10QSB

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 30, 2004

¨ Transition report under Section 13 or 15(d) of the Exchange Act

For the transition period from              to             

Commission file number 0-29024

BENTHOS, INC.

(Exact Name of Small Business Issuer as Specified in Its Charter)

Massachusetts	04-2381876
(State or Other Jurisdiction of Incorporation or Organization)	(I. R. S. Employer Identification No.)

49 Edgerton Drive, North Falmouth, Massachusetts    02556

(Address of Principal Executive Offices)

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 $.06 2/3	1,388,165
(Class)	(Outstanding stock at August 6, 2004)

Transitional Small Business Disclosure Format (check one):    Yes  ¨    No  x

BENTHOS, INC. AND SUBSIDIARIES

FORM 10-QSB

FOR THE THREE MONTHS ENDED

JUNE 30, 2004

INDEX

			Page No.
Face Sheet			1
Index			2
PART I
FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Condensed Consolidated Balance Sheets (unaudited) June 30, 2004 and September 30, 2003	3
		Condensed Consolidated Statements of Operations (unaudited) Three Months and Nine Months Ended June 30, 2004 and June 30, 2003	4
		Condensed Consolidated Statements of Cash Flows (unaudited) Nine Months Ended June 30, 2004 and June 30, 2003	5
		Notes to Financial Statements	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
	Item 3.	Controls and Procedures	20
PART II
OTHER INFORMATION
	Item 6.	Exhibits and Reports on Form 8-K	20
	Signature		20

2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Benthos, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

	June 30, 2004			September 30, 2003
Assets
Current Assets:
Cash and Cash Equivalents	$	49		$	204
Accounts Receivable, Net		3,052			2,535
Inventories		3,039			3,076
Prepaid Expenses and Other Current Assets		139			153
Note Receivable and Other Receivable – Real Estate		—			1,150
Total Current Assets		6,279			7,118
Property, Plant and Equipment, Net		1,165			1,568
Goodwill		576			576
Acquired Intangible Assets, Net		277			456
Other Assets, Net		40			52
	$	8,337		$	9,770
Liabilities and Stockholders’ Investment
Current Liabilities:
Current Portion of Long-Term Debt	$	279		$	879
Accounts Payable		1,343			2,160
Accrued Expenses		1,121			1,161
Customer Deposits		261			261
Total Current Liabilities		3,004			4,461
Long-Term Debt, Net of Current Portion		325			534
Stockholders’ Investment:
Common stock, $.06 2/3 Par Value- Authorized – 7,500 Shares Issued – 1,653 Shares at June 30, 2004 and September 30, 2003		110			110
Capital in Excess of Par Value		1,569			1,569
Retained Earnings		3,960			3,727
Treasury Stock, at Cost– 270 shares at June 30, 2004 and September 30, 2003		(631	)		(631	)
Total Stockholders’ Investment		5,008			4,775
	$	8,337		$	9,770

See accompanying notes to Condensed Consolidated Financial Statements.

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Benthos, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)

	Three Months Ended June 30,						Nine Months Ended June 30,
	2004			2003			2004			2003
Net Sales	$	5,746		$	4,406		$	13,764		$	13,177
Cost of Sales		3,336			2,625			8,151			8,076
Gross Profit		2,410			1,781			5,613			5,101
Selling, General & Administrative Expenses		1,438			1,205			3,919			3,745
Research and Development Expenses		430			444			1,224			1,267
Amortization of Acquired Intangibles		60			60			179			179
Income (Loss) from Operations		482			72			291			(90	)
Interest Income		1			2			1			2
Interest Expense		(15	)		(48	)		(47	)		(161	)
Income (Loss) before Income Taxes		468			26			245			(249	)
Provision for Income Taxes		12			—			12			—
Net Income (Loss)	$	456		$	26		$	233		$	(249	)
Basic Earnings (Loss) Per Share	$	0.33		$	0.02		$	0.17		$	(0.18	)
Diluted Earnings (Loss) Per Share	$	0.31		$	0.02		$	0.17		$	(0.18	)
Weighted Average Number of Shares Outstanding		1,383			1,383			1,383			1,383
Weighted Average Number of Shares Outstanding, Assuming Dilution		1,452			1,391			1,406			1,383

See accompanying notes to Condensed Consolidated Financial Statements.

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Benthos, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

(See Note 10)

	Nine Months Ended
	June 30, 2004			June 30, 2003
Cash Flows from Operating Activities:
Net Income (Loss)	$	233		$	(249	)
Adjustments to Reconcile Net Income (Loss) to Net Cash (Used in) Provided by Operating Activities:
Depreciation and Amortization		730			628
Changes in Assets and Liabilities:
Accounts Receivable		(517	)		640
Inventories		(21	)		(235	)
Refundable Income Taxes		—			393
Prepaid Expenses and Other Current Assets		14			39
Deferred Tax Asset		—			385
Accounts Payable and Accrued Expenses		(857	)		(821	)
Customer Deposits and Deferred Revenue		—			(77	)
Net Cash (Used in) Provided by Operating Activities		(418	)		703
Cash Flows from Investing Activities:
Purchases of Property, Plant and Equipment		(78	)		(126	)
Note Receivable and Other Receivable – Real Estate		1,150			—
Net Cash Provided by (Used in) Investing Activities		1,072			(126	)
Cash Flows from Financing Activities:
Payments on Line of Credit		—			(50	)
Payments on Long-Term Debt		(809	)		(590	)
Net Cash Used in Financing Activities		(809	)		(640	)
Net Decrease in Cash and Cash Equivalents		(155	)		(63	)
Cash and Cash Equivalents, Beginning of Period		204			76
Cash and Cash Equivalents, End of Period	$	49		$	13
Supplemental Disclosure of Cash Flow Information:
Interest Paid	$	52		$	162
Income Taxes Paid, Net	$	77		$	(774	)

See accompanying notes to Condensed Consolidated Financial Statements.

5

Benthos, Inc. and Subsidiaries

Notes to Financial Statements

(in thousands, except per share amounts)

1. Fiscal Periods

The fiscal year of Benthos, Inc. (the Company) 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 the Company 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, 2003, 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 periods are not necessarily indicative of the results to be expected for the full fiscal year. Certain reclassifications have been made to the fiscal year 2003 financial statements to conform to the fiscal year 2004 presentation.

3. Inventories

Inventories are stated at the lower of cost (first-in, first-out) or market and consist of the following:

	June 30, 2004		September 30, 2003
Raw Materials	$	259	$	259
Work-in-Process		2,765		2,772
Finished Goods		15		45
	$	3,039	$	3,076

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4. Note Receivable and Other Receivable – Real Estate

On September 29, 2003, the Company completed the sale of two parcels of real estate in North Falmouth, Massachusetts (the South Side parcel and the North Side parcel), for a total sales price of $2,500. The real estate had a net book value of approximately $171 and the sale resulted in a gain of $2,208 that was recorded in fiscal year 2003. The gross proceeds of $1,300 for the South Side parcel were received on September 30, 2003. The gross proceeds for the North Side parcel were $1,200, consisting of a promissory note in the amount of $300 from the buyer and an additional $850, net of $50 of commissions, which proceeds were held in escrow until the recording of the deed for the North Side parcel was complete. The Company received the $850 in proceeds from escrow on October 17, 2003. The Company received the $300 from the promissory note on October 24, 2003.

5. Earnings (Loss) Per Share

A reconciliation of basic and diluted shares outstanding is as follows:

	Three Months Ended June 30,		Nine Months Ended June 30
	2004	2003	2004	2003
Basic weighted average common shares outstanding	1,383	1,383	1,383	1,383
Weighted average common share equivalents	69	8	23	—
Diluted weighted average shares outstanding	1,452	1,391	1,406	1,383

The following securities were not included in computing earnings per share because their effects would be anti-dilutive:

	Three Months Ended June 30,		Nine Months Ended June 30,
	2004	2003	2004	2003
Options to purchase common stock	146	323	171	375

6. Stock Options

At June 30, 2004, the Company had two stock-based compensation plans (one employee and one non-employee director’s plan). The Company accounts for those plans under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. No stock-based employee compensation cost is reflected in net income (loss), as the options granted under those plans had an exercise price equal to, or greater than, the market value of the underlying common stock on the date of the grant.

The Company provides pro forma disclosures of compensation expense under the fair value method of SFAS No. 123, “Accounting for Stock-Based Compensation,” and SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure.”

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The weighted average assumptions used were as follows:

	Nine Months Ended June 30,
	2004	2003
Risk-free interest rate	3.26% - 3.96%	3.49% - 3.58%
Expected dividend yield	—	—
Expected life (in years)	7	7
Expected volatility	60%	40%

Had compensation cost for the Company’s stock option plans been determined using the fair value method at the grant dates, the effect on the Company’s net income (loss) and income (loss) per share for the periods shown below would have been as follows:

	Three Months Ended June 30,						Nine Months Ended June 30,
	2004			2003			2004			2003
Net income (loss) as reported:	$	456		$	26		$	233		$	(249	)
Add:
Stock-based employee compensation expense included in net income (loss), net of related tax effects		—			—			—			—
Deduct:
Total stock-based employee compensation determined under fair value method for all awards, net of related tax effects		(42	)		(62	)		(124	)		(180	)
Pro forma net income (loss)	$	414		$	(36	)	$	109		$	(429	)
Basic income (loss) income per share
As reported	$	0.33		$	0.02		$	0.17		$	(0.18	)
Pro forma	$	0.30		$	(0.03	)	$	0.08		$	(0.31	)
Diluted income (loss) income per share
As reported	$	0.31		$	0.02		$	0.17		$	(0.18	)
Pro forma	$	0.29		$	(0.03	)	$	0.08		$	(0.31	)

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7. Segment Reporting

The Company views its operations and manages its business as two segments, Undersea Systems and Package Inspection Systems, as being strategic business units that offer different products. The Company evaluates performance of its operating segments based on revenues from external customers, income from operations and identifiable assets.

	Three Months Ended June 30,				Nine Months Ended June 30,
	2004		2003		2004			2003
Sales to Unaffiliated Customers:
Undersea Systems	$	3,352	$	2,652	$	8,560		$	7,461
Package Inspection Systems		2,394		1,754		5,204			5,716
Total	$	5,746	$	4,406	$	13,764		$	13,177
Gross Profit:
Undersea Systems	$	1,378	$	1,077	$	3,459		$	2,730
Package Inspection Systems		1,032		704		2,154			2,371
Total	$	2,410	$	1,781	$	5,613		$	5,101
Income (Loss) from Operations:
Undersea Systems	$	242	$	48	$	309		$	(266	)
Package Inspection Systems		240		24		(18	)		176
Total	$	482	$	72	$	291		$	(90	)
Identifiable Assets:
Undersea Systems					$	5,188		$	6,081
Package Inspection Systems						2,425			1,976
Corporate Assets						724			1,745
Total					$	8,337		$	9,802
Depreciation:
Undersea Systems	$	85	$	81	$	217		$	241
Package Inspection Systems		120		69		272			164
Corporate Assets		26		11		50			33
Total	$	231	$	161	$	539		$	438
Purchases of Fixed Assets:
Undersea Systems	$	13	$	30	$	48		$	42
Package Inspection Systems		2		9		10			14
Corporate Assets		—		66		20			70
Total	$	15	$	105	$	78		$	126

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Revenues by geographic area for the three and nine months ended June 30, 2004 and 2003 were as follows:

	Three Months Ended June 30,				Nine Months Ended June 30,
	2004		2003		2004		2003
Geographic Area:
United States	$	2,188	$	3,030	$	6,659	$	9,231
Germany		729		50		765		255
Other		2,829		1,326		6,340		3,691
Total	$	5,746	$	4,406	$	13,764	$	13,177

Revenues by product line within the Undersea Systems segment were as follows:

	Three Months Ended June 30,				Nine Months Ended June 30,
	2004		2003		2004		2003
Product Line:
Underwater Acoustics	$	1,268	$	1,302	$	3,503	$	3,569
Geophysical Exploration Equipment		1,353		908		2,944		2,929
Other Undersea Products		731		442		2,113		963
Total	$	3,352	$	2,652	$	8,560	$	7,461

The Package Inspection Systems segment has only one product line.

8. Credit Facility

The Company has a credit facility with a bank. This facility provides for loans under two notes: a $5,500 variable rate term note and a $600 variable rate line of credit. The term note is payable in 84 consecutive equal monthly installments of principal and accrues interest at prime (4.0% at June 30, 2004) plus 2%, or 7%, whichever is higher. The term note matures in August 2006. In connection with the land sale discussed in Note 4, the Company paid down the $1,413 principal balance on this term loan by $600 on October 17, 2003. Subsequent to this payment, the bank and the Company amended the term loan to amortize the remaining term loan balance on a monthly basis through August 2006, thereby reducing the monthly principal payment from $64 to $23. Principal payments under the term note will be $70 for the remainder of fiscal year 2004 and $279 and $255 in fiscal years 2005 and 2006, respectively.

The line of credit expires on January 31, 2005. Borrowings under the line of credit are payable as follows: monthly payments of interest only and unpaid principal and unpaid interest at maturity. The interest rate under the line of credit accrues at prime (4.0% at June 30, 2004) plus 2%, or 7%, whichever is higher. Advances are limited to 45% of eligible accounts receivable. The availability under the line of credit was $600 as of June 30, 2004. There were no advances outstanding under the line of credit as of June 30, 2004. The credit facility is secured by substantially all of the assets of the Company and requires the Company to meet certain covenants, including debt service coverage. As of June 30, 2004, the Company was in compliance with these covenants.

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9. Comprehensive Income (Loss)

SFAS No. 130, “Reporting Comprehensive Income,” requires disclosure of all components of comprehensive income (loss). Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. The Company does not have any items of comprehensive income (loss) other than net income (loss).

10. Supplemental Disclosure of Non-Cash Activities

The following is the disclosure of non-cash investing activities:

	Three Months Ended June 30,				Nine Months Ended June 30,
	2004		2003		2004		2003
Transfer of inventory to property, plant, and equipment as demonstration equipment	$	204	$	323	$	647	$	714

During the nine months ended June 30, 2003, the Company reclassified $187 of property, plant and equipment to assets held for sale related to the real estate that was sold in September 2003.

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Item 2.

Management’s Discussion and Analysis

of Financial Condition and Results of Operations

Overview

Benthos, Inc. and its subsidiaries (the Company) design, manufacture, sell and service oceanographic products and systems for underwater exploration, oil and gas development and production, research and defense, as well as electronic inspection equipment for the automated assessment of the seal integrity of food, dairy, beverage, pharmaceutical, personal care and chemical packages. The Company’s customers are located throughout the world.

For the quarter ended June 30, 2004, Benthos recorded sales of $5,746 as compared to $4,406 for the three months ended June 30, 2003. The revenue growth was reflected in both the Undersea and Package Inspection Systems Divisions. The growth in the sales by the Undersea Systems Division was attributable to increased demand for geophysical hydrophones for use by Government and commercial entities for use in exploration by the oil and gas industry, glass instrument housings and modems. The 36.5% increase in sales of the Package Inspection Systems Division for the three months ended June 30, 2004 as compared to the three months ended June 30, 2003 was related to the timing of orders and the resolution of certain previously reported design problems experienced in connection with the launch of new products. The increase in sales volume and mix contributed substantially to the increase in the Company’s gross profit and the resultant increases in operating, pre-tax and net income as further discussed below in the gross profit discussion under “Results of Operations.”

The 158.6% increase in sales to customers outside of the United States for the three months ended June 30, 2004 as compared to the three months ended June 30, 2003 was attributable to large international orders for Package Inspection Systems Division products and geophysical hydrophones used in exploration by the oil and gas industry. The Company generally prices its international sales in U.S. dollars. The prospect for international shipments of geophysical hydrophones is expected to continue in the next few months.

During the fiscal years ended September 30, 2003, 2002, and 2001, the Company experienced a decrease in sales and incurred losses from operations. As a result, the Company did not satisfy several of the financial covenants under its line of credit and term loan agreement with its bank. The Company obtained a waiver of these defaults and new financial covenants were established based upon the Company’s projections for the year ending September 30, 2004. Through June 30, 2004, the Company has met these revised covenants. Management believes that its projections for profitability in fiscal 2004 are attainable. These projections largely rest on several successful new product introductions and cost savings measures. Included in the Company’s projections are the sales of four new products. To the date of this filing, three of these products have been made available for sale and firm orders have been received and shipments made for each of these products.

While there can be no guarantee that the Company will attain these projections, management believes the Company will have sufficient cash flows from operations, cash balances, availability from its line of credit and other potential financing techniques to meet its operating cash requirements for at least the next twelve months. If the Company does not meet its loan covenants or its projections, it may need to seek alternative financing. In such event, there can be no guarantee that the Company will be able to obtain financing on commercially acceptable terms.

Critical Accounting Policies

The preparation of financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. On an ongoing basis, management evaluates the Company’s estimates and assumptions, including but not limited to those related to revenue recognition, inventory valuation, warranty reserves, the impairment of long-lived assets, goodwill and other intangible assets, and income taxes. Management bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

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1. Revenue Recognition

Revenue is recognized when products are shipped to customers, provided that title has passed, there are no uncertainties regarding customer acceptance, there is persuasive evidence of an arrangement, the sales price is fixed or determinable and collection of the related receivable is probable. The Company generally enters into arrangements for multiple deliverables when it contracts to provide installation services. The Company follows EITF No. 00-21, “Revenue Arrangements with Multiple Deliverables.” This includes arrangements that provide for the delivery or performance of multiple products, services and/or rights to use assets where performance may occur at different points in time or over different periods of time. Revenue is allocated to the multiple elements based upon the relative fair values of the elements. The Company generally recognizes revenue from each of these elements as each element is delivered or performed. Amounts received from customers for future delivery are shown as customer deposits in the accompanying condensed consolidated balance sheets. The Company accounts for shipping and handling fees passed on to customers as sales. The corresponding costs are recorded as cost of sales.

2. Inventory Valuation

The Company values its inventory at the lower of actual cost or the current estimated market value. It regularly reviews inventory quantities on hand and inventory commitments with suppliers and records a provision for excess and obsolete inventory based primarily on historical usage for the prior twelve to twenty-four month period. Although the Company makes every effort to ensure the accuracy of its forecasts of future product demand, any significant unanticipated changes in demand or technological developments could have a significant impact on the value of its inventory and its reported operating results.

3. Warranty Reserves

The Company’s warranties require it to repair or replace defective products returned to it during the applicable warranty period at no cost to the customer. It records an estimate for warranty-related costs based on actual historical return rates, anticipated return rates, and repair costs at the time of sale. A significant increase in product return rates, or a significant increase in the costs to repair products, could have a material adverse impact on future operating results for the period or periods in which such returns or additional costs materialize and thereafter.

4. Goodwill

The goodwill associated with the Company’s 1999 acquisition of Datasonics, Inc. is subject to an annual assessment for impairment by applying a fair-value based test. In the fourth quarter of fiscal 2003, the Company completed a valuation of its goodwill by comparing the fair value of its reporting units, as determined by an independent appraiser, to the reporting units’ book value. The valuation indicated that goodwill for the Undersea Systems business segment was not impaired. The valuation was based upon estimates of future income from the reporting units and estimates of the market value of the units, based on comparable recent transactions. These estimates of future income are based upon historical results, adjusted to reflect management’s best estimate of future market and operating conditions, and are continuously reviewed based on actual operating trends. Actual results may differ from these estimates. In addition, the relevancy of recent transactions used to establish market value for the Company’s reporting units is based upon management’s judgment.

5. Income Taxes

The Company accounts for income taxes under the liability method in accordance with SFAS No. 109, “Accounting for Income Taxes.” Deferred tax assets and liabilities are determined based on differences between the financial reporting and income tax bases of assets and liabilities as well as net operating loss and tax credit carryforwards and are measured using the enacted tax rates and laws that will be in effect when the differences reverse. Deferred tax assets may be reduced by a valuation allowance to reflect the uncertainty associated with their ultimate realization.

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Results of Operations – Three months ended June 30, 2004 compared with three months ended June 30, 2003.

The following table presents, for the periods indicated, the percentage relationship of Condensed Consolidated Statements of Operations items to total sales:

	Three Months Ended
	June 30, 2004		June 30, 2003
Net Sales	100.0	%	100.0	%
Cost of Sales	58.1	%	59.6	%
Gross Profit	41.9	%	40.4	%
Selling, General and Administrative Expenses	25.0	%	27.3	%
Research and Development Expenses	7.5	%	10.1	%
Amortization of Acquired Intangibles	1.0	%	1.4	%
Income from Operations	8.4	%	1.6	%
Interest Expense	(0.3	)%	(1.0	)%
Income before Income Taxes	8.1	%	0.6	%
Provision for Income Taxes	0.2	%	—	%
Net Income	7.9	%	0.6	%

The Company evaluates its sales by segments:

	Three Months Ended June 30,
	2004		2003
Sales to Unaffiliated Customers:
Undersea Systems	$	3,352	$	2,652
Package Inspection Systems		2,394		1,754
Total	$	5,746	$	4,406

Sales. Net sales increased by 30.4% in the three months ended June 30, 2004 to $5,746 as compared to $4,406 in the three months ended June 30, 2003.

The table of sales by product line within the Undersea Systems Division is as follows:

	Three Months Ended June 30,
	2004		2003
Product Line:
Underwater Acoustics	$	1,268	$	1,302
Geophysical Exploration Equipment		1,353		908
Other Undersea Products		731		442
Total	$	3,352	$	2,652

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Sales in the Undersea Systems Division increased by 26.4% to $3,352 in the three months ended June 30, 2004 as compared to $2,652 in the three months ended June 30, 2003. The increase in sales was primarily concentrated in the Geophysical Exploration Equipment product line where sales increased by $445 in total, as compared to the three months ended June 30, 2003. Within this product line, sales of geophysical hydrophones for use by Government and commercial entities for use in exploration by the oil and gas industry increased by $953 in the three months ended June 30, 2004 as compared to the three months ended June 30, 2003, and sales of geophysical systems decreased by $509 in the three months ended June 30, 2004 as compared to the three months ended June 30, 2003. Other Undersea Products, which contains shipments of the Company’s glass instrument housings, increased by $289. The Company anticipates that sales of geophysical hydrophones will remain strong in the next three months as a result of demand from the oil and gas industry and sales of glass instrument housings to remain strong in the next nine months as a result of anticipated sales to an international research project. However, the Company believes that in 2005, there will be increased competition in the geophysical hydrophone market as a result of the recent upturn in market demand.

Sales of the Package Inspection Systems Division increased by 36.5% to $2,394 in the three months ended June 30, 2004 as compared to $1,754 in the three months ended June 30, 2003. The increase resulted largely from the timing of orders. The Company anticipates sales of this product line to exceed its sales performance in the final three months of fiscal year 2003. The Package Inspection Systems segment has only one product line.

Sales to customers outside of the United States increased by 158.6% to $3,558 in the three months ended June 30, 2004 as compared to $1,376 in the three months ended June 30, 2003. The increase in sales to customers outside of the United States was primarily in the Package Inspection Systems Division where foreign sales increased by $954 and in Other Undersea Products where foreign sales of geophysical hydrophones for use by Government and commercial entities for use in exploration by the oil and gas industry and geophysical systems increased by $989. The Company anticipates that foreign sales of geophysical hydrophones will remain strong in the next few months but that foreign sales of Package Inspection Division products will not show the gains that were evident in the current three month period.

Gross Profit. Gross profit increased by 35.3% to $2,410 for the three months ended June 30, 2004 as compared to $1,781 for the three months ended June 30, 2003. As a percentage of sales, gross profit was 41.9% in the three months ended June 30, 2004 as compared to 40.4% in the three months ended June 30, 2003. The increase in gross profit percentage is attributed primarily to improved gross margins within both the Undersea Systems and Package Inspection Divisions resulting from increased sales volume and reduced manufacturing variances. The Company anticipates that it will maintain or improve the gross profit as a percentage of sales that it achieved in the past three months in the fourth quarter of the current fiscal year.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by 19.3% to $1,438 for the three months ended June 30, 2004 as compared to $1,205 in the three months ended June 30, 2003. As a percentage of sales, selling, general and administrative expenses decreased to 25.0% in the three months ended June 30, 2004 as compared to 27.3% for the three months ended June 30, 2003. The decrease in selling, general and administrative expenses as a percentage of sales is a result of increased sales volume and decreased selling expenses ($85), offset partially by an increase in sales commissions ($81) due to increased sales volume and sales mix, and provisions for incentive compensation ($135) and profit sharing ($20) as compared to the three months ended June 30, 2003.

Research and Development Expenses. Research and development expenses decreased 3.2% to $430 for the three months ended June 30, 2004 as compared to $444 in the three months ended June 30, 2003. As a percentage of sales, research and development expenses decreased to 7.5% of sales in the three months ended June 30, 2004 from 10.1% in the three months ended June 30, 2003. The decrease in the research and development expenses as a percentage of sales is primarily a result of higher sales volume than in the three months ended June 30, 2003. The Company anticipates that the spending on research and development will remain at the current level for the remainder of fiscal year 2004.

15

Amortization of Acquired Intangibles. Amortization of acquired intangibles was $60 in each of the three month periods ended June 30, 2004 and 2003. The amortization of acquired intangibles relates to the purchased technology in the Datasonics acquisition during fiscal year 1999.

Interest Income. Interest income was $1 in the three months ended June 30, 2004 as compared to $2 in the three months ended June 30, 2003.

Interest Expense. Interest expense decreased to $15 in the three months ended June 30, 2004 as compared to $48 in the three months ended June 30, 2003. The decrease in interest expense was a result of the reduction in the outstanding principal balance in October 2003 on the variable rate term loan used to finance the Datasonics acquisition.

Results of Operations –Nine months of fiscal year 2004 compared with nine months of fiscal year 2003.

The following table presents, for the periods indicated, the percentage relationship of Condensed Consolidated Statements of Operations items to total sales:

	Nine Months Ended
	June 30, 2004		June 30, 2003
Net Sales	100.0	%	100.0	%
Cost of Sales	59.2	%	61.3	%
Gross Profit	40.8	%	38.7	%
Selling, General and Administrative Expenses	28.5	%	28.4	%
Research and Development Expenses	8.9	%	9.6	%
Amortization of Acquired Intangibles	1.3	%	1.4	%
Income (Loss) from Operations	2.1	%	(.7	)%
Interest Expense	(0.3	)%	(1.2	)%
Income (Loss) before Income Taxes	1.8	%	(1.9	)%
Provision for Income Taxes	0.1	%	—	%
Net Income (Loss)	1.7	%	(1.9	)%

The Company evaluates its sales by segments:

	Nine Months Ended June 30,
	2004		2003
Sales to Unaffiliated Customers:
Undersea Systems	$	8,560	$	7,461
Package Inspection Systems		5,204		5,716
Total	$	13,764	$	13,177

Sales. Net sales increased by 4.5% in the first nine months of fiscal year 2004 to $13,764 as compared to $13,177 in the first nine months of fiscal year 2003.

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The table of sales by product line within the Undersea Systems Division is as follows:

	Nine Months Ended June 30,
	2004		2003
Product Line:
Underwater Acoustics	$	3,503	$	3,569
Geophysical Exploration Equipment		2,944		2,929
Other Undersea Products		2,113		963
Total	$	8,560	$	7,461

Sales in the Undersea Systems Division increased by 14.7% to $8,560 in the first nine months of fiscal year 2004 as compared to $7,461 in the first nine months of fiscal year 2003. The increase in sales was primarily concentrated in Other Undersea Products which contained shipments of the Company’s robotic products, including its new Stingray remotely operated vehicle (ROV) and increased demand for the Company’s glass instrument housings which increased by $822, as compared to the first nine months of fiscal year 2003. There was also an increase in sales in the Geophysical Exploration Equipment product line where sales of geophysical hydrophones for use by the Government and commercial entities for use in exploration by the oil and gas industry increased by $1,433 in the first nine months of fiscal year 2004 as compared to the first nine months of fiscal year 2003, and sales of geophysical systems decreased by $1,418 in the first nine months of fiscal year 2004 as compared to the first nine months of fiscal year 2003. The Company anticipates that sales of geophysical hydrophones will remain strong in the next three months as a result of demand from the oil and gas industry and sales of glass instrument housings to remain strong in the next nine months as the result of anticipated sales to an international research project. However, the Company believes that in 2005, there will be increased competition in the geophysical hydrophone market as a result of the recent upturn in market demand.

Sales of the Package Inspection Systems Division decreased by 9.0% to $5,204 in the first nine months of fiscal year 2004 as compared to $5,716 in the first nine months of fiscal year 2003. The decrease resulted largely from the timing of orders and design problems, earlier in fiscal year 2004, related to the launch of new products. The Company has made significant progress in resolving these issues. The Package Inspection Systems Division is planning to maintain its momentum in future quarters. The Company anticipates sales of this product line to exceed its sales performance in the final three months of fiscal year 2003 and to approach its record performance achieved in fiscal year 2003. The Package Inspection Systems segment has only one product line.

Sales to customers outside of the United States increased by 80.1% to $7,105 in the first nine months of fiscal year 2004 as compared to $3,946 in the first nine months of fiscal year 2003. The increase in sales to customers outside of the United States was primarily in the Package Inspection Systems Division where foreign sales increased by $1,093, in Other Undersea Products where foreign sales of glass instrument housings and ROVs increased by $898 in total, in Geophysical Exploration equipment which was up by $1,252, and partially offset by a decrease in foreign sales of Underwater Acoustics of $96.

Gross Profit. Gross profit increased by 10.0% to $5,613 for the first nine months of fiscal year 2004 as compared to $5,101 for the first nine months of fiscal year 2003. As a percentage of sales, gross profit was 40.8% in the first nine months of fiscal year 2004 as compared to 38.7% in the first nine months of fiscal year 2003. The increase in gross profit percentage is attributed primarily to improved gross margins within the Undersea Systems Division resulting from reduced manufacturing variances and a decrease in the reserve requirements for excess and obsolete inventories and is offset slightly by the decrease in gross margins of the Package Inspection Systems Division. Package Inspection Systems Division gross margins were lower than the first nine months of fiscal year 2003 as a result of lower sales volume and product mix in the first nine months of fiscal year 2004. The Company anticipates that it will maintain or improve the gross profit as a percentage of sales that it achieved in the first nine months of the current fiscal year in the fourth quarter of the current fiscal year.

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Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by 4.6% to $3,919 for the first nine months of fiscal year 2004 as compared to $3,745 in the first nine months of fiscal year 2003. As a percentage of sales, selling, general and administrative expenses increased to 28.5% in the first nine months of fiscal year 2004 as compared to 28.4% for the first nine months of fiscal year 2003. The increase in selling, general and administrative expenses as a percentage of sales is a result of increased sales commissions ($59) as a result of increased sales volume and mix, a provision for incentive compensation ($135) and profit sharing ($20) as compared to the first nine months of fiscal year 2003.

Research and Development Expenses. Research and development expenses decreased 3.4% to $1,224 for the first nine months of fiscal year 2004 as compared to $1,267 in the first nine months of fiscal year 2003. As a percentage of sales, research and development expenses decreased to 8.9% of sales in the first nine months of fiscal year 2004 from 9.6% in the first nine months of fiscal year 2003. The decrease in the research and development expenses as a percentage of sales is primarily a result of higher sales volume than in the first nine months of fiscal year 2003. The spending on research and development expenses in the first nine months of fiscal year 2004 was less than in the first nine months of fiscal year 2003 as the spending on one of the projects was nearing completion early in the current fiscal year. The Company anticipates that the spending on research and development will remain at the current level for the remainder of fiscal year 2004.

Amortization of Acquired Intangibles. Amortization of acquired intangibles was $179 in each of the first nine months of fiscal years 2004 and 2003. The amortization of acquired intangibles relates to the purchased technology in the Datasonics acquisition during fiscal year 1999.

Interest Income. Interest income was $1 in the first nine months of fiscal year 2004 as compared to $2 in the first nine months of fiscal year 2003.

Interest Expense. Interest expense decreased to $47 in the first nine months of fiscal year 2004 as compared to $161 in the first nine months of fiscal year 2003. The decrease in interest expense was a result of the reduced outstanding principal balance in October 2003 on the variable rate term loan used to finance the Datasonics acquisition.

Liquidity and Capital Resources. The Company’s cash and cash equivalents decreased $155 from September 30, 2003 to June 30, 2004.

The following table presents, for the nine months ended June 30, 2004, the cash generated and used by the Company’s operations of the balance sheet accounts that affect cash flow from operations:

	Generated		Used
Net income	$	233	$	—
Increase in accounts receivable		—		(517	)
Decrease in accounts payable and accrued expenses		—		(857	)
Increase in inventories		—		(21	)
Depreciation and amortization (noncash)		730		—
Decrease in prepaid expenses and other current assets		14		—
Total	$	977	$	(1,395	)

Cash Generated	$	977
Cash Used		(1,395	)
Total used in operations	$	(418	)

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Cash of $418 was used in operating activities, resulting from the $233 net income generated during the first nine months of fiscal 2004 and the other factors shown in the table above. Accounts receivable increased by $517 during the first nine months, primarily due to increased sales in the current quarter as compared to sales in the quarter ended September 30, 2003. There were also decreases in accounts payable of $817, resulting from the use in early fiscal 2004 of some proceeds from the sale of real estate to reduce vendor obligations, decreases in accrued expenses of $40, and increases in inventory of $21, which includes $647 transferred to property, plant and equipment as demonstration equipment and $718 generated from the sale of demonstration equipment. These uses were partially offset by depreciation and amortization of $730 and decreases in prepaid expenses and other current assets of $14. The Company anticipates that its ability to attain positive cash flow from operations in the future is primarily related to its ability to maintain its operating profits, to improve the collections of accounts receivable through strict adherence to payment terms, reduction of inventories by matching receipts closer to scheduled shipment dates, and management of accounts payable to vendors. The Company anticipates being able to maintain profitability through the end of fiscal year 2004.

The Company generated $1,072 of cash in its investing activities, primarily from the collection of $1,150 relating to the note receivable and other receivable – real estate which represented the remaining proceeds from the real estate transaction that took place on September 29, 2003. The Company does not anticipate any significant uses of cash related to fixed asset purchases.

The Company used $809 of cash in financing activities. Financing activities include the payment of $809 on the term loan. Of this amount, $600 of the payments was from proceeds from the note receivable and other receivable – real estate related to the real estate sale in fiscal year 2003 and $209 was for payments of the reamortized principal under the term loan. The Company does not have any significant contractual obligations or commercial commitments aside from its obligation to the bank that requires quarterly principal payments of $70 through August 2006.

The Company has a credit facility with a bank. This facility provides for loans under two notes: a $5,500 variable rate term note and a $600 variable rate line of credit. The term note is payable in 84 consecutive equal monthly installments of principal and accrues interest at prime (4.0% at June 30, 2004) plus 2%, or 7%, whichever is higher. The term note matures in August 2006. In connection with the land sale discussed in Note 4, the Company paid down the $1,413 principal balance on this term loan by $600 on October 17, 2003. Subsequent to this payment, the bank and the Company amended the term loan to amortize the remaining term loan balance on a monthly basis through August 2006, thereby reducing the monthly principal payment from $64 to $23 and to modify the covenants. Principal payments under the term note will be $70 for the remainder of fiscal year 2004 and $279 and $255 in fiscal years 2005 and 2006, respectively.

The line of credit expires on January 31, 2005. Borrowings under the line of credit are payable as follows: monthly payments of interest only and unpaid principal and unpaid interest at maturity. Borrowings under the line of credit accrue interest at prime (4.0% at June 30, 2004) plus 2%, or 7%, whichever is higher. Advances are limited to 45% of eligible accounts receivable. The availability under the line of credit was $600 as of June 30, 2004. There were no advances outstanding under the line of credit as of June 30, 2004. The credit facility is secured by substantially all of the assets of the Company and requires the Company to meet certain covenants, including debt service coverage. As of June 30, 2004, the Company was in compliance with these covenants.

Management believes that the Company will have sufficient cash flows from operations (based on sales projections, cost reduction measures, and efficiencies), cash balances, availability from its line of credit, and other potential financing techniques to meet its operating cash requirements for at least the next twelve months. If the Company does not meet its loan covenants or its projections, it may need to seek alternative financing. In such event, there can be no guarantee that the Company will be able to obtain alternative financing on commercially acceptable terms.

“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 are forward-looking statements within the meaning

19

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, regulatory changes and other factors. 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.

Item 3. Control and Procedures

The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified within the Commission’s rules and forms, and that such information is accumulated and communicated to its management to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was necessarily required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of its chief executive officer and chief financial officer, of the effectiveness of the design and operation of its disclosure controls and procedures to meet the criteria referred to above. Based on the foregoing, its chief executive officer and chief financial officer concluded that the Company’s disclosure controls and procedures were effective.

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 (or incorporated by reference to the Company’s previous filings) as a part of this report.

(b) Reports on Form 8-K

During the fiscal three months ended June 30, 2004, the Company filed one report on Form 8-K (dated May 4, 2004). That report furnished, under Item 12, a copy of its public announcement on May 4, 2004 of its results of operations and financial condition for the second quarter of fiscal 2004.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has 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.
	Vice President, Chief Financial Officer, and Treasurer
	(Principal Financial and Accounting Officer)

DATE: August 10, 2004

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BENTHOS, INC.

EXHIBIT INDEX

Exhibit
3.1	Restated Articles of Organization (1)
3.2	Articles of Amendment dated April 28, 1997 (2)
3.3	Articles of Amendment dated April 20, 1998 (5)
3.4	By-Laws (1)
3.5	By-Law Amendments adopted January 23, 1998 (4)
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	Fourth Amendment to Employment Agreement with Samuel O. Raymond (22)
10.4	Employment Contract with John L. Coughlin (1)
10.5	Amended and Restated Employment Agreement with John L. Coughlin (10)
10.6	Severance Agreement with John L. Coughlin (13)
10.7	Employment Agreement with Ronald L. Marsiglio dated May 21, 2001 (15)
10.8	Employment Agreement with Francis E. Dunne, Jr. (11)
10.9	Employment Agreement with James R. Kearbey dated as of January 1, 2003 (20)
10.10	Employee Stock Ownership Plan (1)
10.11	First Amendment to Employee Stock Ownership Plan (2)
10.12	Second Amendment to Employee Stock Ownership Plan (8)
10.13	Third Amendment to Employee Stock Ownership Plan (8)
10.14	Fourth Amendment to Employee Stock Ownership Plan (11)

10.15	Fifth Amendment to Employee Stock Ownership Plan (11)
10.16	Benthos, Inc. Employee Stock Ownership Plan as Amended and Restated Effective as of October 1, 2002 (19)
10.17	401(k) Retirement Plan (1993)(1)
10.18	First Amendment to 401(k) Retirement Plan (2)
10.19	Second Amendment to 401(k) Retirement Plan (2)
10.20	Third Amendment to 401(k) Retirement Plan (3)
10.21	401(k) Retirement Plan (1999)(8)
10.22	First Amendment to 1999 401(k) Retirement Plan (11)
10.23	Second Amendment to 1999 401(k) Retirement Plan (11)
10.24	Third Amendment to 1999 401(k) Retirement Plan (14)
10.25	Benthos, Inc. 401(k) Retirement Plan dated March 2004
10.26	Supplemental Executive Retirement Plan (1)
10.27	1990 Stock Option Plan (1)
10.28	Stock Option Plan for Non-Employee Directors (1)
10.29	1998 Non-Employee Directors’ Stock Option Plan (4)
10.30	Benthos, Inc. 2000 Stock Incentive Plan (9)
10.31	License Agreement between the Company and The Penn State Research Foundation dated December 13, 1993 (1)
10.32	Technical Consultancy Agreement between the Company and William D. McElroy dated July 12, 1994 (1)
10.33	Technical Consultancy Agreement between the Company and William D. McElroy dated October 1, 1996 (3)
10.34	General Release and Settlement Agreement between the Company and Lawrence W. Gray dated February 8, 1996 (1)

2

10.35	Line of Credit Loan Agreement between the Company and Cape Cod Bank and Trust Company dated September 24, 1990, as amended (1)
10.36	Commercial Mortgage Loan Extension and Modification Agreement between the Company and Cape Cod Bank and Trust Company, dated July 6, 1994 (1)
10.37	Credit Agreement between the Company and Cape Cod Bank and Trust Company dated August 18, 1999 (8)
10.38	First Amendment to Credit Agreement dated March 23, 2001 (14)
10.39	Second Amendment to Credit Agreement dated December 12, 2001 (17)
10.40	Third Amendment to Credit Agreement dated January 29, 2003 (20)
10.41	Fourth Amendment to Credit Agreement dated November 3, 2003 (22)
10.42	Fifth Amendment to Credit Agreement dated January 7, 2004
10.43	License Agreement between the Company and Optikos Corporation dated July 29, 1997 (3)
10.44	Hydrophone License Agreement between the Company and Sercel, Inc. (formerly Syntron, Inc.) dated December 5, 1996 (6)
10.45	Amendment Number 1 to Hydrophone License Agreement between the Company and Sercel, Inc. (formerly Syntron, Inc.) dated September 11, 1998 (6)
10.46	Asset Purchase Agreement among Benthos, Inc., Datasonics, Inc., and William L. Dalton and David A. Porta (7)
10.47	Settlement Agreement and Mutual Release dated October 18, 2001 between the Company and RJE International, Inc (16)
10.48	Amendment of Settlement Agreement and General Release dated June 10, 2002. (19)
10.49	Amendment and Termination of Consulting Agreement between the Company and William D. McElroy dated February 15, 2002 (18)
10.50	Standard Form Purchase and Sale Agreement among the Company and certain of its subsidiaries and Falmouth Economic Development & Industrial Corporation dated March 21, 2003 (20)
10.51	Amendment of Purchase and Sale Agreement dated as of June 30, 2003 (21)

3

10.52	Second Amendment of Purchase and Sale Agreement dated as of August 11, 2003 (22)
10.53	Agreement among the Company, Samuel O. Raymond and the Samuel O. Raymond 1996 Irrevocable Insurance Trust dated July 24, 2003 (22)
10.54	License Agreement with Simon Fraser University dated September 1, 2000
10.55	Amendment No. 1 to Simon Fraser License Agreement dated March 15, 2004
10.56	Contract with University of Wisconsin-Madison for purchase of pressure glass spheres dated January 21, 2004
21	Subsidiaries of the Registrant (19)
31.1	Certification of Chief Executive Officer Pursuant to the Securities Exchange Act
31.2	Certification of Chief Financial Officer Pursuant to the Securities Exchange Act
32	Statement Pursuant to 18 U.S.C. §1350

(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. 0-29024) 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. 0-29024) 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. 0-29024) and incorporated herein by this reference.

(4) Previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarterly period ended December 31, 1997 (File No. 0-29024) and incorporated herein by this reference.

(5) Previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarterly period ended March 31, 1998 (File No. 0-29024) and incorporated herein by this reference.

(6) Previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarterly period ended December 31, 1998 (File No. 0-29024) and incorporated herein by this reference.

(7) Previously filed as an exhibit to Registrant’s Current Report on Form 8-K filed on or about August 27, 1999 (File No. 0-29024) and incorporated herein by this reference.

(8) Previously filed as an exhibit to Registrant’s Annual Report on Form 10-KSB for the fiscal year ended September 30, 1999 (File No. 0-29024) and incorporated herein by this reference.

4

(9) Previously filed as an exhibit to the Registrant’s definitive proxy statement filed on Schedule 14A on or about January 18, 2000 and incorporated herein by this reference.

(10) Previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarterly period ended December 31, 1999 (File No. 0-29024) and incorporated herein by this reference.

(11) Previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarterly period ended June 30, 2000 (File No. 0-29024) and incorporated herein by this reference.

(12) Previously filed as an exhibit to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended September 30, 2000 (File No. 0-29024) and incorporated herein by this reference.

(13) Previously filed as an exhibit to Amendment No. 1 to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended September 30, 2000 (File No. 0-29024) and incorporated herein by this reference.

(14) Previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarterly period ended March 31, 2001 (File No. 0-29024) and incorporated herein by this reference.

(15) Previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarterly period ended June 30, 2001 (File No. 0-29024) and incorporated herein by this reference.

(16) Previously filed as an exhibit to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended September 30, 2001 (File No. 0-29024) and incorporated herein by this reference.

(17) Previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarterly period ended December 31, 2001 (File No. 0-29024) and incorporated herein by this reference.

(18) Previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarterly period ended March 31, 2002 (File No. 0-29024) and incorporated herein by this reference.

(19) Previously filed as an exhibit to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended September 30, 2002 (File No. 0-29024) and incorporated herein by this reference.

5

(20) Previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarterly period ended March 31, 2003 (File No. 0-29024) and incorporated herein by this reference.

(21) Previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarterly period ended June 30, 2003 (File No. 0-29024) and incorporated herein by this reference.

(22) Previously filed as an exhibit to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended September 30, 2003 (File No. 0-29024) and incorporated herein by this reference.

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EX-10.25

Exhibit 10.25

BENTHOS, INC. 401(K) RETIREMENT PLAN

MARCH 2004

ADOPTION AGREEMENT #003

NONSTANDARDIZED 401(k) PROFIT SHARING PLAN

The undersigned, Benthos, Inc. (“Employer”), by executing this Adoption Agreement, elects to establish a retirement plan and trust (“P1an”) under the Astrue, Coakley & Garloo, Inc. Defined Contribution Prototype Plan and Trust (basic plan document # 01 . The Employer, subject to the Employees Adoption Agreement elections adopts fully the Prototype Plan and Trust provisions. This Adoption Agreement, the basic plan document and any attached appendices or addenda, constitute the Employer’s entire plan and trust document. All section references within this Adoption Agreement are Adoption Agreement section references unless the Adoption Agreement or the context indicate otherwise. All article references are basic plan document and Adoption Agreement references as applicable. Numbers in parenthesis which follow headings are references to basic plan document sections. The Employer makes the following elections granted under the corresponding provisions of tier basic plan document.

ARTICLE I DEFINITIONS

1. PLAN (1.21). The name of the Plan as adopted by the Employer is          Benthos, Inc. 401(k) Retirement Plan

2. TRUSTEE (1.33). The Trustee executing this Adoption Agreement is: (Choose one of (a), (b) or (c))

x (a) A discretionary Trustee. See Plan Section 10.03[A].

[n/a] (b) A nondiscretionary Trustee. See Plan Section 10.03[B1.

[n/a] (c) A Trustee under a separate trust agreement See Plan Section 10.03(G1.

3. EMPLOYEE (1.11). The following Employees are not eligible to participate in the Plan: (Choose (a) or one or more of (b) through (g) as applicable)

[n/a] (a) No exclusions.

[n/a] (b) Collective bargaining Employees.

x (c) Nonresident aliens.

x (d) Leased Employees.

x (e) Reclassified Employees.

x (f) Classifications: Temporary employee.

[n/a] (g) Exclusions by types of contributions. The following classifications) of Employees are not eligible for the specified contributions:

Employee Classification: _________

Contribution type: ________

4. COMPENSATION, (1.07). The Employer makes the following election(s) regarding the definition of Compensation for purposes of the contribution allocation formula under Article III: (Choose one of (a), (b) or (c))

[n/a] (a) W-2 wages Increased by Elective Contributions

[n/a] (b) Code §3401(a) federal Income tax withholding wages increased by Elective Contributions.

x (c) 415 compensation.

^© Copyright 2001 Astrue, Coakley & Garloo, Inc. 2

[Note. Each of the Compensation definitions in (a), (b) and (c) includes Elective Contributions. See Plan Section 1.07(D). To exclude Elective Contributions, the Employer must elect (g).]

Compensation taken into account For the Plan Year in which an Employee first becomes a Participant, the Plan Administrator will determine the allocation of Employer contributions (excluding deferral contributions) by taking into account (Choose one of (d) or (e))

[n/a] (d) Plan Year. The Employee’s Compensation for the entire Plan Year.

x (e) Compensation while a Participant. The Employee’s Compensation only for the portion of the Plan Year in which the employee actually is a Participant.

Modifications to Compensation definition. The Employer elects to modify the Compensation definition elected in (a), (b) or (c) as follows. (Choose one or more of (f) through (n) as applicable. If the Employer elects to allocate its nonelective contribution under Plan Section 3.04 using permitted disparity, (i), 6), (k) and (1) do not apply):

x (f) Fringe benefits. The Plan excludes all reimbursements or other expense allowances, fringe benefits (cash and noncash), moving expenses, deferred compensation and welfare benefits.

[n/a] (g) Elective Contributions. The Plan excludes a Participant’s Elective Contributions. See Plan Section 1.07(D).

[n/a] (h) Exclusion. The Plan excludes Compensation in excess of

[n/a] (i) Bonuses. The Plan excludes bonuses.

[n/a] (j) Overtime The Plan excludes overtime.

[n/a] (k) Commissions. The Plan excludes commissions.

[n/a] (t) Nonelective contributions. The following modifications apply to the definition of Compensation for nonelective contributions

[n/a] (m) Deferral contributions. The following modifications apply to the definition of Compensation for deferral contributions:

[n/a] (n) Matching contributions. The following modifications apply to the definition of Compensation for matching contributions:

5. PLAN YEAR/LIMITATION YEAR (1.24). Plan Year and Limitation Year mean the 12-consecutive month period (except for a short Plan Year) ending every: (Choose (a) or (b). Choose (c) if applicable)

[n/a] (a) December 31.

[n/a] (b) Other. September 30.

[n/a] (c) Short Plan Year: commencing on: _______ and ending on: _____.

[n/a] (a) New Plan. The Effective Date of tine Plan is:__________.

x (b) Restated Plan. The restated Effective Date is: October 1, 2003.

This Plan is an amendment and restatement of an existing retirement plan(s) originally established effective as of: July 1, 1987.

7. HOUR OF SERVICE/ELAPSED TIME METHOD (1.15). The crediting method for Hours of Service is: (Choose one or more of (a) through (d) as applicable)

[n/a] (a) Actual Method. See Plan Section 1.15(B).

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x (b) Equivalency Method. The Equivalency Method is: weekly . [Note: Insert “daily,’ “weekly,’ “semi-monthly payroll periods” or “monthly.”] See Plan Section 1.15(C).

x (c) Combination Method. In lieu of the Equivalency Method specified in (b), the Actual Method applies for purposes of: any hourly paid employee.

[n/a] (d) Elapsed Time Method. In lieu of crediting Hours of Service, the Elapsed Time Method applies for purposes of crediting Service for. (Choose one or more of (1), (2) or (3) as applicable)

[n/a] (1) Eligibility under Article II.

[n/a] (2) Vesting under Article V.

[n/a] (3) Contribution allocations under Article III.

8. PREDECESSOR EMPLOYER SERVICE (1.30). In addition to the predecessor service the Plan must credit by reason of Section 1.30 of the Plan, the Plan credits as Service under this Plan, service with the following predecessor employer(s): N/A

[Note: If the Plan does not credit any additional predecessor service under this Section 1,30, insert “N/A” in the blank line. The Employer also may elect to credit predecessor service with specified Participating Employers only. See the Participation Agreement,] Service with the designated predecessor employer(s) applies: (Choose one or more of (a) through (d) as applicable)

[n/a] (a) Eligibility. For eligibility under Article II. See Plan Section 1.30 for time of Plan entry.

[n/a] (b) Vesting. For vesting under Article V.

[n/a] (c) Contribution allocation. For contribution allocations under Article III.

[n/a] (d) Exceptions. Except for the following Service:

ARTICLE D

ELIGIBILITY REQUIREMENTS

9. ELIGIBILITY (2.01).

Eligibility conditions. To become a Participant in the Plan, an Employee must satisfy the following eligibility conditions: (Choose one or more of (a) through (e) as applicable) [Note: If the Employer does not elect (c), the Employer’s elections under

(a) and (b) apply to all types of contributions. The Employer as to deferral contributions may not elect (b)(2) and may not elect more than 12 months in (b)(4) and (1)(S).]

x (a) Age. Attainment of age 19 _ (not to exceed age 21).

x (b) Service. Service requirement. (Choose one q f (1) through (5))

x (1) One Year of Service.

[n/a] (2) Two Years of Service, without an intervening Break in Service. See Plan Section 2.03(A).

[n/a] (3) One Hour of Service (immediate completion of Service requirement). Tire Employee satisfies the Service requirement on his/her Employment Commencement Date.

[n/a] (4)              months (not exceeding 24).

[n/a] (5) An Employee must complete _____Hours of Service within the ____ time period following the Employee’s Employment Commencement Date. If an Employee does not complete the stated Hours of Service during the specified time period (if any), the Employee is subject to the One Year of Service requirement. [Note: The number of hours may not exceed 1,000 and the time period may not exceed 24 months. If the Plan does not require the Employee to satisfy the Hours of Service requirement within a specified time period, insert “N/A” in the second blank line.]

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x (c) Alternative 401(k)/401(m) eligibility conditions. In lieu of the elections in (a) and (b), the Employer elects the following eligibility conditions for the following types of contributions: (Choose (1) or (2) or both if the Employer wishes to Impose less restrictive eligibility conditions for defer all Employee contributions or for matching contributions)

(1) x Deferral/Employee contributions: (Choose one of a through d. Choose e. if applicable)

a. [n/a] One Year of Service

b. x One Hour of Service (immediate completion of Service requirement)

c. [n/a]              months (not exceeding 12)

d. [n/a] An Employee must complete Hours of Service within the time period following an Employee’s Employment Commencement Date. If an Employee does not complete the stated Hours of Service during the specified time period (if any), the Employee is subject to the One Year of Service requirement. [Note: The number of hours may not exceed 1,0019 and the time period may not exceed 12 months. If the Plan does not require Me Employee to sat’ the Hours of Service requirement within a specified time period, insert “N/A” in the second black line.]

e. [n/a] Age              (not exceeding age 21)

(2) [n/a] Matching contributions: (Choose one off, through l. Choose j. if applicable)

f. [n/a] One Year of Service

g. [n/a] One Hour of Service (immediate completion of Service requirement)

h. [n/a]              months (not exceeding 24)

i. [n/a] An Employee must complete              Hours of Service within the              time period following an Employee’s Employment Commencement Date. If an Employee does not complete the stated Hours of Service during the specified time (if any), the Employee is subject to the One Year of Service requirement. [Note.• The number of hours may not exceed 1,000 and the time period may not exceed 24 months. If the Plan does not require the Employee to satisfy the Hours of Service requirement within a specified time period, insert “N/A” in the second blank line.]

j. [n/a] Age              (not exceeding age 21)

[n/a] (d) Service requirements:                     .

[Note: Any Service requirement the Employer elects in (d) must be available under other Adoption Agreement elections or a combination thereof.)

[n/a] (e) Dual eligibility. The eligibility conditions of this Section 2.01 apply solely to an Employee employed by the Employer after . If the Employee was employed by the Employer by the specified date, the Employee will become a Participant on the latest of (i) the Effective Date; (ii) the restated Effective Date; (iii) the Employee’s Employment Commencement Date; or (iv) on the date the Employee attains age                                                                                                                        (not exceeding age 21).

Plan Entry Date. “Plan Entry Date” means the Effective Date and: (Choose one of (1) through (1). Choose (k) if applicable) [Note: If the Employer does not elect (k), the elections under (1) through Q) apply to all types of contributions. The Employer must elect at least one Entry Date per Plan Year.]

[n/a] (f) Semi-annual Entry Dates. The first day of the Plan Year and the first day of the seventh month of the Plan Year.

[n/a] (g) The first day of the Plan Year.

(h) Employment Commencement Date (immediate eligibility).

x (I) The first day of each:            Plan Year quarter (e.g., “Plan Year quarter”).

[n/a] (j) The following Plan Entry Dates:

[n/a] (k) Alternative 401(k)1401(m) Plan Entry Date(s). For the alternative 401(k)/401(m) eligibility conditions under (c),

Plan Entry Date means: (Choose (1) or (2) or both as applicable)

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(1) [n/a] Deferral/Employee contributions

(Choose one of a through d)

(2) [n/a] Matching contributions (Choose one of e. through h.)

a. [n/a) Semi-annual Entry Dates

b. [o/al The first day of the Plan Year

c. [n/a] Employment Commencement Date (immediate eligibility)

d. [n/a] the first day of each:

e. [n/a] Semi-annual Entry Dates

f. [n/a] The first day of the Plan Year

g. [n/a] Employment Commencement Date (immediate eligibility)

h. [n/a] The first day of each:

Time of participation. An Employee will become a Participant, unless excluded under Section 1.11, on the Plan Entry Date (if employed on that date): (Choose one of (7). (m) or (n). Choose (o) ff applicable): [Note: If the Employer does not elect (o), the election under (1), (m) or (n) applies to all types of contributions.]

x (l) Immediately following or coincident with

[n/a] (m) Immediately preceding or coincident with

[n/a] (a) Nearest

[n/a] (o) Alternative 401(k)/401(m) election(s)* (Choose (1) or (2) or both as applicable)

(1) [n/a] Deferral contributions

(2) [n/a] Matching contributions (Choose one oft., a or d.)

a. [n/a] Immediately following or coincident with

b. [n/a] Immediately following or coincident with

c. [n/a] Immediately preceding or coincident with

d. [n/a] Nearest

the date the Employee completes the eligibility conditions described in this Section 2.01. [Note: Unless otherwise excluded under Section 1.11, an Employee must become a Participant by the earlier of (1) tire first day of the Plan Year beginning after the date the Employee completes the age and service requirements of Code §410(a); or (2) 6 months after the date the Employee completes those requirements.]

10. YEAR OF SERVICE - ELIGIBILITY (2.02). (Choose (a) and (b) as applicable): [Note: If the Employer does not elect a Year of Service condition or elects the Elapsed Time Method, the Employer should not complete (a) or (b).]

x (a) Year of Service. An Employee must complete 1,000 Hour(s) of Service during an eligibility computation period to receive credit for a Year of Service under Article II: [Note: The number may not exceed 1,000. If left blank the requirement is 1,000.]

[n/a] (b) Eligibility computation period. After the initial eligibility computation period described in Plan Section 2.02, the Plan measures the eligibility computation period as: (Choose one of (1) or (2))

[n/a] (1) The Plan Year beginning with the Plan Year which includes the first anniversary of the Employees Employment Commencement Date.

[n/a] (2) The 12-consecutive month period beginning with each anniversary of the Employee’s Employment Commencement Date.

11. PARTICIPATION - BREAK IN SERVICE (2.03). The one year hold-out rule described in Plan Section 2.03(B): (Choose one of (a), (b) or (c))

x (a) Not applicable. Does not apply to the Plan.

[n/a] (b) Applicable. Applies to the Plan and to all Participants.

[n/a] (c) Limited application. Applies to the Plan, but only to a Participant who has incurred a Separation from Service.

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12. ELECTION NOT TO PARTICIPATE (2.06), The Plan: (Choose one of (a) or (b))

x (a) Election not permitted. Does not permit an eligible Employee to elect not to participate.

[n/a] (b) Irrevocable election. Permits an Employee to elect not to participate if the Employee makes a one-time irrevocable election prior to the Employee’s Plan Entry Deft.

ARTICLE III

EMPLOYER CONTRIBUTIONS, DEFERRAL CONTRIBUTIONS AND FORFEITURES

13. AMOUNT AND TYPE (3.01). The amount and type(s) of the Employer’s contribution to the Trust for a Plan Year or other specified period will equal: (Choose one or more of (a) through (f) as applicable)

x (a) Deferral contributions (401(k) arrangement). The dollar or percentage amount by which each Participant has elected to reduce his/her Compensation, as provided in the Participant’s salary reduction agreement and in accordance with Section 3.02.

x (b) Matching contributions (other than safe harbor matching contributions under Section 3.01(d)). The matching contributions made in accordance with Section 3.03.

x (c) Non elective contributions (profit sharing). The following nonelective contribution (Choose (1) or (2) or both as applicable): [Note: The Employer may designate as a qualified nonelective contribution, all or any portion of its nonelective contribution. See Plan Section 3.04(F).)

x (1) Discretionary. An mount the Employer in its sole discretion may determine.

[n/a] (2) Fixed. The following amount:                     .

[n/a] (d) 401(k) safe harbor contributions. The following 401(k) safe harbor contributions described in Plan Section 14.02(D): (Choose one of (1). (2) or (3). Choose (4), (applicable)

[n/a] (1) Safe harbor nonelective contribution. The safe harbor nonelective contribution equals                      % of a Participant’s Compensation [Note: the amount in the blank must be at least 3%].

[n/a] (2) Basic safe harbor matching contribution. A matching contribution equal to 100% of each Participant’s deferral contributions not exceeding 3% of the Participant’s Compensation, plus 50% of each Participant’s deferral contributions in excess of 3% but not in excess of 5% of the Participants Compensation. For this purpose, “Compensation” means Compensation for. [Note: The Employer must complete the blank line with the applicable time period for computing the Employer’s basic safe harbor match, such as “each payroll period,” “each month, “ “each Plan Year quarter” or “the Plan Year”.]

[n/a] (3) Enhanced safe harbor matching contribution. (Choose one of a or b).

[n/a] a. Uniform percentage. An amount equal to % of each Participant’s deferral contributions not exceeding % of the Participant’s Compensation. For this purpose, “Compensation” means Compensation for. (See the Note in (d)(2).]

[n/a] b. Tiered formula. An amount equal to the specified matching percentage for the corresponding level of each Participant’s deferral contribution percentage. For this purpose, “Compensation” means Compensation for:            . [See the Note in (d)(2).]

Deferral Contribution Percentage	Matching Percentage
________________________	________________________
________________________	________________________
________________________	________________________

[Note: The matching percentage may not increase as the deferral contribution percentage increases and the enhanced matching formula otherwise must satisfy the requirements of Code §j401(k)(12)(B)(ii) and (iii). If the Employer wishes to avoid ACP testing on &s enhanced safe harbor matching contribution, the Employer also must limit deferral contributions taken into account (the Deferral Contribution Percentage) for the matching contribution to 6% of Plan Year Compensation.]

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[n/a] (4) Another plan. The Employer will satisfy the 401(k) safe harbor contribution in the following plan:

[n/a] (e) Davis-Bacon contributions. The amount(s) specified for the applicable Plan Year or other applicable period in the Employees Davis-Bacon contract(s). The Employer will make a contribution only to Participants covered by the contract and only with respect to Compensation paid under the contract. If the Participant accrues an allocation of nonelective contributions (including forfeitures) under the Plan in addition to the Davis-Bacon contribution, the Plan Administrator will: (Choose one of (1) or (2))

[n/a] (1) Not reduce the Participant’s nonelective contribution allocation by the Davis-Bacon contribution.

[n/a] (2) Reduce the Participant’s nonelective contribution allocation by the Davis-Bacon contribution.

[n/a] (f) Frozen Plan. This Plan is a frozen Plan effective:             . For any period following the specified date, the Employer will not contribute to the Plan, a Participant may not contribute and an otherwise eligible Employee will not become a Participant in the Plan.

14. DEFERRAL CONTRIBUTIONS (3.02). The following limitations and terms apply to an Employee’s deferral contributions: (If the Employer elects Section 3.01(a), the Employer must elect (a). Choose (b) or (c) as applicable)

x (a) Limitation on amount. An Employee’s deferral contributions are subject to the following limitation(s) in addition to those imposed by the Code; (Choose (1). (2) or (3) as applicable)

x	(1) Maximum deferral amount:	100%
x	(2) Minimum deferral amount	1%
[n/a]	(3)No limitations.

For the Plan Year in which an Employee first becomes a Participant, the Plan Administrator will apply any percentage limitation the Employer elects in (1) or (2) to the Employee’s Compensation; (Choose one of (4) or (5) unless the Employer elects (3))

[n/a] (4) Only for the portion of the Plan Year in which the Employee actually is a Participant IX]

          (5)For the entire Plan Year.

[n/a] (b) Negative deferral election. The Employer will withhold _% from the Participant’s Compensation unless the Participant elects a lesser percentage (including zero) under his/her salary reduction agreement See Plan Section 14.02(C). The negative election will apply to: (Choose one of (1) or (2))

[n/a] (1)All Participants who have not deferred at least the automatic deferral amount as of:

[n/a] (2)Each Employee whose Plan Entry Date is on or following the negative election effective date.

[n/a] (c) Cash or deferred contributions. For each Plan Year for which the Employer makes a designated cash or deferred contribution under Plan Section 14.02(B), a Participant may elect to receive directly in cash not more than the following portion (or, if less, the 402(g) limitation) of his/her proportionate share of that cash or deferred contribution: (Choose one of (1) or (2))

[n/a] (1)All or any portion.                          [n/a]             (2)            %.

Modification/revocation of salary reduction agreement. A Participant prospectively may modify or revoke a salary reduction agreement, or may file a new salary reduction agreement following a prior revocation, at least once per Plan Year or during any election period specified by the basic plan document or required by the Internal Revenue Service. The Plan Administrator also may provide for more frequent elections in the Plan’s salary reduction agreement form.

15. MATCHING CONTRIBUTIONS (INCLUDING ADDITIONAL SAFE HARBOR MATCH UNDER PLANSECTION 14.02(D)(3)) (3.03). The Employer matching contribution is: ((f the Employer elects Section 3.01(b), the Employer must elect one or more of (a), (b) or (c) as applicable. Choose (d) if applicable)

[n/a] (a) Fixed formula. An amount equal to             % of each Participant’s deferral contributions,

x (b) Discretionary formula. An amount (or additional amount) equal to a matching percentage the Employer from time to time may deem advisable of the Participant’s deferral contributions. The Employer, in its sole discretion, may

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designate as a qualified matching contribution, all or any portion of its discretionary matching contribution. The portion of the Employer’s discretionary matching contribution for a Plan Year not designated as a qualified matching contribution is a regular matching contribution.

(c) Multiple level formula. An amount equal to the following percentages for each level of the Participant’s deferral contributions. [Note: he matching percentage only will apply to deferral contributions in excess of the previous level and not in excess of the stated deferral contribution percentage.]

Deferral Contribution Percentage	Matching Percentage
____________________	____________________
____________________	____________________
____________________	____________________

[n/a] (d) Related Employers. If two or more Related Employers contribute to this Plan, the Plan Administrator will allocate matching contributions and matching contribution forfeitures only to the Participants directly employed by the contributing Employer. The matching contribution formula for the other Related Employer(s) is . [Note.• If the Employer does not elect (d), the Plan Administrator will allocate all matching contributions and matching forfeitures without regard to which contributing Related Employer directly employs the Participant]

Time period for matching contributions. The Employer will determine its matching contribution based on deferral contributions made during each: (Choose one of (e) through (h))

x (c) Plan Year.’

[n/a] (f) Plan Year quarter.

[n/a[ (g) Payroll period.

[n/a] (h) Alternative time period:                       .[Note: Any alternative time period the Employer elects in (h) must be the same for all Participants and may not exceed the Plan Year.

Deferral contributions taken into account. In determining a Participant’s deferral contributions taken into account for the above-specified time period under the matching contribution formula, the following limitations apply: (Choose one of (i), (j) or (k)

[n/a]1

(i) All deferral contributions. The Plan Administrator will take into account all deferral contributions.

[n/a] (i) Specific limitation. The Plan Administrator will disregard deferral contributions exceeding % of the Participant’s Compensation. [Note: To avoid the ACP test in a safe harbor 40f(k) plan, the Employer must limit deferrals and Employee contributions which are subject to match to 6% of Plan Year Compensation.]

x (k) Discretionary. The Plan Administrator will take into account the deferral contributions as a percentage of the Participant’s Compensation as the Employer determines.

Other matching contribution requirements. The matching contribution formula is subject to the following additional requirements: (Choose (1) or (m) or both if applicable)

[n/a] (1)Matching contribution limits. A Participant’s matching contributions may not exceed: (Choose one of (1) or (2))

[n/a] (1) _________. [Note: The Employer may elect (1) to place an overall dollar or percentage limit on matching contributions.]

[n/a] (2) 4% of a Participant’s Compensation for the Plan Year under the discretionary matching contribution formula (Note: The Employer must elect (2) if it elects a discretionary matching formula with the safe harbor 401(k) contribution formula and wishes to avoid the ACP test.]

[n/a] (m) Qualified matching contributions. The Plan Administrator will allocate as qualified matching contributions, the matching contributions specified in Adoption Agreement Section:                . The Plan Administrator will allocate all other matching contributions as regular matching contributions. [Note: If the Employer elects two marching formulas, the Employer may use (m) to designate one of the formulas as a qualified matching contribution,]

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16. CONTRIBUTION ALLOCATION (3.04).

Employer nonelective contributions (3. 04( A)). The Plan Administrator will allocate the Employer’s nonelective contribution under the following contribution allocation formula (Choose one of (a), (b) or (c). Choose (d) If applicable)

x (a) Nonintegrated (pro rata) allocation formula.

[n/a] (b) Permitted disparity. The following permitted disparity formula and definitions apply to the Plan: (Choose one of (1) or (2). Also choose (3))

[n/a] (1) Two-tiered allocation formula.

[n/a] (2) Four-timed allocation formula.

[n/a] (3) For purposes of Section 3.04(b), “Excess Compensation” means Compensation in excess of (Choose one of a. or b.)

[n/a] a.                % of the taxable wage base in effect on the first day of the Plan Year, rounded to the next highest $                (not exceeding the taxable wage base).

[n/a] b. The following integration level:

[Note: The Integration level cannot exceed the taxable wage base in effect for the Plan Year for which this Adoption Agreement first is effective.]

[n/a] (c) Uniform points allocation formula. Under the uniform points allocation formula, a Participant receives: (Choose (1) or both (1) and (2) as applicable)

[n/a] (1)                  point(s) for each Year of Service. Year of Service means:                         

[n/a] (2) One point for each $                 [not to exceed $200] increment of Plan Year Compensation.

[n/a] (d) Incorporation of contribution formula. The Plan Administrator will allocate the Employee’s nonelective contribution under Section(s) 3.01(c)(2), (d)(1) or (e) in accordance with the contribution formula adopted by the Employer under that Seen on.

Qualified nonelective contributions. (3.04(F)). The Plan Administrator will allocate the Employer’s qualified nonelective contributions to: (Choose one of (e) or (f))

x (e) Nonhighly compensated Employees only.

[n/a] (t) Al Participants.

Related Employers. (Choose (g) if applicable)

[n/a] (g) Allocate only to directly employed Participants. If two or more Related Employers adopt this Plan, the Plan Administrator will allocate 91 nonelective contributions and forfeitures attributable to nonelective contributions only to the Participants directly employed by the contributing Employer. If a Participant receives Compensation fide more than one contributing Employer, the Plan Administrator will determine the allocations under this Section 3.04 by prorating the Participant’s Compensation between or among the participating Related Employers. [Nom• If the Employer does not elect 3.04(g), the Plan Administrator will allocate all nonelective contributions and forfeitures without regard to which contributing Related Employer directly employs the Participant. 71te Employer may not elect 3.04(g) wider a safe harbor 401(k) Plan]

17. FORFEITURE ALLOCATION (3.05). The Plan Administrator will allocate a Participant forfeiture: (Choose one or more of (a), (b) or (c) as applicable) [Note: Even of the Employer elects immediate vesting, the Employer should complete section 3.05. See Plan Section 9.11.]

x (a) Matching contribution forfeitures. To the extent attributable to matching contributions: (Choose one of (1) through (4))

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x (1) As a discretionary matching contribution

[n/a] (2) To reduce matching contributions.

[n/a] (3) As a discretionary nonelective contribution.

[n/a] (4) To reduce nonelective contributions.

x (b) Nonelective contribution forfeitures. To the extent attributable to Employer nonelective contributions: (Choose one of (1 through (4)).

x (1) As a discretionary nonelective contribution.

[n/a] (2) To reduce nonelective contributions.

[n/a] (3) As a discretionary matching contribution.

[n/a] (4) To reduce matching contributions.

[n/a] (c) Reduce administrative expenses. First to reduce the Plan’s ordinary and necessary administrative expenses for the Plan Year and then allocate any remaining forfeitures in the manner described in Sections 3.05(a) or (b) as applicable.

Timing of forfeiture allocation. The Plan Administrator will allocate forfeitures under Section 3.05 in the Plan Year. (Choose one of (d) or (e))

x (d) In which the forfeiture occurs.

[n/a] (e) Immediately following the Plan Year in which the forfeiture occurs.

18. ALLOCATION CONDITIONS (3.06).

Allocation conditions. The Plan does not apply any allocation conditions to deferral contributions, 401(k) safe harbor contributions (under Section 3.01(d)) or to Davis-Bacon contributions (except as the Davis-Bacon contract provides). To receive an allocation of matching contributions, nonelective contributions, qualified nonelective contributions or Participant forfeitures, a Participant must satisfy the following allocation condition(s): (Choose one or more of (a) through (i) as applicable)

x (a) Hours of Service condition. The Participant must complete at least the specified number of Hours of Service (not exceeding 1,000) during the Plan Year: 1000.

x (b) Employment condition. The Participant must be employed by the Employer on the last day of the Plan Year (designate time period).

[n/a] (c) No allocation conditions.

[n/a] (d) Elapsed Time Method. The Participant must complete at least the specified number (not exceeding 182) of consecutive calendar days of employment with the Employer during the Plan Yew:

[n/a] (e) Termination of Service/581 Hours of Service coverage rule. The Participant either must be employed by the Employer on the last day of the Plan Year or must complete at least 501 Hours of Service during the Plan Year. If the Plan uses the Elapsed Time Method of crediting Service, the Participant mast complete at least 91 consecutive calendar days of employment with the Employer during the Plan Year.

[n/a] (f) Special allocation conditions for matching contributions. The Participant must complete at least              Hours of Service during the              (designate time period) for the matching contributions made for that time period.

[n/a] (g) Death, Disability or Normal Retirement Age. Any condition specified in Section 3.06,              applies if the Participant incurs a Separation from Service during the Plan Year on account of:              (e.g., death, Disability Or Normal Retirement Age).

[n/a] (h) Suspension of allocation conditions for coverage. The suspension of allocation conditions of Plan Section 3.06(E) applies to the Plan.

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x (i) Limited allocation conditions. The Plan does not impose an allocation condition for the following types of contributions:                          matching contributions. [Note: Any election to limit the Plan’s allocation conditions to certain contributions must be the same for all Participants, be definitely determinable and not discriminate in favor of Highly Compensated Employees.]

ARTICLE IV

PARTICIPANT CONTRIBUTIONS

19. EMPLOYEE (AFTER TAX) CONTRIBUTIONS (4.02). The following elections apply to Employee contributions: (Choose one of (a) or (b). Choose (c) y applicable)

x (a) Not permitted. The Plan does not permit Employee contributions.

[n/a] (b) Permitted. The Plan permits Employee contributions subject to the following limitations:                         

[Note: Any designated limitation(s) must be the same for all Participants, be definitely determinable and not discriminate in favor of Highly Compensated Employees.]

[n/a] (c) Matching contribution. For each Plan Year, the Employer’s matching contribution made with respect to Employee contributions is:                         

ARTICLE V

VESTING REQUIREMENTS

20. NORMAIJEARLY RETIREMENT AGE (5.01). A Participant attains Normal Retirement Age (or Early Retirement Age, if applicable) under the Plan on the following date: (Choose one of (a) or (b). Choose (c) if applicable)

x (a) Specific age. The date the Participant attains age                  591/2          . [Note: The age may not exceed age 65.]

[n/a] (b) Age/participation. The later of the date the Participant attains years of age or the anniversary of the first day of the Plan Year in which the Participant commenced participation in the Plan. [Note: The age may not exceed age 65 and the anniversary may not exceed the 5th.]

[n/a] (c) Early Retirement Age, Early Retirement Age is the later of: (i) the date a Participant attains age or (ii) the date a Participant reaches his/her anniversary of the first day of the Plum Year in which the Participant commenced participation in the Plan.

21. PARTICIPANTS DEATH OR DISABILITY (5.02). The 100% vesting rule under Plan Section 5.02 does not apply to: (Choose (a) or (b) or both as applicable)

[n/a] (a) Death.

[n/a] (b) Disability.

22. VESTING SCHEDULE (5.03). A Participant has a 100% Vested interest at all times in his/her deferral contributions, qualified nonelective contributions, qualified matching contributions, 401(k) safe harbor contributions and Davis-Bacon contributions (unless otherwise indicated in (f)). The following vesting schedule applies to Employer regular matching contributions and to Employer nonelective contributions: (Choose (a) or choose one or more of (b) through (fl as applicable)

[n/a] (a) Immediate vesting. 100% Vested at all times. [Note: he Employer must elect (a) f the Service condition under Section 2.01 exceeds One Year of Service or more than twelve months.]

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x (b) Top-heavy vesting schedules. [Note: The Employer must choose one of (b)(1), (2) or (3) fit dons not elect (a).]

[n/a] (1) 6-year graded as specified in the Plan. x (3) Modified top-heavy schedule In/it] (2) 3-year cliff as specified in the Plan.

Years of Service	Vested Percentage
LA= than 1	0	%
F	20	%°
2	40	%
3	60	°x.
4	80	%
5	100	%

[n/a] (c) Non-top-heavy vesting schedules. [Note: The Employer may elect one of (c)(1), (2) or (3) in addition to (b).)

[n/a] (1) 7-year graded as specified in the Plan.

[n/a] (2) 5-year cliff as specified in the Plan.

[n/a] (3) Modified non-top-heavy schedule

Years of Service,	Vested Percentage
Less than 1	%
I	_	%
2
3
4
5	%
6	%
7 or more	100	%

If the Employer does not elect (c), the vesting schedule elected in (b) applies to all Plan Years. [Note: The modified top-heavy schedule of (b)(3) must satisfy Code §416. If the Employer elects (c)(3), the modified non-top-heavy schedule must satisfy Code §411(a)(2),1

[n/a] (d) Separate vesting election for regular matching contributions. In lieu of the election under (a), (b) or (c), the following vesting schedule applies to a Participant’s regular matching contributions; (Choose one of (1) or (2))

[n/a] (1) 100% Vested at all times.

[n/a] (2) Regular matching vesting schedule:

[Note: The vesting schedule completed under (d)(2) must comply with c_od_e §411(a)(4).]

[n/a] (e) Applicationof top-heavy schedule. The non-top-heavy schedule elected under (c) applies in all Plan Years in which the Plan is not a top-heavy plan. [Note: If the Employer does not elect (e), the top-heavy vesting schedule will apply for the first Plan Year in which the Plan is top-heavy and then in all subsequent Plan Years.]

[n/a] (f) Special vesting provisions: . [Note: Any special vesting provision must satisfy Code §411(a). Any special vesting provision must be definitely determinable, not discriminate in favor of Highly Compensated Employees and not violate Code §401 (a)(4).]

23. YEAR OF SERVICE—VESTING (5.06). (Choose (a) and (b)): [Note: ]f the Employer elects the Elapsed Time Method or elects immediate vesting, the Employer should not complete (a) or (b).]

x (a) Year of Service An Employee must complete at least 1,000 Hours of Service during a vesting computation period to receive credit for a Year of Service under Article V. [Note: The number may not exceed 1,000. If left blank, the requirement Is 1,000.]

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x (b) Vesting computation period. The Plan measures a Year of Service on the basis of the following 12-consecutive month period: (Choose one of (1) or (2))

[n/a] (I) Plan Year.

x     (2) Employment year (anniversary of Employment Commencement Date).

24. EXCLUDED YEARS OF SERVIQE - VESTING (5.08). The Plan excludes the following Year; of Service for purposes of vesting: (Choose (a) or choose one or more of (b) through &) as applicable)

x (a) None. None other than as specified in Plan Section 5.08(a).

[n/a] (b) Age 18. Any Year of Service before the Year of Service during which the Participant attained the age of 18.

[n/a] (c) Prior to Plan establishment. Any Year of Service during the period the Employer did not maintain this Plan or a predecessor plan.

[n/a] (d) Parity Break in Service. Any Year of Service excluded under die rule of parity. See Plan Section 5.10.

[n/a] (e) Prior Plan terms. Any Year of Service disregarded wider tare terms of the Plan as in effect prior to this restated Plan.

[n/a] (f) Additional exclusions. Any Year of Service before:

[Note: Any exclusion specified under (f) must comply with Code §411(a)(4). Any exclusion must be definitely determinable, not discriminate in favor of Highly Compensated Employees and not violate Code §401 (a)(4). If the Employer elects immediate vesting, the Employer should not complete Section,5.08.]

ARTICLE VI

DISTRIBUTION OF ACCOUNT BALANCE

25. TIME OF PAYMENT OF ACCOUNT BALANCE (6.01). The following time of distribution elections apply to the Plan:

Separation from Service/Vested Account Balance not exceeding $5,000. Subject to the limitations of Plan Section 6.01(AXI), the ‘trustee will distribute in a lump sum (regardless of the Employees election under Section 6.04) a separated Participants Vested Account Balance not exceeding $5,000: (Choose one of (a) through (d))

x (a) Immediate. As soon as administratively practicable following the Participants Separation from Service.

[n/a] (b) Designated Plan Year. As soon as administratively practicable in the                      Plan Year beginning after the Participants Separation from Service.

[n/a] (c) Designated Plan Year quarter. As soon as administratively practicable in the                      Plan Year quarter beginning after the Participant’s Separation from Service.

[n/a] (d) Designated distribution. As soon as administratively practicable in the: following the Participant’s Separation from Service.

[Note: The designated distribution time must be the same for all Participants, be definitely determinable, not discriminate in favor of Highly Compensated Employees and not violate Code §401 (a)(4).]

Separation from Service/Vested Account Balance exceeding $5,000. A separated Participant whose Vested Account Balance exceeds $5,000 may elect to commence distribution of his/her Vested Account Balance no earlier than: (Choose one of (e) through (i). Choose (J) if applicable.)

[n/a] (f) Designated Plan Year. As soon as administratively practicable in the                      Plan Year beginning after the Participants Separation from Service.

x (e) Immediate. As soon as administratively practicable following the Participants Seperation from Service.

[n/a] (g) Designated Plan Year quarter. As soon as administratively practicable in the                      Plan Year quarter following the Plan Year quarter in which the Participant elects to receive a distribution.

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[n/a] (h) Normal Retirement Age. As soon as administratively practicable after the close of the Plan Year in which the Participant attains Normal Retirement Age and within the time required under Plan Section 6.01(A)(2).

[n/a] (i) Designated distribution. As soon as administratively practicable in the: following the Participant’s Separation from Service. [Note: The designated distribution time must be the same for all Participants, be definitely determinable, not discriminate in favor of Highly Compensated Employees and not violate Code §401(a)(4).)

[n/a] (j) Limitation on Participant’s right to delay distribution. A Participant may not elect to delay commencement of distribution of his/her Vested Account Balance beyond the later of attainment of age 62 or Normal Retirement Age. (Note: If the Employer does not elect 0), the Plan permits a Participant who has Separated from Service to delay distribution until his/her required beginning date. See Plan Section 6_0/(A)(2).)

Participant elections prior to Separation from Service. A Participant, prior to Separation from Service may elect any of the following distribution options in accordance with Plan Section 6.01(C). (Choose (k) or choose one or more of (7) through (a) as applicable). [Note: If the Employer elects any in-service distributions option, a Participant may elect to receive one In-service distribution per Plan Year unless the Plan’s in-service distribution form provides for more frequent in-service distributions.]

[n/a] (k) None. A Participant does not have any distribution option prior to Separation from Service, except as may be provided under Plan Section 6.01(C).

x (I) Deferral contributions. Distribution of all or any portion (as permitted by the Plan) of a Participant’s Account Balance attributable to deferral contributions if. (Choose one or more of (1), (2) or (3) as applicable)

x (1) Hardship (safe harbor hardship rule). The Participant has incurred a hardship in accordance with Plan Sections 6.09 and 14.11(A).

x (2) Age. The Participant has attained age, 59M (Must be at least age 59112).

x (3) Disability. ‘The Participant as incurred a Disability.

x (m) Qualified nonelective contributions/qualified matching contributions/safe harbor contributions. Distribution of all or any portion of a Participant’s Account Balance attributable to qualified nonelective contributions, to qualified matching contributions, or to 401(k) safe harbor contributions if; (Choose (1) or (2) or both as applicable)

x (1) Age. The Participant has attained age 59 1/2 (Must be at least age 591/2).

[n/a] (2) Disability. The Participant has incurred a Disability.

x (u) Nonelective contributions/regular matching contributions Distribution of all or any portion of a Participant’s Vested Account Balance attributable to nonelective contributions or to regular matching contributions if (Choose one or more of (1) through (5) as applicable)

x (I) Age/Service conditions. (Choose one or more of e through d. as applicable):

x a. Age. The Participant has attained age 59 1/2

[n/a] b. Two-year allocations. The Plan Administrator has allocated the contributions to be distributed for a period of not less than                              Plan Years before the distribution date. [Note: The minimum number of years is 2.]

[n/a]                                                                                                    c. Five years of participation. The Participant bas participated in the Plan for at least                                      Plan Years. [Note: The minimum number of ]ears is 5.]

[n/a] d. Vested. The Participant is °r6 Vested in his/her Account Balance. See Plan Section 5.03(A). [Note: If an Employer makes more than one election under Section 6.01(x)(1), a Participant must satisfy all conditions before the Participant 1s eligible for the distribution.]

[n/a] (2) Hardship. The Participant has incurred a hardship in accordance with Plan Section 6.09.

[n/a] (3) Hardship (safe harbor hardship rule). The Participant has incurred a hardship in accordance with Plan Sections 6.09 and 14.11(A).

x (4) Disability. The Participant has incurred a Disability.

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[n/a] (5) Designated condition. The Participant has satisfied the following condition(s): [Note: Arty designated condition(s) must be the same for all Participants, be definitely determinable and not discriminate in favor of Highly Compensated Employees.]

x (o) Participant contributions. Distribution of all or any portion of a Participant’s Account Balance attributable to the following Participant contributions described in Plan Section 4.01; (Choose one of (1), (2) or (3))

[n/a] (1) All Participant contributions.

[n/a] (2) Employee contributions only.

x (3) Rollover contributions only.

Participant loan default/offset. See Section 6.08 of the Plan.

26. DISTRIBUTION METHOD (6.03). A separated Participant whose Vested Account Balance exceeds $5,000 may elect distribution under one of the following method(s) of distribution described in Plan Section 6.03: (Choose one or more of (a) through (d) as applicable)

x (a) Lump sum.

x (b) Installments.

[n/a] (c) Installments for required minimum distributions only.

[n/a] (d) Annuity distribution option(s):

[Note: Any optional method of distribution may not be subject to Employer, Plan Administrator or Trustee discretion.]

27. JOINT AND SURVIVOR ANNUITY REQUIREMENTS (6.04). The joint and survivor annuity distribution requirements of Plan Section 6.04: (Choose one of (a) or (b))

x (a) Profit sharing plan exception. Do not apply to a Participant, unless the Participant is a Participant described in Section 6.04(H) of the Plan.

[n/a] (b) Applicable. Apply to all Participants.

ARTICLE 1X

PLAN ADMINISTRATOR - DUTIES WITH RESPECT TO PARTICIPANTS’ ACCOUNTS

28. ALLOCATION OF NET INCOME, GAIN OR LOSS (9.08). For each type of contribution provided under the Plan, the Plan allocates net income, gain or loss using the following method: (Choose one or more of (a) through (e) as applicable)

x (a) Deferral contributions/Employee contribution. (Choose one or more of (1) through (5) as applicable)

x (1) Daily valuation method. Allocate on each business day of the Plan Year during which Plan assets for which there is an established market are valued and the Trustee is conducting business.

[n/a] (2) Balance forward method. Allocate using the balance forward method.

[n/a] (3) Weighted average method. Allocate using the weighted average method, based an the following weighting period: See Plan Section 14.12.

[n/a] (4) Balance forward method with adjustment Allocate pursuant to the balance forward method, except treat as part of the relevant Account at the beginning of the valuation period             % of the contributions made during the following valuation period:

[n/a] (5) Individual account method. Allocate using the individual account method. See Plan Section 9.08.

x (b) Matching contributions. (Choose one or more of (1) through (5) as applicable)

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x (1) Daily valuation method. Allocate on each business day of the Plan Year during which Plan assets for which there is an established market are valued and the Trustee is conducting business.

[n/a] (2) Balance forward method. Allocate using the balance forward method.

[n/a] (3) Weighted average method. Allocate using the weighted average method, based on the following weighting period See Plan Section 14.12.

[n/a] (4) Balance forward method with adjustment. Allocate pursuant to the balance forward method, except mat as part of the relevant Account at the beginning of the valuation period% of the contributions made during the following valuation period:

[n/a] (5) Individual account method. Allocate using the individual account method. See Plan Section 9.08.

x (c) Employer nonelective contributions. (Choose one or more of (1) through (5) as applicable)

x (1) Daily valuation method. Allocate on each business day of the Plan Year during which Plan assets for which there is an established market are valued and the Trustee is conducting business.

[n/a] (2) Balance forward method. Allocate using the balance forward method.

[n/a] (3) Weighted average method. Allocate using the weighted average method, based on the following weighting period:                     . See Plan Section 14.12.

[n/a] (4) Balance forward method with adjustment Allocate pursuant to the balance forward method, except treat as part of the relevant Account at the beginning of the valuation period% of the contributions made during the following valuation period:

[n/a] (5) Individual account method. Allocate using the individual account method, See Plan Section 9.08.

[n/a] (d) Specified method. Allocate pursuant to the following method:

[Note. The specified method mull be a definite predetermined formula which is not based on Compensation, which satisfies the nondiscrimination requirements of Treas. Reg. §1.401(a)(4) and which is applied uniformly to all Participants.]

[n/a] (e) Interest rate factor. In accordance with Plan Section 9.OB(E), the Plan includes interest at the following rate on distributions made more than 90 days after the most recent valuation date;                     .

ARTICLE X

TRUSTEE AND CUSTODIAN, POWERS AND DUTIES

29. INVESTMENT POWERS (10.03). The following additional investment options or limitations apply under Plan Section 10.03; NIA . (Note. Enter “N/A” if not applicable.]

30. VALUATION OF TRUST (10.15). In addition to the last day of the Plan Year, the Trustee must value the Trust Fund on the following valuation date(s); (Choose one of (a) through (d))

x (a) Daily valuation dates. Each business day of the Plan Year on which Plan assets for which throe is an established market are valued and the Trustee is conducting business.

[n/a] (b) Last day of a specified period. The last day of each                      of the Plan Year.

[n/a] (c) Specified dates:

[n/a] (d) No additional valuation dates.

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Execution Page

The Trustee (and Custodian, if applicable), by executing this Adoption Agreement, accepts its position and agrees to all of the obligations, responsibilities and duties imposed upon the Trustee (or Custodian) under the Prototype Plan and Trust. The Employer hereby agrees to the provisions of this Plan and Trust, and in witness of its agreement, the Employer by its duly authorized officers, has executed this Adoption Agreement, and the Trustee (and Custodian, if applicable) has signified its acceptance, on:                     

Name of Employer     j3enthos, Inc.
Employees E               2381876                Signed:
Names of Trustee:
	Francis E. Dunne. Jr.
	Ronald L. Marsiglio President & CEO                                                 [Names/Title]
	Ronald L. Marsiglio
Signed:
	Pranr•ias F. T7imno, Jr.

Trust EIN(Options):
Signed:	[GRAPHIC]
	Ronald L. Marsiglio President & CEO [Name/Title]
	Vice President                                [Name/Title]

Signed:
	[Name/title]

Signed:
	[Name/title]

Signed:
	[Name/title]

Signed:
	[Name/title]

Signed:
	[Name/title]

Signed:
	[Name/title]

^© Copyright 2001 Astrue, Coakley & Garloo, Inc. 18

Name of Custodian (Optional):
Signed:
	[Name/Title

31. Plan Number. The 3-digit plan number the Employer assigns to this Plan for ERISA reporting purposes (Form 5500 Series) is: 002.

Use of Adoption Agreement. Failure to complete properly the elections in this Adoption Agreement may result in disqualification of the Employee’s Plan. The Employer only may use this Adoption Agreement in conjunction with the basic plan document referenced by its document number on Adoption Agreement page one.

Execution for Page Substitution Amendment Only. If this paragraph is completed, this Execution Page documents an amendment to Adoption Agreement Section(s)                                               effective                                                          , by substitute Adoption Agreement page number(s)

Prototype Plan Sponsor. The Prototype Plan Sponsor identified on the first page of the basic plan document will notify all adopting employers of any amendment of this Prototype Plan or of any abandonment or discontinuance by the Prototype Plan Sponsor of its maintenance of this Prototype Plan. For inquiries regarding the adoption of the Prototype Plan, the Prototype Plan Sponsor’s intended meaning of any Plan provisions or the effect of the opinion letter issued to the Prototype Plan Sponsor, please contact the Prototype Plan Sponsor at the following address and telephone number: P.O. Box 870298, Milton, MA 02187, (617)698-1242 Reliance on Sponsor Opinion Letter. The Prototype Plan Sponsor has obtained from the IRS an opinion letter specifying the form of this Adoption Agreement and the basic plan document satisfy, as of the date of the opinion letter, Code §401. An adopting Employer may rely on the Prototype Sponsor’s IRS opinion letter only to the extent provided in Announcement 2001-77, 2001-30 I.R.B. The Employer may not rely on the opinion letter in certain other circumstances or with respect to certain qualification requirements, which are specified in the opinion letter and in Announcement 2001-77. In order to have reliance in such circumstances or with respect to such qualification requirements, the Employer must apply for a determination letter to Employee Plans Determinations of the Internal Revenue Service.

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PARTICIPATION AGREEMENT

[X] Check here If not applicable and do not complete this page.

The undersigned Employer, by executing this Participation Agreement, elects to become a Participating Employer in the Plan identified in Section 1.21 of the accompanying Adoption Agreement, as if the Participating Employer were a signatory to that Adoption Agreement . The Participating Employer accepts, and agrees to be bound by, all of the elections granted under the provisions of the Prototype Plan as made by the Signatory Employer to the Execution Page of the Adoption Agreement, except as otherwise provided in this Participation Agreement.

32, EFFECTIVE DATE (1.10). The Effective Date of the Plan for the Participating Employer is._

33. NEW PLAN RESTATEMENT. The Participating Employer’s adoption of this Plan constitutes: (Choose one of (a) or (b)) [n/a]

(a) The adoption of anew plan by the Participating Employer.

[n/a]

                                                                                                                                                                (b) The adoption of an amendment and restatement of a plan currently maintained by the Participating Employer, identified as:             and having an original effective date of.                                                                                           

34. PREDECESSOR EMPLOYER SERVICE (1.30). In addition to the predecessor service credited by reason of Section 1.30 of the Plan, the Plan credits as Service under this Plan, service with this Participating Employer. (Choose one or more of (a) through (d) as applicable): [Note: If the Plan does not credit any additional predecessor service under Section 1.30 for this Participating Employer, do not complete this election.]

[n/a]  (a) Eligibility. For eligibility under Article II. See Plan Section 1.30 for time of Plan entry.

[n/a]  (b) Vesting. For vesting under Article V.

[n/a]  (c) Contribution allocation. For contribution allocations under Article III

[n/a]  (d) Exceptions. Except for the following Service:

Name of Plan: Name of Participating Employer:

Signed:

[Narne/title]

[Date]

Participating Employer’s EN:                                

Acceptance by the Signatory Employer to the Execution Page of the Adoption Agreement and by the Trustee.

Name of Signatory Employer:	Names of Trustee:
[Name/Title]	[Name/Title]
Signed:	Signed:
[Date]	[Date]

[Note: Each Participating Employer must execute a separate Participation Agreement. If the Plan does not have a Participating Employer, the Signatory Employer may delete this page from the Adoption Agreement.]

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APPENDIX A

TESTING ELECTIONS/EFFECTIVE DATE ADDENDUM

35. The following testing elections and special effective dates apply: (Choose one or more of (a) through (n) as applicable)

x (a) Highly Compensated Employee (1.14). For Plan Years beginning after September 30. 2004 , the Employer makes the following elections) regarding the definition of Highly Compensated Employee:

(1) [X] Top paid group election.

(2) [n/al Calendar year data election fiscal year plan).

x (b) 401(k) current year testing. The Employer will apply the current year testing method in applying the ADP and ACP tests effective for Plan Years beginning after.                                      September 30, 1997_. [Note: For Plan Years beginning on or after the Employer’s execution of its “GUST” restatement, the Employer must use the same testing method within the same Plan Year for both the ADP and, 4CP tests,]

x (c) Compensation. The Compensation definition under Section 1.07 will apply for Plan Years beginning after: September 30, 2003

[n/a]  (d) Election not to participate. The election not to participate under Section 2.06 is effective: [n/a]                                 

[n/a]  (e) 401(k) safe harbor. The 401(k) safe harbor provisions under Section 3.01(d) are effective:                                 

[n/a]  (f) Negative election. The negative election provision under Section 3.02(b) is effective:                                 

[n/a]  (g) Contribution/allocation formula. The specified contribution(s) and allocation method(s) under Sections 3.01 and 3.04 are effective:

[n/a]  (h) Allocation conditions. The allocation conditions of Section 3.06 are effective:

[n/a]  (i) Benefit payment elections. The distribution elections of Section(s)                                  are effective:

[n/a]  (j) Election to continue pre-S&JPA required beginning date. A Participant may not elect to defer commencement of the distribution of his/her Vested Account Balance beyond the April l following the calendar year in which the Participant attains age 70 1/2. See Plan Section 6.02(A).

[n/a]  (k) Elimination of age 70112 In-service distributions. The Plan eliminates a Participant’s (other than a more than 5°/a owner) right to receive in-service distrⁱbutions on April 1 of the calendar year following the year in which the Participant attains age 701/2 for Plan Years beginning after:                     .

[n/a]  (l) Allocation of earnings. The earnings allocation provisions under Section 9.08 are effective:

[n/a]  (m) Elimination of optional forms of benefit. The Employer elects prospectively to eliminate the following optional forms of benefit: (Choose one or more of (1), (2) and (3) as applicable)

[n/a]  (1) QJSA and QPSA benefits as described in Plan Sections 6.04, 6.05 and 6.06 effective:

[n/a]  (2) Installment distributions as described in Section 6.03 effective:

[n/a]  (3) Other optional forms of benefit (Any election to eliminate must be consistent with Teas. Reg. §1.411(d)-4):

(n) Special effective date(s): Effective as pf October 1. 2002, a Participant can make Elective Deferrals up to 100% of Compensation.

For periods prior to the above-specified special effective date(s), the Plan terms in effect prior to its restatement under this Adoption Agreement will control for purposes of the designated provisions. A special effective date may not result in the delay of a Plan provision beyond the x permissible effective date under any applicable law.

^© Copyright 2001 Astrue, Coakley & Garloo, Inc. 21

APPENDIX B

GUST Remedial Amendment Period Elections

36. The following GUST restatement elections apply: (Choose one or more of (a) through (f) as applicable)

x (a) Highly Compensated Employee elections. The Employer makes the following remedial amendment period elections with respect to the Highly Compensated Employee definition:

(1)	1997:	[n/a	]	Top paid group election.	[n/a	]	Calendar year election.
(2)	1998:	[n/a [n/a	] ]	Calendar year data election. Top paid group election.	[n/a	]	Calendar year data election.
(3)	1999:	[n/a	]	Top paid group election.	[n/a	]	Calendar year data election.
(4)	2000:	[n/a	]	Top paid group election,	[n/a	)	Calendar year data election.
(5)	2001:	[n/a	]	Top paid group election.	[n/a	]’	Calendar year data election.
(6)	2002:	[n/a	]	Top paid group election.	[n/a	]	Calendar year data election.

x (b) 401(k) testing methods. The Employer makes the following remedial amendment period elections with respect to the A ADP test and the ACP test: [Note: The Employer may use a different testing method for the ADP and ACP tests through the end of the Plan Year in which the Employer executes its GUST restated Plan.]

ADP test	ACP test
(1) 1997: [n/a] prior year x current year	1997: [n/a] prior year x current year
(2 1998: [n/a] prior year x current year	1998: [n/a] prior year x current year
(3) 1999: [n/a] prior year x current year	1999: [n/a] prior year x current year
(4) 2000: [n/a] prior year xcurrent year	2000: [n/a] prior year x current year
(5) 2001: [n/a] prior year xcurrent year	2001: [n/a] prior year x current year
(6) 2002: [n/a] prior year x current year	2002: [n/a] prior year x current year

[n/a]  (c) Delayed application of SBJPA required beginning date. The Employer elects to delay the effective date for the required beginning date provision of Plan Section 6.02 until Plan Years beginning after. [n/a) (d) Model Amendment for required minimum distributions. The Employer adopts the IRS Model Amendment in

Plan Section 6.02(E) effective.                                 [Note: The date must not be earlier than January 1, 2001.] Defined

Benefit Limitation

[n/a]  (e) Code §415(e) repeal. The repeal of the Code §415(e) limitation is effective for Limitation Years beginning after [Note: If the Employer does not make an election under (e), the repeal is effective for Limitation Years beginning after December 31, 1999.]

Code §415(e) limitation. To the extent necessary to satisfy the limitation under Plan Section 3.17 for Limitation Years beginning prior to the repeal of Code §415(e), the Employer will reduce: (Choose one of ((J or (g))

[n/a]  (f) The Participant’s projected annual benefit under the defined benefit plan.

[n/a]  (g) The Employer’s contribution or allocation on behalf of the Participant to the defined contribution necessary, the Participant’s projected annual benefit under the defined benefit plan.

Coordination with top-heavy minimum allocation. The flan Administrator will apply the top-heavy minimum allocation provisions of Article XII with the following modifications. (Choose (h) or choose (1) or 6) or both as applicable)

[n/a]  (h) No modifications.

[n/a]  (i) Far Non-Key Employees participating only in this Plan, the top-heavy minimum allocation is the minimum allocation

determined by substituting % (not less than 4%) for “3%,” except: (Choose one of (1) or (2)) [n/a] (1) No exceptions.

[n/a]  (2) Plan Years in which the top-heavy ratio exceeds 90%.

[n/a]l  (l) For Non-Key Employees also participating in the defined benefit plan, the top-heavy minimum is. (Choose one of (1) or (2))

[n/a]  (I) 5 % of Compensation irrespective of the contribution rate of any Key Employee: (Choose one of a or b.)

[n/a]  a. No exceptions.

[n/a]  b. Substituting “7 112’/0” for “5W if the top-heavy ratio does not exceed 90%.

[n/a]  (2) 0% [Note: The defined benefit plan mist =L 6 the top-heavy minimum benefit requirement far these Non-Key Employees.]

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Actuarial assumptions for top-heavy calculation. To determine the top-heavy ratio, the Plan Administrator roil) use the following interest rate and mortality assumptions to value accrued benefits under a defined benefit plan:                                         

^© Copyright 2001 Astrue, Coakley & Garloo, Inc. 23

CHECKLIST OF EMPLOYER INFORMATION

AND EMPLOYER ADMINISTRATIVE ELECTIONS

Commencing with the 2003 Plan Year

The Prototype Plan permits the Employer to make certain administrative elections not reflected in the Adoption Agreement. This form lists those administrative elections and provides a means of recording the Employer’s elections. This checklist is not part of the Plan document.

37. Employer Information.

Benthos, Inc.

[Employer Name)

49 Edgerton Drive

[Address]

North Falmouth. Massachusetts 02556-2821	(508)563-1000
[City, State and Zip Code]	[Telephone Number	]

38. Form of Business.

(a)  x	Corporation	(b)  [n/a]	S Corporation
(c)  [n/a]	Limited Liability Company	(d)  [n/a]	Sole Proprietorship
(e)  [n/a]	Partnership	(f)  [n/a]

39. Section 1.07(F) - Nondiscriminatory definition of Compensation. When testing nondiscrimination under the Plan, the Plan permits the Employer to make elections regarding the definition of Compensation [Note: This election solely is for proposes of nondiscrimination testing. The election does not affect the Employer’s elections under Section 1.07 which apply for purposes of allocating Employer contributions and Participant forfeitures.]

(a) x  The Plan will “gross up” Compensation for Elective Contributions.

(b) [n/a] The Plan will exclude Elective Contributions.

40. Section 4.04 - Rollover contributions.

(a) x The Plan accepts rollover contributions.

(b) [n/a] The Plan does not accept rollover contributions.

41. Section 8-06 - Participant direction of tnvestment1404(c). The Plan authorizes Participant direction of investment with Trustee consent. If the Trustee permits Participant direction of investment, the Employer and the Trustee should adopt a policy which establishes the applicable conditions and limitations, including whether they intend the Plan to comply with BRISA §404(c).

(a)  x The Plan permits Participant direction of investment and is a 404(c) plan.

(b) [n/a] The Plan does not permit Participant direction of investment or is anon-404(c) plan.

42. Section 9.04[A) -Participant loans. The Plan authorizes the Plan Administrator to adopt a written loan policy to permit Participant loans.

(a) x The Plan permits Participant loans subject to the following conditions:

1 x Minimum loan amount:$1,000. $1,000

2 x Maximum number of outstanding loans: one.

x Reasons for which a Participant may request a loan: -

a. x Any purpose.

b. [n/a] Hardship events.

c.[n/a] Other                     .

(4)  x Suspension of loan repayments:

a. [n/a] Not permitted.

b. [n/a] Permitted for non-military leave of absence.

c . x Permitted for military service leave of absence.

(5) x The Participant must be a party in interest.

(b) [n/a] The Plan does not permit Participant loans.

43. Section 11.01- Life Insurance. The Plan with Employer approval authorizes the Trustee to acquire life insurance.

(a) [n/a] The Plan will invest in life insurance contracts.

(b) x The Plan will not invest in life insurance contracts.

44. Surety bond company:                . Surety bond amount $                .

^© Copyright 2001 Astrue, Coakley & Garloo, Inc. 24

EGTRRA

AMENDMENT TO THE

BENTHOS, INC. 401(K) RETIREMENT PLAN

EGTRRA - Employer

ARTICLE I

PREAMBLE

1.1 Adoption and effective date of amendment This amendment of the plan is adopted to reflect certain provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”). This amendment is intended as good faith compliance with the requirements of EGTRRA and is to be construed in accordance with EGTRRA and guidance issued thereunder. Except as otherwise provided, this amendment shall be effective as of the first day of the first plan year beginning after December 31, 2001.

1.2 Suppression of inconsistent provisions. This amendment shall supersede the provisions of the plan to the extent those provisions are inconsistent with the provisions of this amendment

ARTICLE II

ADOPTION AGREEMENT ELECTIONS

The questions in this Article II only need to be completed in order to override the default provisions set forth below. If all of the default provisions will apply, then these questions should be skipped.

Unless the employer elects otherwise in this Article 11, the following defaults apply:

1) The vesting schedule for matching contributions will be a 6 year graded schedule (if the plan currently has a graded schedule that does not satisfy EGTRRA) or a 3 year cliff schedule (if the plan currently has a cliff schedule that does not satisfy EGTRRA. and such schedule will apply to all matching contributions (even those made prior to 2002).

2) Rollovers are automatically excluded In determining whether the $5,000 threshold has been exceeded for automatic cash-outs (if the plan is not subject to the qualified joint and survivor annuity rules and provides for automatic cash-outs). This Is applied to all participants regardless of when the distributable event occurred.

3) The suspension period after a hardship distribution is made will be 6 months and this will only apply to hardship distributions made after 2001.

4) Catch-up contributions will be allowed.

5) For target benefit plans, the increased compensation limit of S200,000 will be applied retroactively (he., to years prior to 2002).

2.1 Vesting Schedule for Matching Contributions

If there are matching contributions subject to a vesting schedule that does not satisfy EGTRRA, then unless otherwise elected below, for participants who complete an hour of service in a plan year beginning after December 31, 2001, the following vesting schedule will apply to all matching contributions subject to a vesting schedule:

If the plan has a graded vesting schedule (i.e., the vesting schedule includes a vested percentage that is more than 0% and less than 100%) the following will apply;

Years of vesting service	Nonforfeitable percentage
2	20%
3	40%
4	60%
5	90%
6	100%

If the plan does not have a graded vesting schedule, then matching contributions will be nonforfeitable upon the completion of 3 years of vesting service.

In lieu of the. above vesting schedule, the employer elects the following schedule:

a. ¨ 3 year cliff (a participant’s accrued benefit derived from employer matching contributions shall be nonforfeitable upon the participant’s completion of three years of vesting service).

b. ¨ 6 year graded schedule (20% after 2 years of vesting service and an additional 20% for each year thereafter).

c. ¨ Other (must be at least as liberal as a- or the b. above):

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EGTRRA - Employer

Years of vesting service	Nonforfeitable percentage
	___________%
	___________%
	___________%
	___________%
	___________%

The vesting schedule set forth herein shall only apply to participants who complete an hour of service in a plan year beginning after December 31, 2001, and, unless the option below is elected, shall apply to all matching contributions subject to a vesting schedule.

d. ¨ The vesting schedule will only apply to matching contributions made in plan years beginning after December 31, 2001 (the prior schedule will apply to matching contributions made in prior plan years).

2.2 Exclusion of Rollovers is Application of Involuntary Cash-out Provisions (for profit sharing and 401(k) plans only). If the plan is not subject to the qualified joint and survivor annuity rules and includes involuntary cash-out provisions, then unless one of the options below is elected, effective for distributions made after December 31, 2001, rollover contributions will be excluded in determining the value of the participant’s nonforfeitable account balance for purposes of the plan’s involuntary cps-out rules.

a. ¨ Rollover contributions will not be excluded.

b. x Rollover contributions will be excluded only with respect to distributions made after April 30, 2004.

(Enter a date no earlier than December 31, 2001.)

c. ¨ Rollover contributions will only be excluded with respect to participants who separated from service after (Enter a date. The date may be earlier than December 31, 2001.)

2.3 Suspension period of hardship distributions. If the plan provides for hardship distributions upon satisfaction of the safe harbor (deemed) standards as set forth in Tress. Reg. Section 1.401(k)-1(d (2)(iv), then, unless the option below is elected, the suspension period following a hardship distribution shall only apply to hardship distributions made after December 31, 2001.

x With regard to hardship distributions made during 2001, a participant shall be prohibited from making elective deferrals and employee contributions under this and all other plans until the later of January 1, 2002, or 6 months after receipt of the distribution.

2.4 Catch-up contributions (for 41)1(k) profit sharing plans only): The plan permits catch-up contributions (Article VI) unless the option below is elected.

¨ The plan does not permit catch-up contributions to be made.

2.5 For target benefit plans only: The increased compensation limit (5200,000 limit) shall apply to years prior to 2002 unless the option below is elected.

¨ The increased compensation limit will not apply to years prior to 2002.

ARTICLE 11

VESTING OF MATCHING CONTRIBUTIONS

3.1 Applicability. This Article shall apply to participants who complete an Hour of Service after December 31, 2001, with respect to accrued benefits derived from employer matching contributions made in plan years beginning after December 31, 2001. Unless otherwise elected by the employer in Section 2.1 above, this Article shall also apply to all such participants with respect to accrued benefits derived from employer matching contributions made in plan years beginning prior to January 1, 2002.

3.2 Vesting schedule. A participant’s accrued benefit derived from employer matching contributions shall vest as provided in Section 2.1 of this amendment.

ARTICLE IV

INVOLUNTARY CASH-OUTS

4.1 Applicability and effective date. If the plan provides for involuntary cash-outs of amounts less than $5,000, then unless otherwise elected in Section 2.2 of this amendment, this Article shall apply for distributions made after December 31, 2001, and shall apply to all participants. However, regardless of the preceding, this Article shall not apply if the plan is subject to the qualified joint and survivor annuity requirements of Sections 401 (a)(11) and 417 of the Code.

4.2 Rollovers disregarded in determining value of account balance for involuntary distributions. For purposes of the Sections of the plan that provide for the involuntary distribution of vested accrued benefits of 55,000 or less, the value of a participants nonforfeitable account balance shall be determined without regard to that portion of the account

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EGTRRA - Employer

balance that is attributable to rollover contributions (and earnings allocable thereto) within the meaning of Sections 402(c), 403(a)(4), 403(b)(S), 408(d)(3)(A)(ii), and 457(e)(16) of the Code. If the value of the participant’s nonforfeitable account balance as so determined is $5,000 or less, then the plan shall immediately distribute the participant’s entire nonforfeitable account balance.

ARTICLE V

HARDSHIP DISTRIBUTIONS

5.1 Applicability and effective date. If the plan provides for hardship distributions upon satisfaction of the safe harbor (deemed) standards as set forth in Trees. Reg. Section 1.401(k)-1(d)(2Xiv), then this Article shall apply for calendar years beginning after 2001.

5.2 Suspension period following hardship distribution. A participant who receives a distribution of elective deferrals after December 31, 2001, on account of hardship shall be prohibited from making elective deferrals and employee contributions under this and all other plans of the employer for 6 months after receipt of the distribution. Furthermore, if elected by the employer in Section 2.3 of this amendment, a participant who receives a distribution of elective deferrals in calendar year 2001 on account of hardship shall be prohibited from malting elective deferrals and employee contributions under this and all other plans until the later of January 1, 2002, or 6 months after receipt of the distribution.

ARTICLE VI

CATCH-UP CONTRIBUTIONS

Catch-up Contributions. Unless otherwise elected in Section 2.4 of this amendment, all employees who are eligible to make elective deferrals under this plan and who have attained age 50 before the close of the plan year shall be eligible to make catch-up contributions in accordance with, and subject to the limitations of, Section 414(v) of the Code. Such catch-up contributions shall not be taken into account for purposes of the provisions of the plan implementing the required limitations of Sections 402(g) and 415 of the Code. The plan shall not be treated as failing to satisfy the provisions of the plan implementing the requirements of Section 401(k)(3), 401(k)(Il), 401(kXl2), 410(b), or 416 of the Code, as applicable, by reason of the malting of such catch-up contributions.

ARTICLE VII

INCREASE IN COMPENSATION LIMIT

Increase in Compensation Limit The annual compensation of each participant taken into account in determining allocations for any plan year beginning after December 31, 2001, shall not exceed 5200,000, as adjusted for cost-of-living increases in accordance with Section 401(ax17)(B) of the Code. Annual compensation means compensation during the plan year or such other consecutive 12-month period over which compensation is otherwise determined under the plan (the determination period). If this is a target benefit plan, then except as otherwise elected in Section 2.5 of this amendment, for purposes of determining benefit accruals in a plan year beginning after December 31, 2001, compensation for any prior determination period shall be limited to $200,000. The cost-of living adjustment in effect for a calendar year applies to annual compensation for the determination period that begins with or within such calendar year.

ARTICLE VIII

PLAN LOANS

Plan loans for owner-employees or shareholder-employees. If the plan permits loans to be made to participants, then effective for plan loam made after December 31, 2001, plan provisions prohibiting loans to any owner-employee or shareholder-employee shall cease to apply.

ARTICLE IX

LIMITATIONS ON CONTRIBUTIONS (LRC SECTION 415 LIMITS)

9.1 Effective date. This Section shall be effective for limitation years beginning after December 31, 2001.

9.2 Maximum annual addition. Except to the extent permitted under Article VI of this amendment and Section 414(v) of the Code, if applicable, the annual addition that may be contributed or allocated to a participant’s account under the plan for any limitation year shall not exceed the lesser of.

a. 140,000, as adjusted for increases in the cost-of-living under Section 415(d) of the Code, or

b. 100 percent of the participants compensation, within the meaning of Section 415(c)(3) of the Code, for the limitation year.

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EGTRRA - Employer

The compensation limit referred to in b, shall not apply to any contribution for medical benefits after separation from service (within the meaning of Section 401(h) or Section 419A(f)(2) of the Code) which is otherwise treated as an annual addition.

ARTICLE X

MODWICATION OF TOP-HEAVY RULES

10.1  Effective date. This Article shall apply for purposes of determining whether the plan is a top-heavy plan under Section 416(g) of the Code for plan years beginning after December 31, 2001, and whether the plan satisfies the minimum benefits requirements of Section 416(c) of the Code for such years. This Article amends the top-heavy provisions of the plan.

10.2  Determination of top-heavy status.

10.2.1  Key employee. Key employee means any employee or former employee (including any deceased employee) who at any time during the plan year that includes the determination date was an officer of the employer having annual compensation greater than $130,000 (as adjusted under Section 416(i)(l) of the Code for plan years beginning after December 31, 2002), a 5-percent owner of the employer, or a 1-percent owner of the employer having annual compensation of more than $150,000. For this purpose, annual compensation means compensation within the meaning of Section 415(c)(3) of the Code. The determination of who is a key employee will be made in accordance with Section 416(i)(1) of the Code and the applicable regulations and other guidance of general applicability issued thereunder.

10.2.2  Determination of present values and amounts. This Section 10.2.2 shall apply for purposes of determining the present values of accrued benefits and the amounts of account balances of employees as of the determination date.

a. Distributions during veer ending on the determination date. The present values of accrued benefits and the amounts of account balances of an employee as of the determination date shall be increased by the distributions made with respect to the employee under the plan and any plan aggregated with the plan under Section 416(gX2) of The Code during the 1-year period ending on the determination date The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the plan under Section 416(gx2)(A)(i) of the Code. In the case of a distribution made for a reason other than separation from service, death, or disability, this provision shall be applied by substituting “5-year period” for “I-year period.”

b. Employees not performing services during year ending on the determination date. The accrued benefits and accounts of any individual who has not performed services for the employer during the 1-year period ending on the determination date shall not be taken into account.

10.3  Minimum benefits.

10.3.1  Matching contributions. Employer matching contributions shall be taken into account for purposes of satisfying the minimum contribution requirements of Section 416(c)(2) of the Code and the plan. The preceding sentence shall apply with respect to matching contributions under the plan or, if the plan provides that the minimum contribution requirement shall be met in another plan, such other plan. Employer matching contributions that are used to satisfy the minimum contribution requirements shall be treated as matching contributions for purposes of the actual contribution percentage test and other requirements of Section 401 (m) of the Code.

10.3.2  Contributions under other plans. The employer may provide, in an addendum to this amendment, that the minimum benefit requirement shall be met in another plan (including another plan that consists solely of a cash or deferred arrangement which meets the requirements of Section 401(kX12) of the Code and matching contributions with respect to which the requirements of Section 401(mX11) of the Code are met). The addendum should include the name of the other plan, the minimum benefit that will be provided under such other plan, and the employees who will receive the minimum benefit under such other plan.

ARTICLE Xl

DIRECT ROLLOVERS

11.1  Effective date. This Article shall apply to distributions made after December 31, 2001.

11.2  Modification of definition of eligible retirement Wan. For purposes of the direct rollover provisions of the plan, an eligible retirement plan shall also mean an annuity contract described in Section 403(b) of the Code and an eligible plan under Section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this plan. The definition of eligible retirement plan shall also apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the alternate payee under a qualified domestic relation order, as defined in Section 414(p) of the Code.

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EGTRRA - Employer

11.3  Modification of definition of eligible rollover distribution to exclude hardship distributions. For purposes of the direct rollover provisions of the plan, any amount that is distributed on account of hardship shall not be an eligible rollover distribution and the distributee may not elect to have any portion of such a distribution paid directly to an eligible retirement plan.

11.4  Modification of definition of eligible rollover distribution to include after-tax employee contributions. For purposes of the direct rollover provisions in the plan, a portion of a distribution shall not fail to be an eligible rollover distribution merely because the portion consists of after-tax employee contributions which are not includible in gross income. However, such portion may be transferred only to an individual retirement account or annuity described in Section 408(a) or (b) of the Code, or to a qualified defined contribution plan described in Section 401 (a) or 403(a) of the Code that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible.

ARTICLE XII

ROLLOVERS FROM OTHER PLANS

Rollovers from other plans. The employer, operationally and an a nondiscriminatory basis, may limit the source of rollover contributions that may be accepted by this plan.

ARTICLE XIII

REPEAL OF MULTIPLE USE TEST

Repeal of Multiple Use Test The multiple use test described in Treasury Regulation Section 1.401(m)-2 and the plan shall not apply for plan years beginning after December 31, 2001.

ARTICLE XIV

ELECTIVE DEFERRALS

14.1  Elective Deferrals - Contribution Limitation. No participant shall be permitted to have elective deferrals made under this plan, or any other qualified plan maintained by the employer during any taxable year, in excess of the dollar limitation contained in Section 402(g) of the Code in effect for such taxable year, except to the extent permitted under Article VI of this amendment and Section 414(v) of the Code, if applicable.

14.2  Maximum Salary Reduction Contributions for SIMPLE plans. If this is a SIMPLE 401(k) plan, then except to the extent permitted under Article VI of this amendment and Section 414(v) of the Code, if applicable, the maximum salary reduction contribution that can be made to this plan is the amount determined under Section 408(pX2)(A)(ii) of the Code for the calendar year.

ARTICLE XV

SAFE HARBOR PLAN PROVISIONS

Modification of Top-Heavy Rules. The top-heavy requirements of Section 416 of the Code and the plan shall not apply in any year beginning after December 31, 2001, in which the plan consists solely of a cash or deferred arrangement which meets the requirements of Section 401(kX12) of the Code and matching contributions with respect to which the requirements of Section 401(m)(11) of the Code are met.

ARTICLE XVI

DISTRIBUTION UPON SEVERANCE OF EMPLOYMENT

16.1  Effective date. This Article shall apply for distributions and transactions made after December 31, 2001, regardless of when the severance of employment occurred.

16.2  New distributable event A participant’s elective deferrals, qualified nonelective contributions, qualified matching contributions, and earnings attributable to these contributions shall be distributed on account of the participant’s severance from employment. However, such a distribution shall be subject to the other provisions of the plan regarding distributions, other than provisions that require a separation from service before such amounts may be distributed.

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EGTRRA - Employer

This amendment has been executed this 30th day of April, 2004.

By:	/s/ Ronald L. Marsiglio
	EMPLOYER

Name of Plan. Benthos, Inc. 401(k) Retirement Plan ^© Copyright 2001 Astrue, Coakley & Garloo, Inc.

6

POST-EGTRRA

AMENDMENT TO TSE

ASTRUE, COAX LEY & GARLOO, INC.

DEFINED CONTRIBUTION PROTOTYPE PLAN & TRUST

ASTRUE, COAKLEY & GARLOO, INC. DEFINED CONTRIBUTION PROTOTYPE PLAN & TRUST POST-EGTRRA AMENDMENT

ARTICLE I

PREAMBLE

1.1 Adoption and effective date of amendment. This amendment of the plan is adopted to reflect certain provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”), the Job Creation and Worker Assistance Act of 2002, IRS Regulations issued pursuant to IRC §401(a)(9), and other IRS guidance. This amendment is intended as good faith compliance with the requirements of EGTE A and is to be construed in accordance with EGTRRA and guidance issued thereunder. Except as otherwise provided, this amendment shall be effective as of the first day of the first plan year beginning after December 31, 2001.

1.2 Suppression of inconsistent provisions. This amendment shall supersede the provisions of the plan to the extent those provisions are inconsistent with the provisions of this amendment.

1.3 Adoption by prototype sponsor. Except as otherwise provided herein, pursuant to Section 5.01 of Revenue Procedure 2000-20, the sponsor hereby adopts this amendment on behalf of all adopting employers.

ARTICLE. II

ADOPTION AGREEMENT ELECTIONS

The questions In this Article II only need to be completed in order to override the default provisions set forth below. If all of the default provisions will apply, then these questions should be skipped

Unless the employer elects otherwise in this Article II, the following defaults apply:

1. If catch-up contributions are permitted, then the catch-up contributions are treated like any other elective deferrals for purposes of determining matching contributions under the plan.

2. For plans subject to the qualified joint and survivor annuity rules, rollovers are automatically excluded In determining whether the 55,000 threshold has been exceeded for automatic cash-outs of the plan provides for automatic cash-outs). This is applied to all participants regardless of when the distributable event occurred.

3. The minimum distribution requirements are effective for distribution calendar years beginning with the 2002 calendar year. In addition, participants or beneficiaries may elect on an Individual basis whether the 5-year rule or the life expectancy rule in the plan applies to distributions after the death of a participant who has a designated beneficiary.

4. Amounts that are “deemed 125 compensation” are not Included in the definition of compensation.

2.1 Exclusion of Rollovers in Application of Involuntary Cash-out Provisions. If tie plan is subject to the joint and survivor annuity rules and includes involuntary cash-out provisions, then unless one of the options below is elected, effective for distributions made after December 31, 2001, rollover contributions will be excluded in determining the value of a participant’s nonforfeitable account balance. for purposes of the plan’s involuntary cash-out rules.

a. ¨ Rollover contributions will not be excluded.

b. ¨ Rollover contributions will be excluded only with respect to distributions made after         . Enter a date no earlier than December 31, 2001).

c. ¨ Rollover contributions will only be excluded with respect to participants who separated from service after         ., (Enter a date. The date may be earlier than December 31, 2001:)

2.2 Catch-up contributions (for 401(k) profit sharing plans only): The plan permits catch-up contributions effective for calendar years beginning after December 31, 2001, (Article V) unless otherwise elected below. a. ¨ The plan does not permit catch-up contributions to be made.

b. ¨ Catch-up contributions arc permitted effective as of (enter a date no earlier than January 1, 2002).

And, catch-up contributions will be taken into account in applying any matching contribution under the Plan unless otherwise elected below.

c. ¨ Catch-up contributions will not be taken into account in applying any matching contribution under the Plan

Astrue, Coakley & Garloo, Inc.

Amendment for Section 401(a)(9) Final and Temporary Treasury Regulations.

2.3

a. Effective date. Unless a later effective date is specified in below, the provisions of Article VI of this amendment will apply for purposes of determining required minimum distributions for calendar years beginning with the 2002 calendar year.

¨ This amendment applies for purposes of determining required minimum distributions for distribution calendar years beginning with the 2003 calendar year, as well as required minimum distributions for the 2002 distribution calendar year That are made on or after                      (leave blank if this amendment does not apply to any minimum distributions for the 2002 distribution calendar year),

b. Election to not permit Participants or Beneficiaries to Fleet 5-Year Rule.

Unless elected below, Participants or beneficiaries may elect on an individual basis whether the 5-year rule or the life expectancy rule in Sections 6.2.2 and 6.4.2 of this amendment applies to distributions after the death of a Participant who has a designated beneficiary. The election must be made no later than the earlier of September 30 of the calendar year in which distribution would be required to begin under Section 6.2.2 of this amendment, or by September 30 of the calendar year which contains the fifth anniversary of the Participant’s (or, if applicable, surviving spouse’s) death. If neither the Participant nor beneficiary makes an election under this paragraph, distributions will be made in accordance with Sections 6.2.2 and 6.4.2 of this amendment and, if applicable, the elections in Section 2.3.c of this amendment below.

¨ The provision set forth above in this Section 2.3.b shall not apply. Rather, Sections 6.2.2 and 6.4.2 of this amendment shall apply except as elected in Section 2.3.c of this amendment below.

c. Election to Apply 5-Year Rule to Distributions to Designated Beneficiaries.

¨ If the Participant dies before distributions begin and there is a designated beneficiary, distribution to the designated beneficiary is not required to begin by the date specified in the Plan, but the Participant’s entire interest will be distributed to the designated beneficiary by December 31 of the calendar year containing the fifth anniversary of the Participant’s death. If the Participant’s surviving spouse is the Participant’s sole designated beneficiary and the surviving spouse dies after the Participant but before distributions to either the Participant or the surviving spouse begin, this election will apply as if the surviving spouse were the Participant.

If the above is elected, then this election will apply to:

1. ¨ All distributions.

2. ¨ The following distributions:                                                              

d. Election to Allow Designated Beneficiary Receiving Distributions Under 5-Year Rule to Elect Life Expectancy Distributions.

¨ A designated beneficiary who is receiving payments under the 5-year rule may make a new election to receive payments under the life expectancy rule until December 31, 2003, provided .that all amounts that would have been required to be distributed under the life expectancy rule for all distribution calendar years before 2004 are distributed by the earlier of December 31, 2003, or the end of the 5-year period. ‘

2.4 Deemed 125 compensation, Article VII of this amendment shall not apply unless otherwise elected below.

¨ Article VII of this amendment (Deemed 125 Compensation) shall apply effective as of Plan Years and Limitation Years beginning on or after (insert the later of January 1, 1998, or the first day of the first plan year the Plan used this definition).

ARTICLE III

INVOLUNTARY CASH-OUTS

3.1 Applicability and effective date If the plan is subject to the, qualified joint and survivor annuity rules and provides for involuntary cash-outs of amounts less than $5,000, then unless otherwise elected in Section 2.1 of this amendment, this Article shall apply for distributions made after December 31, 2001, and shall apply to all participants.

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Astrue, Coakley & Garloo, Inc.

3.2 Rollovers disregard in determining value of account balance for involuntary distributions. For purposes of the Sections of the plan that provide for the involuntary distribution of vested accrued benefits of $5,000 or less, the value of a participant’s nonforfeitable account balance shall be determined without regard to that portion of the account balance that is attributable to rollover contributions (and earnings allocable thereto) within the meaning of Sections 402(c), 403(a)(4), 403 (b)(8), 408(d)(3)(A)(ii), and 457(e)(l6) of the Code. If the value of the participant’s nonforfeitable account balance as so determined is $5,000 or less, then the plan shall immediately distribute the participant’s entire nonforfeitable account balance.

ARTICLE IV

HARDSHIP DISTRIBUTIONS

Reduction of Section 402(v) of the Code following hardship distribution. If the plan provides for hardship distributions upon satisfaction of the safe harbor (deemed) standards as set forth in Tress. Reg. Section 1.401 (k)-I(d)(2)(iv), then effective as of the data the elective deferral suspension period is reduced from 12 months to 6 months pursuant to POTRR.A, reduction in the maximum amount of elective deferrals that a Participant may make pursuant to Section 402(g) of the Code solely because of a hardship distribution made by this plan or any other plan of the Employer.

ARTICLE V

CATCH-UP CONTRIBUTIONS

Catch-up Contributions. Unless otherwise elected in Section 2.2 of this amendment, effective, for calendar years beginning after December 31, 2001, all employees who arc eligible to make elective deferrals under this plan and who have attained age 50 before the close of the calendar year shall be eligible to make catch-up contributions in accordance with, and subject to the limitations of Section 414(v) of the Code. Such catch-up contributions shall not be taken into account far purposes of the provisions of the plan implementing the required limitations of Sections 402(8) and 415 of the Code. The plan shall not be treated as failing to satisfy the provisions of the plan implementing the requirements of Sections 401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416 of the Code, as applicable, by reason of the making of such catch-up contributions.

If elected in Section 2.2, catch-up contributions shall not be treated as elective deferrals for purposes of applying any Employer matching contributions under the plan.

ARTICLE VI

REQUIRED MINIMUM DISTRIBUTIONS

6.1 GENERAL RULES

6.1.1 Effective Date. Unless a later effective date is specified in Section 2.3,a of this amendment, the provisions of this amendment will apply for purposes of determining required minimum distributions for calendar years beginning with the 2002 calendar year.

6.1.2 Coordination with Minimum Distribution Requirements Previously in Effect. If the effective date of this amendment is earlier than calendar years beginning with the 2003 calendar year, required minimum distributions for 2002 under this amendment will be determined as follows. If the total amount of 2002 required minimum distributions under the Plan made to the distributee prior to the effective date of this amendment equals or exceeds the required minimum distributions determined under this amendment, then no additional distributions will be required to be made for 2002 on or after such date to the, distributee. If the total amount of 2002 required minimum distributions under the Plan made to the distributes prior to the effective-date of this amendment is less than the amount determined under this amendment, then required minimum distributions for 2002 on and alter such date will be determined so that the total amount of required minimum distributions for 2002 made to the distributee will be the amount determined under this amendment.

6.1.3 Precedence. The requirements of this amendment will take precedence over any inconsistent provisions of the Plan.

6.1.4 Requirements of Treasury Regulations Incorporated. All distributions required under this amendment will be determined and made in accordance with the Treasury regulations under Section 401(a)(9) of the Internal Revenue Code.

6.1.5 TBFRA Section 242(b)(2) Elections. Notwithstanding the other provisions of this amendment. distributions may be made under a designation made before January 1, 1984, in accordance with Section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act (TEFRA) and the provisions of the Plan that relate to Section 242(b)(2) of TEFRA.

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6.2 TIME AND MANNER OF DISTRIBUTION

6.2.1 Recurred Beginning Date. The Participant’s entire interest will be distributed, or begin to be distributed, to the Participant no later than the Participant’s required beginning date.

6.2.2 Death of Participant Before Distributions Begin. If the Participant dies before distributions begin, the Participant’s entire interest will be distributed, or begin to be distributed, no later than as follows:

(a) If the Participant’s surviving spouse is the Participant’s sole designated beneficiary, then, except as provided in Article VI, distributions to the surviving spouse will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died, or by December 31 of the calendar year in which the Participant would

have attained age 70’/z, if later.

(b) If the Participant’s surviving spouse is not the Participant’s sole designated beneficiary, then, except as provided in Section 2.3 of this amendment, distributions to the designated beneficiary will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died.

(c) If there is no designated beneficiary as of September 30 of the year following the year of the Participant’s death, the Participant’s entire interest will be distributed by December 31 of the calendar year containing the fifth anniversary

of the Participant’s death.

(d) If the Participant’s surviving spouse is the Participant’s sole designated beneficiary and the surviving spouse dies after the Participant but before distributions to the surviving spouse begin, this Section 6.2.2, other than Section 6.2.2(a), will apply as if the surviving spouse were the Participant .

For purposes of this Section 6.2.2 and Section 2.3, unless Section 6.2.2(d) applies, distributions are considered to begin on the Participant’s required beginning date. If Section 6.2.2(d) applies, distributions art considered to begin on the date distributions are required to begin to the surviving spouse under Section 6.2.2(a). If distributions under an annuity purchased from an insurance company irrevocably commence to the Participant before the Participant’s required beginning date (or to the Participant’s surviving spouse before the date distributions are required to begin to the surviving spouse under Section 6.2.2(a)), the date distributions are considered to begin is the date distributions actually commence.

6.2.3 Forms of Distribution. Unless the Participant’s interest is distributed in the form of an annuity purchased from an insurance company or in a single sum on or before the required beginning date, as of the first distribution calendar year distributions will be made in accordance with Sections 6.3 and 6.4 of this amendment If the Participants interest is distributed in the form of an annuity purchased from an insurance company, distributions thereunder will be made in accordance with the requirements of Section 401(aX9) of the Code and the Treasury regulations.

6.3 REQUIRED MINIMUM DISTRIBUTIONS DURING PARTICIPANT’S LIFETIME

6.3.1 Amount of Required Minimum Distribution for Each Distribution Calendar Year. During the Participant’s lifetime, the minimum amount that will be distributed^-for each distribution calendar year is the lesser of

(a) the quotient obtained by dividing the Participant’s account balance by the distribution period in the Uniform Lifetime Table set forth in Section 1.401(a)(9)-9 of the Treasury regulations, using the Participant’s age as of the Participant’s birthday in the distribution calendar year, or

(b) if the Participant’s sole designated beneficiary for the distribution calendar year is the Participant’s spouse, the quotient obtained by dividing the Participant’s account balance by the number in the Joint and Last Survivor Table set forth in Section 1.401(a)(9)-9 of the Treasury regulations, using the Participant’s and spouse’s attained ages as of the Participant’s and spouse’s birthdays in the distribution calendar year.

6.3.2 Lifetime Required Minimum Distributions Continue Through Year of Participant’s Death. Required minimum distributions will be determined under this Section 6.3 beginning with the first distribution calendar year and up to and including the distribution calendar year that includes the Participant’s date of death.

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6.4 REQUIRED MINIMUM DISTRIBUTIONS AFF +T R PARTICIPANT’S DEATH

6.4.1 Death On or After Date Distributions Begin,

(a) Participant Survived by Designated Beneficiary. If the Participant dies on or after the date distributions begin and there is a designated beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s account balance by the longer of the remaining life expectancy of the Participant or the remaining life expectancy of the Participant’s designated beneficiary, determined as follows:

(1) The Participant’s remaining life expectancy is calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

(2) If the Participant’s surviving spouse is the Participant’s sole designated beneficiary, the remaining lift expectancy of the surviving spouse is calculated for each distribution calendar year after the year of the Participant’s death using the surviving spouse’s age as of the spouse’s birthday in that year. For distribution calendar years after the year of the surviving spouse’s death, the remaining life expectancy of the surviving spouse is calculated using the age of the surviving spouse as of the spouse’s birthday in the calendar year of the spouse’s death, reduced by one for each subsequent calendar year.

(3) If the Participant’s surviving spouse is not Participant’s sole designated beneficiary, the designated beneficiary’s remaining life expectancy is calculated using this age of the beneficiary in the year following the year of the Participant’s death, reduced by one for each subsequent year.

(b) No Designated Beneficiary. If the Participant dies on or after the date distributions begin and there is no designated beneficiary as of September 30 of the year after the year of the Participant’s death, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s account balance by the Participant’s remaining life expectancy calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

6.4.2 Death Before Date Distributions Begin.

(a) Participant Survived by Designated Beneficiary. Except as provided in Section 2.3, if the Participant dies before the date distributions begin and there is a designated beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s account balance by the remaining life expectancy of the Participant’s designated beneficiary, determined as provided in Section 6.4.1.

(b) No Designated Beneficiary. If the Participant dies before the date distributions begin and there is no designated beneficiary as of September 30 of the year following the year of the Participant’s death, distribution of the Participant’s entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of the. Participant’s death.

(c) Death of Surviving Spouse Before Distributions to Surviving Spouse Are Required to Begin. If the Participant dies before the date distributions begin, the Participant’s surviving spouse is the Participant’s sole designated beneficiary, and the surviving spouse dies before distributions are required to begin to the surviving spouse under Section 6.2.2(x), this Section 6.4.2 will apply as if the surviving spouse were the Participant.

6.5 DEFINITIONS

6.5.1 Designated beneficiary. The individual who is designated as the Beneficiary under the Plan and is the designated beneficiary under Section 401(a)(9) of the Internal Revenue Code and Section 1.401(a)(9)-I, Q&A-4, of the Treasury regulations.

6.5.2 Distribution calendar Year. A calendar year for which a minimum distribution is required. For distributions beginning before the Participant’s death, the first distribution calendar year is the calendar year immediately preceding the calendar year which contains the Participant’s required beginning date. For distributions beginning after the Participant’s death, the first distribution calendar year is the calendar year in which distributions are required to begin under Section 6.2.2. The required minimum distribution for the Participant’s fast distribution calendar year will be made on or before the Participant’s’ required beginning date. The required minimum distribution for other distribution calendar years, including the required minimum distribution for the distribution calendar year in which the Participant’s required beginning date occurs, will be made on or before December 31 of that distribution calendar year.

6.5.3 Life expectancy. Life expectancy as computed by use of the Single Life Table in Section 1.401(a)(9)-9 of the Treasury regulations.

Astrue, Coakley & Garloo, Inc.

6.5.4 Participant’s account balance. The account balance as of the last valuation date in the calendar year immediately preceding the distribution calendar year (valuation calendar yea’) increased by the amount of any contributions made and allocated or forfeitures allocated to the account balance as of dates in the valuation calendar year after the valuation date and decreased by distributions made in the valuation calendar year after the valuation date. The account balance for the valuation calendar year includes any amounts rolled over or transferred to the Plan either in the valuation calendar year or in the distribution calendar year if distributed or transferred in the valuation calendar year.

6.5.5 Required beginning date. The date specified in the Plan when distributions under Section 401(a)(9) of the Internal Revenue Code are required to begin.

ARTICLE VII

DEEMED 125 COMPENSATION

If elected, this Article shall apply as of the effective date specified in Section 2.4 of this amendment. For purposes of any definition of compensation under this Plan that includes a reference to amounts under Section 125 of the Code, amounts under Section 125 of the Code include any amounts not available to a Participant in cash in lieu of group health coverage because the Participant is unable to certify that he or she has other health coverage. An amount will be treated as an amount under Section 125 of the Code only if the Employer does not request or collect information regarding the Participant’s other health coverage as part of the enrollment process for the health plan.

Astrue, Coakley & Garloo, Inc.

Except with respect to any election made by the employer in Article II, this amendment is hereby adopted by the prototype sponsor on behalf of all adopting employers on December 23.

Sponsor acne: Astrue. Coakley & Genoa. Inc.

By:	/s/ David C. Astrue
	David C. Astrue

NOTE: The employer only needs to execute this amendment if an election has been made in Article II of this amendment. This amendment has been executed this ______________________________ day of ____________________________________

Name of Plan: __________________________

Name of Employer:
By
	EMPLOYER

Name of Participating Employer: _________________

By:
	PARTICIPATING EMPLOYER

Internal Revenue Service	Department of the Treasury
Plan Description: Prototype Non-standardized Profit Sharing Plan	Washington, DC 20224
FFN: 503A4180701-003 Case: 200102890 EIN: 04-3404010
BPD 01        Plan: 003    Letter Serial No: K307802a

ASTRUE COAKLEY & GARLOO INC
	Contact Person: Ms. Arrington 50-00197
P O BOX 870298
	Telephone Number (202) 203-5911 In
MILTON, MA 02187
	Reference to; T=SP:RA:IGV
Dear Applicant:	Date: 08/30/2001

In our opinion, the form of the plan identified above is acceptable under section 401 of the Internal Revenue Code for use by employers for the benefit of their employees. This opinion relates only to the acceptability of the form of the plan under, the Internal Revenue Code. It is not an opinion of the affect of other Federal or local statutes.

You must furnish a copy of this letter to each employer who adopts this plan. You are also required to send a copy of the approved form of the plan, any approved amendments and related documents to Employee Plans Determinations in Cincinnati at the address specified in section 9.11 of Rev. Proc. 2000-20, 2000-6 I.R.B. 553.

This letter considers the changes in qualifications requirements made by the Uruguay Round Agreements Act (GATT), Pub. L. 103-465, the Small Business Job Protection Act of 1996, Pub. L. 104-288, the Uniformed services Employment and Reemployment Rights Act of 1994, Pub. L. 103-353, the Taxpayer Relief Act of 1997, Pub. L. 105-34, the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206 and the Community Renewal Tax Relief Act of 2000, Pub. L. 106-554. These laws are referred to collectively as OUST.

Our opinion on the acceptability of the form of the plan is not a ruling or determination as to whether an employer’s plan qualifies under code section 401 (a). However. an employer that adopts this plan may rely on this letter with respect to the qualification of its, plan under Code section 401(a), as provided for in Announcement 2001-77, 2001-30 I.R.B. and outlined below. The terms of the plan must be followed in operation.

Except as provided below, our opinion does not apply with respect to the requirements of: (a) Code sections 401(a)(4), 401 (a) (26), 401(1), 410(b) and 414(6). Our opinion does not apply for purposes of Code section 401 (a)(10)(B) and section 401 (a)(16) if an employer ever maintained another qualified plan for one or more employees who are covered by this plan. For this purpose, the employer will not be considered to have maintained another plan merely because the employer has maintained another defined contribution plan(a), provided such other plans) hike been terminated prior to the effective date of this plan and no annual additions have been credited to the account of any participant under such other plans) as of any date within the limitation year of this plan. Likewise, it this plan is first effective on or after the effective date of the repeal of Code section 415(e), the employer will not be considered to have maintained another plan merely because the employer has maintained a defined benefit plan(s), provided the defined benefit plans) has been terminated prior to the effective date of this plan. Our opinion also does not apply for purposes of Code section 401(a) (16) if, after December 31, 1985, the employer maintains a welfare benefit fund defined in Code section 419(a), which provides postretirement medical benefits allocated to separate accounts for key employees as defined in code section 419A(d) (3).

Our opinion applies with respect to the requirements of Code section 410(b) if 100 percent of all nonexcludable employees benefit under the plan. Employers that elect a safe harbor allocation formula end a safe harbor compensation definition can also rely on an opinion letter with respect to the nondiscriminatory amounts requirement under section 401(a) (4) and the requirements of sections 401(k) and 401(m) (except where the plan is a safe harbor plan under section 401(k) (12) that provide ¨ for the safe harbor contribution to be made under another plan).

ASTRUE COAKLEY & GARLOO INC

FFN 503A4180701-003

Page 2

An employer that elects to continue to apply the pre-GUST family aggregation rules in years beginning after December 31, 2996, or the combined plan limit of section 415(a) in years beginning after December 31, 1999, will not be able to rely on the opinion letter without a determination letter. The employer may request a determination letter by filing an application with Employee Plans Determinations on Form 5307, Application far Determination for Adopters of master or Prototype or volume Submitter Plans.

If you, the master or prototype sponsor, have any questions concerning the IRS processing of this case, please call the above telephone number. This number is only far use of the sponsor. Individual participants and/or adopting employers with questions concerning the plan should contact the master or prototype sponsor. The plan’s adoption agreement must include the sponsor’s, address and telephone number for inquiries by adopting employers.

if you write to the IRS regarding this plan, please provide your telephone number and the most convenient time for u to call in case we need more information. whether you call or write, please refer to the Letter Serial Humber and File Folder Number shown in the heading of this letter.

You should keep this letter an a permanent record. Please notify us if you modify or discontinue sponsorship of this plan. Sincerely yours,

Director

Employee Plans Rulings & Agreements

BENTHOS, INC. 401(K) RETIREMENT PLAN

QUALIFIED DOMESTIC RELATIONS ORDER PROCEDURE

In the case of any Domestic Relations Order (“DRO”) received by Benthos, Inc. 401(k) Retirement Plan (the “Plan”), its status as a Qualified Domestic Relations Order (“QDRO”) under the Employee Retirement Income Security Act (“ERISA”) and the Internal Revenue Code will be determined under the following procedures. The Plan Administrator is responsible for administering the QDRO Procedure. The purpose of the QDRO Procedure is to establish a reasonable and consistent procedure for determining the qualified status of a DRO and for making distributions pursuant to a DRO that qualifies under Internal Revenue Code Section 414(p).

Procedure prior to receipt of order The Plan will apply the following procedure prior to the Plan’s receipt of a DRO.

1. Suspension of Participant distributions or loans. If the Plan Administrator is on notice (verbal or written) regarding a pending domestic relations action (e.g., a divorce) and has a reasonable belief the Participant’s account may become subject to a QDRO, the Plan Administrator may suspend processing the Participant’s distribution or loan requests pending resolution.

2. Removing hold on the account. After placing a hold on the account, the Plan Administrator should notify the Participant of the hold on the account. In order to remove the hold, the Plan Administrator should request the Participant to provide written confirmation that a court will not issue a QDRO with respect to the account, such as a property settlement agreement awarding the entire account to the Participant.

Procedure after receipt of order. The Plan will apply the following procedure whenever it receives a DRO which purports to be a QDRO.

1. Notice to Participant and to alternate payee. Within a reasonable time period after receipt of a DRO, the Plan Administrator will notify the Participant and any alternate payee of the receipt of the order, and will deliver to the Participant and to each alternate payee a copy of this QDRO Procedure.

2. Notice to Trustee. The Plan Administrator, within a reasonable time period after receipt of a DRO, will notify the Trustee of the receipt of the order. The Plan Administrator also will account separately for the amount of the Participant’s benefit that is subject to the order. The Plan Administrator will direct the Trustee to segregate the “QDRO amount” if possible.

3. Review of order. The Plan Administrator will review the order within a reasonable time to determine its qualified status. The Plan Administrator will complete a QDRO DETERMINATION CHECKLIST with respect to each order the Plan receives. In most circumstances, the Plan Administrator will complete review of the order within 30 days of receipt. After review, the Administrator will determine whether the order Is a QDRO.

4. Suspension of distributions and loans. If the Participant is eligible to receive benefits or loans from the Plan at the time of receipt of the order, the Plan Administrator will suspend distributions and loans to the Participant to the extent the Plan Administrator deems necessary to comply with the order should the Plan Administrator determine the order is a QDRO.

5. Determination order is a QDRO. If the Plan Administrator determines the order is a QDRO:

a. The Plan Administrator will notify the Participant and each alternate payee that the order Is a QDRO and the Plan will distribute amounts pursuant to the QDRO. The Plan Administrator will notify the Participant and each alternate payee of the decision within ten days of the determination by mailing to each party a copy of the QDRO DETERMINATION CHECKLIST, which will include the Plan Administrator’s certification.

b. If the QDRO requires immediate payment, the Plan will pay the designated amounts as soon as administratively feasible. Payment of any amount the order required the Plan to pay during the determination period will include interest from the date the QDRO required the first payment, at the rate of interest determined to be reasonable. The rate of interest payable on regular savings accounts is a reasonable rate of Interest for this purpose.

c. If the Plan cannot make the distribution within 30 days of the determination of qualified status of the QDRO, the Plan Administrator will advise the parties of the delay, of the reason for the delay, and of the date by which the Plan expects to make payment.

d. The Plan Administrator will advise the Participant when the Plan has completed payment to the alternate payee.

e. The Plan will maintain a separate accounting (which may include a segregated account) for each alternate payee until the Plan has completed benefits under the QDRO.

f. Each alternate payee is entitled to file with the Plan a beneficiary designation in the same manner as a Participant in the Plan, except that if the Plan is subject to the joint and survivor annuity requirements, the joint and survivor annuity provisions do not apply to the alternate payee’s spouse.

6. Determination order is not a QDRO. If the Plan Administrator determines the order is not a QDRO:

a. The Plan Administrator will advise the Participant and each alternate payee of the adverse decision and of the reasons for the adverse decision. The Plan will advise the Participant and each alternate payee of the decision within ten days of the determination by mailing to each party a copy of the QDRO DETERMINATION CHECKLIST, which will Include the Plan Administrator’s certification of the decision.

b. The Plan Administrator will discontinue separate accounting for the amounts payable under the order. The Plan will pay the benefits to the party entitled to receive the benefits. If the Participant is not entitled to a present distribution of any of the segregated benefits, the Plan will continue to account for the Participant’s benefits as if the Plan had not received the order.

c. If the Plan Administrator determines the status of the order within the 18-month period beginning on the date the order would require the first payment, the Plan Administrator may delay distribution of any benefits subject to the order if the Plan Administrator has reason to believe a party will seek to cure the defects in the order. The Plan Administrator will continue to delay distribution during the period the Plan Administrator determines to be necessary to fulfill the Plan Administrator’s fiduciary duties under the Plan.

7. Consultation with legal counsel. The Plan Administrator will consult with the Plan’s legal counsel in case of questions that arise with respect to the interpretation of any provision of the order or with respect to the qualified status of the order.

/s/ Ronald L. Marsiglio

Signature of Plan Administrator

BENTHOS, INC. 401(K) RETIREMENT PLAN

QDRO DETERMINATION CHECKLIST

The Plan Administrator must complete this checklist to comply with the Plan’s QDRO Procedure. Note: The Plan Administrator must determine the qualified status of the order within a reasonable time. If the Plan Administrator does not conclude the determination within 18 months from the time the first payment is due under the order, the order will be effective only prospectively.

PRELIMINARY DATA

1. Identifying information. The Order concerns:

Participant:                                                                                                                                 Soc. Sec No.:                                         

Participant’s address:                                                                                                                                                                                 

Alternate Payee:                                                                                                                Soc. Sec. No.:                                                  

Alternate Payee’s address:                                                                                                                                                                         

________________________________________________________________________________________________________

2. Notification. The Plan Administrator has mailed notification of receipt of a Domestic Relations Order, by regular first class mail, as follows:

Date of notification to Participant:                                                                                                                                                                

Date of notification to alternate payee(s):                                                                                                                                                     

Date of notification to Trustee:                                                                                                                                                                     

Note: The Plan Administrator must notify the Participant and each alternative payee of receipt of the order, within 10 days of the Plan Administrator’s receipt of the order. The Plan Administrator will account separately for the amounts subject to the order within 2 business days after receipt of the order. The Plan Administrator must advise the Trustee of the existence of the order within 2 business days after receipt, so the Trustee does not distribute funds subject to the order.

REVIEW OF ORDER

3. Technical Requirements. The Plan Administrator should complete review of the order within a reasonable time. The order is a Qualified Domestic Relations Order (“QDRO”) only if the Plan Administrator answers “Yes” to each question in this paragraph 3. If the Plan Administrator answers “No” to any question, check paragraph 7 and state the reason(s) for the answer in paragraph 7.

a. Order. Is the order an order entered pursuant to a state domestic relations law (including a community property law)?

Yes:              No:             

b. Domestic relations matter. Does the order relate to providing child support, alimony (maintenance) payments or marital property rights?

Yes              No            

c. Plan identification. Does the order specify this Plan as the plan subject to the order?

Yes

d. Alternate payee. Does the order direct payment to the Participant’s spouse, former spouse, child or other dependent (the “alternate payee”)?

Yes              No            

e.                      Identification of Participant Does the order identify the Participant?

Yes              No            

f. Identification of alternate payee. Does the order state each alternate payee’s name and mailing address?

Yes              No            

g. Description of benefit. Does the order state the amount or the percentage of the Participant’s benefit the Plan must pay to each alternate payee? Note: Answer “Yes” if the order describes the manner in which the Plan may determine the amount or percentage.

Yes              No            

h. Period of payment. Does the order state the number of payments or the period to which the order applies? Note: A lump sum payment satisfies this requirement

Yes              No            

4. Plan Consistency Requirements. The order is a QDRO only If the Plan Administrator answers “No” to each question in this paragraph 4. If the Plan Administrator answers “Yes” to any question, check paragraph 8 and state the reason(s) for the answer in paragraph 8.

a. Required benefit. Does the order require the Plan to provide a type or a form of benefit or a benefit option the Plan otherwise does not provide? Note: Consult the Plan’s QDRO provisions. Payment consistent with the Plan’s QDRO provisions or consistent with the Plan’s normal distribution provisions is acceptable.

Yes              No             

b. Amount of benefit. Does the order require the Plan to provide benefits greater than the benefits available to the Participant without the QDRO?

Yes          No             

c. Prior QDRO. Does the order require payment of benefits that a previous QDRO requires the Plan to pay to another alternate payee? Note: if no prior QDRO is in effect with respect to the Participant, answer “NO.”

Yes          No                        

5. Timing of Payment Requirement. The order is a QDRO only if the timing of payments under the order is consistent with the terms of the Plan. Note: If the Plan authorizes payment at any time under a QDRO, the order automatically satisfies the timing of payment requirement. If the Plan does NOT contain special provisions for immediate payment under a QDRO, the Plan only may make payment under a QDRO (if the Participant has not terminated employment) by the date the Participant attains his “earliest retirement age.” If the Plan Administrator does not answer “Yes” to part a. of this paragraph 5, the Plan Administrator must determine whether the Participant has reached his “earliest retirement age” under part b. of this paragraph 5.

a. Immediate authorization payment. Does the Plan authorize payment at any time under a QDRO?

Yes          No                        

if “Yes,” the order satisfies the timing of payment requirement. Skip part b. of this paragraph 5.

b. Earliest retirement age payment. If the answer to part 5.a. is “No,” complete this part b. to determine if payment will occur under the order after the Participant’s “earliest retirement age,”

i. Does the Plan authorize payment of benefits to the Participant (separate and apart from the order) on the date of the required payment to the alternate payee under the order (e.g., an in-service distribution from a profit sharing plan)?

Yes                      No             

ii. As of the date of commencement of payment to the alternate payee under the order, will the Participant have reached the hater of (a) age 50, or (b) the earliest date on which the Participant could begin receiving benefits If the Participant terminated employment?

Yes                      No             

If the Plan Administrator answers “Yes” to either b.i. or b.ii, the order satisfies the timing of payment requirement. If the Plan Administrator answers “No” to both b.i. and bii., check paragraph 9.

6. Determination of Qualified Status. If the Plan Administrator has answered “Yes” to each question in paragraph 3, has answered “No” to each question in paragraph 4, and has answered “Yes” to at least one question in paragraph 5, the order qualifies as a QDRO. If the order qualifies as a QDRO, the Plan Administrator should write “NIA” next to each of paragraphs 7, 8 and 9, and should sign the Plan Administrators Certification of QDRO in paragraph 10. If the order does NOT qualify as a QDRO, the Plan Administrator should check one or more of paragraphs 7, 8 and 9, should complete the explanation as required, and should sign the Plan Administrator’s Certification of Nonqualified Status in paragraph 10. The Plan Administrator should notify the Participant and each alternate payee of the determination by mailing a copy of this QDRO Determination Checklist to each party, complete with the Plan

Administrator’s Certification. After notification of the Participant and each alternate payee, the Plan Administrator should complete the QDRO procedure.

NOTE: CHECK AND COMPLETE ONLY THOSE OF PARAGRAPHS 7, 8 AND 9 WHICH APPLY IN RESPONSE TO PARAGRAPHS 3,4 AND 5. IF ANY OF PARAGRAPHS 7, 8 AND 9 DO NOT APPLY, WRITE “N/A” NEXT TO THE NUMBER AND DO NOT COMPLETE THE PARAGRAPH.

        7. Disqualification-Technical Requirements. The order is not a QDRO because the order does not satisfy one or more of the technical requirements referred to in paragraph 3. The explanation of each “No” answer is the following:

        8. Disqualification-Consistency Requirements. The order is not a QDRO because the order does not satisfy one or more of the consistency requirements referred to in paragraph 4. The explanation of each “Yes” answer is the following:

        9. Disqualification-Timing of Payment Requirement. The order Is not a QDRO because the order requires the payment of benefits earlier than the Plan permits (as determined under paragraph 5). The Plan does not permit the immediate distribution of benefits to an alternate payee under a QDRO, AND the order requires the payment of benefits prior to the Participant’s “earliest retirement age.”

DETERMINATION OF STATUS

10. Plan Administrator’s Certification. Sign the certification paragraph which states the Plan Administrator’s determination with respect to the qualified status of the order. COMPLETE ONLY ONE CERTIFICATION.

Plan Administrator’s Certification of QDRO

I, the undersigned Plan Administrator, certify the order identified in paragraph 1 is a qualified domestic relations order. The Plan will distribute in accordance with the QDRO.

Date:	By:
	Plan Administrator

Plan Administrator’s Certification of Nonqualified Status

I, the undersigned Plan Administrator, certify the order identified in paragraph I is not a qualified domestic relations order. The Plan will pay any amounts segregated In accordance with Code Section 414(p) without regard to the order. If the Participant is not receiving any distribution from the Plan, the Plan Administrator will disregard any separate accounting.

Date:	- By:
	Plan Administrator

BENTHOS, INC. 401(K) RETIREMENT PLAN

PARTICIPANT LOAN PROGRAM

Benthos, Inc. 401(k) Retirement Plan permits loans to be made to Participants and their beneficiaries. However, before any loan is made, the Plan requires that a written loan program be established which sets forth the rules and guidelines for making Participant loans. This document shall serve as the required written loan program. In addition, the Administrator may use this document to serve as, or supplement, any required notice of the loan program to Participants and their beneficiaries. All references to Participants in this loan program shall include Participants and their Beneficiaries who are “parties in interest” as defined by Act Section 3(14).

1. The Administrator of the Plan is authorized to administer the Participant loan program. All applications for loans shall be made by a Participant to the Administrator on forms which the Administrator will make available for such purpose.

2. All loan applications shall be considered by the Administrator within a reasonable time after the Participant makes formal application. The Participant shall also be required to provide such supporting information deemed necessary by the Administrator. This may include a financial statement, tax returns and such other financial information which the Administrator may consider necessary and appropriate to determine whether a loan should be granted. Furthermore, the Participant shall authorize the Administrator to obtain a credit report on the Participant.

3. The Administrator shall determine whether a Participant qualifies for a loan, applying such criteria as a commercial lender of funds would apply in like circumstances with respect to the Participant. Such criteria shall include, but need not be limited to, the creditworthiness of the Participant and his general ability to repay the loan, the period of time such Participant has been employed by the Employer, whether adequate security has been provided for the loan, and whether the Participant agrees, as a condition for receiving the loan, to make repayments through direct, after-tax payroll deduction.

4. With regard to any loan made pursuant to this program, the following rule(s) and limitation(s) shall apply (check those that apply), in addition to such other requirements set forth in the plan:

x No loan in an amount less than $1,000 shall be granted to any Participant

¨ Loans shall only be granted in the event of a Participant’s hardship or for the purpose of enabling a Participant to meet certain specified financial situations. For this purpose, a loan shall be authorized in the event of significant health expenses or loss of income resulting from a prolonged illness or disability of the Participant, loss of income or significant health expenses resulting from a prolonged illness, disability or death in the Participant’s immediate family, establishing the principal residence of the Participant, or for paying for a college education (including graduate studies) for the Participant or his dependents. The Administrator shall determine whether a Participant qualifies for a loan under this paragraph.

x All loans made pursuant to this program shall be considered a directed investment from the account(s) of the Participant maintained under the Plan. As such, all payments of principal and interest made by the Participant shall be credited only to the account(s) of such Participant.

¨ A Participant shall be entitled to a loan up to $10,000 even if such amounts would exceed one-half (1/2) of the present value of the non-forfeitable accrued benefit of the Participant under the Plan.

x Term for repayment of a home may not exceed 15 years.

x A loan is treated in default if unpaid for more than 90 days.

x Only one loan(s) may be outstanding for a Participant at any given time.

x Interest rate will be adjusted according to prime rate as listed in the Wall Street Journal plus one percent

5. Any loan granted or renewed under this program shall bear a reasonable rate of interest. In determining such rate of interest, the Plan shall require a rate of return commensurate with the prevailing interest rate charged on similar commercial loans under like circumstances by persons in the business of lending money. Such prevailing interest rate standard shall permit the Administrator to consider factors pertaining to the opportunity for gain and risk of loss that a professional lender would consider on a similar arms-length transaction, such as the creditworthiness of the Participant and the security given for the loan. Therefore, in establishing the rate of interest, the Administrator shall conduct a reasonable and prudent inquiry with professional lenders in the same geographic locale where the Participant and Employer reside to determine such prevailing interest rate for loans under like circumstances.

6. The Plan shall require that adequate security be provided by the Participant before a loan is granted. For this purpose, the Plan shall consider a Participant’s interest under the Plan to be adequate security. However, in no event shall more than 50% of a Participant’s vested interest in the Plan (determined immediately after origination of the loan) be used as security for the loan. Generally, it shall be the policy of the Plan not to make loans which require security other than the Participant’s vested interest in the Plan. However, if additional security is necessary to adequately secure the loan, then the Administrator shall require that such security be provided before the loan will be granted. For this purpose, the Participant’s principal residence may serve as additional security, if permitted by State law.

7. Generally, a default shall occur upon the failure of a Participant to timely remit payments under the terms of the loan when due. In such event, the Trustee shall take such reasonable actions which a prudent fiduciary in like circumstances would take to protect and preserve Plan assets, including foreclosing on any collateral and commencing such other legal action for collection which the Trustee deems necessary and advisable. Failure to make any installment payment when due in accordance with the terms of the loan results in a deemed distribution at the time of such failure. The Trustee shall not be required to commence such actions immediately upon a default. Instead, the Trustee may grant the Participant a grace period to cure any default, provided such actions would constitute a prudent and reasonable course of conduct for a professional lender in like circumstances. Any such grace period shall not continue beyond the last day of the calendar quarter following the calendar quarter in which the required installment payment was due.

8. Upon satisfaction of the criteria established for granting a loan, the Administrator shall inform the Trustee that the Participant has qualified to receive a loan under the Plan’s program. The Trustee shall review the determination made by the Administrator (including the prevailing interest rate which has been set for the loan) and, if it determines that such loan would be a prudent investment for the Plan, applying such fiduciary standards required by ERISA, the Trustee may grant the loan request. In making such determination, the Trustee may consider the liquidity of the Plan assets available for loans. The Trustee shall then require that the Participant execute all documents necessary to establish the loan, including a promissory note and such other documents which will provide the Plan with adequate security.

Adopted this 30th day of April, 2004. This loan program may be amended from time to time.

Administrator:

EX-10.42

Exhibit 10.42

FIFTH AMENDMENT TO CREDIT AGREEMENT

This Fifth Amendment to Credit Agreement is made as of the 7th day of January, 2004, by and between Cape Cod Bank and Trust Company, NA (“Lender”), a National Association, with offices at 2 Barlows Landing Road, Pocasset, Massachusetts 02559 and Benthos, Inc. (“Borrower”), a Massachusetts corporation with its principal place of business at 49 Edgerton Drive, North Falmouth, Massachusetts 02556.

RECITALS:

A. Borrower and Lender entered into a certain Credit Agreement dated August 18, 1999, as amended by a First Amendment to Credit Agreement and Amendment to Revolving Note and Term Note dated March 23, 2001, as further amended by Second, Third and Fourth Amendments to Credit Agreement dated December 12, 2001, January 29, 2003 and November 3, 2003, respectively, (the “Credit Agreement”) regarding: (i) a Commercial Variable Rate Revolving or Draw Note dated August 18, 1999, as amended by an Amendment dated December 8, 2000, a Second Amendment dated March 23, 2001, a Third Amendment dated July 9, 2001, a Fourth Amendment dated December 12, 2001 and a Fifth Amendment dated January 29, 2003 (the “Revolving Note”), (ii) a Commercial Variable Rate Promissory Note dated August 18, 1999, as amended by an Amendment dated October 17, 2000, a Second Amendment dated March 23, 2001, a Third Amendment dated December 12, 2001 and a Fourth Amendment dated November 3, 2003 (the “Term Note”), and (iii) other instruments and agreements executed in conjunction therewith, including without limitation a certain Partial Release of Mortgage, dated October 16, 2003, filed with the Barnstable County Registry District of the Land Court as Document Number 946,238 on October 27, 2003, and recorded with the Barnstable County Registry of Deeds in Book 17,848, Page 162, executed and delivered by the Bank in connection with the sale by the Borrower and

certain affiliates of the Borrower of a portion of the premises located at Edgerton Drive, Route 28 and Route 28A Falmouth, Barnstable County, Massachusetts.

B. Borrower and Lender now desire to further amend the Credit Agreement and to further amend the Revolving Note as set forth herein and in a separate amendment of even date herewith to said Revolving Note.

2

AGREEMENTS:

Now, therefore, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Lender and the Borrower hereby agree as follows:

1. Capitalized terms used herein shall have the meaning given to them in the Credit Agreement unless separately defined herein.

2. As of December 12, 2003, the outstanding principal balance of the Revolving Loan under the Revolving Note was $200,000 and the outstanding principal balance of the Term Loan under the Term Note was $766,700.03.

3. The definition of “Expiration Date” as set forth in Section 1.01 of the Credit Agreement is hereby amended to be January 31, 2005.

4. Section 6.02 of the Credit Agreement is hereby amended by adding the following paragraph:

“(e) assurance in form and substance satisfactory to Lender from the Borrower’s auditors that the Borrower’s year end September 30, 2003 audit will not contain a “going concern opinion”.

5. Section 8.02(a) of the Credit Agreement is hereby deleted and replaced with the following paragraph:

a. “The Borrower will maintain a ratio of Current Assets to Current Liabilities of greater than or equal to:

(i) 1.61 to 1.00 as of December 31, 2003;

(ii) 1.66 to 1.00 as of March 31, 2004;

(iii) 1.80 to 1.00 as of June 30, 2004; and

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(iv) 1.95 to 1.00 as of September 30, 2004.”

6. Section 8.02(b) of the Credit Agreement is hereby deleted and replaced with the following:

b. “The Borrower shall maintain a ratio of Total Debt to Tangible Net Worth less than or equal to:

(i) 1.26 to 1.00 as of December 31, 2003;

(ii) 1.16 to 1.00 as of March 31, 2004;

(iii) 1.05 to 1.00 as of June 30, 2004; and

(iv) .89 to 1.00 as of September 30, 2004.

Tangible Net Worth shall equal total assets minus total liabilities minus intangible assets.”

7. Section 8.02(c) of the Credit Agreement is hereby deleted and replaced with the following:

c. “The Borrower shall maintain a ratio of Cash Flow to Debt Service Payments, which on a cumulative basis for the applicable period shall be greater than or equal to the following:

(i) (negative) - .39 to 1.00 for quarter ending December 31, 2003;

(ii) (negative) - .09 to 1.00 for quarter ending March 31, 2004;

(iii) .52 to 1.00 for quarter ending June 30, 2004; and

(iv) .84 to 1.00 for quarter ending September 30, 2004.

This ratio will be calculated on a cumulative basis and will be determined as follows: (x) Net profit after taxes (a) plus interest expense, (b) plus seventy-five percent (75%) of depreciation, (c) plus

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amortization (y) divided by interest expense plus the current maturity of principal for the year to date.”

8. Section 11.01(m) of the Credit Agreement is amended by deleting “September 20, 2002” and inserting “September 30, 2003” in its place.

9. Except as provided herein, the Credit Agreement, as previously amended, shall remain unchanged. The Credit Agreement as previously amended and as further amended hereby is hereby ratified and confirmed.

Witness:	BENTHOS, INC.
/s/ Pamela J. Falotico	By:	/s/ Ronald L. Marsiglio
	Name:	Ronald L. Marsiglio
	Title:	Chief Executive Officer and President

Witness:	CAPE COD BANK AND TRUST COMPANY, NA
/s/ Susan E. Desroches	By:	/s/ Timothy F. Kelleher
	Name:	Timothy F. Kelleher III
	Title:	Senior Vice President

5

EX-10.54

Exhibit 10.54

LICENSE AGREEMENT

AGREEMENT, made as of the 1st day of September, 2000, between SIMON FRASER UNIVERSITY, of 8888 University Drive, Burnaby, British Columbia, V5A I S6 Canada (“LICENSOR”), and BENTHOS, INC., a Massachusetts corporation with a usual place of business situated at 49 Edgerton Drive, North Falmouth, Massachusetts 02556 U.S.A. (“BENTHOS”) (LICENSOR and BENTHOS are sometimes herein referred to collectively as “the Parties” and individually as a “Party”).

WITNESSETH

WHEREAS, LICENSOR owns or has the exclusive rights to United States Patent Application Number 09/148.131, filed September 4, 1998 (hereinafter further defined and referred to as “Licensed Patent Application”), which relates to technology and know-how related to the production of a new generation bathymetry system for use in swath bathmetry including 3D side scan for seafloor mapping (included fields of use), but not for use in mine hunting, forward looking or sector scan use or sub-bottom profiling (excluded fields of use) as described in Schedule A; and

WHEREAS, BENTHOS wishes to obtain, and LICENSOR is willing to grant, an exclusive, worldwide license under said Licensed Patent Application, and under Licensed Patents (as hereinafter further defined) for use in swath bathmetry including 3D side scan for seafloor mapping, but not for use in mine hunting, forward looking or sector scan use or subbottom profiling

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows:

SECTION 1

DEFINITIONS

As used in this Agreement, the following terms shall be deemed to have the following meanings:

1.1 “Licensed Patent Applications” shall mean (a) United States Patent Application Number 09/148.131, filed September 4,1998 (b) any and all continuations, divisions, and continuations-in-part of such Application, whether related to such Application directly or through one or more intervening applications; (c) any foreign application for patent or utility model claiming priority in whole or in part from any of the applications identified in subparagraphs (a) and (b) above; and (d) any and all continuations, divisions, and continuations-in-part of any of the applications identified in subparagraph (c) above, whether related to such applications directly or through one or more intervening applications.

1.2 “Licensed Patents” shall mean (a) any and all patents and utility models issuing on or registered from any of the Licensed Patent Applications; and (b) any and all reexaminations, reissues, additions, or extensions of any of the patents or utility models identified in subparagraph (a) above.

1.3 “Licensed Product,” singular or plural, shall mean any module for Computed Angle of Arrival Transient Imaging (CAATI) and Small Aperture Range versus Angle (SARA) sonar, including without limitation swath bathymetry systems, 3-D side scan sonar imaging systems, wherein the manufacture, use, offer for sale, sale or importation of the module by BENTHOS would, but for the rights and license granted herein, constitute an infringement of a valid and enforceable claim of a subsisting Licensed Patent.

Page 2 of 22

1.4 “Net Sales” shall mean BENTHOS’S total gross billings for sales, leases, or other dispositions of Licensed Products by BENTHOS and any of its Affiliates to any party which is not an Affiliate, less the following deductions where factually applicable: (a) discounts (other than advertising allowances, fees or commissions to salesmen or sales representatives), credits, rebates and other allowances allowed and taken; (b) transportation and insurance charges separately billed to the customer or prepaid; (c) special outbound packing separately billed to the customer or prepaid; (d) sales, use, turnover, and similar taxes and customs duties imposed upon and with specific reference to the particular sales of Licensed Products, excluding income tax of BENTHOS; and (e) amounts refunded or credited for returned merchandise. Net Sales shall not include sales, leases or other dispositions between the Parties, sales, leases or other dispositions by independent distributors, or sales, leases or dispositions between BENTHOS and its Affiliates.

1.4.1 “Sub-Licensing” shall mean the transfer by Benthos to a third party of some or all of the rights of BENTHOS as a licensee hereunder.

1.5 An “Affiliate” of a Party shall mean a corporation or other entity controlled by, controlling, or under common control with such Party. For the purpose of this Agreement, “control” or “controlling” means (a) the ownership, directly or indirectly, of more than fifty percent (50%) of the voting stock or analogous interest in such corporation or other entity; or (b) the existence of any other relationship between LICENSOR or BENTHOS and such other corporation or entity which results in effective managerial control by one over the other, regardless of whether such control is continuously exercised.

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1.6 “Effective Date” shall mean the date first written above.

SECTION 2

GRANT OF LICENSE

2.1 Subject to and contingent upon the issuance of the final approval of the Licensed Patent Applications, LICENSOR hereby grants to BENTHOS and its Affiliates, and BENTHOS hereby accepts, an exclusive, worldwide, royalty-bearing right and license under the Licensed Patent Applications and the Licensed Patents (with the right to grant sublicenses in the licensed fields of use) to make, have made, use, sell, offer for sale, lease and otherwise dispose of Licensed Products for use in swath bathmetry including 3D side scan, but not for use in mine hunting, forward looking or sector scan use. Such sublicenses have the prior written consent of the LICENSOR, but notice will be made to the LICENSOR and a copy of each sublicense granted will be furnished to the LICENSOR within 30 days after execution.

2.2 If for any reason BENTHOS, in its sole discretion, shall terminate the Consulting Agreement between Paul Kraeutner, Ph.D. and BENTHOS or between JKL Research Ltd., a British Columbia corporation. and BENTHOS dated on or about the date hereof, prior to the first anniversary date of the Consulting Agreement, then the License granted herein shall convert to a non-exclusive license on such termination date. The LICENSOR shall be duly notified by BENTHOS regarding such a change of status in the Consulting Agreement(s).

2.3 Notwithstanding Article 2.1 herein, the parties acknowledge and agree that the LICENSOR may use the Technology and any Improvements without charge in any

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manner whatsoever for research, scholarly publication, educational or other noncommercial use.

SECTION 3

LICENSE FEES AND ROYALTIES

3.1 In consideration of the rights and license granted to BENTHOS under this Agreement, BENTHOS agrees to pay to LICENSOR, a one-time license fee of Twenty Thousand ($20,000.00) Dollars (U.S.) (the “License Fee”) which shall be payable upon the execution of this Agreement. BENTHOS also agrees to pay to LICENSOR, a periodic royalty in the amount of six and one-quarter (6.25%) percent of its Net Sales of Licensed Products sold, leased or otherwise disposed of by or for BENTHOS, where the Licensed Product consists, in each instance, of a complete stand alone survey system and has not been combined with any other BENTHOS product. Where a Licensed Product has been combined with another BENTHOS product or other BENTHOS products, whether now existing or developed after the Effective Date, the royalty shall be calculated on the basis of that portion of the gross billing which is attributable to the Licensed Product. For example, if a Licensed Product has been combined with other BENTHOS products such that the gross billing amount for the complete product sold is $10,000 and the portion of the gross billing amount attributable to the Licensed Product is $6,000, the royalty due LICENSOR. shall be an amount equal to three and three-quarters percent (3.75%) of the Net Sales amount for the complete product sold (60% x 6.25%). Such royalty shall be paid by BENTHOS to LICENSOR within thirty (30) days after the end of each calendar quarter during the term of this Agreement. Only one periodic royalty shall be payable for

Page 5 of 22

sale, lease or other disposition of a Licensed Product even if the Licensed Product is covered by more than one Licensed Patent or more than one claim of any Licensed Patent. BENTHOS will provide a schedule of royalty payment calculations for each system where the Licensed Products is a subsystem of a larger system. No royalties shall be paid to LICENSOR for third-party products and systems that are incorporated into Licensed Products in order to satisfy specific customer requests.

3.2 LICENSOR may, at its option, give written notice that it intends to convert the exclusive license granted pursuant to paragraph 2.1 to an irrevocable, non-exclusive license if the total annual royalty paid by BENTHOS to LICENSOR in any one year during the term of this Agreement, as determined in paragraph 3.1 of this Agreement, is less than the minimum royalty due for that year according to the following schedule:

Year 1		-0
Year 2	$	20,000
Year 3	$	40,000
Year 4	$	100,000
Year 5	$	100,000

For purposes of this paragraph 3.2, Year 1 commences on that date on which BENTHOS officially introduces the Licensed Product to the marketplace (“Market Introduction Date”), Year 2 commences on the first anniversary of the Market Introduction Date, Year 3 commences on the second anniversary of the Market Introduction Date, and so on. Notice of the Market Introduction Date will be served to the LICENSOR. In the event that a Market Introduction Date has not been established within two (2) years of this Agreement, Year I commences on the second anniversary of this Agreement, Year 2

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commences on the third anniversary of this Agreement and so on. In the event that the cumulative royalties paid during any given year are below the minimum royalty amount for that year, BENTHOS may, at BENTHOS’S option, elect to pay the difference to LICENSOR in order to maintain its license hereunder as an exclusive license. Any conversion to a non-exclusive license shall be effective ninety (90) days following receipt of LICENSOR’S notice by BENTHOS; provided, however, that if BENTHOS shall within sixty (60) days of receipt of such notice make up the difference between the total annual royalty for such year actually paid and the minimum royalty for that year, such notice shall not be effective, and the exclusive license set forth in paragraph 2.1 shall continue in effect.

3.3 If BENTHOS shall sublicense some or all of the License rights granted hereunder to a sublicensee during the Term hereof, as extended from time to time, then the royalty fee provided for in Section 3.1 which is due to LICENSOR, shall to the extent such License rights have been sublicensed be paid directly by a sublicensee to the LICENSOR hereunder in accordance with all the terms of this agreement and BENTHOS shall have no further obligation to pay such royalty fee or satisfy any other obligation of sublicensee.

SECTION 4

RECORDS, REPORTS AND PAYMENT OF ROYALTIES

4.1 BENTHOS shall maintain records in sufficient detail and, upon reasonable notice, allow any independent certified public accounting firm of recognized standing, appointed by LICENSOR, and reasonably acceptable to BENTHOS, to examine its consolidated books

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and records, and the books and records of its Affiliates pertaining to the Licensed Products. Such examinations shall occur only during business hours, upon reasonable notice and not more than twice a year, and shall be for the purpose of verifying the calculation of periodic royalties due under this Agreement and to otherwise establish compliance with the terms of this Agreement. A final such examination shall occur once during the year immediately succeeding termination of this Agreement. The fees and expenses of the accounting firm performing the examination shall be borne by LICENSOR. Unless written objection is made by LICENSOR and delivered to BENTHOS within sixty (60) days after completion of such examination, the calculation of royalties paid by BENTHOS prior to the date of such examination shall be final and binding on the Parties, except insofar as adjusted or corrected as a result of BENTHOS’s regular annual audit. Any information provided to LICENSOR or its accountants pursuant hereto shall be treated as Confidential and Proprietary Information of BENTHOS to be used only for the purpose of the examination in accordance with this paragraph 4.1.

4.2 BENTHOS agrees to submit written reports to LICENSOR within ninety (90) days after the last day of each full or partial calendar quarter during the term of this Agreement, stating in each such report the Net Sales of BENTHOS or the absence of such sales, for the previous calendar quarter for the sale, lease or other disposition of Licensed Products, and the periodic royalty due thereon. BENTHOS shall include in such reports a schedule of royalty payment calculations for each product sold where the Licensed Product is a component of a larger product or a sub-system of a larger system. The obligation to make royalty reports under this Agreement shall begin with the calendar quarter of

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BENTHOS’ Market Introduction Date or other transfer of a Licensed Product subject to payment of royalty to LICENSOR, and shall continue thereafter. BENTHOS shall accompany each report with payment of the amount of royalties, if any, shown to be due by such report in accordance with Sections 3 and/or 4 hereof. In addition, BENTHOS shall make a written report to LICENSOR within ninety (90) days after the date of termination of this Agreement, stating in such report the Net Sales of BENTHOS of any Licensed Products not previously reported to LICENSOR and the periodic royalty due thereon, and shall accompany such report with payment of the amount of royalties shown to be due therein,

4.3 Payment shall be made to LICENSOR at the address set forth in Section 7.1 or such banking institution as LICENSOR may direct from time to time, in legal tender of the United States of America. In the event periodic royalties must be converted from foreign currency into United States Dollars, such conversion shall be calculated using the average exchange rate published in The New York Times for the thirty (30) day period immediately preceding payment

4.4 With the exception of income taxes imposed on LICENSOR, all other taxes and charges imposed by any governmental agency (except as provided in paragraph 1.4), and all expenses of currency conversion and transmission, shall be borne by BENTHOS and no deduction shall be made from such remittances for any such other taxes, charges or expenses. If income taxes imposed by law on remittances to be paid to LICENSOR under this Agreement are required to be withheld by BENTHOS and paid to any governmental taxing authority, such income tax may be deducted from remittances to LICENSOR and paid on LICENSOR’S behalf to such governmental taxing authority, but

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in such case the official tax receipt or a copy thereof shall be sent promptly to LICENSOR by BENTHOS. BENTHOS, at its expense, shall timely prepare all applications, reports and other documents required by any governmental authority to permit timely remittance to LICENSOR in accordance with this Agreement.

SECTION 5

TERM AND TERMINATION

5.1 The rights and licenses granted under this Agreement shall commence on the Effective Date.

5.2 Unless this Agreement shall be terminated by either Party pursuant to the provisions hereof; this Agreement shall remain in full force and effect for a term of five (5) years following the Market Introduction Date.

5.3 LICENSOR shall have the right to terminate this Agreement on sixty (60) days written notice to BENTHOS at any time on default by BENTHOS in the observance or performance of any covenant, condition or terms herein required to be observed and performed by BENTHOS. Termination under this paragraph 5.3 shall be effective at the end of such notice period, provided that BENTHOS shall not have corrected such default or embarked upon a course of action to correct such default and given written confirmation of same to LICENSOR within such notice period.

5.4 All rights and licenses granted under or pursuant to this Agreement by LICENSOR to BENTHOS are, and shall otherwise be deemed to be, for purposes of Section 365(n) of Title 11, U.S. Code (the “Bankruptcy Code”), licenses and rights to “intellectual property” as defined under Section 101 of the Bankruptcy Code. The Parties agree that

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BENTHOS, as licensee of such rights under this Agreement, shall retain and may fully exercise all of its rights and elections under the Bankruptcy Code.

5.5 This Agreement is terminable by BENTHOS upon sixty (60) days written notice to LICENSOR.

5.6 The license granted to BENTHOS pursuant to paragraph 2.1 hereof shall survive expiration of the term of this Agreement, provided that the license shall automatically revert, upon expiration, to an irrevocable, non-exclusive license and further provided that BENTHOS shall continue to pay royalties pursuant to the terms of paragraph 3.1 hereof.

5.7 Royalies in the amounts outlined in section 3.1 shall be paid for the use of any technology licensed in this agreement for the life of the associated patent.

5.8 If final approval of the Licensed Patent Applications has not been received within One Hundred Eighty (180) days of the date hereof, then BENTHOS may terminate this Agreement upon thirty (30) days written notice to LICENSOR.

SECTION 6

ASSIGNABILITY

6.1 This Agreement and the rights, licenses and obligations hereunder may not be assigned by either Party without the express written consent of the other Party, except as part of the sale of the assigning Party’s business to which the Licensed Patent Applications and Licensed Patents relate. This Agreement shall be binding upon and inure to the benefit of the Parties hereto, their permitted assigns, trustees or receivers in bankruptcy or successors by merger, purchase of assets or otherwise.

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SECTION 7

NOTICE

7.1 Any notice or communication required or permitted to be given by either Party hereunder shall be in written form and shall be considered to be sufficiently given if mailed by registered or certified mail or transmitted by overnight courier, addressed to the parties hereto as follows:

To LICENSOR:

Director, University / Industry Liaison Office

Simon Fraser University

8888 University Drive, Bumaby, B.C. V5A 1S6

Telephone: (604) 291-4292

Facsimile: (604) 291-3477

To BENTHOS:

Benthos, Inc.

49 Edgerton Drive, North Falmouth, MA 02556-2826

Attention: President

Telephone: 508-563-1000

Facsimile: 508-563-6444

7.2 Such notices shall be effective upon receipt by the addressee.

SECTION 8

CONTROLLING LAW

8.1 The parties hereto agree that this Agreement shall be considered to have been made in, and construed and interpreted in accordance with the substantive laws of the Commonwealth of Massachusetts.

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SECTION 9

WARRANTIES, PARTIES’ RESPONSIBILITY, AND LIABILITY

9.1 LICENSOR warrants and represents that at the time of execution to its knowledge it is the owner of the Licensed Patents and Licensed Patent Applications, and that it has the right to grant the rights and license granted hereunder. LICENSOR further warrants and represents that the Licensed Products and parts and subassemblies thereof may be manufactured, used, sold, leased or otherwise disposed of, and BENTHOS may exercise all rights and licenses granted hereunder. BENTHOS shall not claim from LICENSOR for any and all losses, damages, costs and expenses (including reasonable legal fees on a solicitor and client basis) arising from any claim of patent or allegation or other proprietary right infringement upon the manufacture, marketing, use, sale, lease or other disposition of Licensed Products or the exercise of any license right under this Agreement limited to 50% of the License Fee.

9.2 Except as expressly provided herein, nothing contained in this Agreement shall be construed as:

(a) a warranty or representation that the exercise of rights and licenses granted under this Agreement shall be free from infringement of patents, other than the Licensed Patents and the Licensed Patent Applications; or

(b) a grant of any right, by license or otherwise, by either party to the other, under either Party’s patent, patent application (with the exception of the Licensed Patent Applications and Licensed Patents), trademark, copyright, know-how, or other intellectual property rights.

9.3 Notwithstanding any provision of this Agreement to the contrary, BENTHOS shall not be

Page 13 of 22

obligated to, and shall have no liability to LICENSOR for BENTHOS’S failure to evaluate, develop, test, conduct trials, make, have made, use, sell, lease or otherwise dispose of any Licensed Product. Except as provided in paragraph 3.2 above, BENTHOS shall have the unqualified right, at any time to cease or suspend all efforts to market Licensed Products. BENTHOS will serve notice to LICENSOR when a decision to cease or suspend efforts to market Licensed Products is made. Nothing herein shall prevent BENTHOS from setting its own prices for Licensed Products, or for products or systems containing Licensed Products, or determining BENTHOS’S marketing policies and practices in its sole discretion.

9.4 In the event BENTHOS believes that a third party is infringing a right contained within any of the Licensed Patents, BENTHOS shall notify LICENSOR of said alleged infringement, whereupon LICENSOR shall have option to take measures to prevent the infringement, whether by action, suit, proceeding or otherwise, and shall pay the entire cost of pursuing such measure(s) limited to 50% of the issued License Fees and royalties paid hereunder by Benthos or any third party to LICENSOR, so long as any such measure is initiated prior to conversion of BENTHOS’S license to a non-exclusive license pursuant to paragraphs 3.2 or 5.6. LICENSOR shall, within thirty (30) days after notice thereof, inform BENTHOS how and to what extent it is pursuing such third party alledged infringement. In the event LICENSOR does not take measures to prevent infringement by any third-party infringer as optioned hereunder, or in the event BENTHOS deems any such action taken by LICENSOR to be insufficient, BENTHOS shall have the right, but not the obligation, to pursue such infringer and to take such measures against such infringer as BENTHOS may reasonably deem appropriate.

Page 14 of 22

BENTHOS shall have the sole right to any proceeds from such measure(s); provided, however, that BENTHOS shall pay a portion of any such recovery to LICENSOR, with such portion being equal to the royalty LICENSOR would have received had the sales, leases or other disposition by the third-party infringer been made by BENTHOS under this Agreement. In no case, however, shall the total royalty paid by BENTHOS to LICENSOR be more than the recovery, less reasonable expenses incurred in such action, suit or proceeding, including attorneys’ fees. LICENSOR shall, if requested, join as a party to any such suit or settlement and shall agree to sign all necessary rightful instruments, and do whatever else may be necessary to further the conduct of such proceedings.

9.5 If BENTHOS’S license has been converted to a non-exclusive license pursuant to paragraphs 2.2 or 3.2 above, LICENSOR shall have the sole right, but not the obligation, to take measures, except as to measures taken by BENTHOS pursuant to paragraph 9.4 prior to conversion of BENTHOS’S license to a non-exclusive license, to prevent the infringement by third-party infringers of any Licensed Patent, whether by action, suit, proceeding or otherwise and shall pay the entire cost of pursuing such measure(s). LICENSOR shall have the sole right to any proceeds from such measure(s).

9.6 Except as set forth above, neither BENTHOS nor LICENSOR shall have any other responsibilities or obligations in connection with actions to enforce the Licensed Patents.

Page 15 of 22

SECTION 10

DISPUTE RESOLUTION

10.1 In the event of any dispute, controversy, or claim between the parties hereto arising from or relating to the subject of this Agreement (a “Dispute”), upon the written request of either party, each of the parties shall appoint a designated officer or other authorized representative to meet and negotiate in good faith to resolve such Dispute. Formal proceedings for the arbitration of such Dispute in accordance with Section 10.2 hereof may not be commenced until the earlier of (a) the expiration of thirty (30) days after the initial request for such negotiations, or (b) either of the designated officers or other authorized representatives concluding in good faith and notifying the other designated officer or representative that amicable resolution through continued negotiation of the matter in issue does not appear likely.

10.2 LICENSOR and BENTHOS stipulate and agree that if they are unable to resolve any Dispute as contemplated by Section 10.1 hereof, then such Dispute shall be resolved by final and binding arbitration by a panel of three (3) arbitrators in accordance with and subject to the Commercial Arbitration Rules of the American Arbitration Association (“AAA”) then in effect. Following notice of a party’s election to require arbitration, each party shall within thirty (30) days select and identify in writing to the other party one (1) arbitrator, and those two (2) arbitrators shall within thirty (30) days thereafter select a third arbitrator. If the two arbitrators are unable to agree on a third arbitrator within thirty (30) days, the AAA shall within (30) days thereafter select such third arbitrator. Discovery as permitted by the Federal Rules of Civil Procedure then in effect shall be allowed in connection with arbitration to the extent consistent with the purpose of the arbitration and as allowed by the arbitrators. Judgment upon the award rendered in any arbitration may be entered in any court of competent jurisdiction, or application may be made to such court for a judicial acceptance of the award and an enforcement, as the law

Page 16 of 22

of the state having jurisdiction may require or allow. During any arbitration proceedings, all rights and obligations of the parties under this Agreement shall continue and all payments required to be made hereunder shall continue to be made. The fact that arbitration is or may be allowed shall not impair the exercise of any termination rights under this Agreement.

SECTION 11

MISCELLANEOUS

11.1 This Agreement shall be executed in two counterparts in the English language and each such counterpart shall be deemed an original thereof.

11.2 Upon the termination of this Agreement, BENTHOS shall have the right to dispose of all Licensed Products then on hand, including work in process, and to complete all orders for Licensed Products on hand as of the date it received notice of termination, but periodic royalties which would otherwise be payable pursuant to this Agreement had such termination not become effective shall continue to be paid with respect to all such Licensed Products when sold as though this Agreement had not been terminated.

113 Neither termination nor expiration of this Agreement shall terminate BENTHOS’S obligation to pay all periodic royalties which shall then have accrued up to the date of such expiration or termination. BENTHOS’S obligation to report royalties due and submit its books and records for inspection as provided in paragraph 4.1 hereof shall continue until BENTHOS’S royalty obligations shall have been fully determined and discharged by proper payment as provided in paragraph 5.7

Page 17 of 22

11.4 LICENSOR shall promptly give notice to BENTHOS of and upon commencement of any voluntary or involuntary bankruptcy proceeding involving LICENSOR as a debtor. Likewise, BENTHOS shall promptly give notice to the LICENSOR of and upon commencement of any voluntary or involuntary bankruptcy proceeding involving BENTHOS as a debtor.

11.5 LICENSOR agrees that all information and documentation made available or disclosed to LICENSOR or its accountants by BENTHOS as a result of or related to this Agreement, or any negotiations therefor, shall be received and treated by LICENSOR as the confidential and proprietary information of BENTHOS to be used only for the purpose of LICENSOR’ S examination rights under Section 4 hereof.

SECTION 12

ENTIRE AGREEMENT

This Agreement constitutes the entire agreement between the Parties concerning the subject matter hereof and supersedes all written and oral prior agreements and understandings with respect thereto. No variation or modification of the terms of this Agreement nor any waiver of any of the terms or provisions hereof shall be valid unless in writing and signed by an authorized representative of each Party.

Page 18 of 22

SECTION 13

SEVERABILITY

This Agreement is subject to the restrictions, limitations, terms and conditions of all applicable governmental regulations, approvals and clearances. If any term or provision of this Agreement is held invalid, illegal or unenforceable in any respect for any reason, that invalidity, illegality or unenforceability shall not affect any other term or provision hereof, and this Agreement shall be interpreted and construed as if such term or provision, to the extent the same shall have been held to be invalid, illegal or unenforceable, had never been contained herein.

SECTION 14

WAIVER

Failure by either Party to enforce any rights under this Agreement shall not be construed as a waiver of such rights nor shall a waiver by either Party in one or more instances be construed as constituting a continuing waiver or as a waiver in other instances.

SECTION 15

RIGHT OF FIRST REFUSAL

In the event that LICENSOR develops new products or technology improvements in the future based on LICENSOR’S proprietary Licensed Patent Application and intends to grant license rights in such products or improvements for the exploitation of LICENSOR’S Licensed Patent Application, LICENSOR shall first give BENTHOS prior written notice of such intention. BENTHOS shall have the right, exercisable within

Page 19 of 22

ninety (90) days from the date of receipt of such notice, to indicate its intention in writing to enter into a license agreement with LICENSOR subject to terms and conditions mutually acceptable to LICENSOR and BENTHOS. If BENTHOS and LICENSOR shall fail to enter into a mutually acceptable license agreement within said ninety (90) day period, LICENSOR shall be free to license the new products or technology improvements to any third party.

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed in duplicate by duly authorized officers effective on the date and year first written above.

Simon Fraser University

LICENSOR		BENTHOS, INC.
By:	/s/ Mike Volker	By:	/s/ John Coughlin
Name:	Mike Volker	Name:	John Coughlin
Title:	Director, University Industry Liaison	Title:	President 9/26/00

Page 20 of 22

SCHEDULE A

Imaging Methods and Apparatus Using Model-Based Array Signal Processing

This invention relates generally to the field of constructing two-dimensional or three-dimensional images or maps of surfaces and objects in a volume from signals scattered by those surfaces or objects. The invention has particular application in acoustic imaging. The invention may also be applied to radar imaging. The invention may be applied to terrain mapping, object detection, object avoidance, medical ultrasound imaging and the like.

This invention provides a method for imaging a region. The region may be underwater, in air or visceral. The method begins by transmitting a pulse toward the region. The pulse may be an acoustic pulse or an electromagnetic pulse. The method continues with the step of detecting a signal scattered from the region to yield a multi-channel scattering signal at a receive transducer array comprising of a plurality of N elements or N beam formed subarrays. L snapshots are obtained, where L is an integer with L>1, by sampling the scattering signal at one or more instants after transmitting the pulse to yield a plurality of complex samples. In a processing device, which may be a programmed computer, the plurality of complex samples are processed to obtain image data comprising angles of arrival from M principal scattering components, where M is an integer, with 1<M<N-1. The case where M>2 provides particular advantages over the current state of the art. Preferably the processing is performed by: constructing a sample matrix S_L,M,.N from the complex samples; from the sample matrix computing a null-space vector w comprising a plurality of entries; computing a plurality of roots of a polynomial formed from the entries of the null-space vector, and, from the roots of the polynomial computing angles of arrival and amplitudes for M principal scattering components. Finally, the method stores the angles of arrival and optionally the amplitudes as image data.

Licensed Fields-of Use

The License agreement includes both the swath bathymetry field-of-use and the 3D sidescan field-of-use in underwater applications where:

swath bathymetry is an underwater field-of-use of the Licensed Patent in which the depth of the seafloor is estimated at several points across the track of a forward moving vessel or vehicle_ The across-track region is called a swath and extends directly athwartships in both the port and starboard directions (i.e. a swath bathymetry sonar is oriented in a side-looking configuration and is used for measuring bathymetry athwartships as the vessel or vehicle moves forward along a track). Both towed and direct vessel/vehicle mount configurations are possible for both surface and underwater vessels and vehicles. The transducer assembly is fixed in a direct side-looking configuration and cannot be mechanically or electronically scanned in any way.

3D sidescan is an underwater field-of-use of the Licensed Patent in which the depth of the seafloor combined with a coregistered measure of the acoustic reflectivity is estimated at several points across the track of a forward moving vessel or vehicle. The across-track region is called a swath and extends directly athwartships in both the port and starboard directions (i.e. a swath bathymetry sonar is oriented in a side-looking configuration and is used for measuring both bathymetry and acoustic reflectivity athwartships as the vessel or vehicle moves forward along a track). Both towed and direct vessel /vehicle mount configurations are possible for both surface and underwater vessels and vehicles. The transducer assembly is fixed in a direct side-looking configuration and cannot be mechanically or electronically scanned in any way.

Page 21 of 22

Fields-of-Use Explicitly Excluded from the License

The License agreement explicitly excludes any field-of-use that is not underwater as well as the sector-scan, electronic sector-scan, forward-looking, mine-hunting and sub-bottom profiling fields-of-use in underwater applications where:

sector-scan is a field-of-use of the Licensed Patent in which acoustic backscatter is measured using a mechanically steered transducer assembly. Sector-scan differs from swath bathymetry and 3D sidescan in that for sector-scan, mechanical scanning is employed to scan a volume of water or an area of the seafloor.

electronic sector-scan is a field-of-use of the Licensed Patent in which acoustic backscatter is measured using an electronically steered transducer assembly. Electronic sector-scan differs from swath bathymetry and 3D sidescan in that for electronic sector-scan, electronic scanning is employed to scan a volume of water or an area of the seafloor.

forward looking is a field-of-use of the Licensed Patent in which a sonar transducer assembly is mounted on a vessel or vehicle with the transducer assembly oriented in a general forward-looking direction. Both towed and direct vessel/vehicle mount configurations are possible for both surface and underwater vessels and vehicles. Forward-looking differs from swath bathymetry and 3D sidescan in that for forward-looking, the main response axis of the transducer assembly is oriented in a general forward looking direction rather than directly to the side of a vessel or vehicle track. Forward-looking may include look-directions that are not directly forward

mine-hunting is a field-of-use of the Licensed Patent in which a sonar is used for the purpose of detection and/or location of mines. Mine-hunting differs from swath bathymetry and 3D sidescan in that for mine-hunting, the sonar is used to identify and locate specific targets lying either on the seafloor or in the water column rather than to estimate the general bathymetry and/or acoustic reflectivity of the seafloor alone.

sub-bottom profiling is a field-of-use of the Licensed Patent in which acoustic backscatter is measured from regions below the water-seafloor interface (i.e. sub-bottom) for the purpose of mapping and or detecting/locating sub-bottom features or targets. Sub-bottom profiling differs from swath bathymetry and 3D sidescan in that for subbottom profiling, the objective is to measure acoustic backscatter from regions within the seafloor as well as from the water-seafloor interface.

Page 22 of 22

EX-10.55

Exhibit 10.55

Benthos License Amendment No. 1

AMENDMENT No. 1

THIS AMENDMENT NUMBER 1 (this “Amendment”), dated as of March 15, 2004, amends the License Agreement dated as of September 1st, 2000 (the “License”) between the parties regarding certain technology described in US Patent 6,130,641 “Imaging Methods and Apparatus Using Model Based Array Signal Processing,” and is

BETWEEN

SIMON FRASER UNIVERSITY,

a university duly continued under the University Act of British Columbia

having offices at Room 2100, Strand Hall, 8888 University Drive,

Burnaby, British Columbia, Canada, V5A 1S6

(“Licensor”);

AND:

BENTHOS, INC.,

a Massachusetts corporation with a usual place of business at:

49 Edgerton Drive, North Falmouth, Massachusetts, 02556 U.S.A.

(“Benthos”)

WHEREAS:

A. The Licensor has been engaged in research during the course of which it has invented, developed and/or acquired certain technology described in US Patent 6,130,641 “Imaging Methods and Apparatus Using Model Based Array Signal Processing,” (further described in Schedule A under the heading “Technology Description”), which research was undertaken by the Inventors John Bird and Paul Kraeutner in the School of Engineering Science of the Licensor;

B. The Licensor is desirous of further expanding the current License with Benthos with the objective of furthering society’s use of Licensor’s advanced technology, and to generate further research in a manner consistent with Licensor’s status as a non-profit, tax exempt educational institution;

C. Benthos is desirous of the Licensor granting an additional non-exclusive licence to Benthos for the Issued Patent technology (Technology) licensed under the License Agreement to include the Mine-Hunting field-of-use and to use or cause to be used such Technology to manufacture, distribute, market, sell, or lease products derived or developed from such Technology for the Mine Hunting field-of-use utilizing Swath Bathymetry, 3D Sidescan, and, optionally Sub-Bottom Profiling, and to sell the same to the general public during the term of the License Agreement.

D. Benthos is also desirous of the Licensor granting a right of first refusal to a license for the Sub-Bottom Profiling field-of-use for a period of two (2) years.

Page 1 of 5

Benthos License Amendment No. 1

NOW THEREFORE, in consideration of the mutual covenants contained herein and intending to be legally bound, the Licensor and Benthos hereby agree as follows:

1. This Amendment will become effective as of the date hereof.

2. Paragraph 1.2 of the License is replaced with the following:

1.2 “Licensed Patents” shall mean US Patent 6,130,641 entitled “Imaging Methods and Apparatus Using Model Based Array Signal Processing” issued October 10, 2000, and any and all re-examinations, reissues, foreign counterparts, continuations, divisions, and continuations-in-part thereof.

3. Paragraphs 2.4, 2.5, and 2.6 are added to the License:

2.4 Licensor hereby grants to Benthos and its Affiliates, and Benthos hereby accepts, a nonexclusive, worldwide, royalty bearing right and license under the Licensed Patent(s) (without the right to grant sublicenses in the Licensed fields of use) to make, have made, use, sell, offer for sale, lease, import, and otherwise dispose of Licensed Products that utilize Mine-Hunting field-of-use technology in the Swath Bathymetry and 3D Sidescan fields-of-use that are already exclusively licensed to Benthos.

2.5 If Benthos exercises its option rights to the Sub-Bottom Profiling field-of-use as set forth in Paragraph 15.1, then Benthos shall also have a nonexclusive worldwide, royalty bearing right and license under the Licensed Patent(s) (without the right to grant sublicenses in the Licensed fields of use) to make, have made, use, sell, offer for sale, lease, import, and otherwise dispose of Licensed Products that utilize Mine-Hunting field-of-use technology in the Sub-Bottom Profiling field-of-use.

2.6 Fields-of-use are further defined in Schedule A. Products utilizing the Technology that are not included in the License are Sector-Scan, Electronic Sector-Scan, Forward-Looking, and, currently, in Sub-Bottom Profiling fields-of-use.

4. Paragraphs 3.4 and 3.5 are added to the License:

3.4 In consideration of the rights and nonexclusive license to Mine-Hunting granted to Benthos under the License, as amended herewith, Benthos agrees to pay to Licensor an additional one-time license fee of Five Thousand ($5,000.00) Dollars (U.S.) (the “Amendment License Fee”) which shall be payable upon the execution of Amendment No. 1 to this License.

3.5 No multiple royalties shall be due because the manufacture, use, offer to sell, importation, or sale of Licensed Products falls within the definition of more than one field-of-use.

5. Paragraphs 15.1 is added:

15.1 The Licensor hereby grants to Benthos an exclusive, two-year option to acquire, at Benthos sole discretion, either an exclusive or nonexclusive license to the Sub-Bottom Profiling field-of-use. Benthos may exercise its option at any time during the two-year option period by notifying Licensor of its election to acquire an exclusive or a nonexclusive license and paying Licensor Ten Thousand ($10,000.00) Dollars (U.S.) (the “Exclusive Sub-Bottom Profiling Fee”) or Five-Thousand ($5,000.00) Dollars (U.S.) (the “Nonexclusive Sub-Bottom Profiling Fee”).

6. Schedule A to the License is replaced in its entirety by the revised Schedule A attached hereto.

7. In all other respects the terms of the License are affirmed.

Page 2 of 5

Benthos License Amendment No. 1

IN WITNESS WHEREOF, the parties hereto have executed this Amendment No.1 on the dates indicated below to be effective upon the date first written above.

SIMON FRASER UNIVERSITY	BENTHOS, INC.
/s/ Michael C. Volker	/s/ Ronald L. Marsiglio
Michael C. Volker	Ronald L. Marsiglio
Director University/Industry Liaison Office	President and CEO
Date: 5-12-04	Date: 5-6-04

Page 3 of 5

Benthos License Amendment No. 1

Schedule A

Technology Description

Imaging Methods and Apparatus Using Model-Based Array Signal Processing

US Patent 6,130,641

This invention relates generally to the field of constructing two-dimensional or three-dimensional images or maps of surfaces and objects in a volume from signals scattered by those surfaces or objects. The invention has particular application in acoustic imaging. The invention may also be applied to radar imaging. The invention may be applied to terrain mapping, object detection, object avoidance, medical ultrasound imaging and the like.

This invention provides a method for imaging a region. The region may be underwater, in air or visceral. The method begins by transmitting a pulse toward the region. The pulse may be an acoustic pulse or an electromagnetic pulse. The method continues with the step of detecting a signal scattered from the region to yield a multi-channel scattering signal at a receive transducer array comprising of a plurality of N elements or N beamformed subarrays. L snapshots are obtained, where L is an integer with L>1, by sampling the scattering signal at one or more instants after transmitting the pulse to yield a plurality of complex samples. In a processing device, which may be a programmed computer, the plurality of complex samples are processed to obtain image data comprising angles of arrival from M principal scattering components, where M is an integer, with 1<M<N-1. The case where M>2 provides particular advantages over the current state of the art. Preferably the processing is performed by: constructing a sample matrix S_L,M,N from the complex samples; from the sample matrix computing a null-space vector w comprising a plurality of entries; computing a plurality of roots of a polynomial formed from the entries of the null-space vector; and, from the roots of the polynomial computing angles of arrival and amplitudes for M principal scattering components. Finally, the method stores the angles of arrival and optionally the amplitudes as image data.

Licensed fields-of-use:

The License Agreement, as amended, includes the Swath Bathymetry field-of-use, the 3D Sidescan field-of-use and the Mine Hunting field-of-use in underwater applications where:

Swath Bathymetry is an underwater field-of-use of the Licensed Patent in which the depth of the seafloor is estimated at several points across the track of a forward moving vessel or vehicle. The across-track region is called a swath and extends directly beneath and athwartships in both the port and starboard directions (i.e. a Swath Bathymetry sonar is oriented in a generally side-looking configuration and is used for measuring bathymetry as the vessel or vehicle moves forward along a track). Both towed and direct vessel/vehicle mount configurations are possible for both surface and underwater vessels and vehicles. While the transducer assembly is fixed in a generally side-looking configuration, and cannot be mechanically or electronically scanned in any way, it is understood that the transducer assembly may be configured and arranged to provide bathymetry data to fill the center gap in the swath bathymetry field-of-use.

3D Sidescan is an underwater field-of-use of the Licensed Patent in which the depth of the seafloor combined with a co-registered measure of the acoustic reflectivity is estimated at several points across the track of a forward moving vessel or vehicle. The across-track region is called a swath and extends directly beneath and athwartships in both the port and starboard directions (i.e. a 3D Sidescan is oriented in a side-looking configuration and is used for measuring both bathymetry and acoustic reflectivity as the vessel or vehicle moves forward along a track). Both towed and direct vessel/vehicle mount configurations are possible for both surface and underwater vessels and vehicles. While the transducer assembly is fixed in a generally side-looking configuration, and cannot be mechanically or

Page 4 of 5

Benthos License Amendment No. 1

electronically scanned in any way, it is understood that the transducer assembly may be configured and arranged to provide sidescan data to fill the center gap in the 3D Sidescan field-of-use.

Mine-Hunting is an underwater field-of-use of the Licensed Patent in which a side-looking sonar is used for the purpose of detection and/or location of mines lying either on the seafloor or in the water column at several points across the track of a forward moving vessel or vehicle. The across-track region is called a swath and extends directly athwartships in both the port and starboard directions (i.e. a Mine-Hunting sonar is oriented in a side-looking configuration and is used for detecting and/or locating underwater mines athwartships as the vessel or vehicle moves forward along a track). Both towed and direct vessel/vehicle mount configurations are possible for both surface and underwater vessels and vehicles. The transducer assembly is fixed in a side-looking configuration and cannot be mechanically or electronically scanned in any way. The Mine-Hunting field-of-use differs from Swath Bathymetry and 3D Sidescan in that for Mine-Hunting, the sonar is used to identify and locate specific mine-like targets lying either on the seafloor or in the water column rather than to estimate the general bathymetry and/or acoustic reflectivity of the seafloor. The Mine-Hunting field-of-use differs from Sub-Bottom Profiling in that for Mine-Hunting, the sonar is used to identify and locate specific mine-like targets lying either within the seafloor or within the water-seafloor interface rather than to measure acoustic backscatter from these regions.

Fields-of-use Explicitly Excluded from the License

The License agreement explicitly excludes any field-of-use that is not underwater as well as the Sector-Scan, Electronic Sector-Scan, Forward-Looking, and, currently, Sub-Bottom Profiling fields-of-use in underwater applications where:

Sector-Scan is a field-of-use of the Licensed Patent in which acoustic backscatter is measured using a mechanically steered transducer assembly. Sector-Scan differs from Swath Bathymetry and 3D Sidescan in that for Sector-Scan, mechanical scanning is employed to scan a volume of water or an area of the seafloor.

Electronic Sector-Scan is a field-of-use of the Licensed Patent in which acoustic backscatter is measured using an electronically steered transducer assembly. Electronic Sector-Scan differs from Swath Bathymetry and 3D Sidescan in that for Electronic Sector-Scan, electronic scanning is employed to scan a volume of water or an area of the seafloor.

Forward-Looking is a field-of-use of the Licensed Patent in which a sonar transducer assembly is mounted on a vessel or vehicle with the transducer assembly oriented in a general forward-looking direction. Both towed and direct vessel/vehicle mount configurations are possible for both surface and underwater vessels and vehicles. Forward-Looking differs from Swath Bathymetry and 3D Sidescan in that for Forward-Looking, the main response axis of the transducer assembly is oriented in a general forward looking direction rather than directly to the side of a vessel or vehicle track. Forward-Looking may include look-directions that are not directly forward.

Field-of-use Optioned in the Amendment

Sub-Bottom Profiling is a field-of-use of the Licensed Patent in which acoustic backscatter is measured from regions below the water-seafloor interface (i.e. Sub-Bottom Profiling) for the purpose of mapping and or detecting/locating sub-bottom features or targets. Sub-Bottom Profiling differs from Swath Bathymetry and 3D Sidescan in that for Sub-Bottom Profiling, the objective is to measure acoustic backscatter from regions within the seafloor as well as from the water-seafloor interface.

Page 5 of 5

EX-10.56

Exhibit 10.56

January 21, 2004

CONTRACT

CONTRACT NO:	04-5954
COMMODITY OR SERVICE:	PRESSURE GLASS SPHERES
PERIOD OF CONTRACT:	January 22, 2004 through January 21, 2005 [with the option of five one-year renewal periods]

This Agreement is entered into between the University of Wisconsin-Madison (hereinafter called University) and BENTHOS, INC.

Whereas the University issued a Request for Proposal (RFP) dated November 25, 2003, and

Whereas the University wishes to award a contract pursuant to the process; and

Whereas BENTHOS, INC. wishes to provide product and services requested in the RFP;

NOW, THERFORE, in consideration of the mutual promises, covenants, and agreements hereinafter set forth, BENTHOS, INC. and the University do hereby agree as follows:

1. BENTHOS, INC. agrees to supply such pressure glass spheres in accordance with the terms, conditions, and specification of the RFP, including Appendices, Addendum and e-mail clarifications, and BENTHOS, INC.’s response, signed and dated December 15, 2003. The RFP and Response are incorporated and made a part of this contract.

2. BENTHOS, INC. also agrees to the University’s terms and conditions of the RFP 04-5954, which is incorporated and made a part of this contract.

3. The parties further wish to clarify the following:

The University can purchase the spheres as follows:

a.	Cost of Sphere	$	513.00
	Packaged with BENTHOS, INC box and peanuts	$	0.00
	Shipping	$	14.38
	FOB: Destination – UW Madison	$	527.38

b.	Cost of Sphere	$	513.00
	Packaged with styrofoam molding	$	70.00
	Shipping	$	14.38
	FOB: Destination – UW Madison	$	597.38

c. All spheres purchased by collaborating institutions will be delivered FOB BENTHOS, INC. and delivered duty unpaid.

d. The shipping of $14.38 is based on filling a container truck and shipping one lot in that method. If there is an expedite fee, or change in the shipping method, that charge can be added to the price of each sphere if it is greater than $14.38.

4. In the event of any inconsistency in this Contract, the inconsistency shall be resolved in the following order of precedence:

• The specific terms and conditions stated herein.

• The terms and conditions of RFP 04-5954 Dated November 25, 2003 including all Appendices, Addendum and e-mail clarifications.

• The terms and conditions of BENTHOS, INC. response to the RFP signed and dated December 15, 2003.

5. This Agreement may be amended only by written agreement of the parties.

FOR: UNIVERSITY OF WISCONSIN-MADISON	FOR:	BENTHOS, INC.
		49 EDGERTON DR.
		NORTH FALMOUTH, MA 02556

/s/ Mike Hardiman by Illegible	BY:	/s/ Francis E. Dunne
Mike Hardiman
Director, Purchasing Services	TITLE: Vice President
Title
DATE: 1/22/04	DATE: 1/22/04

NOTE: For administration of this contract, please contact:

Gail Movrich

       Name

Purchasing Agent

       Title

608-262-1323

       Phone

-2-

EX-31.1

EXHIBIT 31.1

Section 302 Certification

I, Ronald L. Marsiglio, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Benthos, Inc., a Massachusetts corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4. The small business issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the small business issuer’s internal controls over financial reporting that occurred during the most recent fiscal quarter that has materially effected or is reasonably likely to materially effect, the small business issuer’s internal control over financial reporting: and

5. The small business issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors:

a. All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Dated: August 10, 2004

RONALD L. MARSIGLIO

Ronald L. Marsiglio

President and Chief Executive Officer

2

EX-31.2

EXHIBIT 31.2

Section 302 Certification

I, Francis E. Dunne, Jr., certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Benthos, Inc., a Massachusetts corporation;

2 Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

5. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

6. The small business issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the small business issuer’s internal controls over financial reporting that occurred during the most recent fiscal quarter that has materially effected or is reasonably likely to materially effect, the small business issuer’s internal control over financial reporting: and

5. The small business issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors:

a. All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Dated: August 10, 2004

FRANCIS E. DUNNE, JR.

Francis E. Dunne, Jr.

Vice President, Chief Financial Officer,

and Treasurer

2

EX-32

EXHIBIT 32

WRITTEN STATEMENT

OF

CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

The undersigned hereby certify that, to the best of the knowledge of the undersigned, the Quarterly Report on Form 10-QSB for the period ended June 30, 2004 filed by Benthos, Inc. with the Securities and Exchange Commission fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the issuer.

Dated: August 10, 2004

RONALD L. MARSIGLIO

Ronald L. Marsiglio

President and Chief Executive Officer

FRANCIS E. DUNNE, JR.

Francis E. Dunne, Jr.

Vice President, Chief Financial Officer and Treasurer