-----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, J8P8HK0qa3WYPjQRNQdX2blhJHUcifUorjNprn4x+f2b6PeiIK4qGrrypNIKjJ0n WlMLz0F9leaVQNdBGVIH1Q== 0000927016-98-000415.txt : 19980210 0000927016-98-000415.hdr.sgml : 19980210 ACCESSION NUMBER: 0000927016-98-000415 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980209 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: SEC FILE NUMBER: 000-29024 FILM NUMBER: 98525856 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 December 31, 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 1,317,490 (Class) (Outstanding stock at February 5, 1998) Traditional Small Business Disclosure Format (check one): Yes X No --- ---- 2 BENTHOS, INC. AND SUBSIDIARY FORM 10-QSB FOR THE THIRTEEN WEEKS ENDED DECEMBER 31, 1997 INDEX
Page No. Face Sheet 1 Index 2 PART I FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets (unaudited) 3 December 31, 1997 and September 30, 1997 Condensed Consolidated Statements of Earnings (unaudited) 4 Thirteen Weeks Ended December 31, 1997 and December 31, 1996 Condensed Consolidated Statements of Cash Flow (unaudited) 5 Thirteen Weeks Ended December 31, 1997 and December 31, 1996 Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis 7-8 of Financial Condition and Results of Operations PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 9 Signature 9
3 PART I - FINANCIAL INFORMATION Item 1. Financial Statements Benthos, Inc. and Subsidiary Condensed Consolidated Balance Sheets (in thousands, except per share amounts) (unaudited)
Assets December 31, 1997 September 30, 1997 Current Assets: Cash and Cash Equivalents $3,064 $2,663 Accounts Receivable, Net 1,459 2,170 Inventories 2,421 2,063 Prepaid Expenses 346 469 Deferred Tax Asset 516 516 -------------- -------------- Total Current Assets 7,806 7,881 Property, Plant and Equipment, Net 1,894 1,961 Other Assets 234 234 -------------- -------------- $9,934 $10,076 ============== ============== Liabilities and Stockholders' Investment Current Liabilities: Current Maturities of Long-term Debt $ 69 $ 34 Accounts Payable 394 314 Accrued Expenses 1,140 1,373 Customer Deposits 206 141 -------------- -------------- Total Current Liabilities 1,809 1,862 Long-term Debt, Net of Current Maturities 442 791 Stockholders' Investment: Common Stock, $.0667 par value- Authorized - 2,500 shares Issued - 1,586 shares at December 31, 1997 and September 30, 1997 106 106 Capital in Excess of Par Value 1,270 1,270 Retained Earnings 7,084 6,894 Treasury Stock, at Cost (777) (847) -------------- -------------- Total Stockholders' Investment 7,683 7,423 -------------- -------------- $ 9,934 $10,076 ============== ==============
See accompanying notes to Condensed Consolidated Financial Statements 4 Benthos, Inc. and Subsidiary Condensed Consolidated Statements of Earnings (in thousands, except per share amounts) (unaudited)
Thirteen Weeks Ended December 31, 1997 December 31, 1996 Net Sales $ 3,404 $ 4,844 Cost of Sales 1,283 2,156 -------------- -------------- Gross Profit 2,121 2,688 Selling, General & Administrative Expenses 1,524 1,505 Research and Development Expenses 312 242 -------------- -------------- Income from Operations 285 941 Interest Income 39 6 Interest Expense (16) (19) -------------- -------------- Income before Provision for Income Taxes 308 928 Provision for Income Taxes 118 374 -------------- -------------- Net Income $ 190 $ 554 ============== ============== Basic Earnings Per Share $0.15 $0.46 ============== ============== Diluted Earnings Per Share $0.14 $0.40 ============== ============== Common Shares Outstanding 1,293 1,210 Common Shares Assuming Dilution 1,394 1,383
See accompanying notes to Condensed Consolidated Financial Statements 5 Benthos, Inc. and Subsidiary Condensed Consolidated Statements of Cash Flow (in thousands) (unaudited)
Thirteen Weeks Ended December 31, 1997 December 31, 1996 Cash Flows From Operating Activities: Net Income $ 190 $ 554 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization 191 195 Changes in Assets and Liabilities: Accounts Receivable 711 (1,039) Inventories (358) 208 Prepaid Expenses 123 22 Accounts Payable & Accrued Expenses (153) (92) Customer Deposits 65 (144) -------------- ------------- Net Cash Provided by (used in) Operating Activities 769 (296) Cash Flows from Financing Activities: Purchases of Property, Plant & Equipment (40) (196) Increase in Other Assets (14) (86) -------------- ------------- Net Cash Used in Investing Activities (54) (282) Cash Flows from Financing Activities: Payments on long-term debt, net (314) (8) -------------- ------------- Net Cash Used in Financing Activities (314) (8) -------------- ------------- Net Increase (Decrease) in Cash and Cash Equivalents 401 (586) Cash and Cash Equivalents, Beginning of Period 2,663 751 -------------- ------------- Cash and Cash Equivalents, End of Period $3,064 $ 165 ============== ============= Supplemental Disclosure of Cash Flow Information: Interest Paid $16 $19 ============== ============= Income Taxes Paid $20 $759 ============== =============
See accompanying notes to Condensed Consolidated Financial Statements 6 Benthos, Inc. Notes to Financial Statements 1. Fiscal Periods The Company's fiscal year is comprised of 52 weeks and ends on September 30 each year. Interim quarters are comprised of 13 weeks unless otherwise noted and end on the Sunday closest to December 31, March 31, and June 30. All references in the unaudited condensed consolidated financial statements to fiscal periods ended on December 31, March 31, or June 30 mean the interim quarters referred to above. 2. 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, 1997, 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 interim period are not necessarily indicative of the results to be expected for the full fiscal year. 3. Inventories Inventories are stated at the lower of cost (first-in, first-out) or market and consist of the following:
December 31,1997 September 30, 1997 (in thousands) Raw Materials $ 91 $ 90 Work-in-Process 2,285 1,928 Finished Goods 45 45 ------------- ----------- $2,421 $2,063 ============= ===========
4. Earnings Per Share In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings Per Share" which revises the calculation and presentation provisions of Accounting Principles Board Opinion 15 ("APB 15") and related interpretations. Statement No. 128 has been adopted in the accompanying financial statements with retroactive application. Basic earnings per share excludes dilution and is computed by dividing net earnings by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Diluted earning per share is computed based upon the weighted average number of common shares and dilutive common equivalent shares outstanding. Common stock options, which are common stock equivalents, have a dilutive effect on earnings per share in all periods and are therefore included in the computation of diluted earnings per share. Diluted earnings per share in the accompanying statements of operations is identical to the primary earnings per share previously presented in accordance with APB 15. The Company has stock options for 32 shares of common stock at an average exercise price of $17.54, which have not been included in basic or diluted earnings per share as they are antidilutive. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollars in thousands, except per share data) Results of Operations -- First quarter of fiscal year 1998 compared with first quarter of fiscal year 1997. The following table presents, for the periods indicated, the percentage relationship of Condensed Consolidated Statements of Earnings items to total sales:
Thirteen Weeks Ended December 31, 1997 December 31, 1996 (unaudited) Net Sales 100.0% 100.0% Cost of Sales 37.7% 44.5% ------------ ------------ Gross Profit 62.3% 55.5% Selling, General & Administrative Expenses 44.8% 31.1% Research and Development Expenses 9.1% 5.0% ------------ ------------ Income from Operations 8.4% 19.4% Interest Income/(Expense), Net .7% (.3%) ------------ ------------ Income Before Provision for Income Taxes 9.1% 19.1% Provision for Income Taxes 3.5% 7.7% ------------ ------------ Net Income 5.6% 11.4% ============ ============
Sales. Net sales decreased by 29.7% in the first quarter of fiscal year 1998 to $3,404 as compared to $4,844 in the first quarter of fiscal year 1997. Sales of the Container Inspection Systems Division decreased by 7.4% to $1,888 in the first quarter of fiscal year 1998 as compared to $2,038 in the first quarter of fiscal year 1997. The decrease resulted largely from the timing of project orders. Sales of the Undersea Systems Division decreased by 46% to $1,516 in the first quarter of fiscal year 1998 as compared to $2,806 in the first quarter of fiscal year 1997. The decrease resulted mainly from lower sales of hydrophones in the first quarter of fiscal year 1998 as compared to the first quarter of fiscal year 1997 related to the transitioning to a new hydrophone product. Gross Profit. Gross Profit decreased by 21.1% to $2,121 for the first quarter of fiscal year 1998 as compared to $2,688 for the first quarter of fiscal year 1997. As a percentage of sales, gross profit was 62.3% in the first quarter of fiscal year 1998 as compared to 55.5% in the first quarter of fiscal year 1997. The increase in gross profit percentage is attributed primarily to the higher sales mix of Container Inspection Systems Division products, which carry a higher gross profit, in the first quarter of fiscal year 1998. 8 Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by 1.3% to $1,524 for the first quarter of fiscal year 1998 as compared to $1,505 in the first quarter of fiscal year 1997. As a percentage of sales, selling, general and administrative expenses increased to 44.8% in the first quarter of fiscal year 1998 as compared to 31.1% for the first quarter of fiscal year 1997. This increase in percentage of sales is primarily a result of a reduced level of sales in the first quarter of fiscal year 1998. Research and Development Expenses. Research and development expenses increased 28.9% to $312 for the first quarter of fiscal year 1998 as compared to $242 in the first quarter of fiscal year 1997. As a percentage of sales, research and development expenses increased to 9.1% of sales in the first quarter of fiscal year 1998 from 5.0% in the first quarter of fiscal year 1997. 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 Income. Interest income increased to $39 in the first quarter of fiscal year 1998 as compared to $6 in the first quarter of fiscal year 1997. The increase in interest income was a result of higher invested cash balances. Provision for Income Taxes. The provision for income taxes decreased to $118 in the first quarter of fiscal year 1998 as compared to $374 in the first quarter of fiscal year 1997. The effective tax rate used in the first quarter of fiscal year 1998 was 38.3% as compared to the rate of 40.3% used in the first quarter of fiscal year 1997. The rate used in the first quarter of fiscal year 1998 is the same rate as was applied to the full year of fiscal 1997 and is lower than the statutory rate due to the benefit from the Company's Foreign Sales Corporation. Liquidity and Capital Resources. The Company's cash and cash equivalents increased $401 from September 30, 1997 to December 31, 1997. This increase resulted primarily from cash generated from operations of $769. Accounts receivable decreased $711 resulting from improved collections and lower sales volume and inventories increased by $358 to support future sales. Cash flow from financing activities was a use of $314 resulting from payments on the Company's long term debt. 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. "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: the timing of large project orders, 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. 9 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: February 5, 1998 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) 3.4 By-Law Amendments adopted January 23, 1998 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 (3) 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 1998 Non-Employee Directors' Stock Option Plan 10.14 License Agreement between the Company and The Penn State Research Foundation dated December 13, 1993 (1) 10.15 Technical Consultancy Agreement between the Company and William D. McElroy dated July 12, 1994 (1) 10.16 Technical Consultancy Agreement between the Company and William D. McElroy dated October 1, 1996 (3) 10.17 General Release and Settlement Agreement between the Company and Lawrence W. Gray dated February 8, 1996 (1) Exhibit 10.18 Line of Credit Loan Agreement between the Company and Cape Cod Bank and Trust Company dated September 24, 1990, as amended (1) 10.19 Commercial Mortgage Loan Extension and Modification Agreement between the Company and Cape Cod Bank and Trust Company, dated July 6, 1994 (1) 10.20 License Agreement between the Company and Optikos Corporation dated July 29, 1997 (3) 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. O-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. (3) Previously filed as an exhibit to Registrant's Quarterly Report on Form 10-QSB for the quarterly period ended June 29, 1997 (File No. O-28932) and incorporated hereby by this reference. EX-3.4 2 BY-LAW AMENDMENTS ADOPTED JANUARY 23, 1998 Exhibit 3.4 BENTHOS, INC. By-Law Amendments adopted January 23, 1998 ------------------------------------------ RESOLVED: that Article 3, Section 3.2, of the By-Laws of the Corporation be and hereby is amended to read in its entirety as follows: "Section 3.2 Special Meetings. ------------------------------ So long as the Corporation has a class of voting stock registered under the Securities Exchange Act of 1934, as amended, special meetings of the stockholders may be called by the President or by a majority of the Directors and shall be called by the Clerk, or in case of the death, absence, incapacity or refusal of the Clerk, by any other officer, upon written application of one or more stockholders who hold at least 40 percent in interest of the capital stock entitled to vote at the meeting. Such call shall state the time, place and purposes of the meeting." RESOLVED: that Article 4, Section 4.1, of the By-Laws of the Corporation be and hereby is amended to read in its entirety as follows: "Section 4.1 Number and Election. --------------------------------- The Board of Directors shall consist of not less than the minimum number of individuals permitted by law and shall be divided into three classes, such classes to be as nearly equal in number as possible. One of such classes of Directors shall be elected annually by the stockholders. Subject to the foregoing requirements and applicable law, the Board of Directors may, from time to time, fix the number of Directors and their respective classifications, provided that any such action does not operate to remove a Director elected by the stockholders or the Directors other than in the manner specified in the Articles of Organization or these By-Laws. No decrease in the number of Directors constituting the Board of Directors shall shorten the term of any incumbent Director. Except as otherwise provided in accordance with the Articles of Organization or these By-Laws, the members of each class shall be elected for a term of three years and shall serve until their successors are elected and qualified. Any successor to a Director whose seat becomes vacant shall serve for the remainder of the term of his predecessor and until his successor is elected and qualified. The number of Directors may be increased by the Directors by the affirmative vote of a majority of the Directors then in office." RESOLVED: that Article 6, Section 6.2, of the By-Laws of the Corporation be and hereby is amended by deleting the first paragraph thereof in its entirety and by amending the third paragraph thereof to read in its entirety as follows: "A Director may be removed from office only for cause by vote of either (a) the holders of a majority of the shares outstanding and entitled to vote in the election of Directors or (b) a majority of the Directors then in office. "Cause" shall mean only (i) conviction of a felony, (ii) declaration of unsound mind by order of court, (iii) gross dereliction of duty, (iv) commission of an action involving moral turpitude or (v) commission of an action that constitutes intentional misconduct or a knowing violation of law if such action in either event results both in an improper substantial personal benefit and a material injury to the Corporation." RESOLVED: that the first paragraph of Article 6, Section 6.3, of the By- Laws of the Corporation be amended to read in its entirety as follows: "Any vacancy at any time existing in the Board of Directors, whether resulting from an increase in the size of the Board of Directors, from the death, resignation, disqualification or removal of a Director or otherwise, shall be filled solely by the affirmative vote of a majority of the remaining Directors then in office." EX-10.13 3 1998 NON-EMPLOYEE DIRECTOR'S STOCK OPTION PLAN EXHIBIT 10.13 BENTHOS, INC. 1998 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN The purposes of the Benthos, Inc. 1998 Non-Employee Directors' Stock Option Plan (the "Plan") are to promote the long-term success of Benthos, Inc. ("Benthos") by creating a long-term mutuality of interests between the non- employee Directors and stockholders of Benthos, to provide an additional inducement for such directors to remain with Benthos and to provide a means through which Benthos may attract able persons to serve as directors of Benthos. SECTION 1 Administration The Plan shall be administered by a Committee (the "Committee") appointed by the Board of Directors of Benthos (the "Board") and consisting of not less than two members of the Board. The Committee shall keep records of action taken at its meetings. A majority of the Committee shall constitute a quorum at any meeting, and the acts of a majority of the members present at any meeting at which a quorum is present, or acts approved in writing by all the members of the Committee, shall be the acts of the Committee. At all times this membership of the Committee shall always satisfy the requirements of Rule 16b-3 under the Securities Exchange Act of 1934 (the "1934 Act") or any successor rule. The Committee shall interpret the Plan and prescribe such rules, regulations and procedures in connection with the operations of the Plan as it shall deem to be necessary and advisable for the administration of the Plan consistent with the purposes of the Plan. All questions of interpretation and application of the Plan, or as to stock options granted under the Plan, shall be subject to the determination of the Committee, which shall be final and binding. Notwithstanding the above, the selection of the directors to whom stock options are to be granted, the timing of such grants, the number of shares subject to any stock option, the exercise price of any stock option, the periods during which any stock option may be exercised and the term of any stock option shall be determined by the Board as hereinafter provided, and the Committee shall have no discretion as to such matters. SECTION 2 Shares Available Under the Plan The aggregate number of shares which may be issued and as to which grants of stock options may be made under the Plan is 150,000 shares of the common stock, par value $.0667 per share, of Benthos (the "Common Stock"), subject to adjustment and substitution as set forth in Section 5. If any stock option granted under the Plan is canceled by mutual consent or terminates or expires for any reason without having been exercised in full, the number of shares subject thereto shall again be available for purposes of the Plan. The shares which may be issued under the Plan may be either authorized but unissued shares or treasury shares or partly each. SECTION 3 Grant of Stock Options Options to purchase shares of Common Stock shall be granted under the Plan as follows: (i) immediately following the initial election of any new director of Benthos who is not otherwise an employee of Benthos, or any subsidiary of Benthos (a "non-employee Director"), an option shall be granted to such new non- employee Director for the purchase of Fifteen Thousand (15,000) shares of Common Stock, and (ii) from time to time thereafter such additional options to purchase shares of Common Stock as the Board in its sole discretion shall determine, shall be granted to non-employee Directors. All options granted pursuant to this Plan shall be "nonstatutory stock options" (i.e., stock options which do not qualify under Sections 422 or 423 of the Internal Revenue Code of 1986, as amended (the "Code"). SECTION 4 Terms and Conditions of Stock Options Stock options granted under the Plan shall be subject to the following terms and conditions: (A) The purchase price at which each stock option may be exercised (the "option price") shall be one hundred percent (100%) of the fair market value per share of the Common Stock covered by the stock option on the date of grant, determined as provided in Section 4(G). (B) The option price for each stock option shall be paid in full upon exercise and shall be payable in cash in United States dollars (including check, bank draft or money order); provided, however, that in lieu of such cash the person exercising the stock option may pay the option price in whole or in part by delivering to Benthos shares of Common Stock having a fair market value on the date of exercise of the stock option, determined as provided in Section 4(G), equal to the option price for the shares being purchased; except that (i) any portion of the option price representing a fraction of a share shall in any event be paid in cash and (ii) no shares of Common Stock which have been held for less than six months may be delivered in payment of the option price of a stock option. Delivery of shares may also be accomplished through the effective transfer to Benthos of shares of Common Stock held by a broker or other agent. Benthos will also cooperate with any person exercising a stock option who participates in a cashless exercise program of a broker or other agent under which all or part of the shares received upon exercise of the stock option are sold through the broker or other agent or under which the broker or other agent makes a loan to such person. Notwithstanding the foregoing, the exercise of the stock option shall not be deemed to occur and no shares of Common Stock will be issued by Benthos upon exercise of the stock option until Benthos has received payment of the option price in full. 2 The date of exercise of a stock option shall be determined under procedures established by the Committee, and as of the date of exercise the person exercising the stock option shall be considered for all purposes to be the owner of the shares with respect to which the stock option has been exercised. Payment of the option price with shares of Benthos shall not increase the number of shares of the Common Stock which may be issued under the Plan as provided in Section 2. (C) No stock option granted hereunder shall be exercisable during the first year of its term, except in the event of death as provided in Section 4(E) or in the event of a Section 6 Event as provided in Section 6. Thereafter, the options shall be exercisable as follows: after one year from the date of grant, the option may be exercised for one-third of the option shares, after two years from the date of grant, the option may be exercised for two-thirds of the option shares, and after three years from the date of grant, the option may be exercised for all of the option shares. Subject to the preceding sentence and subject to Section 4(E) which provides for earlier termination of a stock option under certain circumstances, each stock option shall be exercisable for ten years from the date of grant. A stock option to the extent exercisable may be exercised in whole or in part. (D) No stock option shall be transferable by the grantee otherwise than by will, or if the grantee dies intestate, by the laws of descent and distribution of the state of domicile of the grantee at the time of death. All stock options shall be exercisable during the lifetime of the grantee only by the grantee or the grantee's guardian or legal representative. (E) If a grantee ceases to be a director of Benthos for any reason, any outstanding stock options held by the grantee shall be exercisable according to the following provisions: (i) If a grantee ceases to be a director of Benthos for any reason other than resignation, removal for cause or death, any outstanding stock option held by such grantee shall be exercisable by the grantee (but only if exercisable by the grantee immediately prior to ceasing to be a director) at any time prior to the expiration date of such stock option or within one year after the date the grantee ceases to be a director, whichever is the shorter period; (ii) If during his term of office as a director a grantee resigns from the Board or is removed from office for cause, any outstanding stock option held by the grantee which is not exercisable by the grantee immediately prior to resignation or removal shall terminate as of the date of resignation or removal, and any outstanding stock option held by the grantee which is exercisable by the grantee immediately prior to resignation or removal shall be exercisable by the grantee at any time prior to the expiration date of such stock option or within three months after the date of resignation or removal of the grantee, whichever is the shorter period. 3 (iii) Following the death of a grantee during service as a director of Benthos, any outstanding stock option held by the grantee at the time of death shall be exercisable, to the extent such outstanding stock option would have been exercisable on the next subsequent anniversary date of such option after the death of the grantee, by the person entitled to do so under the will of the grantee, or, if the grantee shall fail to make testamentary disposition of the stock option or shall die intestate, by the legal representative of the grantee at any time prior to the expiration date of such stock option or within one year after the date of death of the grantee, whichever is the shorter period; (iv) Following the death of a grantee after ceasing to be a director and during a period when a stock option is exercisable under clause (i) above, the stock option shall be exercisable by such person entitled to do so under the will of the grantee or by such legal representative at any time prior to the expiration date of the stock option or within one year after the date of death, whichever is the shorter period; and (v) Following the death of a grantee after ceasing to be a director and during a period when a stock option is exercisable under clause (ii) above, the stock option shall be exercisable by such person entitled to do so under the will of the grantee or by such legal representative at any time during the shorter of the following two periods: (i) until the expiration date of the stock option or (ii) until three months after the grantee ceased being a director or one year after the date of death of the grantee (whichever is longer). A stock option held by a grantee who has ceased to be a director of Benthos shall terminate upon the expiration of the applicable exercise period, if any, specified in this Section 4(E). (F) All stock options shall be confirmed by an agreement, or an amendment thereto, which shall be executed on behalf of Benthos by an authorized officer of Benthos and by the grantee. (G) Fair market value of the Common Stock shall be the closing price, as applicable, for the date as of which fair market value is to be determined as quoted in The Wall Street Journal (or in such other reliable publication as the Committee, in its discretion, may determine to reply upon): (i) the closing price per share of Common Stock for such date on (or on any composite index including) the principal United States securities exchange registered under the 1934 Act on which the Common Stock is listed, or (ii) if the Common Stock is not listed on any such exchange, the closing price per share of the Common Stock for such date on the Nasdaq National Market or SmallCap Market or any successor system then in use ("Nasdaq"). If there are no such sale price quotations for the date as of which fair market value is to be determined but there are such sale price quotations within a reasonable period before such date, then fair market value shall be the 4 closing price per share of Common Stock on the closest date prior to the date on which the fair market value is to be determined. If the fair market value of the Common Stock cannot be determined on the basis previously set forth in this Section 4(G) for the date as of which fair market value is to be determined, the Committee shall in good faith determine the fair market value of the Common Stock on such date. Fair market value shall be determined without regard to any restriction other than a restriction which, by its terms, will never lapse. (H) The obligation of Benthos to issue shares of the Common Stock under the Plan shall be subject to (i) the effectiveness of a registration statement under the Securities Act of 1933, as amended, with respect to such shares, if deemed necessary or appropriate by counsel for Benthos, (ii) the condition that the shares shall have been listed (or authorized for listing upon official notice of issuance) upon each stock exchange, if any, on which the Common Stock may then be listed and (iii) all other applicable laws, regulations, rules and orders which may then be in effect. Subject to the foregoing provisions of this Section 4 and other provisions of the Plan, any stock option granted under the Plan shall be subject to such restrictions and other terms and conditions, if any, as shall be determined, in its discretion, by the Board and set forth in the agreement referred to in Section 4(F), or an amendment thereto; except that in no event shall the Committee or the Board have any power or authority which would case the Plan to fail to be a plan described in Rule 16b-3(d)(1), or any successor rule. SECTION 5 Adjustment and Substitution of Shares If a dividend or other distribution shall be declared upon the Common Stock payable in shares of the Common Stock, the number of shares of the Common Stock set forth in Section 3, the number of shares of the Common Stock then subject to any outstanding stock options and the number of shares of the Common Stock which may be issued under the Plan but are not then subject to outstanding stock options on the date fixed for determining the stockholders entitled to receive such stock dividend or distribution shall be adjusted by adding thereto the number of shares of the Common Stock which would have been distributable thereon if such shares had been outstanding on such date. If the outstanding shares of the Common Stock shall be changed into or exchangeable for a different number or kind of shares of stock or other securities of Benthos or another corporation, whether through reorganization, reclassification, recapitalization, stock split-up, combination of shares, merger or consolidation, then there shall be substituted for each share of the Common Stock set forth in Section 3, for each share of the Common Stock subject to any then outstanding stock option and for each share of the Common Stock which may be issued under the Plan but which is not then subject to any outstanding stock option, the number and kind of shares of stock or other securities into which each outstanding share of the Common Stock shall be so changed or for which each such share shall be exchangeable. 5 In case of any adjustment or substitution as provided for in the first two paragraphs of this Section 5, the aggregate option price for all shares subject to each then outstanding stock option prior to such adjustment or substitution shall be the aggregate option price for all shares of stock or other securities (including any fraction) to which such shares shall have been adjusted or which shall have been substituted for such shares. Any new option price per share shall be carried to at least three decimal places with the last decimal place rounded upwards to the nearest whole number. If the outstanding shares of the Common Stock shall be changed in value by reason of any spin-off, split-off or split-up, or dividend in partial liquidation, dividend in property other than cash or extraordinary distribution to holders of the Common Stock, the Committee shall make any adjustments to any then outstanding stock option which it determines are equitably required to prevent dilution or enlargement of the rights of grantees which would otherwise result from any such transaction. No adjustment or substitution provided for in this Section 5 shall require Benthos to issue or sell a fraction of a share or other security. Accordingly, all fractional shares or other securities which result from any such adjustment or substitution shall be eliminated and not carried forward to any subsequent adjustment or substitution. Except as provided in this Section 5, grantee shall have no rights by reason of any issue by Benthos of stock of any class or securities convertible into stock of any class, any subdivision or consolidation of shares of stock of any class, the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class. SECTION 6 Additional Rights in Certain Events (A) Definitions. For purposes of this Section 6, the following terms shall have the following meanings: (1) The term "Person" shall be used as that term is used in Sections 13(d) and 14(d) of the 1934 Act as in effect on the effective date of the Plan. (2) "Beneficial Ownership" shall be determined as provided in Rule 13d-3 under the 1934 Act as in effect on the effective date of the Plan. (3) A specified percentage of "Voting Power" of a company shall mean such number of the Voting Shares as shall enable the holders thereof to cast such percentage of all the votes which could be cast in an annual election of directors (without consideration of the rights of any class of stock other than the common stock of the company to elect directors by a separate class 6 vote); and "Voting Shares" shall mean all securities of a company entitling the holders thereof to vote in an annual election of directors (without consideration of the rights of any class of stock other than the common stock of the company to elect directors by a separate class vote). (4) "Tender Offer" shall mean a tender offer or exchange offer to acquire securities of Benthos (other than such an offer made by Benthos or any Subsidiary), whether or not such offer is approved or opposed by the Board. (5) "Continuing Directors" shall mean a director of Benthos who either (a) was a director of Benthos on the effective date of the Plan or (b) is an individual whose election, or nomination for election, as a director of Benthos was approved by a vote of at least two-thirds of the directors then still in office who were Continuing Directors (other than an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors of Benthos which would be subject to Rule 14a-11 under the 1934 Act, or any successor Rule). (6) "Section 6 Event" shall mean the date upon which any of the following events occurs: (a) Benthos acquires actual knowledge that any Person other than Benthos, a Subsidiary or any employee benefit plan(s) sponsored by Benthos or a Subsidiary has acquired the Beneficial Ownership, directly or indirectly, of securities of Benthos entitling such Person to 30% or more of the Voting Power of Benthos; (b) A Tender Offer is made to acquire securities of Benthos entitling the holders thereof to 30% or more of the Voting Power of Benthos; or (c) A solicitation subject to Rule 14a-11 under the 1934 Act (or any successor Rule) relating to the election or removal of 50% or more of the members of the Board or any class of the Board shall be made by any person other than Benthos or less than 51% of the members of the Board shall be Continuing Directors; or (d) The stockholders of Benthos shall approve a merger, consolidation, share exchange, division or sale or other disposition of assets of Benthos as a result of which the stockholders of Benthos immediately prior to such transaction shall not hold, directly or indirectly, immediately following such transaction a majority of the Voting Power of (i) in the case of a merger or consolidation, the surviving or resulting corporation, (ii) in the case of a share exchange, the acquiring corporation or (iii) in the case of a division or sale or other disposition of assets, each surviving, resulting or acquiring corporation which, immediately following the transaction, holds more than 7 10% of the consolidated assets of Benthos immediately prior to the transaction; provided however, that (i) if securities beneficially owned by a grantee are included in determining the Beneficial Ownership of a Person referred to in paragraph 6(a), (ii) a grantee is required to be named pursuant to Item 2 of the Schedule 14D-1 (or any similar successor filing requirement) required to be filed by the bidder making a Tender Offer referred to in paragraph 6(b) or (iii) if a grantee is a "participant" as defined in Instruction 3 to Item 4 of Schedule 14A under the 1934 Act (or any successor rule) in a solicitation (other than a solicitation by Benthos) referred to in paragraph 6(c), then no Section 6 Event with respect to such grantee shall be deemed to have occurred by reason of such event. (B) Acceleration of the Exercise Date of Stock Options. Notwithstanding any other provision contained in the Plan, in case any "Section 6 Event" occurs all outstanding stock options (other than those held by a person referred to in the proviso to Section 6(A)(6)) shall become immediately and fully exercisable whether or not otherwise exercisable by their terms. SECTION 7 Effect of the Plan on the Rights of Corporation and Stockholders Nothing in the Plan, in any stock option granted under the Plan, or in any stock option agreement shall confer any right to any person to continue as a director of Benthos or interfere in any way with the rights of the stockholders of Benthos or the Board to elect and remove directors. SECTION 8 Amendment and Termination The right to amend the Plan at any time and from time to time and the right to terminate the Plan at any time are hereby specifically reserved to the Board, provided always that no such termination shall terminate any outstanding stock options granted under the Plan, and provided further that no amendment of the Plan shall (i) be made without stockholder approval if stockholder approval of the amendment is at the time required for stock options under the Plan by Nasdaq or the rules of any stock exchange on which the Common Stock may then be listed, (ii) amend more than once every six months the provisions of the Plan relating to the selection of the Directors to whom stock options are to be granted, the timing of such grants, the number of shares subject to any stock option, the exercise price of any stock options, the periods during which any stock option may be exercised and the term of any stock option other than to comply with changes in the Code or the rules and regulations thereunder or (iii) otherwise amend the Plan in any manner that would cause stock options under the Plan not to qualify for the exemption provided 8 by Rule 16b-3 under the 1934 Act, or any successor rule. No amendment or termination of the Plan shall, without the written consent of the holder of a stock option therefore awarded under the Plan, adversely affect the rights of such holder with respect thereto. Notwithstanding anything contained in the preceding paragraph or any other provision of the Plan or any stock option agreement, the Board shall have the power to amend the Plan in any manner deemed necessary or advisable for stock options granted under the Plan to qualify for the exemption provided by Rule 16b-3 (or any successor rule relating to exemption from Section 16(b) of the 1934 Act), and any such amendment shall, to the extent deemed necessary or advisable by the Board, be applicable to any outstanding stock options theretofore granted under the Plan notwithstanding any contrary provisions contained in any stock option agreement. In the event of any such amendment to the Plan, the holder of any stock option outstanding under the Plan shall, upon request of the Committee and as a condition to the exercisability of such option, execute a conforming amendment in the form prescribed by the Committee to the stock option agreement referred to in Section 4(F) within such reasonable time as the Committee shall specify in such request. SECTION 9 Effective Date and Duration of Plan The Plan shall become effective upon approval by the affirmative vote of the holders of a majority of the Common Stock present in person or by proxy and entitled to vote at a duly called and convened meeting of such holders. If such approval is obtained at the Special Meeting of Stockholders on April 3, 1998, the Plan shall be effective on the date of such meeting. This Plan shall expire on December 31, 2007. Termination of the Plan shall not, without the consent of the grantee, affect such grantee's rights under any option previously granted to such grantee. 9 EX-11 4 COMPUTATION OF EARNINGS PER SHARE Exhibit 11 BENTHOS, INC. AND SUBSIDIARY COMPUTATION OF EARNINGS PER SHARE FOR THE THIRTEEN WEEKS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996 (in thousands, except per share amounts)
Net Income Shares Per Share Amount For the thirteen weeks ended December 31, 1997 Net Income $190 - - Basic Earnings per share: Income available to common stockholders 190 1,293 $.15 ======= Diluted earnings per share: Options issued to Directors, Officers, and employees - 101 - ------- ------- Income available to common stockholders plus assumed conversions $190 1,394 $.14 ======= ======= ======= For the thirteen weeks ended December 31, 1996 Net Income $554 - - Basic Earnings per share: Income available to common stockholders 554 1,210 $.46 ======= Diluted earnings per share: Options issued to Directors, Officers, and employees - 173 - ------- ------- Income available to common stockholders plus assumed conversions $554 1,383 $.40 ======= ======= =======
EX-27 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF BENTHOS, INC. AND SUBSIDIARY CONTAINED ELSEWHERE IN THIS QUARTERLY REPORT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS SEP-30-1998 OCT-01-1997 DEC-31-1997 3,064 0 1,459 162 2,421 7,806 6,103 4,209 9,934 1,809 442 0 0 106 7,577 9,934 3,404 3,404 1,283 1,524 312 0 16 308 118 190 0 0 0 190 .15 .14
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