taxes 2,080,315 1,473,530 Provision for Income Taxes 796,802 516,000 ----------- ---------- Net Income $ 1,283,513 $ 957,530 =========== ========== Net Income Per Common and Common Equivalent Share $1.41 $1.09 Weighted Average Common and Common =========== ========== Equivalent Shares Outstanding 914,000 876,000
6 Benthos, Inc. and Subsidiary Condensed Consolidated Statements of Cash Flow (unaudited)
Thirty-Nine Weeks Ended June 29, 1997 June 30, 1996 Cash Flows From Operating Activities: Net Income $1,283,513 $ 957,530 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization 583,773 446,074 Changes in Assets and Liabilities: Accounts Receivable 51,984 134,943 Inventories 892,734 (434,123) Prepaid Expenses (258,843) 3,971 Accounts Payable & Accrued Expenses (647,999) 835,569 Customer Deposits (151,468) (148,638) ---------- ---------- Net Cash Provided by Operating Activities 1,753,694 1,795,326 Cash Flows from Financing Activities: Purchase of Property, Plant & Equipment (328,085) (520,389) Increase in Other Assets (84,998) (33,876) ---------- ---------- Net Cash Used in Investing Activities (413,083) (554,265) Cash Flows from Financing Activities: Decrease in Demand Note Payable 0 (275,000) Payments on long-term debt, net (23,384) (24,892) ---------- ---------- Net Cash Used in Financing Activities (23,384) (299,892) ---------- ---------- Net Increase in Cash and Cash Equivalents 1,317,227 941,169 Cash and Cash Equivalents, Beginning of Period 751,357 17,461 ---------- ---------- Cash and Cash Equivalents, End of Period $2,068,584 $ 958,630 ========== ========== Supplemental Disclosure of Cash Flow Information: Interest Paid $ 59,116 $ 83,676 Income Taxes Paid $1,624,164 $ 235,337
7 Benthos, Inc. Notes to Financial Statements 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 thirty-nine week periods ended June 29, 1997 and June 30, 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:
June 29,1997 September 30, 1996 Raw Materials $ 107,566 $ 203,314 Work-in-Process 2,515,655 3,226,405 Finished Goods 35,303 121,539 ---------- ---------- $2,658,524 $3,551,258 ========== ==========
3. Net Income Per Share Net income per common and common equivalent share is based on the weighted average number of common and common equivalent shares outstanding during each period, computed in accordance with the treasury stock method. Fully diluted net income per common and common equivalent share has not been presented as it is not significantly different. In February 1997 the Financial Accounting Standard Board issued the Statement of Financial Accounting Standards No. 128 "Earnings per Share" (SFAS No. 128). SFAS No. 128 must be adopted as of December 31, 1997 and all prior earnings per share amounts must be retroactively restated. In accordance with Staff Accounting Bulletin No. 74, the Company is disclosing the effect this statement would have on the thirteen weeks and thirty-nine weeks ended June 29, 1997 and June 30, 1996 on a pro forma basis. The following table summarizes the pro forma earnings per share amounts under SFAS No. 128. 8
Net Income Shares Per Share Amount For the thirteen weeks ended June 29, 1997 Net Income $ 297,600 -- -- Basic Earnings per share: Income available to common stockholders 297,600 836,000 $0.36 ===== Diluted earnings per share: Options issued to Directors, Officers, and -- 77,000 -- employees ---------- -------- Income available to common stockholders $ 297,600 913,000 $0.33 plus assumed conversions ========== ======== ===== For the thirteen weeks ended June 30, 1996 Net Income $ 347,700 -- -- Basic Earnings per share: Income available to common stockholders 347,700 790,000 $0.44 ===== Diluted earnings per share: Options issued to Directors, Officers, and -- 108,000 -- employees ---------- -------- Income available to common stockholders $ 347,700 898,000 $0.39 plus assumed conversions ========== ======== ===== Net Income Shares Per Share Amount For the thirty-nine weeks ended June 29, 1997 Net Income $1,283,500 -- -- Basic Earnings per share: Income available to common stockholders 1,283,500 821,000 $1.56 ===== Diluted earnings per share: Options issued to Directors, Officers, and -- 93,000 -- employees ---------- -------- Income available to common stockholders $1,283,500 914,000 $1.41 plus assumed conversions ========== ======== ===== For the thirty-nine weeks ended June 30, 1996 Net Income $ 957,500 -- -- Basic Earnings per share: Income available to common stockholders 957,500 790,000 $1.21 ===== Diluted earnings per share: Options issued to Directors, Officers, and -- 86,000 -- employees ---------- -------- Income available to common stockholders $ 957,500 876,000 $1.09 plus assumed conversions ========== ======== =====
Basic earnings per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the quarter. The computation of diluted earnings per common share is similar to the computation of basic earnings per common share except that the denominator is increased for the assumed exercise of dilutive options using the treasury stock method. 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations -- Third quarter of fiscal year 1997 compared with third quarter of fiscal year 1996. The following table presents, for the periods indicated, the percentage relationship of Condensed Consolidated Statements of Earnings items to total sales:
Thirteen Weeks Ended June 29, 1997 June 30, 1996 (unaudited) Net Sales 100.0% 100.0% Cost of Sales 45.7% 47.9% ----- ----- Gross Profit 54.3% 52.1% Selling, General & Administrative Expenses 32.7% 31.8% Research and Development Expenses 10.3% 4.3% ----- ----- Income from Operations 11.3% 16.0% Interest Expense, Net (0.3%) (0.6%) ----- ----- Income Before Provision for Income Taxes 11.0% 15.4% Provision for Income Taxes 3.4% 5.4% ----- ----- Net Income 7.6% 10.0% ===== =====
Sales. Total sales increased by 12.6% in the third quarter of fiscal year 1997 to $3,913,000 as compared to $3,476,000 in the third quarter of fiscal year 1996. Sales of the Undersea Systems Division increased by 62.4% to $2,239,000 in the third quarter of fiscal year 1997 as compared to $1,378,000 in the third 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, imaging and glass flotation product lines. Sales in the Container Inspection Systems Division were $1,674,000 in the third quarter of fiscal year 1997 as compared to $2,098,000 in the third quarter of fiscal year 1996. This 20.2% decrease is due to the timing of purchases by customers of new equipment. Gross Profit. Gross Profit increased by 17.4% to $2,126,000 for the third quarter of fiscal year 1997 as compared to $1,811,000 for the third quarter of fiscal year 1996. As a percentage of sales, gross profit was 54.3% in the third quarter of fiscal year 1997 as compared to 52.1% for the third quarter of fiscal year 1996. The increase in gross profit percentage was attributed primarily to sales mix within the Undersea Systems Division and overhead efficiencies related to the increased sales volume. 10 Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by 15.9% to $1,279,000 for the third quarter of fiscal year 1997 as compared to $1,104,000 in the third quarter of fiscal year 1996. The increase in total expenses was a result of higher selling and advertising expenses coinciding with the increased volume and product promotion, the costs of the Company's sales meetings held in the third quarter of 1997, expenses related to the Company's Annual Stockholders Meeting, the investor relations function and additional personnel necessary to support the Company's growth . As a percentage of sales, selling, general and administrative expenses increased to 32.7% in the third quarter of fiscal year 1997 as compared to 31.8% for the third quarter of fiscal year 1996. Research and Development Expenses. Research and development expenses increased 170% to $405,000 in the third quarter of fiscal year 1997 as compared to $150,000 in the third quarter of fiscal year 1996. As a percentage of sales, research and development expenses increased to 10.3% in the third quarter of fiscal year 1997 from 4.3% in the third quarter of fiscal year 1996. The increase in the overall level of expenditures is due to investments in new product development and is consistent with the Company's current operational plans. Interest Expense. Interest expense, net, decreased to $12,700 in the third quarter of fiscal year 1997 as compared to $21,000 in the third 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 due to higher cash balances invested. Provision for Income Taxes. The provision for income taxes decreased to $132,000 in the third quarter of fiscal year 1997 from $188,000 in the third quarter of fiscal year 1996. The effective tax rate used in the third quarter of fiscal year 1997 was 30.7% as compared to 35.1% in the third quarter of fiscal year 1996. In the third quarter of fiscal year 1997, the Company recognized a cumulative adjustment to the effective tax rate for fiscal year 1997 to 38.3% as compared to the rate of 40.3% used in the first two quarters of fiscal year 1997. This adjustment recognizes the increased benefits to be realized from the Company's Foreign Sales Corporation. Results of Operations - First three quarters of fiscal year 1997 compared with first three quarters of fiscal year 1996. The following table presents, for the periods indicated, the percentage relationships of Condensed Consolidated Statements of Earnings items to total sales:
Thirty-Nine Weeks Ended June 29, 1997 June 30, 1996 (unaudited) Net Sales 100.0% 100.0% Cost of Sales 45.0% 45.7% ----- ----- Gross Profit 55.0% 54.3% Selling, General & Administrative Expenses 31.2% 31.4% Research and Development Expenses 7.7% 5.4% ----- ----- Income from Operations 16.1% 17.5% Interest Expense, Net (0.4%) (0.9%) ----- ----- Income Before Provision for Income Taxes 15.7% 16.6% Provision for Income Taxes 6.0% 5.8% ----- ----- Net Income 9.7% 10.8% ===== =====
11 Sales. Total sales increased by 48.6% in the first three quarters of fiscal year 1997 to $13,189,000 as compared to $8,874,000 in the first three quarters of fiscal year 1996. Sales of the Undersea Systems Division increased by 113.3% to $7,957,000 in the first three quarters of fiscal year 1997 as compared to $3,730,000 in the first three quarters 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, imaging and glass flotation product lines. Sales in the Container Inspection Systems Division were essentially flat in the comparable 39 week periods. Gross Profit. Gross Profit increased by 50.5% to $7,249,000 for the first three quarters of fiscal year 1997 as compared to $4,817,000 for the first three quarters of fiscal year 1996. As a percentage of sales, gross profit was 55.0% in the first three quarters of fiscal year 1997 as compared to 54.3% for the first three quarters of fiscal year 1996. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by 47.9% to $4,117,000 for the first three quarters of fiscal year 1997 as compared to $2,783,000 in the first three quarters of fiscal year 1996. The increase in total expenses was a result of higher selling and commission 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, legal expenses in connection with the Company's proxy solicitation, costs of the Annual Stockholders Meeting, trade show activity, sales meeting expenses, and investor relations activities in the first three quarters of fiscal year 1997. As a percentage of sales, selling, general and administrative expenses decreased slightly to 31.2% in the first three quarters of fiscal year 1997 as compared to 31.4% for the first three quarters of fiscal year 1996. Research and Development Expenses. Research and development expenses increased 110.7% to $1,008,000 in the first three quarters of fiscal year 1997 as compared to $478,000 in the first three quarters of fiscal year 1996. As a percentage of sales, research and development expenses increased to 7.7% in the first three quarters of fiscal year 1997 from 5.4% in the first three quarters of fiscal year 1996. The increase in the percentage of sales and dollars expended is due to investments in new product development and is consistent with the Company's current operational plans. Interest Expense. Interest expense, net, decreased to $43,000 in the first three quarters of fiscal year 1997 as compared to $82,000 in the first three quarters 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 due to higher invested cash balances. Liquidity and Capital Resources. The Company's cash and cash equivalents increased $1,317,000 from September 30, 1996 to June 29, 1997. This increase resulted primarily from cash generated from operations of $1,754,000. Accounts receivable decreased $52,000 as improved collection activities offset the increased sales volume and asset management programs were able to decrease inventories by $893,000. Customer deposits decreased by $151,000 as the orders related to these deposits were shipped. Cash flow from investing activities was a use of $413,000 and resulted primarily from purchases of property, plant and equipment of $328,000. The Company believes it is well positioned to finance future working capital requirements and capital expenditures during the next twelve months through cash on hand, current earnings and available credit facilities. 12 "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. 13 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: August 12, 1997 EXHIBIT INDEX Exhibit 3.1 Restated Articles of Organization (1) 3.2 Articles of Amendment dated April 28, 1997. (2) 3.3 By-Laws (1) 4.1 Common Stock Certificate (1) 10.1 Employment Contract with Samuel O. Raymond (1) 10.2 Amendment to Employment Contract with Samuel O. Raymond (2) 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 (2) 10.6 401(k) Retirement Plan (1) 10.7 First Amendment to 401(k) Retirement Plan (2) 10.8 Second Amendment to 401(k) Retirement Plan (2) 10.9 Third Amendment to 401(k) Retirement Plan 10.10 Supplemental Executive Retirement Plan (1) 10.11 1990 Stock Option Plan (1) 10.12 Stock Option Plan for Non-Employee Directors(1) 10.13 License Agreement between the Company and The Penn State Research Foundation dated December 13, 1993 (1) 10.14 Technical Consultancy Agreement between the Company and William D. McElroy dated July 12, 1994 (1) 10.15 Technical Consultancy Agreement between the Company and William D. McElroy dated October 1, 1996 10.16 General Release and Settlement Agreement between the Company and Lawrence W. Gray dated February 8, 1996 (1) 10.17 Line of Credit Loan Agreement between the Company and Cape Cod Bank and Trust Company dated September 24, 1990, as amended (1) Exhibit 10.18 Commercial Mortgage Loan Extension and Modification Agreement between the Company and Cape Cod Bank and Trust Company, dated July 6, 1994 (1) 10.19 License Agreement between the Company and Optikos Corporation dated July 29, 1997 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. (2) Previously filed as an exhibit to Registrant's Quarterly Report on Form 10-QSB for the quarterly period ended March 30, 1997 (File No. O- 28932) and incorporated herein by this reference. EX-10.9 2 THIRD AMENDMENT TO 401K RETIREMENT PLAN EXHIBIT 10.9 THIRD AMENDMENT TO BENTHOS, INC. 401(K) RETIREMENT PLAN AS AMENDED AND RESTATED EFFECTIVE AS OF NOVEMBER 5, 1993 THIRD AMENDMENT adopted this 29/th/ day of July, 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 as 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 further amend the Plan in order to change the allocation formula for employer profit sharing contributions. NOW, THEREFORE, effective as October 1, 1996, the Plan is hereby amended as follows: 1. Section 3.04(B) of the Adoption Agreement and the Basic Plan document shall be amended to read, in its entirety, as follows: (b) Nonintegrated Allocation Formula. 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. 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 Third Amendment to be executed by its duly authorized officer as of the day and year set forth above. BENTHOS, INC. By: JOHN L. COUGHLIN --------------------------- John L. Coughlin, President EX-10.15 3 TECHNICAL CONSULTANCY AGREEMENT EXHIBIT 10.15 TECHNICAL CONSULTANCY AGREEMENT BETWEEN: BENTHOS, INC. (BENTHOS) North Falmouth, Massachusetts AND: William D. McElroy (The Consultant) Marine Systems Technology, Inc. Falmouth, Massachusetts DATED: October 1, 1996 This Agreement supersedes all previous agreements, defines the terms and conditions under which the Consultant, William D. McElroy, shall provide services to BENTHOS and defines the rights and obligations of the parties as part of this agreement. A. RELATIONSHIP 1. The relationship of the Consultant to BENTHOS is that of an independent contractor and not that of an employee of BENTHOS. All expenses for the operation of the Consultant's business shall be borne by the Consultant. The Consultant is solely responsible for the Consultant's employees and for their actions. 2. The Consultant has no authority to commit BENTHOS in any matter, cause, or undertaking without the prior written consent of BENTHOS; and, similarly, BENTHOS has no authority to commit the Consultant in any matter, cause or undertaking beyond the scope of this Agreement, without the prior written consent of the Consultant. Any business travel BENTHOS may wish the Consultant to do on its behalf shall be arranged by mutual agreement of both parties. 3. The Consultant has no authority to make, vary, alter, enlarge, or limit contracts or letters of intent, or to make representations or guarantees not specifically authorized in writing by BENTHOS. The Consultant has no authority to bind BENTHOS to any contract of employment, and no authority to receive payments on behalf of BENTHOS. 4. Upon a breach of any of the terms and conditions of this Agreement by either party, or should either party become insolvent, bankrupt, make an assignment or trust mortgage for the benefit of creditors, or enter into a receivership, this Agreement may be terminated immediately at the option of the other party by written notice to the other. 5. The failure of either party to enforce at any time, or for any period of time, provisions of the Agreement shall not be construed as a waiver of such provisions or of the right of each party to enforce the terms of this Agreement. B. DURATION OF AGREEMENT This Agreement is effective October 1, 1996 and remains effective indefinitely. If either party wishes to terminate the contract, written notice shall be provided from one party to the other at least one year prior to the desired termination date. This Agreement may be terminated immediately by mutual agreement of both the Consultant and BENTHOS. 2 C. SCOPE OF WORK 1. The primary scope of work of the Consultant under the terms of this Agreement is to provide engineering services to BENTHOS. This support shall include development of new products, the enhancement of existing products, technical assistance in marketing products, and technical assistance in generating and maintaining the documentation used for manufacturing. 2. Any material, special test equipment or travel expenses required to accomplish the work performed under this Agreement shall either be supplied by BENTHOS or paid for by BENTHOS at the Consultant's cost. No such material commitments shall be made by the Consultant without the approval of BENTHOS. Any material or special equipment paid for by BENTHOS will become the property of BENTHOS. 3. The actual scheduling of the tasks will be made by mutual agreement with the Consultant. The Consultant will provide an average of 24 hours per week of engineering services. If effort above the level contracted for in this Agreement is required to meet the needs of BENTHOS, additional hours can be authorized by BENTHOS. D. REMUNERATION BENTHOS agrees to remunerate the Consultant at the initial rate of $64.00 per hour. This rate will be adjusted annually on October 1st of each succeeding year of the Agreement. The rate will be changed by the same percentage BENTHOS budgets for its average employee salary adjustments for the fiscal year starting on the respective October 1st. This remuneration shall be the extent of BENTHOS' financial responsibility. E. AMENDMENTS The Agreement may be modified, abridged or amended only by a documents or documents in writing signed by both BENTHOS and the Consultant. F. REPORTS During the first week of each month the Consultant shall submit to BENTHOS a written report of his activities with respect to BENTHOS for the preceding month and of his planned work for the next month. G. CONFIDENTIAL INFORMATION Through the work performed for BENTHOS, the Consultant may have had or may have access to confidential know-how, business documents or information, marketing data, client lists and trade secrets which are company confidential or considered proprietary to BENTHOS. The Consultant agrees not to disclose, directly or indirectly (except as required by law), any Proprietary Information to any person not employed by BENTHOS without permission from the Engineering Manager or the President of BENTHOS, and, in all such cases, only to the extent required in the course of the Consultant's services to BENTHOS. At the termination of this Agreement, the Consultant shall deliver to BENTHOS all notes, letters, documents and records which may contain Proprietary Information which are then in his possession or control, and shall not retain or use copies or summaries of this information. H. USE OF BENTHOS STOCKROOM The Consultant may purchase mechanical, electrical, and electronic components from the BENTHOS stockroom at BENTHOS' standard cost. Purchases are to be approved by either the BENTHOS Manufacturing Manager or Materials Manager to assure non-interference with BENTHOS' operations. Any items purchased from the BENTHOS stockroom are for the Consultant's use in product development efforts and are not for resale as separate items. I. USE OF BENTHOS PRESSURE TEST AND TEST POOL FACILITIES The Consultant may use the BENTHOS pressure test facility or the BENTHOS test pool on a not to interfere basis. The only charge for the use of these facilities will be for technician services which will be charged at the current published rate. A technician is required for the operation of the pressure test facility. A technician is not required for the use of the test pool facility. J. NEW DEVELOPMENTS The Consultants shall promptly and fully disclose in writing to BENTHOS, or such other person as BENTHOS may designate, all ideas, designs, programs, methods, inventions, improvements, discoveries and writings, including any modifications or improvements of products, new products or applications thereof, whether or not patentable or copyrightable, and whether or not reduced to practice, made or conceived by him (either solely or in collaboration with others) which may arise as part of the work performed for BENTHOS under the scope of this Agreement. The Consultant acknowledges that all such New Developments are the exclusive property of BENTHOS and hereby agrees to assign all right, title and interest in and to such New Developments to BENTHOS. 4 K. CONFLICT OF INTEREST The Consultant agrees that while this Agreement is active the Consultant shall not knowingly provide consulting services to any other company to develop products directly competitive with those BENTHOS sells as standard products or is developing for future sales. L. AGREEMENT ACCEPTANCE SIGNATURES Benthos,Inc. John L. Coughlin 1/9/97 ---------------- ------ William D. McElroy William D. McElroy 1/13/97 ------------------ ------- EX-10.19 4 LICENSE AGREEMENT EXHIBIT 10.19 LICENSE AGREEMENT BETWEEN BENTHOS, INC. AND OPTIKOS CORPORATION JULY 29, 1997 LICENSE AGREEMENT AGREEMENT made as of the 29th day of July, 1997 between OPTIKOS CORPORATION, a Massachusetts corporation with a principal place of business located at 286 Cardinal Medeiros Avenue, Cambridge, Massachusetts 02141 ("Optikos") and BENTHOS, INC., a Massachusetts corporation with a principal place of business located at 49 Edgerton Drive, North Falmouth, Massachusetts 02556 ("Benthos"). WITNESSETH: WHEREAS, Benthos is engaged in the packaged product inspection industry; WHEREAS, Optikos is the owner of certain Technology, as hereinafter defined; WHEREAS, Benthos and Optikos have been co-developing the Technology with a view to Benthos acquiring an exclusive worldwide license to the Technology; and WHEREAS, Optikos and Benthos want to reduce their agreement with respect to the licensing of the Technology to writing. NOW, THEREFORE, in consideration of the premises, and the mutual covenants, conditions and agreements hereinafter set forth, Optikos and Benthos intending to be legally bound, hereby mutually agree as follows: 1. DEFINITIONS ----------- 1.1 "AGREEMENT" shall mean this Agreement. 1.2 "ANNUAL EXCLUSIVITY AMOUNT" shall mean the sum of Twenty Thousand ($20,000.00) Dollars. 1.3 "CONFIDENTIAL INFORMATION" shall mean trade secrets, know how, materials, data, procedures, financial information, customer information, business strategies, technical information of both Optikos and Benthos which is not readily available or otherwise known by the public. 1.4 "DELIVERABLES" shall mean the items listed on Appendix B hereto which perform as described in Appendix A hereof. 1.5 "DELIVERY DATE" shall mean the date on which the Deliverables are delivered by Optikos to Benthos pursuant to Section 5 hereof. -1- 1.6 "DOCUMENTATION" shall mean copies of any tangible information in existence as of the Delivery Date which were generated by Optikos hereunder to document the structure and operation of the Deliverables. 1.7 "EXCLUSIVITY DIFFERENTIAL AMOUNT" shall mean the amount computed by subtracting the amount of License Fees paid to Optikos with respect to a fiscal year from the Annual Exclusivity Amount. 1.8 "FIELD OF USE" shall mean the packaged product inspection industry, including without limitation, packaged products containing solid, liquid, gaseous, vacuums, and contents consisting of various combinations thereof, and packaging of all kinds, including without limitation, paper, aluminum, glass, metal, plastic, cardboard, and the like. All other fields of use are reserved to Optikos. 1.9 "FIRST YEAR" shall mean that fiscal year of Benthos commencing on October 1, 1997, or if the fiscal year of Benthos is subsequently changed on the first fiscal year of Benthos to commence after January 1, 1997. 1.10 "LICENSE FEES" shall mean the monies specified in Section 8. hereof to be paid by Benthos to Optikos for the rights in the Technology granted by Optikos to Benthos herewith. 1.11 "NET SELLING PRICE" shall mean, in the event the Product is sold or leased on a stand alone basis, then the gross selling price or rental payments for the Product less any of the following but only insofar as they pertain to the sale or lease of the Product by Benthos and are included in such gross selling price or rental payment. A. sales or excise taxes paid directly or indirectly by Benthos; B. any shipping costs actually paid and separately itemized by Benthos; and C. normal and customary trade discounts, returns, and allowances actually paid or allowed. In those instances where the Product is sold or leased bundled or as a part of a system or with other products of Benthos, the Net Selling Price shall be determined by multiplying the Net Selling Price or rental of the bundled product by a fraction, the numerator of which is the list price of the Product and the denominator of which is the total price of all products in the bundled product comprising the Product. 1.12 "PRODUCT" shall mean an optically based inspection machine to be utilized in the Field of Use. -2- 1.13 "STATEMENT OF WORK" shall mean the development work described on Appendix C hereto. 1.14 "TECHNOLOGY" shall mean certain property rights, concepts and technologies related to the optical detection of characteristics of packaged containers (including height of fill) which includes all of the following intellectual property of Optikos: A. United States Patent Provisional Application No. 60/042377 filed on March 24, 1997 and attached hereto as Appendix A. B. Any releases, extensions, divisional applications, continuations or continuations in part of the patents described in Subparagraph A above and any patents issuing as a result of such applications; C. All foreign counterparts of the items described in Subparagraph A and B above; D. Other trade secrets, know how and other information related to the subject matter hereof communicated by any means from Optikos to Benthos provided it is related to the contents of Appendix A; and E. The Documentation. 1.15 "TERM" shall mean perpetual. 2. OWNERSHIP OF RIGHTS ------------------- Optikos represents and warrants that Optikos, to the best of its knowledge, is the sole and exclusive owner of the Technology. With the exception of the rights granted herein to Benthos, all other rights with respect to the Technology are expressly reserved by Optikos. 3. GRANT ----- Optikos hereby grants to Benthos an exclusive, nonassignable, nontransferable, worldwide, license to use the Technology solely in the association with the manufacture, lease, sale, use, advertising, marketing or distribution of the Product in the Field of Use. Benthos may sublicense the rights granted hereunder provided that such sublicenses are consistent with the license granted hereunder. Any sublicense granted by Benthos in violation of this provision shall be void and shall be deemed to be a material breach of this Agreement. Optikos will provide Benthos with any enhancements, modifications or improvements to the Technology, provided such shall be based on or derived from the Deliverables. Benthos hereby provides Optikos with a royalty-free, worldwide, nonexclusive license to any modifications, improvements and enhancements to the -3- Technology that Benthos makes provided that such shall be based on or derived from the Deliverables and that the nonexclusive license shall be limited to the fields of use reserved hereunder by Optikos. 4. DEVELOPMENT COSTS ----------------- Benthos shall pay for certain development costs with respect to the Technology, the Documentation and the creation of a prototype Product, provided that: 4.1 all development costs are approved in advance in writing by Benthos; 4.2 all development costs are related to the Statement of Work; and 4.3 the aggregate of such development costs up to and including the Delivery Date shall not exceed the amounts set forth in Appendix C hereto. 5. DELIVERABLES ------------ The Deliverables shall be delivered by Optikos to Benthos on or before December 31, 1997. Failure to deliver the Deliverables in a timely manner shall be a material breach of the Agreement. 6. ACCEPTANCE ---------- Upon receipt of the Deliverables, Benthos shall have thirty (30) calendar days to inspect the Deliverables and insure that the Deliverables satisfy the specifications set forth in the Statement of Work. In the event that Benthos determines that the Deliverables do not meet the specifications of the Statement of Work, Benthos shall provide written notice to Optikos within said thirty (30) day period of the nonconformity of the Deliverables to the specifications and return the nonconforming portion of the Deliverables to Optikos. Optikos will use reasonable commercial efforts at the expense of Optikos to cure the nonconformity as soon as possible but in all events within thirty (30) days of the receipt of the nonconforming Deliverables. If such nonconformity cannot be cured by Optikos within such thirty (30) day period, then Benthos shall have a period of thirty (30) days thereafter to cure the nonconformity. If the nonconformity cannot be cured, then Benthos may elect to terminate this Agreement. If such nonconformity is cured by Benthos, any expenses incurred by Benthos shall be credited against further License Fees payable to Optikos. The acceptance of the Deliverables by Benthos will be deemed to have occurred upon the first to occur of the following: -4- 6.1 written notification of acceptance by Benthos to Optikos within thirty (30) days after the Delivery Date; 6.2 expiration of thirty (30) calendar days after the Delivery Date without written notice of nonacceptance by Benthos having been received by Optikos; or 6.3 Benthos sells or leases the Product in a commercial sale or rental. 7. EXPORT CONTROLS --------------- It is understood that Optikos and Benthos are subject to the United States law and regulations controlling the export of technical data, computer software, laboratory prototype and other commodities, and that their obligations hereunder are contingent on compliance with applicable United States export laws and regulations. The transfer of certain technical data and commodities may require a license from the cognizant agency of the United States Government and/or written assurances by Benthos that Benthos shall not export data or commodities to certain foreign countries without prior approval of such agency. Optikos neither represents that a license shall not be required nor that, if required, it shall be issued. Benthos shall be responsible for payment of all reasonable costs, attendant to securing said licenses. 8. LICENSE FEES ------------ 8.1 Benthos shall pay a License Fee to Optikos for each Product sold or leased in a commercial transaction equal to the following of the Net Selling Price: ten (10) percent for up to twenty (20) units shipped, 7.5 percent for between 21 and 50 units shipped, 6.5 percent for between 51 and 100 units shipped, and 5 percent for each units over 100 units shipped. For the purposes hereof, the License Fee of Optikos will be deemed to be computed based on units of Product invoiced by Benthos during the fiscal year. 8.2 In all events, this Agreement will be an exclusive license of Technology in the Field of Use for the period prior to the commencement of the First Year. After the commencement of the First Year and in the event that, during any fiscal year of Benthos commencing with the First Year, Optikos receives License Fees attributable to a particular fiscal year which are less than the Annual Exclusivity Amount, then Benthos may either (i) elect to pay the Exclusivity Differential Amount to Optikos and maintain the exclusive nature of the license of the Technology in the Field of Use; or (ii) not pay the Exclusivity Differential Amount and allow this Agreement to become a nonexclusive license of the Technology in the Field of Use commencing on the 61/st/ day after the end of such fiscal year. In all events, if Optikos receives the Annual Exclusivity Amount with respect to the preceding fiscal year of the Company in accordance with the above provisions, this Agreement will be deemed to be an exclusive license of the Technology in the Field of Use by Optikos to Benthos for the subsequent year. The election hereunder must be made by Benthos -5- within sixty (60) days of the end of the preceding fiscal year. If the Annual Exclusivity Amount was not received in License Fees attributable to a particular fiscal year, then Benthos will be deemed to have waived the exclusive rights of Benthos to license the Technology in the Field of Use if the Exclusivity Differential Amount has not been paid to Optikos within sixty (60) days of the end of the pertinent fiscal year. In all events, if Optikos receives License Fees which are at least equal to the Annual Exclusivity Amount with respect to any fiscal year, commencing with the First Year, within sixty (60) days of the end of such fiscal year, then this Agreement will remain exclusive for the next subsequent fiscal year without any further action on the part of Optikos or Benthos. 8.3 No multiple License Fees shall be payable as a result of the manufacturer, sale or lease of the Product involving the Technology in the event it may be covered by more than one patent application or patent However, all License Fees and Annual Exclusivity Fees shall be paid hereunder as long as Product is based on, incorporates or is derived from Technology. 8.4 All License Fees or any other amounts required to be paid hereunder shall be paid in United States Dollars at the principal place of business of Optikos in Cambridge, Massachusetts or at such other address as Benthos may be directed from time to time in writing by Optikos. 8.5 All License Fees provided for under this Agreement shall accrue when the Product is sold. 8.6 Benthos shall keep full, true and accurate books of account and records containing all particulars that may be necessary for the purposes of showing the amounts payable to Optikos hereunder. Said books of account shall be kept at the principal place of business or the principal place of business of the appropriate division of Benthos to which this Agreement relates. Said books and the supporting data shall be open at all reasonable times for three (3) years following the end of the fiscal year to which they pertain, to the inspection of independent certified public accountants to be proposed by Optikos and approved by Benthos, said approval not to be unreasonably withheld, for the purpose of verifying License Fees or compliance in other respects with this Agreement, such inspection is to occur no more than once each calendar year upon reasonable prior notice to Benthos. The expense of such inspection shall be borne by Optikos unless such inspection reveals a deficiency of at least 15% in payments due to Optikos by Benthos in which case Benthos shall pay for such inspection. 8.7 The License Fees shall be payable to Optikos within one (1) month after the end of each quarter of the fiscal year of Benthos. Benthos shall have the option of paying any portions of the License Fees herein provided at any time earlier than that specified. Each payment of License Fees shall be accompanied by true and accurate reports giving such particulars of the business conducted by Benthos during the period to which such payment applies under this Agreement ending thirty (30) days prior to such payment date as shall be pertinent to an accounting hereunder. 8.8 The License Fees set forth in this Agreement shall, if overdue, bear interest until payment at the rate of 1.5% per month. The payment of such interest shall not foreclose Optikos from -6- exercising any other rights Optikos may have as a consequence of the lateness of any payment. 9. WARRANTIES ---------- 9.1 LICENSOR REPRESENTATIONS AND WARRANTIES. Optikos has no knowledge of any third party claims regrading proprietary rights in the Property which would interfere with the rights granted under this Agreement. EXCEPT AS PROVIDED IN THIS AGREEMENT, Optikos MAKES NO OTHER WARRANTY EXPRESS OR IMPLIED WITH RESPECT TO ITS PROPERTY. ALL WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE EXPRESSLY EXCLUDED. 9.2 LICENSEE REPRESENTATIONS AND WARRANTIES. Benthos warrants that the Product and any other articles covered by this Agreement and its policy of sale and exploitation shall be of such standard as the best quality of similar products presently sold by Benthos in the Territory and shall be in full conformance with all applicable laws and regulations. 9.3 The provisions of this Section shall survive any termination. 10. INDEMNIFICATION --------------- 10.1 INDEMNIFICATION BY LICENSOR. Optikos shall indemnify Benthos from any damages arising from any breach of Optikos' warranties in Section 9 hereof provided: (a) such claim, if sustained, would prevent Benthos form marketing the Products or the Technology; (b) such claim arises solely out of the Property as disclosed to the Benthos, and not out of any change in the Technology made by Benthos or a vendor of Benthos, or by reason of any off-the-shelf component or by reason of any claim for trademark infringement; (c) Benthos gives Optikos prompt written notice of any such claim; (d) such indemnity shall only be applicable in the event of a final decision by a court of competent jurisdiction from which no appeal of right exists; and (e) that the maximum amount due from Optikos to Benthos under this paragraph shall not exceed fifty (50%) percent of amount due to Optikos under Section 8 from the date that Benthos notifies Optikos of the existence of such a claim as made in writing by a third party. Before the institution of a suit against Benthos coming within the scope of this Section, and after such notice, Benthos may take as a credit against fifty (50%) percent of royalties due after notification, its reasonable legal fees and expenses paid to outside counsel in connection with such claim. After the commencement of a suit against Benthos or a customer of Benthos coming within the scope of this paragraph, Benthos may place fifty percent of the royalists thereafter due to Optikos under Section 5. in a separate interest bearing fund hereinafter referred to a "Legal Fund". Benthos may draw against such Legal Fund to satisfy all the reasonable expenses of defending such suit paid to outside counsel and third parties and of any judgment or settlement made therein. In the event the Legal Fund shall be insufficient to pay the then current defense obligations, Benthos may advance monies on behalf of said Legal Fund and shall be reimbursed as payments are credited to the Legal Fund. Optikos' -7- and Optikos' agent's liability to Benthos shall not extend beyond the loss of its royalty deposit in the Legal Fund as set forth in this paragraph. After such suit has been concluded by settlement or otherwise, any balance remaining in the Legal Fund shall be paid to Optikos and all future royalties due to Optikos shall be paid to Optikos as they would otherwise become due. Benthos shall not permit the time for appeal from an adverse decision on a claim to expire or settle such a claim without the consent of Optikos, which consent shall not be unreasonably withheld. 10.2 INDEMNIFICATION BY LICENSEE. Benthos hereby indemnifies Optikos and undertakes to defend Optikos and hold Optikos harmless (including without limitation attorney's fees and costs) from any claims arising out of or incurred in connection with any allegedly unauthorized use of any patent, process, idea, method, device, or copyright by Benthos in connection with the Product, the Property or any other articles covered by this Agreement or any other alleged action by Benthos and also from any claims arising out of advertising distribution or marketing of the Product, provided that, such indemnity shall only be applicable in the event of a final decision by a court of competent jurisdiction and the maximum amount of such indemnity shall not exceed the total amount of License Fees paid to Optikos. 11. PROPRIETARY RIGHTS; TITLE ------------------------- Optikos may, but is not obligated to seek, in its own name and its own expense, appropriate patent, trademark or copyright protection in the United States for the Technology and Optikos makes no warranty or representation with respect to the validity of any patent, trademark or copyright which may be granted with respect to the Property. Optikos grants to Benthos the right to apply for foreign patents on the Property or Product provided that such patents shall be applied for in the name of Optikos and licensed to Benthos during the Term and pursuant to the conditions of this Agreement. Benthos shall have the right to deduct its reasonable out of pocket expenses for the preparation, filing and prosecution of any such foreign patent application (but in no event more than $10,000 for all applications from future royalties due to Optikos under the terms of this Agreement. Benthos shall obtain Optikos' prior written consent before incurring expenses for any foreign patent application. This Agreement is conditioned on Benthos's compliance with the provisions of the trademark, patent and copyright laws of the United States and any foreign country in the Territory. All copies of the Product as well as all promotional material shall bear appropriate proprietary notices. Benthos, if it so desires, may commence or prosecute any claims or suits against third parties regarding such title or rights in its own name. Benthos shall notify Optikos in writing of any infringements or imitations by others of the Product, or trademarks of Optikos on articles similar to those covered by this Agreement which may come to Benthos' attention. Benthos shall not institute any suit or take any action on account of any such infringements or imitations without first obtaining the written consent of Optikos to do so and such consent shall not be unreasonably withheld. Optikos will cooperate fully and in good faith with Benthos for the purpose of securing and preserving Benthos' (or any grantor of Benthos') rights in and to the Technology and any works derived from the Technology. Any recovery, (including but not limited to a licensing agreement included as resolution of an infringement of an -8- infringement dispute) procured by Benthos whether by judgment, settlement or otherwise shall be divided equally between Optikos and Benthos after deduction of Benthos' reasonable attorney's fees in procuring such recovery. 12. CONFIDENTIALITY --------------- Optikos and Benthos acknowledge that each may be furnished or may otherwise receive or have access to Confidential Information. The parties agree to preserve and protect the confidentiality of the Confidential Information. The terms, provisions and substance of this Agreement shall remain within the strictest confidence of all parties, and no party shall disclose such information to third parties without the prior written consent of the other unless required to do so by law. The provisions of this Section shall survive the termination of this Agreement. 13. INSURANCE --------- Benthos shall, throughout the Term obtain and maintain, at its own expense, standard product liability insurance coverage. Such policy shall: (a) be maintained with a carrier having a Moody's rating of at least B; and (b) provide protection against any and all claims, demands and causes of action arising out of any defects or failure to perform, alleged or otherwise, of the Products or any use of the Licensed Products. The amount of coverage shall be a minimum of $2,000,000 combined single limit. Benthos shall furnish Optikos with a certificate from its product liability insurance carrier evidencing such insurance coverage and in no event shall Benthos distribute the Product prior to receipt by Optikos and Agent of such evidence of insurance. 14. TERMINATION ----------- The parties shall have the right to terminate this Agreement and the license granted in this Agreement as follows: 14.1 TERMINATION FOR BREACH. Any party shall have the right to terminate this Agreement at any time if any other party materially breaches any of its obligations pursuant to this Agreement and such breach is not cured within thirty (30) days after written notice from the nonbreaching party. 14.2 OPTIKOS' RIGHT TO TERMINATE. Optikos shall have the right to terminate this Agreement in the event that Benthos (a) terminates or suspends its business; (b) Benthos fails to pay License Fees when due, or fails to accurately report net sales as defined in the payment section of this Agreement; (c) makes an assignment for the benefit of creditors; (d) becomes subject to any voluntary or involuntary order of any governmental agency involving the recall of any of the -9- Product because of safety, health, or other hazards or risks to the public; (e) fails to maintain or obtain product liability insurance as required by the provisions of this Agreement; (f) becomes insolvent or becomes subject to direct control by a trustee, receiver or similar authority for a period of more than thirty (30) days; (g) attempts to assign or sublicense rights without the permission of Optikos; or (h) fails to commence sale of the Product within a reasonable period of time following acceptance of the Technology by Benthos after the Delivery Date in accordance with Section 6 hereof provided that, any such breach is not cured by Benthos within thirty (30) days written notice to Benthos by Optikos of the alleged breach. 14.3 EFFECT OF TERMINATION OR EXPIRATION. Upon expiration or termination of this Agreement, all obligations with respect to License Fees shall be satisfied by Benthos. After the expiration or termination of this Agreement, all rights granted to Benthos under this Agreement shall revert to Optikos, and Benthos will refrain from further manufacturing, copying, marketing, distribution, or use of the Product or other product which incorporates the Technology. Within thirty (30) days after termination or expiration, Benthos shall deliver to Optikos a statement indicating the number and description of the Product which it has on hand or is in the process of manufacturing as of the expiration or termination date. After expiration of the Agreement, Benthos, may sell Product which Benthos has on hand, in process, or for which there are outstanding purchase orders on the termination date, for a period of one year after termination or expiration except that Benthos shall have no such right in the event: (a) of a government recall of the Product, (b) Benthos' failure to secure or maintain insurance as required by this Agreement; or (c) Benthos' failure to accelerate and pay all License Fees and furnish all statements for that period. Benthos acknowledges that its failure to halt the sale, distribution or manufacture of the Product after termination or expiration of this Agreement will result in immediate and irremediable damage to Optikos. Benthos acknowledges that there is no adequate remedy at law for such failure to cease copying, manufacture, and distribution and that in the event of such failure Optikos shall be entitled to equitable relief by way of temporary and permanent injunctions and such other further relief as any court with jurisdiction may deem just and proper. No party to this Agreement shall be liable by reason of termination of this Agreement to the other for damages on account of any loss of prospective profits on anticipated sales or on account of expenditures, investments, leases or other commitments relating to the business or goodwill of any party, notwithstanding any law to the contrary. 15. MISCELLANEOUS ------------- 15.1 ATTACHMENTS AND EXHIBITS. Any material contained in an attachment, exhibit or addendum to this Agreement shall be incorporated in this Agreement. From time to time, the parties may revise the information specified in the attachments or exhibits. Such revisions, if executed by all parties, shall be incorporated in this Agreement and shall be binding on the parties. 15.2 ATTORNEY'S FEES AND EXPENSES. Each party shall pay its own attorney's fees incurred in enforcing this Agreement. -10- 15.3 ENTIRE UNDERSTANDING. This Agreement expresses the full, complete and exclusive understanding of the parties with respect to the subject matter hereof and supersedes all prior proposals, representations, agreements and understandings, whether written or oral. 15.4 FORCE MAJEURE. Dates or times by which any party is required to make performance under this Agreement shall be postponed automatically to the extent that any party is prevented from meeting them by strikes, Wars, Acts of God, or other causes beyond their reasonable control, except that if such conditions persist for a period of six months and are particular to Benthos as opposed to the toy industry as a whole, then Optikos may terminate this Agreement. 15.5 ASSIGNMENT. Benthos may not assign or transfer its rights or obligations pursuant to this Agreement without the prior written consent of Optikos which consent shall not be unreasonably withheld, delayed or qualified. Any assignment or transfer in violation of this Section shall be void. 15.6 ARBITRATION. If a dispute arises between the parties arising under or relating to this Agreement, the parties agree to submit such dispute to arbitration in the Commonwealth of Massachusetts conducted on a confidential basis pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Any decision or award as a result of any such arbitration proceeding shall be in writing and shall provide an explanation for all conclusions of law and fact and shall include the assessment of costs, expenses and reasonable attorney's fees. Any such arbitration shall be conducted by an arbitrator experienced in merchandising or licensing law and shall include a written record of the arbitration hearing. The parties reserve the right to object to any individual who shall be employed by or affiliated with a competing organization or entity. An award of arbitration may be confirmed in a court of competent jurisdiction. 15.7 WAIVER. The waiver or failure of any party to exercise in any respect any right provided for herein shall not be deemed a waiver of any further right under this Agreement. 15.8 NO JOINT VENTURE. No party shall represent themselves to be the employee, franchisee, franchisor, joint venturer, officer or partner of the other party and nothing in this Agreement shall be construed to place the parties in the relationship of partners or joint venturers. 15.9 INVALIDITY. If any provision of this Agreement is invalid under any applicable statute or rule of law, it is to that extent to be deemed omitted and the remaining provisions of this Agreement shall in no way be affected or impaired thereby. 15.10 GOVERNING LAW. This Agreement shall be governed by the laws of the Commonwealth of Massachusetts. 15.11 NOTICES. Any notice or communication required or permitted to be given under this Agreement shall be sufficiently given when mailed by certified mail, postage prepaid, or sent by facsimile transmission, cable or overnight courier, charges prepaid, in each case properly -11- addressed to the addresses of the parties indicated on the signature page and such notice shall be deemed to have been given as of the date so mailed or sent. OPTIKOS: OPTIKOS CORPORATION By STEPHEN D. FANTONE --------------------- Stephen D. Fantone President BENTHOS: BENTHOS, INC. By: JOHN L. COUGHLIN --------------------- John L. Coughlin President and ChiefExecutive Officer -12- EX-11 5 COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11 BENTHOS, INC. AND SUBSIDIARY COMPUTATION OF EARNINGS PER SHARE
Thirteen Weeks Thirty-Nine Weeks Ended Ended June 29, 1997 June 30, 1996 June 29, 1997 June 30, 1996 Net Income $297,580 $347,658 $1,283,513 $957,530 -------- -------- ---------- -------- Weighted average common shares outstanding 836,000 790,000 821,000 790,000 Common stock equivalents outstanding pursuant to the treasury stock method 77,000 108,000 93,000 86,000 -------- -------- --------- -------- Weighted average number of common and common equivalent shares outstanding 913,000 898,000 914,000 876,000 ======== ======== ========== ======== Net income per common and common equivalent share outstanding $ .33 $ .39 $ 1.41 $ 1.09 ======== ======== ========== ========
EX-27 6 FINANCIAL DATA SCHEDULE
5 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. 9-MOS SEP-30-1997 JUN-29-1997 $2,068,584 0 1,467,158 127,593 2,658,524 7,039,148 5,963,240 3,992,003 9,246,056 1,681,546 797,204 0 0 69,318 6,697,988 9,246,056 13,189,079 13,189,079 5,940,211 4,117,273 1,007,819 22,500 59,116 2,080,315 796,802 1,283,513 0 0 0 1,283,513 1.41 1.41
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