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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 20, 1999
BOLT TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Commission File Number 0-10723
CONNECTICUT 06-0773922
(State or other jurisdiction of (I.R.S. Employer
of incorporation) Identification No.)
Four Duke Place
Norwalk, Connecticut 06854
(Address of principal executive offices) (Zip Code)
(203) 853-0700
(Registrant's telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report)
(1)
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Item 2. Acquisition or Disposition of Assets.
On April 20, 1999, Bolt Technology Corporation, (the "Company"), a Connecticut
corporation, acquired A-G Geophysical Products, Inc. ("AG"). This acquisition
was effected by the Company acquiring all of the outstanding stock of A-G from
Albert H. Gerrans, Jr., Stephen Clay and Robert Bernard. A-G is a leading
developer and manufacturer of patented underwater electrical connectors and
cables, air gun signature hydrophones and pressure transducers for the marine
seismic industry.
The aggregate consideration paid by the Company in respect of the acquisition
described above was $13.6 million and consisted of $6.1 million of cash, 63,492
shares of the Company's common stock valued at $0.5 million and note to Mr.
Gerrans for $7.0 million. The Company used its cash to fund the cash portion
of the consideration.
The purchase price for shares of A-G capital stock was determined through arms'
length negotiations between management of the Company on the one hand and A-G
and A-G's stockholders on the other hand. Neither A-G nor its stockholders had
any material relationship prior to acquisition with the Company, any affiliates
of the Company, any director or officer of the Company or any associate of any
such director or officer.
To effect the acquisition certain terms and financial covenants of the Company's
unsecured line of credit with Fleet National Bank were modified.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements.
As of the date of filing this Current Report on Form 8-K, it is impracticable
for the Company to provide the financial statements required by this Item 7(a).
In accordance with item 7(a)(4) of Form 8-K, such financial statements shall be
filed by amendment to this Form 8-K no later than July 5, 1999.
(b) Pro Forma Financial Information.
As of the date of filing this Current Report on Form 8-K, it is impracticable
for the Registrant to provide the pro forma financial information required by
this Item 7(b). In accordance with Item 7(b) of Form 8-K, such financial
statements shall be filed by amendment to this Form 8-K no later than July 5,
1999.
(c) Exhibits.
2.1 Stock Purchase Agreement for the acquisition of A-G Geophysical Products,
Inc. by Bolt Technology Corporation from Albert H. Gerrans, Jr., Stephen Clay
and Robert Bernard dated as of April 20, 1999. Pursuant to Item 601(b) (2) of
Regulation S-K, the Company agrees to furnish supplementary a copy of any
omitted schedule or exhibit to the Securities and Exchange Commission upon
request.
(2)
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Item 7. Financial Statements and Exhibits. (cont'd.)
4.1 Promissory Note dated April 20, 1999 between Bolt Technology Corporation
and Albert H. Gerrans, Jr.
4.2 Pledge Agreement dated April 20, 1999 between Bolt Technology Corporation
and Albert H. Gerrans, Jr.
4.3 Security Agreement dated April 20, 1999 between A-G Geophysical Products,
Inc., Albert H. Gerrans, Jr. and Bolt Technology Corporation.
10.1 Modification to Commercial Revolving Loan and Security Agreement dated
April 20, 1999 between Bolt Technology Corporation and Fleet National Bank.
10.2 Lease Agreement dated April 20, 1999 between Albert H. Gerrans, Jr. and
Bolt Technology Corporation.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BOLT TECHNOLOGY CORPORATION
By: /s/ Raymond M. Soto
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Raymond M. Soto
Chairman and President
April 30, 1999
(3)
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STOCK PURCHASE AGREEMENT
Exhibit 2.1
for the Acquisition of
A-G Geophysical Products, Inc.
by
Bolt Technology Corporation
from Albert H. Gerrans, Jr., Stephen Clay and Robert Barnard
(Sellers)
April 20, 1999
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TABLE OF CONTENTS
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Page
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1. PURCHASE AND SALE OF STOCK ............................................. 1
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1.1 Purchase of Stock ................................................ 1
1.2 Purchase Price and Payment Terms ................................. 2
1.3 Loan ............................................................. 2
1.4 Lease Agreement .................................................. 3
2. CLOSING ................................................................ 3
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2.1 Time and Place of Closing ........................................ 3
2.2 Sellers' Performance at Closing .................................. 3
2.3 Buyer's Performance at Closing ................................... 4
3. SELLERS' REPRESENTATIONS AND WARRANTIES ................................ 5
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3.1 Title to Stock ................................................... 5
3.2 Sellers' and the Company's Authority to Execute
and Deliver Agreement ............................................ 6
3.3 Organization and Corporate Power ................................. 6
3.4 Certificate of Incorporation and By-laws; Minute Books ........... 6
3.5 Due Authorization; Consents ...................................... 6
3.6 Capitalization ................................................... 7
3.7 Financial Statements ............................................. 7
3.8 Real Property .................................................... 8
3.9 Leases ........................................................... 8
3.10 Personal Properties .............................................. 9
3.11 Inventories ...................................................... 9
3.12 Employment Arrangements .......................................... 9
3.13 Material Contracts and Arrangements .............................. 10
3.14 Customers; Suppliers ............................................. 11
3.15 Accounts Receivable .............................................. 12
3.16 Permits, Licenses etc ............................................ 12
3.17 Trademarks, Patents and Similar Rights ........................... 12
3.18 Litigation and Compliance with Laws .............................. 13
3.19 Extraordinary Events ............................................. 13
3.20 Insurance Policies ............................................... 14
3.21 Powers of Attorney; Bank Accounts ................................ 14
3.22 Tax Returns ...................................................... 15
3.23 Liabilities ...................................................... 16
3.24 Books and Records ................................................ 16
3.25 Conflicts of Interest ............................................ 16
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3.26 ERISA ............................................................ 17
3.27 No Government Authorizations or Approvals Required ............... 18
3.28 Broker's Fees .................................................... 18
3.29 Environmental .................................................... 18
3.30 Products Liability ............................................... 19
3.31 Information Technology Systems; Year 2000 Compliance ............. 19
3.32 Material Information ............................................. 20
3.33 Related Assets ................................................... 20
3.34 Investment Intent ................................................ 20
3.35 Review and Evaluation of Buyer Information ....................... 20
4. BUYER'S REPRESENTATIONS AND WARRANTIES ................................. 20
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4.1 Organization and Corporate Power ................................. 21
4.2 Due Authorization; Effect of Transaction ......................... 21
4.3 No Governmental Authorizations or Approvals Required ............. 21
4.4 Broker's Fees .................................................... 21
4.5 Capitalization ................................................... 21
5. CONDITIONS TO OBLIGATIONS OF SELLERS AND BUYER ......................... 21
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5.1 Withdrawal by Sellers ............................................ 21
5.2 Withdrawal by Buyer .............................................. 22
5.3 Notice of Withdrawal ............................................. 23
6. COVENANTS OF SELLERS AND THE COMPANY ................................... 23
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6.1 Access to Records and Properties Prior to the Closing Date ....... 23
6.2 Operation of the Business of the Company ......................... 24
6.3 Expenses ......................................................... 26
6.4 Taxes ............................................................ 26
6.5 Parties to be Reasonable; Termination ............................ 26
6.6 Notice of Changes ................................................ 26
6.7 Preservation of Business ......................................... 26
6.8 Litigation ....................................................... 27
6.9 No Negotiations .................................................. 27
6.10 Financial Statements ............................................. 27
6.11 Limitations on Disposition ....................................... 27
7. SURVIVAL ............................................................... 28
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7.1 Limited Survival of Representations and Warranties ............... 28
7.2 Other ............................................................ 28
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8. RESTRICTIVE COVENANT ................................................... 28
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8.1 Non-Competition .................................................. 28
8.2 Reasonableness of Restriction .................................... 29
8.3 Modification of Restrictions ..................................... 29
8.4 Remedies ......................................................... 29
9. INDEMNIFICATION ........................................................ 29
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9.1 Indemnification by Sellers and the Company ....................... 29
9.2 Indemnification by Buyer ......................................... 30
9.3 Survival of Indemnification ...................................... 30
9.4 Notice and Opportunity to Defend ................................. 30
10. MISCELLANEOUS ........................................................... 31
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10.1 Waiver and Amendment ............................................. 31
10.2 Entire Agreement ................................................. 31
10.3 Interpretation ................................................... 31
10.4 Counterparts ..................................................... 31
10.5 Notices .......................................................... 31
10.6 Successors and Assigns ........................................... 32
10.7 Governing Law .................................................... 33
10.8 Severability ..................................................... 33
10.9 Publicity ........................................................ 33
10.10 Further Assurances ............................................... 33
SCHEDULES
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3.3 Jurisdictions and Subsidiaries
3.5 Consents
3.6 Capitalization
3.7 Contingent Liabilities
3.8 Real Property
3.9 Leases
3.10 Personal Property
3.12 Employment Arrangements
3.13 Material Contracts and Arrangements
3.14 Customers; Suppliers
3.15 Accounts Receivable
3.16 Permits, Licenses
3.17 Trademarks, Patents and Similar Rights
3.18 Litigation
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3.19 Extraordinary Events
3.20 Insurance
3.21 Powers of Attorney; Bank Accounts
3.22 Taxes
3.23 Liabilities
3.26 ERISA
3.29 Environmental
3.30 Products Liability
3.31 Information Technology
3.33 Related Assets
EXHIBITS
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A: Buyer Note
B: Pledge Agreement
C: Guaranty
D: Security Agreement
E: UCC-1 Financing Statement
F: Lease Agreement
G: Form of Opinion of the Company's and Sellers' Counsel
H: Gerrans' Employment Agreement
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STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of April 20, 1999, by
and among ALBERT H. GERRANS, JR. ("Gerrans"), STEPHEN CLAY ("Clay"), ROBERT
BARNARD ("Barnard" and together with Gerrans and Clay, sometimes herein referred
to jointly and severally as "Sellers"), A-G GEOPHYSICAL PRODUCTS, INC., a Texas
corporation (the "Company"), and BOLT TECHNOLOGY CORPORATION, a Connecticut
corporation ("Buyer").
W I T N E S S E T H :
WHEREAS, Gerrans owns 4,000 shares, Barnard owns 31 shares, and Clay owns 31
shares of common stock, no par value, of the Company ("Stock"), constituting one
hundred percent (100%) of the issued and outstanding capital stock of the
Company;
WHEREAS, Sellers desire to sell to Buyer and Buyer desires to purchase from
Sellers all of the shares of Stock, subject to the terms and conditions set
forth herein, for the purpose of acquiring the geophysical products
manufacturing business conducted by the Company (the "Business");
WHEREAS, Gerrans and Buyer desire to enter into certain other agreements for
their mutual benefit;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Sellers, the Company and Buyer,
intending to be legally bound, hereby agree as follows:
1. PURCHASE AND SALE OF STOCK.
--------------------------
1.1 Purchase of Stock. Subject to and in reliance upon the representations,
-----------------
warranties and agreements herein set forth, and subject to the terms and
conditions herein contained, on the Closing Date (as defined in Section 2),
Sellers shall convey, sell, assign, transfer and deliver to Buyer (or at Buyer's
election, a wholly-owned acquisition subsidiary of Buyer), and Buyer (or such
acquisition subsidiary) shall purchase all of the Stock. Sellers shall transfer
the Stock free and clear of any claims, pledges, contracts, title retention
agreements, rights, options, liens, encumbrances, agreements, charges, taxes or
liabilities of every kind and nature (each, a "Claim" and together, "Claims").
<PAGE>
1.2 Purchase Price and Payment Terms. Buyer shall pay to Sellers an amount
--------------------------------
equal to Thirteen Million Six Hundred Thousand Dollars ($13,600,000.00) as the
aggregate purchase price for the Stock (the "Purchase Price") payable as
follows:
(i) Release to Gerrans at the Closing of the deposit of Twenty Thousand
Dollars ($20,000.00) previously paid into escrow on behalf of Gerrans upon the
execution of the letter of intent regarding the transactions contemplated
hereby, receipt of which Gerrans hereby acknowledges;
(ii) Six Million Eighty Thousand Dollars ($6,080,000.00), shall be
delivered to Sellers at the Closing by wire transfer of funds to the domestic
bank accounts designated by each of Sellers in writing at least three (3)
business days prior to the Closing Date, with $5,872,416 paid to Gerrans,
$103,792 to Clay and $103,792 to Barnard, which payment shall constitute
payment in full as to Clay and Barnard;
(iii) Buyer shall deliver to Gerrans at the Closing the Buyer Note (as
defined in Section 1.3) evidencing the purchase money loan to be made by
Gerrans to Buyer in connection with the purchase of the shares of Stock owned
by Gerrans (the "Loan"), in the original principal amount of Seven Million
Dollars ($7,000,000.00); and
(iv) The balance of Five Hundred Thousand Dollars ($500,000.00), shall be
delivered at the Closing to Gerrans in connection with the purchase of the
shares of Stock owned by Gerrans by the issuance by Buyer of stock
certificate(s) bearing restrictive legends representing that number of shares
of its Common Stock which has a market value of $500,000 (the "Bolt Stock"),
based on the closing price of the Bolt Stock on the date as close in time to
the Closing Date as practical, as reported on the American Stock Exchange.
1.3 Loan. At the Closing, Buyer shall deliver to Gerrans a promissory note
----
payable to Gerrans in the original principal amount of $7,000,000 (the "Buyer
Note") in the form attached hereto as Exhibit A. The interest rate on the
---------
principal balance from time to time due under the Buyer Note shall be 8.25%.
Accrued interest shall be payable monthly. Principal shall be payable quarterly
in installments of $425,000, with a final payment of $1,900,000 paid at
maturity. Payment of all amounts under the Buyer Note shall be secured by a
pledge of all of the Stock purchased hereunder (which shall be issued in the
name of Buyer at the Closing) and pledged pursuant to a pledge agreement in the
form attached hereto as Exhibit B (the "Pledge Agreement"). In addition, the
---------
Company shall deliver a guarantee of the Buyer's obligations under the Loan,
pursuant to a Guaranty in the form attached hereto as Exhibit C (the
---------
"Guaranty"), which Guaranty shall be secured by a security interest in all the
assets of the Company, pursuant to a Security Agreement in the form attached
hereto as Exhibit
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D and a UCC-1 Financing Statement attached hereto as Exhibit E (the Loan,
- - ---------
pledge, guaranty and grant of the security interest being the "Loan
Transaction", and the Buyer Note, the Pledge Agreement, the Guaranty, the
Security Agreement, the Financing Statement and all other documents executed in
connection with the Loan Transaction being the "Loan Documents"). The Loan
Documents, together with this Agreement and the Lease Agreement (as defined in
Section 1.4) shall herein be referred to as the "Transaction Documents".
1.4 Lease Agreement. At the Closing, Gerrans and the Company shall execute a
---------------
lease agreement with respect to certain real estate at which the Business is
located at 14880 Skinner Road, Cypress, Texas 77429 in the form attached hereto
as Exhibit F (the "Lease Agreement").
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2. CLOSING.
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2.1 Time and Place of Closing. The closing of the purchase and sale of the
-------------------------
Stock shall be effected on or before April 20, 1999, at 10:00 a.m., local time,
at the offices of Levett, Rockwood & Sanders P.C., 33 Riverside Avenue,
Westport, Connecticut 06880, counsel to Buyer, or on such other day or at such
other hour or place as Buyer and Sellers shall hereafter mutually agree. Such
closing shall herein be referred to as the "Closing," and the date as of which
the Closing occurs shall herein be referred to as the "Closing Date". The
Closing shall be effective as of the close of business on the Closing Date.
2.2 Sellers' Performance at Closing. At the Closing hereunder, Gerrans
-------------------------------
shall deliver (or cause to be delivered) to Buyer:
(a) a certificate or certificates evidencing ownership of one hundred
percent (100%) of the issued and outstanding shares of the Company's capital
stock, with stock powers duly endorsed sufficient to transfer to Buyer all
right, title and interest in and to the Stock to be transferred, sold, assigned
and conveyed by the Sellers to Buyer pursuant to the provisions of this
Agreement, free and clear of any and all Claims;
(b) a certificate of good standing and tax clearance certificates (as to
income, sales and use and employment filings) for the Company from the Secretary
of State for Texas and each state listed on Schedule 3.3, each issued within
------------
fifteen (15) days prior to the Closing Date;
(c) for each jurisdiction in which the Company or Gerrans is located or
has property, UCC-11 searches and lien, judgment and tax searches, for the
Company and Gerrans, certified as of the Closing Date by the Company and
Gerrans;
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(d) a certified copy of resolutions of the Company's board of directors
and shareholders authorizing the execution of this Agreement, the consummation
of the transactions described herein, and such other consents or approvals which
counsel for Buyer may reasonably request;
(e) the opinion of Weycer, Kaplan, Pulaski & Zuber, P.C., counsel for
Sellers, dated as of the Closing Date, addressed to Buyer, with respect to the
matters set forth on Exhibit G and in form and substance satisfactory to Buyer
---------
and counsel for Buyer;
(f) a copy of the Company's certificate of incorporation certified by the
Secretary of the State of Texas, together with a copy of the Company's By-laws,
all as amended to date, all certified by the president and secretary of the
Company;
(g) an Employment Agreement in substantially the form attached hereto as
Exhibit H among the Company, Buyer and Gerrans duly executed by Gerrans;
- ---------
(h) a Lease Agreement in substantially the form attached hereto as
Exhibit F between Buyer and Gerrans duly executed by Gerrans;
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(i) the resignations of the existing officers and directors of the
Company;
(j) all of the books, data, documents, instruments and other records
relating to the Business;
(k) such other documents, instrument or certificates as Buyer or its
counsel shall reasonably request in order to consummate the transactions
contemplated herein.
2.3 Buyer's Performance at Closing. At the Closing hereunder, Buyer shall
------------------------------
deliver (or cause to be delivered) the following:
(a) the amount of $5,872,416 by wire transfer to Gerrans, $103,792 by
wire transfer to Clay and $103,792 by wire transfer to Barnard;
(b) the Buyer Note duly executed by Buyer;
(c) the Security Agreement duly executed by Buyer and the Company;
(d) the Pledge Agreement duly executed by Buyer;
(e) the Guaranty duly executed by the Company;
(f) the Financing Statement duly executed by Buyer;
4
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(g) a certificate or certificates bearing restrictive legends evidencing
the Bolt Stock, vesting in Gerrans all right, title and interest in and to the
Bolt Stock to be issued or transferred by Buyer to Gerrans pursuant to Section
1.2 (iv) of this Agreement, free and clear of any and all claims;
(h) a certificate or certificates evidencing ownership of one hundred
percent (100%) of the issued and outstanding shares of the Company's capital
stock, with stock powers duly endorsed (and delivered to Weycer, Kaplan, Pulaski
& Zuber, P.C. as escrow agent) sufficient to transfer to Gerrans all right,
title and interest in and to the Stock to be transferred, sold, assigned and
conveyed to Buyer in the event of default under the Loan Agreement pursuant to
the provisions of this Agreement, free and clear of any and all Claims;
(i) an Employment Agreement in substantially the form attached hereto as
Exhibit H among the Company, Buyer and Gerrans duly executed by Buyer;
- ---------
(j) a certified copy of resolutions of Buyer's board of directors
authorizing the execution and delivery of this Agreement and the consummation of
the transactions described herein, and any other consents or approvals which
counsel for Sellers may reasonably request; and
(k) such other documents, instruments and certificates as Sellers or
their counsel shall reasonably request in order to consummate the transactions
contemplated herein.
3. SELLERS' REPRESENTATIONS AND WARRANTIES.
---------------------------------------
As an inducement to Buyer to enter into this Agreement and to consummate
the transactions contemplated hereby, Sellers and the Company, jointly and
severally, represent, warrant, covenant and agree with Buyer that as of the date
hereof and at all times through the Closing Date:
3.1 Title to Stock. Sellers own all of the Stock beneficially and of record,
--------------
free and clear of all Claims. There is no restriction affecting the ability of
the Sellers to transfer the legal and beneficial title and ownership of the
Stock to Buyer and, upon delivery thereof to Buyer pursuant to the terms of this
Agreement, Buyer will acquire record and beneficial title to the Stock, free and
clear of all Claims. There are no tax judgments, liens or other claims or
encumbrances against the Company's assets or against Sellers' assets or any
assets of family members which could become a Claim against the Stock. Sellers
have not at any time in any manner transferred to any person or entity any
rights in or to
5
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the Stock or any portion thereof, including without limitation rights to
dividends or distributions.
3.2 Sellers' and the Company's Authority to Execute and Deliver Agreement.
---------------------------------------------------------------------
Each of the Sellers and the Company has the full legal right and power and all
authority required by law to enter into the Transaction Documents and to perform
his/its obligations hereunder and thereunder, as applicable. Each of the
Sellers and the Company has duly executed and delivered each of the Transaction
Documents to which he or it is a party, and each of such Transaction Documents
is the legal, valid and binding obligation of the Sellers and the Company
enforceable in accordance with its terms.
3.3 Organization and Corporate Power. The Company is a corporation duly
--------------------------------
organized, validly existing and in good standing under the laws of the State of
Texas, and is duly qualified to do business in each jurisdiction in which such
qualification is required by law. Schedule 3.3 contains a complete and accurate
------------
list of all jurisdictions in which the Company is qualified to do business,
together with a description of the activities which makes such qualification
necessary. The Company has full corporate power and authority to own and sell
its assets and to carry on the business in which it is engaged. Except as set
forth in Schedule 3.3, the Company has no subsidiaries or affiliates (defined as
------------
a person or entity that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or under common control with the
Company). Except as set forth in Schedule 3.3, the Company owns or leases all
------------
of the assets which are utilized to carry on its business and none of the
Company, Gerrans or any other Sellers or third person owns or controls any other
entity necessary for carrying on such business.
3.4 Certificate of Incorporation and By-laws; Minute Books. The Certificate
------------------------------------------------------
of Incorporation and By-laws of the Company and all amendments thereto to date
have been delivered to Buyer by Sellers, and are complete and correct as of the
date hereof. The Company is not in default in any respect in the performance,
observance or fulfillment of any of the terms or conditions of its Certificate
of Incorporation or By-laws. The minute books of the Company contain, and will
contain at the Closing Date, accurate and complete minutes in all material
respects of all meetings and resolutions of its directors and shareholder held
since its incorporation. All resolutions of the Company were duly passed and
all meetings of the Company were duly held and the stock certificate book and
register are, and will at the Closing Date be, complete and accurate and shall
reflect all transactions contemplated by this Agreement.
3.5 Due Authorization; Consents. No agreement, instrument or understanding,
---------------------------
nor any judgment, writ, injunction,
6
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decree, order, law, rule or regulation to which either Sellers or the Company is
a party or by which Sellers, the Company or any of his or its properties is
bound or affected, has been or will be violated or breached by the execution and
delivery of the Transaction Documents or the performance or satisfaction of any
agreement or condition herein contained upon his or its part to be performed or
satisfied. Except as disclosed in Schedule 3.5, no consent or other
------------
authorization is required for such execution, delivery, performance and
satisfaction (whether already obtained or to be obtained), and to the extent
such consents or authorizations have not been obtained as of the date of this
Agreement, Sellers shall have obtained all such consents or authorizations on or
before Closing Date.
3.6 Capitalization. The Company's authorized, issued and outstanding capital
--------------
consists of the shares set forth in Schedule 3.6. Sellers have good and
------------
marketable title to one hundred percent (100%) of the outstanding shares of
Stock, which shares are duly authorized, validly issued, fully paid, non-
assessable and free and clear of all Claims. The Company has no, and as of the
Closing Date will not have any, obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interest therein. There are, and as of the Closing Date, there will be, no
shares reserved for issuance. There are, and as of the Closing Date, there will
be no outstanding subscriptions, options, warrants, rights, calls or convertible
securities, stock appreciation rights (phantom or otherwise), joint venture,
partnership or other commitments of any nature relating to shares of the capital
stock of the Company. As of the date hereof there is no, and as of the Closing
Date there will be no, liability or indebtedness for dividends or other
distributions declared or accumulated but unpaid with respect to any of such
shares of Stock.
3.7 Financial Statements. Sellers have delivered to Buyer (i) the Company's
--------------------
unaudited balance sheet and the related statement of income, for the fiscal year
ended September 30, 1998, (ii) the Company's unaudited balance sheet and
statement of income for the interim period ending December 31, 1998, and (iii)
the Company's unaudited balance sheet and statement of income for the interim
period ending March 31, 1999, which statements specifically set forth and
provide for federal and state income tax liability of the Company (A) for the
Company's prior fiscal year ended September 30, 1998, and (B) for the Company's
current fiscal year through March 31, 1999 (collectively, the "Financial
Statements"). The Financial Statements are true, correct and complete and have
been prepared in accordance with generally accepted accounting principles,
consistently applied, and fairly and accurately present the assets, liabilities,
results of operations and equity of the Company at such dates and for such
periods thereof, subject to any necessary year-end adjustments with respect to
the interim Financial Statements, none of which adjustments individually or in
the aggregate will be material in amount or type. There has not been any change
since the date of the most recent Financial Statement which has affected
materially or adversely the results of the operation of the Company, and, to
Sellers' knowledge, no fact or condition exists which might cause any material
change in the operations or financial condition of the Company. Schedule 3.7
------------
sets forth all contingent liabilities or losses relating to the
7
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Business not specifically described in the Financial Statements and which are
reasonably anticipated to exceed $10,000. Sellers have disclosed to Buyer all
material facts relating to the preparation of the Financial Statements,
including the basis of accounting for affiliated transactions. Sellers have not
used an independent certified accountant for preparation of financial statements
(whether compiled, reviewed or audited) at any time during the last four years.
Sellers have maintained books and records in good order, accurately reflected
all transactions to be recorded thereon and in accordance with the requirements
of GAAP. Such books and records are true and complete and readily available for
fiscal years ending September 30, 1997 and 1998. Since the date of the most
recent Financial Statements, the Company has not entered into any transaction,
incurred any liability except in connection with the transactions described
herein or in the ordinary course of business or as set forth on Schedule 3.7 or
------------
made any distribution or payments to shareholders other than as employee salary
and fringe benefits.
3.8 Real Property. Schedule 3.8 contains a description of all real property
------------- ------------
which is used by the Company, and a list of all material contracts, agreements,
concessions, leases, utilities, outside service arrangements and commitments
relating to or affecting such real property or any interests therein used by the
Company, or to which the Company contemplates becoming a party or by which any
real property used by the Company is bound or affected in any material respect,
together with all amendments and supplements thereto and modifications thereof
(the "Real Property Agreements"). Sellers have delivered to Buyer true and
complete copies of the Real Property Agreements. All of the Real Property
Agreements are legally valid and binding and in full force and effect, and there
are no defaults thereunder. The Company does not purport to have any fee
interest, leasehold or other interest in real property except as reflected on
Schedule 3.8 hereto. Other than as set forth in Schedule 3.8, the Company has
- ------------ ------------
good record and indefeasible title in fee simple to the real property and
improvements listed thereon, free and clear of all mortgages, material liens,
encumbrances, equities, claims and obligations to other persons, of every kind
and character. The buildings, plants, improvements and structures located on
the premises described in Schedule 3.8 and the present use of thereof comply
------------
with all zoning laws, ordinances and regulations of governmental authorities
having jurisdiction thereof and all such buildings, plants, improvements and
structures are in a state of reasonable maintenance and repair and are in good
operating condition. The Company has all easements, rights of ingress and
egress, utilities, and outside service arrangements necessary for the conduct of
the Business. None of the improvements located on the real property described on
Schedule 3.8 encroach on real property not owned by the Company nor are there
- ------------
any encroachments on the real property owned by the Company. Neither the whole
nor any portion of any real property leased by the Company or occupied by and
used by the Company has been condemned, requisitioned or otherwise taken or
claimed by any public authority or private person, and there is no such
condemnation, requisition or taking or claim threatened.
8
<PAGE>
3.9 Leases. Schedule 3.9 sets forth a complete and accurate list of each
------ ------------
lease to which the Company is a party (whether as lessor or lessee), and
includes the name of each current lessor and lessee, and the dates of such lease
and any amendment thereto. Except as set forth in Schedule 3.9, all leases set
------------
forth in Schedule 3.9 are valid and binding, in full force and effect and
------------
enforceable in accordance with their terms. There are no defaults or arrearages
by the Company, or any default or arrearages by any other party to such leases,
in the performance required thereunder and no waiver or indulgence has been
granted by any of the lessors under such leases. None of the rights of the
Company under any such leasehold or other interest in the property will be
impaired by the consummation of the transactions contemplated by this Agreement,
and all of such rights will be enforceable by Buyer after the Closing without
the consent or agreement of any other party. The transfer of ownership of the
Company pursuant to this Agreement will not constitute a default under any lease
or require the consent of any other party, except as set forth in Schedule 3.9.
------------
3.10 Personal Properties. Except as set forth in Schedule 3.10, the Company
------------------- -------------
owns and has good and marketable title to all of the tangible and intangible
personal properties, other than leaseholds referred to in Section 3.9, reflected
upon the most recent Financial Statements or otherwise used by the Company in
the Business if not so reflected, free and clear of all mortgages, liens,
encumbrances, equities, claims and obligations to other persons, of whatever
kind or character. All such personal properties are in good operation,
condition and repair, normal wear and tear excepted, capable of performing the
functions for which such items are currently and normally used by the Company
and all required maintenance has been consistently performed with respect to
such personal properties.
3.11 Inventories. The inventories of the Company shown on the balance sheet
-----------
at September 30, 1998, included in the Financial Statements, consist of items of
a quality and quantity usable and saleable in the normal course of its business,
and the book values of the inventories shown on that balance sheet do not exceed
the replacement costs as of that date of the usable and saleable items therein,
and the book values at which such inventories are carried on that balance sheet
reflect the inventory valuation policy consistently applied by the Company, the
policy being to value inventory on the basis of the cost (first-in, first-out).
The inventories of the Company acquired subsequent to September 30, 1998,
consist of items of a quality and quantity usable and saleable in the normal
course of its business, and the book values at which such inventories are
carried on the Company's books and records reflect the inventory valuation
policy consistently applied by the Company. Any inventory which is obsolete or
otherwise not usable and saleable within the normal course of business is
properly reflected as such on the Financial Statements.
3.12 Employment Arrangements. Except as set forth in Schedule 3.12, the
----------------------- -------------
Company has no obligation, contingent or otherwise, under any employment
agreement, collective bargaining or other labor agreement, any
9
<PAGE>
agreement containing severance or termination pay arrangements, deferred
compensation agreement, retainer or consulting arrangements, bonus or profit-
sharing plan, stock option or purchase plan or other employee contract or non-
terminable (whether with or without penalty) arrangements, group life, health,
medical, hospitalization or other insurance plan or program or other employee or
fringe benefit plan, including vacation, sick leave or disability plans or
programs. The Company has maintained full and complete records regarding its
employees, their compensation benefits, length of service and performance, all
of which are located at the Company's principal headquarters. Neither the
Company nor any of the employees of the Company, are at any time during the past
five yearshave been subject to, involved in or threatened with any union
elections, petitions therefor or other organizational activities other than
those set forth in Schedule 3.12. Except as disclosed on Schedule 3.12 hereto,
------------- -------------
the Company does not have a contract or arrangement with a labor union or other
collective bargaining organization, and is not involved, directly or indirectly,
in any labor dispute, negotiation, pending grievance or arbitration, whether
with individual present or former employees, agents or representatives, or
arising under a collective bargaining agreement, or unfair labor practice charge
arising under the National Labor Relations Act, or labor or employment related
lawsuit, or any charge pending before any federal, state or local fair
employment practice agency or organization, or any threatened claim involving
any of the foregoing, and since September 30, 1993, there has not been any
strike, work stoppage, or other labor disturbance, whether by union or non-union
employees, relating to the employees of the Company.
3.13 Material Contracts and Arrangements.
-----------------------------------
(a) Except as set forth in Schedule 3.13, the Company does not have any
-------------
material contract or agreement, whether oral or written, including, without
limiting the generality of the foregoing, any (i) contract or agreement for the
purchase or sale of inventory in excess of $10,000 in any one instance; (ii)
contract or agreement for the purchase or sale of supplies, services or other
items in excess of $10,000 in any one instance; (iii) contract or agreement for
the purchase, sale or lease of any equipment providing for total payments in
excess of $10,000 in any one instance; (iv) indenture, mortgage, note, letter of
credit or other instrument relating to the borrowing of money; (v) contract or
agreement that would limit the Company from entering any lines of business or
any geographical area; (vi) contract or agreement which is not terminable by the
Company upon prior notice of ninety (90) days or less; (vii) contract or
agreement with independent distributors or sales representatives or similar
agreements; or (viii) other contract or agreement not made in the ordinary
course of business. True, correct and complete copies of each contract listed on
Schedule 3.13 have been previously delivered to Buyer. Each of the material
- -------------
contracts set forth in Schedule 3.13 calling for the sale of inventory or
-------------
performance of services can be satisfied or performed by the Company without any
material loss to it. Each of such contracts is in full force and effect, and
there does not exist any actual or alleged condition or event which, after
notice or lapse of time or both, would constitute a
10
<PAGE>
default by the Company or by the other party, to any written contract,
agreement, lease, license, commitment, instrument or obligation. The Company has
not received notice of the termination of any such contract prior to the
expiration of the scheduled term thereof and has no knowledge of the intent of a
party to any such contract to do the same. Except as disclosed on Schedule 3.13
-------------
hereto, neither the Company nor the Sellers nor any other employee or agent of
the Company has entered into any enforceable agreement containing any
prohibition or restriction of competition or solicitation of customers with any
person, corporation, partnership, firm, association or business organization,
entity or enterprise which is now in effect and would affect Buyer's conduct of
the Company. Except as set forth in Schedule 3.13, no contract or agreement to
-------------
which Sellers or the Company is a party or by which Sellers or the Company is
bound will become void or otherwise of no effect upon a sale of the Stock, nor,
except as set forth in Schedule 3.13, is any contract or agreement terminable at
-------------
the option of the other party or parties thereto upon a sale of the Stock, nor
is any such contract, except as set forth in Schedule 3.13, terminable at the
option of the other party or parties thereto upon prior notice of ninety (90)
days or less.
(b) Schedule 3.13 also lists specifically each of the following described
-------------
documents, the copies thereof heretofore delivered to Buyer being true and
complete and including all amendments and supplements thereto and modifications
thereof:
(i) Each inspection report, questionnaire, inquiry, demand or request for
information (and each response thereto) received by the Company (other than
those of general application and routinely received within the ordinary course
of business) from any governmental body or administrative agency since
December 31, 1993, and each statement, report or other document (other than
those filed on a periodic basis in the ordinary course of business) filed
after December 31, 1993, by the Company with any federal, state or local
governmental body or administrative agency (including, without limitation,
environmental compliance agencies, the Securities and Exchange Commission,
Federal Trade Commission, Department of Justice, Department of Labor, and
National Labor Relations Board);
(ii) Each audit report or other formal report submitted to the Company,
its directors or shareholder(s) since December 31, 1993, by independent
accountants in connection with any interim or year-end audit or review of the
books or financial statements of the Company and any management letter issued
by such independent accountants in connection therewith or otherwise;
(iii) Each market survey, management study, engineering report, real
estate appraisal or other special report or study concerning the Company
submitted to the Sellers since December 31, 1993, by any independent business,
marketing, engineering or other consultant; and
11
<PAGE>
(iv) Each statement (including, without limitation, completed
questionnaires) concerning conflicts of interest received since December 31,
1993, by the Company from any of its employees.
3.14 Customers; Suppliers. Except as set forth on Schedule 3.14 hereto,
-------------------- -------------
since September 30, 1997, there has not been any material change in the
relationship or course of dealing between the Company and any of its suppliers
or customers. Listed on Schedule 3.14 are the ten (10) largest customers and
--------------
ten (10) largest suppliers (by dollar volume) of the Company for each of the
fiscal years ending during 1996, 1997 and for 1998.
3.15 Accounts Receivable. All customer and trade notes, fees and accounts
-------------------
receivable owned by the Company were created in the ordinary course of business,
are not subject to any discount, rebate, offset, defense or the like, to the
best of Sellers' knowledge are fully collectible in the aggregate to the extent
of the aggregate face value thereof as indicated in such Financial Statements
(subject to any reserves stated therein), and to the extent not collected prior
thereto, will be on the Closing Date, fully collectible in the aggregate.
Schedule 3.15 sets forth the total amount of the reserve for accounts of
- -------------
doubtful collection currently shown on the most recent Financial Statements and
any subsequent changes therein, the specific customer accounts and amounts for
which the Company has allocated a portion of such reserves.
3.16 Permits, Licenses etc. The Company possesses and has the right to use,
----------------------
and at the Closing will possess and have the right to use, all governmental and
private permits, licenses, consents, waivers, and other authorizations required
to exercise full dominion and control, over its assets and to carry on its
business as now conducted (the "Permits") without any conflict or alleged
conflict or infringement with the rights of others and subject to no Claim. All
such permits, licenses, consents, waivers, and other authorizations material to
the operation or existence of the Company or the Business are listed on Schedule
--------
3.16 hereto. Each Permit is valid and in full force and effect and will not be
- ----
terminated, adversely affected, required to be transferred or otherwise subject
to governmental approval by the transactions contemplated hereby.
3.17 Trademarks, Patents and Similar Rights. Schedule 3.17: (a) lists all
-------------------------------------- -------------
trademarks, service marks, trade names, copyrights, patents, trade secrets,
licenses and other proprietary know-how, inventions or designs ("Intellectual
Property"), which are owned by the Company or used by the Company in its
business; (b) specifies the jurisdictions in or by which any of such
Intellectual Property items have been registered, filed or issued; and (c)
contains a description of all contracts or licenses pursuant to which the
Company has authorized any other person(s) to use such Intellectual Property and
any contract or license pursuant to which the Company may use any
12
<PAGE>
Intellectual Property it does not own. Except as set forth in Schedule 3.17, the
-------------
Company is the sole and exclusive owner of the Intellectual Property set forth
therein and has the sole and exclusive right to use such Intellectual Property,
and there are no, and at the Closing there will be no, patents, copyrights,
trademarks, tradenames, processes, designs, formulae, inventions, ideas, or
concepts which are used by or may be necessary to the Company which the Company
is prohibited from using without royalty because of the ownership of any such
patents, copyrights, trademarks, tradenames, processes, designs, formulae,
inventions, ideas, or concepts being vested in third parties. In addition, no
claim or demand of any other person, firm or corporation exists pertaining to
the aforesaid, no proceeding has been instituted, is pending or, to the
knowledge of Sellers, threatened which challenges the Company's rights with
respect thereto. No claims, notices, or demands have been received by Sellers or
the Company concerning (i) infringement of any patent, copyright, or trademark,
(ii) any unauthorized use of any name, process, formula, invention, idea or
concept, or (iii) any asserted unfair competition, and none of the trademarks,
trade names, service marks, patents or copyrights listed in Schedule 3.17 is
-------------
subject to any outstanding order, decree, judgment or stipulation and, none
infringes upon or otherwise violates the rights of others or is being infringed
by others. The Company has taken adequate steps to keep its proprietary
information confidential and limited to its employees and agents.
3.18 Litigation and Compliance with Laws. Except as listed on Schedule 3.18,
----------------------------------- -------------
there are no suits, grievances, complaints, charges, proceedings, claims, or
investigations now pending by or against, or to the knowledge of Sellers,
threatened by or against, or any valid basis or grounds therefor, against
Sellers or the Company or any other officer or director thereof, at law or in
equity, including, without limitation, any voluntary or involuntary proceedings
under any applicable state or federal bankruptcy laws, or before or by any
governmental department, office, commission, board, agency, referee,
instrumentality or arbitrator (whether domestic or foreign), which involves a
claim or demand for any judgment, decree, or liability, action or injunction
against an action, whether or not fully covered by insurance, in connection with
the business, affairs, properties or assets of Sellers or of the Company. The
Company is, and at all time has been, in compliance in all material respects
with all laws, governmental rules and regulations applicable to its business,
affairs, properties or assets. Schedule 3.18 hereto sets forth each such suit,
-------------
action, claim, proceeding or investigation or inquiry, of a type referred to in
this Section 3.18 pending at any time since December 31, 1993. There is no
outstanding order, writ, injunction or decree of any court, administrative
agency or governmental body or arbitration tribunal against or affecting Sellers
or the Company or Sellers' or the Company's liabilities, properties, financial
condition, results of operations or prospects. Neither Sellers nor the Company,
nor any other officer or director of the Company, is charged or, to Sellers'
knowledge, threatened with or is under investigation with respect to, any
violation of any provision of any Federal, state, municipal or other law or
administrative rule or regulation relating to any aspect of the Company's
business, affairs, properties or assets or in default with respect to any
judgment,
13
<PAGE>
order, writ, injunction, decree, demand or assessment issued by any
court or any Federal, state, municipal or other governmental agency, board,
commission, bureau, instrumentality or department relating to any aspect of
Sellers' or the Company's business, affairs, properties or assets. Except as
listed on Schedule 3.18, the Company has not received, nor is the Company about
-------------
to receive, to the Sellers' knowledge, any notice, order or the like from any
governmental authority, requiring or recommending the Company make any change in
the operation, method of operation, buildings, equipment, employees, or any
other aspect of the Company.
3.19 Extraordinary Events. Since September 30, 1997, the Company has
--------------------
conducted its business in the ordinary course of business, and, except as
disclosed in Schedule 3.19, has not disposed of any material assets, except
-------------
inventory held for sale and sold or to be sold in the ordinary course of
business. Since September 30, 1997, there has not been, except as disclosed in
Schedule 3.19, (i) any adverse change in the condition (financial or otherwise)
- -------------
of the Company its properties, liabilities, results of operations, or prospects,
except changes in the ordinary course of business which have not in any one case
or in the aggregate been material; (ii) any damage, destruction or loss (whether
or not covered by insurance) materially affecting the properties, liabilities,
financial condition, results of operations or prospects of the Company; (iii)
any change in the accounting methods or practices, other than as required by
law, used to determine the financial condition of the Company and the results of
its operations, including without limitation, any change in depreciation or
amortization policies or rates theretofore adopted; (iv) any sale, lease,
abandonment or other disposition by the Company of any interest in real property
used in or held for use in the Company, or, other than in the ordinary course of
business, of any machinery, equipment or other operating property used in or
held for use in the Company, or any sale, assignment, transfer, license, or
other disposition by the Company of any patent, trademark, trade name, brand
name, service mark, copyright (or pending application for any patent, trademark
or copyright), invention, process, know-how, formula, pattern, design, trade
secret or interest thereunder or other intangible asset used in or related to
the Company; or (v) any other occurrence, event or condition which materially
affects or may reasonably be expected to materially affect the liabilities,
properties, financial condition, results of operation or prospects of the
Company.
3.20 Insurance Policies. Schedule 3.20 contains an accurate and complete
------------------ -------------
description of all insurance policies in force and effect with respect to the
Company's business, properties and assets, including without limitation, product
liability insurance and insurance on Company personnel, specifying the insurer,
the amount of the coverage, the type of insurance, the policy number, the
expiration date, the annual premium, any pending claims thereunder, and any
notice or other information regarding possible claims thereunder, cancellation
thereof or premium increases thereon. True and complete copies of the most
recent inspection reports, if any, received from insurance underwriters as to
the condition of the properties of the Company are attached to Schedule 3.20.
-------------
The Company is not in default
14
<PAGE>
with respect to any material provision contained in any insurance policy, and
the Company has not failed to give any notice or present any claim under any
insurance policy in due and timely fashion. All such policies are valid and
enforceable by the Company and in full force and effect, and are sufficient in
nature, scope and amounts to insure adequately the Company's business,
properties, assets and risks.
3.21 Powers of Attorney; Bank Accounts. Except as set forth in Schedule
--------------------------------- --------
3.21, the Company has no power of attorney outstanding. Schedule 3.21 sets
- ---- -------------
forth the names and addresses of all banks, trust companies, savings and loan
associations or similar financial institutions at which the Company has an
account, lock box or safe deposit box, the account name and account number and
the names of all persons authorized to draw thereon, have access thereto or in
the case of a box, the custodian of the keys to such box.
3.22 Tax Returns. The provision for taxes shown on the most recent Financial
-----------
Statements was sufficient to satisfy all income, gross receipts, franchise,
excise, license, employment, occupation, environmental, capital stock, profits,
registration, value added, sales and use taxes, or other tax of any kind
whatsoever, governmental charges, duties, penalties, interest and fines due or
which might lawfully be due, to the United States or any foreign taxing
authority or any state, county, city or agency of any of the foregoing ("Taxes")
and all assessments received by the Company for all periods ended on or prior to
the date of the most recent Financial Statements. As of the date hereof, no
Taxes payable by Sellers or the Company are past due, no tax liabilities have
been assessed or proposed which remain unpaid, and neither Sellers nor the
Company is aware of any basis upon which any assessment for additional Taxes
could be made against Sellers or the Company. In addition, neither Sellers nor
the Company has signed any extension agreement with the Internal Revenue Service
or any other government entity or taxing authority or given a waiver of a
statute of limitations with respect to the payment of Taxes. Sellers and the
Company have filed or obtained extensions of time to file all income tax returns
and all state, local and foreign income, franchise, sales, use, excise or
similar tax returns and all real property tax returns which were required to be
filed as of the date of this Agreement, and until the Closing Date will timely
file or obtain extensions of time to file all returns which were not required to
be filed prior to the date hereof. All tax returns that Sellers or the Company
was required to file were correct and complete in all respects. The information
shown on the Federal income tax returns of the Company heretofore delivered to
Buyer is accurate and complete in all material respects and fairly presents the
information purported to be shown. Except as described in Schedule 3.22 as to
-------------
the date, scope, nature and resolution thereof, the Federal income tax returns
of the Company have not been examined by the Internal Revenue Service or any
state governmental body since September 30, 1993. Except as described in
Schedule 3.22, there are no suits, actions, claims, investigations, inquiries or
- -------------
proceedings now pending or, to Sellers' knowledge, threatened against Sellers or
the Company, nor are there any matters under discussion with any
15
<PAGE>
governmental authority relating to Taxes, nor are there any claims which might
reasonably be asserted by any such authority for payment of additional Taxes.
There are no liens or security interests on any of the assets of the Company or
Sellers that arose in connection with any failure (or alleged failure) to pay
any Taxes. The Company has, and at the Closing will have, paid all unemployment
and disability contributions due and owing, and will have accrued for any
amounts not yet due and owing, in respect of services rendered by employees of
the Company. All Taxes or other amounts which the Company is required by law to
withhold or collect have been duly withheld or collected and to the extent
required have been paid over to the proper governmental authorities on a timely
basis or if not yet due, properly reflected as an obligation on the most recent
Financial Statements. The Company has not filed a consent under Sec. 341(f) of
the Internal Revenue Code of 1986, as amended (the "Code") concerning
collapsible corporations. The Company has not made any payments, nor is
obligated to make any payments, nor is a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Code Sec. 280G. The Company is not and has not been a United
States real property holding corporation within the meaning of Code Sec.
897(c)(2) during the applicable period specified in Code Sec. 897(c)(1)(A)(ii).
The Company is not and has never been a party to any tax allocation or sharing
agreement. The Company (a) has never been a member of an affiliated group filing
a consolidated Federal income tax return, or (b) has any liability for the Taxes
of any Person under Treas. Reg. Section 1.1502-6 (or any similar provision of
state, local or foreign law), as a transferee or successor, by contract, or
otherwise.
3.23 Liabilities. Except as disclosed on Schedule 3.23, the Company does not
----------- -------------
have any debts or liabilities of any nature, whether accrued or not, absolute or
contingent, due or to become due or otherwise, and there is no basis for
assertion against the Company of claims for any debts or liabilities, other than
(i) those set forth on its most recent Financial Statements; and (ii)
liabilities subsequently incurred in the ordinary course of business which are
not in the aggregate material. No event has occurred which constitutes, or
which with the giving of notice or the passage of time or both would constitute,
a material breach or default in respect of the terms or conditions of any such
liability and no waiver or forbearance has been granted by any holder of any
such liability with respect thereto.
3.24 Books and Records. The Company has at all times since January 1, 1996,
-----------------
kept full and complete financial books and records and has recorded all
transactions which should be set forth and reflected, all in accordance with
generally accepted accounting principles and past practices of the Company
consistently applied, and the Company will continue to do so, without variation
in method or procedure until and including the Closing Date.
3.25 Conflicts of Interest. Neither Sellers nor any other officer, director
---------------------
or employee of the Company, or family member of any of
16
<PAGE>
the foregoing, is presently a party to any transaction with the Company (other
than for services as officers, directors and employees), including, without
limitation, any loan or guarantee, or any contract, agreement or other
arrangement providing for the furnishing of services or goods to or by, or
otherwise requiring payments (directly, indirectly or contingently) to or from,
any officer, director, employee, family member of any of the foregoing, or any
corporation, partnership, trust or other entity in which any such officer,
director, employee or family member has an interest or is an officer, director,
trustee or partner. Neither Sellers nor the Company nor any officer, director,
employee, or family member of the foregoing, owns, directly or indirectly, any
interest in, or is a director, officer or employee of, any corporation,
partnership, firm, association or business organization, entity or enterprise
which is a competitor, potential competitor, supplier or customer of the
Company, nor is in any way associated with or involved in a business similar to
that conducted by the Company, provided that ownership of not more than one
percent (1%) of the capital stock of any corporation listed on a national
securities exchange shall not be deemed to be ownership of an interest in such
corporation for purposes of this Section 3.25. Neither Sellers nor the Company
nor any officer, director, employee or family member of any of the foregoing,
owns, or has any claim, right or interest in or to, directly or indirectly, in
whole or in part, any property, asset or right, tangible or intangible
(including without limitation, any patent, trademark, tradename, brand name,
copyright, pending application for any patent, trademark or copyright, any
invention, process, know-how, formula, pattern, design or trade secret), which
the Company is presently using or the use of which is necessary or proper for
its business.
3.26 ERISA. The Company has complied and currently is in compliance, both as
-----
to form and operation, with the applicable provisions of the Employee Retirement
Security Act of 1974, as amended ("ERISA"), the Internal Revenue Code of 1986,
as amended (the "Code") and all other applicable laws with respect to each
Employee Benefit Plan (and related trust, insurance contract, or fund) or any
material fringe benefit plan or program which is maintained or has been
established by the Company or to which the Company contributes or is required to
contribute. Schedule 3.26 lists all Welfare Plans and Pension Plans of the
-------------
Company currently in effect. All documents, reports, descriptions and
statements with respect to any Pension Plan or Welfare Plan which are required
to be filed with any government agency have been timely filed or have been
timely distributed to the appropriate persons and correct and complete copies
have been delivered to Buyer. Each Pension Plan and related trust are qualified
within the meaning of Sections 401(a) and 501(a) of the Code, respectively.
With respect to each Pension Plan, a favorable determination letter as to
qualification under Section 401(a) of the Code has been obtained by the Company
and copies thereof have been forwarded to Buyer. With respect to any Pension
Plan or any Welfare Plan, neither the Company nor any fiduciary of any such plan
(as described in Section 21(A) of ERISA) has been engaged in any transaction in
violation of Section 404 of ERISA, Section 406 of ERISA (for which no exemption
exists under Section 408 of ERISA), or Section 4975(c)(1) of the Code (for which
no exemption exists under Section 4975(c)(2) or (d) of the Code) which
17
<PAGE>
would subject the Company or any such fiduciary to any tax, penalty or liability
under Section 4098 of ERISA or Section 4975 of the Code. The Company has timely
made all contributions required under the terms of any Pension Plan, any Welfare
Plan and any related agreement. The fair market value of the assets held to fund
any Pension Plan which is a defined benefit plan as defined in Section 3(35) of
ERISA as of September 30, 1998, exceeds the actuarial present value of all
accrued benefits (both vested and non-vested) under such Pension Plan as of
September 30, 1998, and such valuation has been determined in accordance with
the Pension Benefit Guaranty Corporation ("PBGC") methods, factors and
assumptions applicable thereto. No Pension Plan has an accumulated funding
deficiency as defined in Section 302 of ERISA or Section 412 of the Code,
whether or not waived and each Pension Plan has been funded in accordance with
the minimum funding standards of ERISA and the Code. The Company has paid all
premiums (and interest charges and penalties for late payment, if applicable)
due PBGC with respect to each Pension Plan subject to Title IV of ERISA. A
Reportable Event referred to in Section 4043(b) of ERISA has not occurred with
respect to any Pension Plan subject to Title IV of ERISA. The Company has taken
no action and has not made any filing with the PBGC or the Internal Revenue
Service to terminate any Pension Plan. Neither Gerrans nor the Company has any
knowledge of any event or condition referred to in Section 4042(a) or 4043 of
ERISA which presents a material risk of termination of any Pension Plan by the
PBGC. No proceeding or other action has been initiated (or threatened) by the
PBGC to terminate any Pension Plan, and no written notice has been given to
Gerrans or the Company of an intention to commence or seek commencement of any
such proceeding or action. The Company does not maintain or contribute or has
ever maintained or contributed to any Welfare Plan for current or future retired
or terminated employees, their spouses or dependents (other than in accordance
with Code Section 4980B). For purposes of this Section, Employee Benefit Plan
means any qualified or non-qualified employee welfare benefit plan (as defined
in Section 3(1) of ERISA ("Welfare Plan")) and each employee pension benefit
plan (as defined in Section 3(2) of ERISA ("Pension Plan")).
3.27 No Government Authorizations or Approvals Required. No authorization or
--------------------------------------------------
approval of, or filing with, any governmental body (other than routine report
filings) is required in connection with Sellers' execution and delivery of this
Agreement, the Transaction Documents or the consummation of the transactions
contemplated hereby or thereby, as applicable.
3.28 Broker's Fees. Sellers have not paid, nor have Sellers become obligated
-------------
to pay, directly or through the Company, any fee or commission to any broker,
realtor, finder or intermediary for or on account of the transactions
contemplated herein.
3.29 Environmental. The Company has all permits, licenses and other
-------------
authorizations which are or will be required in respect of the
18
<PAGE>
Company under all Federal, state and local laws, rules, regulations, ordinances,
programs, permits, guidances, orders and consent decrees relating to health,
safety and environmental matters, including but not limited to the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendment and
Reauthorization Act of 1986, the Toxic Substances Control Act, the Clean Water
Act, the River and Harbor Act, the Water Pollution Control Act, the Safe
Drinking Water Act, the Solid Waste Disposal Act, the Federal Insecticide,
Fungicide and Rodenticide Act, the Clean Air Act, the Occupational Safety and
Health Act, and the regulations promulgated thereunder, as all of the same may
be amended from time to time ("Environmental Laws"). The Company is, and has
been in compliance in all material respects with the terms and conditions of all
such required permits, licenses and authorizations, and all other limitations,
restrictions, conditions, standards, prohibition, requirements, obligations,
schedules and timetables contained in the Environmental Laws. There is no
pending civil or criminal litigation, notice of violation or administrative
proceeding relating in any way to the Environmental Laws (including without
limitation, notices, demand letters or claims under any Environmental Laws) with
respect to the Company. Sellers do not suspect or believe that any civil or
criminal litigation, notice of violation or administrative action relating in
any way to the Environmental Laws with respect to the Company is threatened.
There have not been and there are not any past or present events, conditions,
circumstances, activities, practices, incidents or actions which could
reasonably be expected to interfere with or prevent continued compliance with
any Environmental Law as in effect on the date hereof by the Company or which
may give rise to any legal liability, or otherwise form the basis of any claim,
action, suit, proceeding, hearing or investigation against or involving the
Company based on any violation or alleged violation of any Environmental Law.
Schedule 3.29 contains a complete description of all past and current practices,
- -------------
contracts and agreements of the Company for disposal of materials and wastes
(whether or not hazardous) generated by the Company and all of such wastes and
materials have been disposed of in accordance with such practices, contracts and
agreements. There has been no disposal by the Company, directly or indirectly,
of any materials or wastes to, on or in any site currently listed or formally
proposed to be listed on the National Priorities List under Superfund or any
site listed or formally proposed to be listed as a major or priority cleanup
site under any comparable state law. Schedule 3.29 lists (i) all environmental
-------------
reports or assessments which have been performed on behalf of the Company, or to
the Company's knowledge, on behalf of others, with respect to the real property
which is subject to the Lease Agreement, and the Sellers have provided complete
copies thereof to Buyer, and (ii) the actions taken by the Company in response
to the recommendations contained therein.
3.30 Products Liability. Except as disclosed on Schedule 3.30, no action,
------------------ -------------
suit, inquiry, proceeding or investigation by or before any court or
governmental or other regulatory or administrative agency or commission is or at
any time in the past has been pending or, since December 31, 1993, to the
knowledge of Sellers, threatened against or involving the Company relating to
any product alleged to have been manufactured or
19
<PAGE>
sold by Sellers and alleged to have been defective or improperly designed or
manufactured, nor is there any basis for any such action, suit, inquiry,
proceeding or investigation (whether or not such action, suit, inquiry,
proceeding or investigation would be barred by workers compensation or similar
laws).
3.31 Information Technology Systems; Year 2000 Compliance. Except as
----------------------------------------------------
described on Schedule 3.31, the Company's information technology systems are in
-------------
good operation, condition and repair, capable of performing the functions for
which such systems are currently and normally used by the Company and all
required maintenance has been consistently performed with such systems. The
Company possesses all software licenses necessary to conduct the Business as
presently conducted. All such licenses are set forth on Schedule 3.31. Except
-------------
as described on Schedule 3.31, the Company has (i) conducted a review and
-------------
assessment of all areas within its business and operations that could be
adversely affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by the Company may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to, on and any date after
December 31, 1999); and (ii) implemented a plan and timeline for addressing the
Year 2000 Problem on a timely basis. Based on the foregoing, all computer
applications used by the Company, or to the best of Sellers' knowledge, any of
the suppliers, vendors, and customers of the Company, that are material to its
business or operations are able to perform properly date-sensitive functions for
all dates before, on and after January 1, 2000.
3.32 Material Information. Sellers have disclosed to Buyer in writing all
--------------------
facts material to the Stock, the Company and its properties, liabilities,
financial condition, results of operations and prospects. Neither the Financial
Statements nor this Agreement, including the schedules hereto, nor any other
document furnished by Sellers to Buyer in writing contains an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or which is necessary to make the statements therein not misleading.
3.33 Related Assets. The Company has good and marketable title to all assets
--------------
of every kind, nature and description relating to the Business ("Related
Assets"), except as otherwise set forth on Schedule 3.33.
-------------
3.34 Investment Intent. Gerrans is acquiring the Bolt Stock for his own
-----------------
account and for investment purposes only and not with the view to, or for resale
in connection with, any distribution thereof. Gerrans understands that the Bolt
Stock he is acquiring is characterized as "restricted securities" under the
federal securities law inasmuch as they are being acquired from Buyer in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act of 1933 (the "Act") only in certain limited circumstances.
20
<PAGE>
Gerrans represents that he is familiar with Rule 144 promulgated under the Act,
and understands the resale limitations imposed thereby and by the Act.
3.35 Review and Evaluation of Buyer Information. Gerrans and his
------------------------------------------
representative have received and reviewed a copy of Buyer's Annual Report on
Form 10-K for the fiscal year ended June 30, 1998, and Buyer's Quarterly Report
on Form 10-Q for the quarters ended September 30, 1998 and December 31, 1998.
Gerrans acknowledges that he has reviewed the above-referenced documents,
Gerrans further acknowledges the he has had the opportunity to ask Buyer's
management questions about Buyer's business and financial condition and that
Gerrans has obtained such information as requested to the extent deemed
necessary by Gerrans to permit Gerrans to fully evaluate the merits and risks of
an investment in Buyer. Further Gerrans has consulted with such other of its
investment and/or accounting and/or legal and/or tax advisors as Gerrans has
deemed necessary and appropriate in making the decision to acquire the Bolt
Stock.
4. BUYER'S REPRESENTATIONS AND WARRANTIES.
--------------------------------------
As an inducement to Sellers to enter into this Agreement and to consummate
the transactions contemplated hereby, Buyer represents, warrants, covenants and
agrees with Sellers that as of the date hereof and at all times through the
Closing Date:
4.1 Organization and Corporate Power. Buyer is a corporation duly organized,
--------------------------------
validly existing and in good standing under the laws of the State of Connecticut
with the corporate power and authority to execute and deliver and to perform its
obligations hereunder.
4.2 Due Authorization; Effect of Transaction. No provision of Buyer's
----------------------------------------
Certificate of Incorporation or By-laws, or of any agreement, instrument or
understanding, or any judgment, decree, rule or regulation to which Buyer is a
party or by which it is bound, has been or will be violated by the execution by
Buyer of the Transaction Documents or the performance or satisfaction of any
agreement or condition herein upon its part to be performed or satisfied, and
all requisite corporate and other authorizations for such execution, delivery,
performance and satisfaction have been duly obtained. This Agreement will upon
execution and delivery be the legal, valid and binding obligation of Buyer,
enforceable in accordance with its terms.
4.3 No Government Authorizations or Approvals Required. No authorization or
--------------------------------------------------
approval of, or filing with, any governmental body (other than routine report
filings) is required in connection with
21
<PAGE>
Buyer's execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
4.4 Broker's Fees. Buyer has not paid, nor has Buyer become obligated to
-------------
pay, any fee or commission to any broker, realtor, finder or intermediary for or
on account of the transactions contemplated herein.
4.5 Capitalization. Buyer has good and marketable title to the shares of
--------------
Bolt Stock, which shares are duly authorized, and upon issuance and delivery to
Gerrans shall be validly issued, fully paid, non-assessable and free and clear
of all Claims.
5. CONDITIONS TO OBLIGATIONS OF SELLERS AND BUYER.
----------------------------------------------
5.1 Withdrawal by Sellers. The obligations of Sellers to consummate the
----------------------
transactions contemplated hereby are subject to the satisfaction, on or before
the Closing Date of the following conditions, each of which may be waived by
Sellers, in their sole discretion:
(a) Any of the representations, warranties, covenants and agreements of
Buyer contained in this Agreement do not continue to be true and correct in all
material respects at all times from the date hereof to the Closing Date, with
the same force and effect as if made on and as of each such date and the Closing
Date, or any of the agreements and conditions required by this Agreement to be
performed or satisfied by Buyer on or prior to the Closing Date, including,
without limitation, those set forth in Section 2.3 hereof, have not been duly
performed or satisfied; and
(b) On the Closing Date, any suit, action, proceeding or governmental
investigation shall be pending or in prospect or, to Sellers' knowledge,
threatened, seeking to enjoin this Agreement or the consummation of the
transactions contemplated herein, to declare the transaction or Sellers' conduct
unlawful, or to obtain monetary damages with respect to this Agreement.
5.2 Withdrawal by Buyer. The obligations of Buyer to consummate the
-------------------
transactions contemplated hereby are subject to the satisfaction, on or before
the Closing Date of the following conditions, each of which may be waived by
Buyer in its sole discretion:
(a) Any of the representations, warranties, covenants and agreements of
Sellers or the Company contained in this Agreement or otherwise made in writing
by him or it, or on his
22
<PAGE>
or its behalf pursuant hereto, do not continue to be true and correct in all
material respects at all times from the date hereof to the Closing Date, with
the same force and effect as though made on and as of each such date and the
Closing Date, or any of the agreements and conditions to be performed or
satisfied by Sellers or the Company hereunder at or prior to the Closing Date,
including, without limitation, those set forth in Section 2.2 hereof, have not
been duly performed or satisfied;
(b) On the Closing Date, any suit, action, proceeding or governmental
investigation shall be pending or in prospect or, to Buyer's knowledge,
threatened, seeking to enjoin this Agreement or the consummation of the
transactions contemplated herein, to declare the transaction or Buyer's conduct
unlawful, or to obtain monetary damages with respect to the Agreement;
(c) If at any time before the Closing, any event, including without
limitation, fire, flood, earthquake, explosion, act of God, war, civil
commotion, labor disruption, act of any government, governmental subdivision or
agency, change in economic conditions generally, increased competition,
decreased customer demand, or the termination or modification of a material
contract or business relationship of the Company (whether or not any such event
is covered by insurance) shall occur which in Buyer's reasonable judgment
substantially or materially affects, interrupts or impairs the Company or the
value of the Stock;
(d) The results shall be unsatisfactory to Buyer of any (i) reports,
inspections, audits, due diligence or other investigations conducted by Buyer or
on its behalf, including without limitation, any environmental audit, survey or
other inspection of real properties owned or utilized by the Company, any
investigations or reports regarding product liability claims, losses or
potential exposure, (ii) review of the Company's purchase orders and customer
list, (iii) any supplement or amendment of any schedule hereto by Sellers prior
to the Closing, (iv) interim monthly financial statements of the Company
delivered to Buyer after the date hereof and prior to Closing as provided in
Section 6.10 hereof; and
(e) Buyer shall have secured the consent of Fleet Bank to the execution,
delivery and performance of the Transaction Documents.
5.3 Notice of Withdrawal. If Buyer or Sellers shall elect to withdraw
--------------------
pursuant to this Section 5, Buyer or Sellers, as the case may be, shall give
written notice to the other party of such election prior to or at the Closing.
If such notice is given, this Agreement shall terminate upon the giving of such
notice, subject to the terms and conditions of the December 8, 1998 letter of
intent (as extended by letter agreement dated February 25, 1999) pertaining to
the $20,000 earnest money deposit.
23
<PAGE>
6. COVENANTS OF SELLERS AND THE COMPANY.
------------------------------------
Sellers and the Company covenant and agree with Buyer as follows: with
respect to the period between the date hereof and the Closing Date and, with
respect to Sections 6.10 and 6.11 hereof, after the Closing Date:
6.1 Access to Records and Properties Prior to the Closing Date.
----------------------------------------------------------
(a) Sellers and the Company shall give Buyer, its accountants, counsel and
other representatives full access to all of the premises, properties, books,
financial statements, contracts, commitments, records and personnel of the
Company and shall cause the officers of the Company to furnish Buyer with such
financial and operating data and other information with respect to the business
and properties of the Company as Buyer shall from time to time request. In
addition to the foregoing, Sellers agree that Buyer shall have the right to have
an environmental audit conducted of the real properties, facilities and
equipment utilized by the Company and to have Deloitte & Touche LLP, or another
independent certified public accounting firm, perform an acquisition audit of
the Company, and with the consent of Sellers' accountants (which Sellers will
obtain), to review the working papers of Sellers' accountants pertaining to the
Company's financial position or the results of its operations.
(b) Buyer will use all reasonable efforts to keep confidential all
materials (including all copies made thereof) obtained from Sellers or Sellers'
representatives in connection with the transactions contemplated hereby, unless
such information is (i) otherwise available to the public, (ii) information
which Buyer can demonstrate was developed independently by Buyer, or (iii)
information which Buyer received from a third party legally entitled to transfer
it. In the event of termination of this Agreement, upon Sellers' written
request, Buyer and its authorized representatives will promptly return any such
information to Sellers any such information. Under no circumstances shall this
Agreement preclude Buyer from taking such steps as may be necessary to purchase
a competitor of the Company in the event the transaction contemplated by this
Agreement is not consummated.
6.2 Operation of the Business of the Company. Sellers agree to conduct the
----------------------------------------
operations of the Company in the ordinary and usual course of business, to
maintain the financial condition of the Company substantially consistent with
that reflected in the Financial Statements, not to enter into any extraordinary
transaction or make any transfer (except in the ordinary course of business) or
distribution of Company assets, to preserve intact its present business
organization, to take reasonable steps to keep available the services of its
officers and employees and to maintain satisfactory relationships with
licensors, licensees, suppliers, contractors, distributors, customers and others
having business relations with it. Without limiting the generality of the
24
<PAGE>
foregoing, and except as otherwise expressly provided this Agreement or with the
prior written consent of Buyer, Sellers and the Company agree that the Company
shall not:
(a) keep and maintain its books of account and records other than in
accordance with generally accepted accounting principles consistent with past
practices;
(b) amend or change the Company's Certificate of Incorporation or By-
laws;
(c) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of additional
options, warrants, commitments, subscriptions, rights to purchase or otherwise)
any stock of any class or any securities convertible into shares of stock of any
class;
(d) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combinations thereof) in respect of its capital stock,
or redeem or otherwise acquire any shares of its capital stock;
(e) (i) create, incur or assume any long-term debt (including obligations
with respect to capital leases), or create, incur, assume, maintain or permit to
exist any short-term debt representing indebtedness for borrowed money, (ii)
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person,
other than as the result of the endorsement of negotiable instruments in the
ordinary course of business consistent with past practices, or (iii) make any
loans, advances or capital contributions to, or investments in, any other
person;
(f) (i) increase in any manner the compensation for any of its directors,
officers or other employees, (ii) pay or agree to pay any pension, retirement
allowance or other employee benefits not required or permitted by an existing
plan, agreement or arrangement to any such director, officer or employee,
whether past or present, or (iii) commit itself to any new or renewed pension,
profit-sharing, bonus, incentive, deferred compensation, stock purchase, stock
option, stock appreciation right, group insurance, severance pay, retirement or
other employee benefit plan, agreement or arrangement, or to any employment or
consulting agreement (or amendment, renewal other extension thereof) with or for
the benefit of any person, or to amend any of such plans or any of such
agreements in existence on the date hereof;
(g) permit any of its current insurance policies to be canceled or
terminated or any of the coverage thereunder to lapse, unless simultaneously
with such termination, cancellation or lapse, replacement policies are in full
force and effect providing coverage equal to or greater than the coverage under
those canceled, terminated or lapsed for substantially similar premiums;
25
<PAGE>
(h) amend or terminate any lease or, except in the ordinary course of
business, sell, transfer, mortgage or otherwise dispose of or encumber, or agree
to sell, transfer, mortgage or otherwise dispose of or encumber, any properties,
real personal or mixed;
(i) except in the ordinary course of business, sell, transfer, license or
otherwise dispose of, or agree to sell, transfer, license or otherwise dispose
of, any Intellectual Property;
(j) enter into any other agreements, commitments or contracts which,
individually or in the aggregate, are material to the business, prospects,
operations, properties, assets, liabilities, earnings, cash flows or condition
(financial or otherwise) of the Company, except agreements, commitments or
contract for the purchase, sale or lease of goods and services in the ordinary
course of business, consistent with past practice and not in excess of current
requirements, or otherwise make any material change in conduct of the business
or operations of the Company;
(k) make any change in its banking and safety deposit arrangements;
(l) grant any powers of attorney;
(m) approve or undertake, either as the surviving, disappearing,
acquiring or selling corporation, any merger, consolidation, liquidation, asset
acquisition or disposition or any takeover transaction or furnish or cause to be
furnish any information concerning its business, properties or assets to any
person (other than to Buyer) which is interested in any such transaction;
(n) solicit, encourage, respond to or otherwise entertain any inquiries
or proposals for the acquisition of all or any part of the capital stock, assets
or business of the Company;
(o) take any action which would result in any of the representation or
warranties contained in this Agreement not being true at and as of the time
immediately after such action, or in any of the covenants contained in this
Agreement becoming unperformable;
(p) settle or otherwise compromise any claim asserted by any Taxing
authority; or
(q) agree to do any of the foregoing.
6.3 Expenses. Sellers and Buyer shall each pay their own costs and expenses
--------
(including, without limitation, the fees and expenses of its accountants,
agents, representatives and counsel) incident to the negotiation, preparation
and carrying out of this Agreement and necessary to its performance of and
compliance with all agreements and conditions contained herein or with respect
to any other aspect of the transactions contemplated
26
<PAGE>
by this Agreement, regardless of whether the transactions contemplated hereby
are consummated.
6.4 Taxes. Sellers shall pay any and all income, sales, transfer, conveyance
-----
or documentary taxes of any sort imposed by a governmental authority on or in
connection with the sale or transfer of the Stock from Sellers to Buyer and
shall cause any appropriate stock transfer stamps to be affixed at the Closing
to the certificates evidencing the Stock transferred hereunder.
6.5 Parties to be Reasonable; Termination. Each of the parties hereto agrees
-------------------------------------
to use its best efforts to cause the preconditions to the Closing to occur in a
timely fashion, and to prevent the conditions permitting any party to withdraw
from occurring. If the Closing does not occur on or prior to April 20, 1999,
this Agreement may be terminated by either Buyer or Sellers except that (a)
Buyer may not so terminate if its willful act or failure to act with the
intention of unreasonably preventing the Closing from occurring on or prior to
such date prevented the occurrence of the Closing on or prior to such date, and
(b) Sellers may not so terminate if his willful act or failure to act with the
intention of preventing the Closing from occurring on or prior to such date
prevented the occurrence of the Closing on or prior to such date. The party
asserting his or its right to terminate this Agreement shall give notice thereof
to the other party to this Agreement stating the grounds therefor. Nothing
herein shall relieve any party from liability for a breach of its obligations
under this Agreement.
6.6 Notice of Changes. Until the Closing, Sellers shall notify Buyer of any
-----------------
material change in the Business as soon as it become apparent to Sellers that
any such change has or may occur.
6.7 Preservation of Business. Until the Closing, the Company will and
------------------------
Sellers will cause the Company to use its best efforts to preserve its business
organization intact, and to preserve its goodwill. Without limiting the
generality of the foregoing, the Company will, and Gerrans will cause the
Company to, timely perform all obligations required of the Company under the
contracts and permits listed on the Schedules to this Agreement.
6.8 Litigation. Sellers will promptly notify Buyer of any lawsuits, claims,
----------
proceedings or investigations which are commenced or, to Sellers' knowledge,
threatened by or against the Company, or commenced or, to Sellers' knowledge,
threatened against (i) the Company's affiliates, or against any employee,
consultant or director of the Company or any affiliate, in connection with the
Business, or (ii) Sellers, in connection with any of their assets, including the
Stock.
27
<PAGE>
6.9 No Negotiations. Until the Closing, or the earlier termination of this
---------------
Agreement in accordance with its terms, without the express prior consent of
Buyer, neither the Company, Gerrans nor any of their affiliates, officers,
directors, employees, consultants, advisors, agents, investment bankers, or any
family members of any of the foregoing shall, directly or indirectly, initiate
discussions with, engage in negotiations with, entertain any offer from, or
provide any information to any corporation, partnership, person or other entity
or group involving the possible sale, directly or indirectly, transfer or joint
venture of the Company, the Business or assets or the Stock of the Company to
any person or entity other than Buyer.
6.10 Financial Statements. Gerrans acknowledges that audited financial
--------------------
statements for the fiscal years ended September 30, 1997 and 1998 will need to
be prepared and certified by Buyer's independent certified public accountants
("Buyer's CPAs"), for inclusion in Buyer's Current Report on Form 8-K to be
filed with the Securities and Exchange Commission and thereafter to be
incorporated into Buyer's audited financial statements. Gerrans agrees that
between the date hereof and the Closing Date, Buyer's CPAs shall be afforded
access to (including copies of ) the Company's books and records and such other
information as Buyer's CPAs reasonably request in order to commence preparation
of such audited financial statements. At all times during such preparation,
whether before or after the Closing, Gerrans and the Company shall cooperate
fully with Buyer's CPAs, including taking such actions as Buyer's CPAs
reasonably require, in connection with the preparation and certification by
Buyer's CPAs of such audited financial statements.
6.11 Limitations on Disposition. The Bolt Stock has not been registered
--------------------------
under the Act or under applicable state securities laws and, therefore, cannot
be sold, assigned, or otherwise transferred unless it is subsequently registered
under the Act and under applicable state securities laws or an exemption from
such registration is then available. Gerrans hereby agrees that he will not
sell, assign, or transfer the Bolt Stock unless it is registered under the Act
and under applicable state securities laws or an exemption from such
registration is then available, according to an opinion of Buyer's counsel or
other counsel reasonably acceptable to Buyer. Gerrans represents that he can
afford to hold the Bolt Stock for an indefinite period of time.
7. SURVIVAL.
--------
7.1 Limited Survival of Representations and Warranties. The representations
--------------------------------------------------
and warranties of the parties contained in Articles 3 and 4 shall survive the
Closing and expire on December 31, 2000, provided that (a) claims, if any,
asserted in writing prior to the expiration of the representation or warranty to
which they related, shall survive until finally resolved and satisfied in full
and (b) claims, if any, which (i) involve the representations set forth in
Section
28
<PAGE>
3.29 or otherwise involve environmental matters; (ii) are based on
fraud; (iii) relate to title of the Stock; (iv) relate to any alleged ownership
of or interest in the Stock, the Company or its assets, or matters relating to
any prior ownership interest in the Stock, the Company or its assets; (v) assert
tax liability; or (vi) relate to a product liability claim or other liability of
the Company arising prior to the Closing Date, shall survive for the full period
of the applicable statute of limitations, and until finally resolved and
satisfied in full. All claims and actions for indemnity for breach of any
representation or warranty shall be asserted or maintained in writing by a party
hereto on or prior to the expiration of such representation or warranty. Each
of the warranties and representations contained herein is independent of every
other, and no warranty or representation shall in any way limit, restrict,
modify, or be deemed or construed in any way to limit, restrict or modify any
other warranty or representation. Without limiting the foregoing, each and all
of the foregoing warranties and representations shall survive the consummation
and closing of this transaction and such investigation as Buyer may make,
limited as aforesaid. The consummation or Closing of this transaction in the
face of any known breach of any warranty or representation contained herein
shall not be, or be deemed or construed to be, a waiver of such breach,
departure, or variation, unless such breach, departure or variation is
specifically identified and waived in writing by the party to which the warranty
or representation was made.
7.2 Other. All covenants, agreements and indemnities contained herein shall
-----
survive for the full period of the applicable statute of limitations, and until
finally resolved and satisfied in full, provided however that performance of the
covenants contained in Sections 6.1, 6.2 and 6.5 through 6.9 hereof shall expire
on the Closing Date in accordance with their terms.
8. RESTRICTIVE COVENANT.
--------------------
8.1 Non-Competition. Gerrans agrees that for a period expiring five (5)
---------------
years from the Closing Date (the "Expiration Date"), he will not directly or
indirectly, for his own account or as an employee, officer, director, partner,
joint venturer, shareholder, investor or otherwise, either (i) engage in any
business or enterprise involving manufacturing, distribution, marketing or sale
of any product competitive with those manufactured, distributed, marketed or
sold by the Company in the United States or any province, district, island or
possession located outside the United States in which the Company does business
as of the date hereof through the Expiration Date, (ii) compete with the Company
in any other business in which the Company may be engaged or which it is
actively developing or had developed as of the Expiration Date, or (iii) employ
or solicit the employment or engagement by others of any employees of the
Company or independent contractors (except accountants and attorneys) servicing
the Company or solicit the business of any customers or suppliers of the Company
in a manner which would compete with the Company. The prohibitions contained
herein shall not prohibit Gerrans from owning (without any further
29
<PAGE>
participation or involvement) not more than one percent (1%) of the outstanding
capital stock of any entity listed on a national securities exchange. Gerrans
agrees that he will not disclose to others or use for his own benefit (or cause
or induce others to do the same) any proprietary, confidential or secret
information or documents of the Company (including, without limitation, customer
lists, processes, inventions, methods or products, whether or not patented or
patentable). For purposes of this Section 8.1, "Company" shall include Buyer and
its affiliates.
8.2 Reasonableness of Restriction. Gerrans acknowledges that the restricted
-----------------------------
period of time and geographical area specified under Section 8.1 hereof are
reasonable, in view of the nature of the business in which the Company is
engaged and his knowledge of the Company's business. The parties intend for
this restriction to be deemed to be a series of separate covenants, one for each
and every county of each and every state of the United States and each and every
province, district, island or possession outside of the United States, to the
extent covered by Section 8.1.
8.3 Modification of Restrictions. Notwithstanding anything contained in
----------------------------
Section 8.2 to the contrary, if the period of time or the geographical area
specified under Section 8.1 hereof should be determined by a court of competent
jurisdiction to be unreasonable in any judicial proceeding, then the parties
agree that the provision shall remain in full force and effect for the greatest
time period and in the greatest area that would not render it unenforceable.
8.4 Remedies. Gerrans acknowledges that any breach of this Section 8 will
--------
cause Buyer irreparable harm for which there is no adequate remedy at law, and
as a result of this, Buyer shall be entitled to the issuance by court of
competent jurisdiction of an injunction, restraining order or other equitable
relief in favor of itself restraining Gerrans from committing or continuing any
such violation. Any right to obtain an injunction, restraining order or other
equitable relief hereunder shall not be deemed a waiver of any right to assert
any other remedy Buyer may have at law or in equity.
9. INDEMNIFICATION.
---------------
9.1 Indemnification by Sellers and the Company. Sellers hereby agree to
------------------------------------------
indemnify, defend and hold Buyer and its affiliates (defined as a person or
entity that directly, or indirectly through one or more intermediaries, controls
or is controlled by, or under common control with Buyer) and their officers,
directors, employees and Sellers, and their successors and assigns, harmless
from and against any and all liabilities, damages, losses, proceedings, suits,
claims, demands, actions, assessments, judgments, costs and expenses (including
without limitation, attorney's fees and disbursements) arising out of, or
resulting from (i) any breach of any warranty or any misrepresentation by
Sellers or the Company, or (ii) the nonperformance or
30
<PAGE>
breach of any agreement, covenant or obligation to be performed under this
Agreement on the part of Sellers before or at Closing, or the Company.
9.2 Indemnification by Buyer. Buyer hereby agrees to indemnify, defend and
------------------------
hold Sellers, and their successors and assigns, harmless from and against any
and all liabilities, damages, losses, claims, proceedings, suits, demands,
actions, assessments, costs and expenses (including without limitation,
attorney's fees and disbursements) arising out of, or resulting from, (i) any
breach of any warranty or any misrepresentation by Buyer, or (ii) the
nonperformance or breach of any agreement, covenant or obligation to be
performed on the part of Buyer under this Agreement.
9.3 Survival of Indemnification. It is understood and agreed that these
---------------------------
agreements of indemnification shall survive without time limitation, subject to
the provisions of Section 7.1 limiting survival of certain representations and
warranties.
9.4 Notice and Opportunity to Defend. Promptly after the receipt by Buyer or
--------------------------------
Sellers respectively (an "Indemnified Party"), of notice of any claim or the
commencement of any action or proceeding which such Indemnified Party recognizes
gives rise or may give rise to a claim against the other party (the
"Indemnitor") under this Section 9, the Indemnified Party shall give the
Indemnitor written notice of such claim or the commencement of such action or
proceeding. The Indemnitor shall have the right to compromise or to defend any
such matter, at its expense and by its own counsel, except that no such
compromise shall include any agreement requiring the Indemnified Party to take
any action or to refrain from taking any action without the Indemnified Party's
written consent, which shall not unreasonably be withheld or delayed. If the
Indemnitor shall undertake to defend any such asserted liability, it shall
promptly notify the Indemnified Party of its intention to do so, and the
Indemnified Party agrees to cooperate with the Indemnitor and its counsel in the
defense of any such asserted liability. In any event, the Indemnified Party
shall have the right to approve any compromise or settlement sought by the
Indemnitor, and the Indemnitor shall have the right to approve any compromise or
settlement sought by the Indemnified Party, which approval, in either case,
shall not be unreasonably withheld. The Indemnified Party shall have the right
to employ its own counsel in any such action, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party unless (i) the
Indemnitor shall not in fact have employed counsel reasonably satisfactory to
the Indemnified Party; or (ii) the Indemnified Party shall have reasonably
concluded that such action involves or is likely to involve a customer, supplier
or other party with which the Indemnified Party has or reasonably anticipates
having in the following twelve months, a commercial relationship or that there
may be a conflict of interest between it and the Indemnitor in the conduct of
the defense of such action (in which case the Indemnified Party shall have the
right to direct the defense of the action using counsel reasonably satisfactory
to the Indemnitor).
31
<PAGE>
10. MISCELLANEOUS.
-------------
10.1 Waiver and Amendment. Any term or provision of this Agreement may be
--------------------
waived at any time by the party which is entitled to the benefit thereof and
this Agreement may be amended or supplemented at any time only by a written
instrument executed by the party to be charged.
10.2 Entire Agreement. This Agreement and the exhibits and schedules
----------------
referred to herein, together with the Transaction Documents when executed,
constitute the entire agreement among the parties with respect to the
transactions contemplated hereby and supersede the letter of intent dated
December 8, 1998 between the parties, as amended, and all other prior
arrangements or understandings, whether written or oral, with respect thereto,
except that the provisions of pages 2 and 3 of said letter of intent respecting
the $20,000 earnest money deposit shall remain in full force and effect until
Closing.
10.3 Interpretation. The headings contained in this Agreement are solely for
--------------
the purpose of reference, are not part of the agreement of the parties and shall
not in any way affect the meaning or interpretation of this Agreement. The
language of all parts of this Agreement is the language of both parties hereto
and shall in all cases be construed according to its fair meaning and not for or
against either party, regardless of which party was generally responsible for
the preparation of this Agreement.
10.4 Counterparts. For the convenience of the parties, any number of
------------
counterparts of this Agreement may be executed by one or more parties hereto and
all such executed counterparts together shall be deemed to be an original
instrument.
10.5 Notices. All notices, consents, requests, instructions, approvals and
-------
other communications provided for herein shall be in writing and shall be hand
delivered, sent by nationally recognized overnight courier, or by certified or
registered mail, postage prepaid, return receipt requested, at the addresses set
forth below:
If to Gerrans or the Company:
Mr. Albert H. Gerrans, Jr.
President
A-G Geophysical Products, Inc.
P.O. Box 461
14886 Skinner Road
Cypress, Texas 77410-0461
32
<PAGE>
Copy to:
Weycer, Kaplan, Pulaski & Zuber, P.C.
1400 Summit Tower
Eleven Greenway Plaza
Houston, Texas 77046-1104
Attn: Albert S. Weycer, Esq.
If to Clay:
Steven Clay
12011 Red Bud
Cypress, Texas 77429
If to Barnard:
Robert Barnard
Route 5, Box 308D
Cleveland, Texas 77327
If to Buyer:
Bolt Technology Corporation
Four Duke Place
Norwalk, Connecticut 06854
Attn: Raymond M. Soto
Copy to:
Levett, Rockwood & Sanders P.C.
33 Riverside Avenue
Westport, Connecticut 06880
Attn: Barbara A. Young, Esq.
or such other address as any party hereto may, from time to time, designate in a
written notice given in a like manner. Notice given as set out above shall be
deemed effective upon receipt (or refusal to receive).
10.6 Successors and Assigns. This Agreement shall be binding upon and shall
----------------------
inure to the benefit of and be enforceable by the heirs, personal
representatives, successors and assigns of the parties hereto, and shall not be
33
<PAGE>
assignable by the parties, except that Buyer may assign any of its rights or
obligations hereunder to an acquisition subsidiary without consent of Sellers.
10.7 Governing Law. This Agreement shall be governed by and construed and
-------------
enforced in accordance with the laws of the State of Texas, except that the law
of any other relevant state shall be applied if doing so is necessary to
validate any provisions of this Agreement. The parties hereby consent to the
jurisdiction of the state and federal courts located in the States of
Connecticut and Texas and submit to the jurisdiction of any such court in which
any such suit or proceeding is so instituted, and waive any objections as to
venue of such courts.
10.8 Severability. In the event that any court of competent jurisdiction
------------
shall finally determine that any provision, or any portion thereof, contained in
this Agreement shall be void or unenforceable in any respect, then such
provision shall be deemed limited to the extent that such court determines it
enforceable, and as so limited shall remain in full force and effect. In the
event that such court shall determine any such provision, or portion thereof
wholly unenforceable, the remaining provisions of this Agreement shall
nevertheless remain in full force and effect provided that the severing of such
provision, or portion thereof will not materially change the substance of this
Agreement.
10.9 Publicity. Prior to the Closing, Sellers and Buyer shall not
---------
issue any press release or otherwise make any public statement with respect to
the execution of, or the transactions contemplated by, this Agreement without
the prior written consent of the other party, except as may be required by law.
After the Closing, any public statements and press releases shall be made by
Buyer in its sole discretion.
10.10 Further Assurances. Subsequent to the Closing, Sellers shall
------------------
from time to time, at Buyer's request and without further cost or expense to
Buyer, execute and deliver such other instruments of conveyance and transfer (to
be prepared by and at the cost of Buyer) and take such other actions as Buyer
may reasonably request in order more effectively to sell, transfer, assign,
deliver, convey, and vest, in and to Buyer, title to and possession of the
Stock.
34
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or caused this Agreement
to be executed by their duly authorized representatives as of the date first
written above.
BOLT TECHNOLOGY CORPORATION
By: /s/ Raymond M. Soto
-------------------
Raymond M. Soto
President
A-G GEOPHYSICAL PRODUCTS, INC.
By: /s/ Albert H. Gerrans, Jr.
--------------------------
Albert H. Gerrans, Jr.
President
Albert H. Gerrans, Jr.
--------------------------
Albert H. Gerrans, Jr.
/s/ Stephen Clay
--------------------------
Stephen Clay
/s/ Robert BArnard
---------------------------
Robert Barnard
35
<PAGE>
Exhibit A
---------
Buyer Note
<PAGE>
Exhibit B
---------
Pledge Agreement
<PAGE>
Exhibit C
---------
Guaranty
<PAGE>
Exhibit D
---------
Security Agreement
<PAGE>
Exhibit E
---------
UCC-1 Financing Statement
<PAGE>
Exhibit F
---------
Lease Agreement
<PAGE>
Exhibit G
---------
Form of Opinion of the Company's and Sellers' Counsel
<PAGE>
Exhibit H
---------
Gerrans' Employment Agreement
<PAGE>
Exhibit 4.1
-----------
NON-NEGOTIABLE
--------------
PROMISSORY NOTE
---------------
$7,000,000.00 April 20, 1999
For value received, BOLT TECHNOLOGY CORPORATION, a Connecticut
corporation ("Payor"), promises to pay to the order of ALBERT H. GERRANS, JR.,
at Post Office Box 694, Hempstead, Texas 77445 ("Holder"), or at such other
address as Holder shall from time to time specify in writing, the principal sum
of Seven Million and No/100 Dollars ($7,000,000.00) ("Note"), in legal and
lawful money of the United States of America, with interest on the outstanding
principal until paid at the rate of eight and one-quarter percent (8.25%) per
annum. Interest shall be computed on a per annum basis of a year of 360 days
and for the actual number of days elapsed, unless such calculation would result
in a rate greater than the highest rate permitted by applicable law, in which
case interest shall be computed on a per annum basis of a year of 365 days or
366 days in a leap year, as the case may be.
1. Payment Terms.
-------------
Interest only shall be due and payable monthly as it accrues on the
first (1st) day of each and every calendar month, beginning May 1, 1999, and
continuing regularly and monthly thereafter until April __, 2002 ("Final
Maturity Date"). The principal of this Note shall be due and payable in
quarter-annual installments of Four Hundred Twenty-Five Thousand and No/100
Dollars ($425,000.00) each, commencing August 1, 1999, and continuing regularly
and quarter-annually thereafter on each successive November 1, February 1, and
May 1, thereafter, until said Final Maturity Date, when the entire amount
hereof, including all principal and interest then remaining unpaid, shall be
then due and payable; interest shall be calculated on the unpaid principal to
the date each payment is received, and the payment made credited first to the
discharge of the interest accrued as of the date payment is received, and the
balance to the reduction of the principal. Notwithstanding the foregoing, if
prior to the Final Maturity Date, the Payor completes a public offering of the
Payor's common stock pursuant to a Registration Statement filed under the
Securities Act of 1933, as amended, other than a registration on Form S-8 in
connection with a registration of shares to be offered pursuant to an employee
benefit plan of Payor, then contemporaneously with the closing of such public
offering and receipt by Payor of the net proceeds due to Payor from such
offering, Payor shall make a payment to Holder in an amount equal to the lesser
of: (i) all principal and interest then remaining due and unpaid hereunder, or
(ii) the net proceeds received by Payor from such offering. In the event that
the amount paid by Payor is less than the then outstanding principal and
interest hereunder, Payor shall thereafter continue to make scheduled payments
of principal and interest hereunder until this Note is repaid in full.
2. Default Rate.
------------
<PAGE>
Matured unpaid principal and interest shall bear interest from date of
maturity until paid at the rate stated above plus five percent (5%) per annum.
3. Prepayment.
----------
Payor reserves the right to prepay, prior to maturity, all or any part
of the principal of this Note without penalty. Any prepayments shall be applied
first to accrued interest and then to principal, and further shall be applied to
the last maturing installment of principal due hereunder. Payor will provide
written notice to the holder of this Note of any such prepayment of all or any
part of the principal at the time thereof. All payments and prepayments of
principal or interest on this Note shall be made in lawful money of the United
States of America in immediately available funds, at the address of Holder
indicated above, or such other place as the holder of this Note shall designate
in writing to Payor.
4. Default.
-------
It is expressly provided that upon default in the punctual payment of
this Note or any part hereof, principal or interest, as the same shall become
due and payable, or upon the occurrence of an event of default specified in any
of the other Security Documents (as defined below), the holder of this Note may,
at his option, without further notice or demand, (i) declare the outstanding
principal balance of and accrued but unpaid interest on this Note at once due
and payable, (ii) foreclose all liens securing payment hereof, (iii) pursue any
and all other rights, remedies and recourses available to the holder hereof,
including but not limited to any such rights, remedies or recourses under the
Security Documents, at law or in equity, or (iv) pursue any combination of the
foregoing; and in the event default is made in the prompt payment of this Note
when due or declared due, and the same is placed in the hands of an attorney for
collection, or suit is brought on same, or the same is collected through
probate, bankruptcy or other judicial proceedings, then the Payor agrees and
promises to pay all costs of collection, including reasonable attorney's fees.
Notwithstanding the foregoing, the Holder agrees to provide the Payor written
notice at the address specified herein in the event of any default hereunder and
the Payor shall have ten (10) days from the date of such notice to cure any such
default, prior to Holder exercising any of the remedies set forth in (i) through
(iv) above.
5. Joint and Several Liability: Waiver.
------------------------------------
Each maker, signer, surety and endorser hereof, as well as all heirs,
successors and assigns of said parties, shall be directly and primarily, jointly
and severally, liable for the payment of all indebtedness hereunder. Holder may
release or modify the obligations of any of the foregoing persons or entities,
or guarantors hereof, in connection with this Note without affecting the
obligations of the others. Except as otherwise herein provided, all such persons
or entities expressly, including without limitation, the Payor waives
presentment and demand for payment, notice of default (other than as provided
herein), notice of intent to accelerate maturity, notice of acceleration of
maturity, protest, notice of protest, notice of dishonor, and all other notices
and demands for which waiver is not prohibited by law, and diligence in the
collection hereof; and agree to all renewals, extensions, indulgences, partial
payments, releases or exchanges of collateral, or taking of additional
collateral, with or without notice, before or after maturity. No delay or
omission of Holder in exercising any right hereunder shall be a waiver of such
right or any other right under this Note.
<PAGE>
6. No Usury Intended: Usury Savings Clause.
----------------------------------------
In no event shall interest contracted for, charged or received
hereunder, plus any other charges in connection herewith which constitute
interest, exceed the maximum interest permitted by applicable law. The amounts
of such interest or other charges previously paid to the holder of the Note in
excess of the amounts permitted by applicable law shall be applied by the holder
of the Note to reduce the principal of the indebtedness evidenced by the Note,
or, at the option of the holder of the Note, be refunded. To the extent
permitted by applicable law, determination of the legal maximum amount of
interest shall at all times be made by amortizing, prorating, allocating and
spreading in equal parts during the period of the full stated term of the loan
and indebtedness, all interest at any time contracted for, charged or received
from the Payor hereof in connection with the loan and indebtedness evidenced
hereby, so that the actual rate of interest on account of such indebtedness is
uniform throughout the term hereof.
7. Security. This Note is secured by the following:
---------
(a) That certain Guaranty executed by A-G Geophysical Products, Inc.
in favor of Holder dated as of even date herewith; and
(b) That certain Pledge Agreement executed by Payor this date.
This Note and all other documents evidencing, securing, governing, guaranteeing
and/or pertaining to this Note, including but not limited to those documents
described above, are hereinafter collectively referred to as the "Security
--------
Documents." The holder of this Note is entitled to the benefits and security
- ---------
provided in the Security Documents.
8. Texas Finance Code.
-------------------
In no event shall Chapter 346 of the Texas Finance Code (which
regulates certain revolving loan accounts and revolving tri-party accounts)
apply to this Note. To the extent that Chapter 303 of the Texas Finance Code
and/or Articles lD.002 and lD.003 of the Texas Credit Title are applicable to
this Note, the "weekly ceiling" specified in such article is the applicable
ceiling; provided that, if any applicable law permits greater interest, the law
permitting the greatest interest shall apply.
9. Governing Law. Venue.
--------------------
This Note is being executed and delivered, and is intended to be
performed in the State of Texas. Except to the extent that the laws of the
United States may apply to the terms hereof, the substantive laws of the State
of Texas shall govern the validity, construction, enforcement and interpretation
of this Note. In the event of a dispute involving this Note or any other
instruments executed in connection herewith, the undersigned irrevocably agrees
that venue for such dispute shall lie in any court of competent jurisdiction in
Harris County, Texas.
10. Stock Purchase Agreement.
-------------------------
This Note is issued pursuant to the terms of that certain Stock
Purchase Agreement dated as of even date herewith, and represents a portion of
the Purchase Price paid
<PAGE>
by the Payor to the Holder for the purchase of Four Thousand (4,000) shares of
Common Stock of A-G Geophysical Products, Inc. this date.
11. Captions.
--------
The captions in this Note are inserted for convenience only and are
not to be used to limit the terms herein.
12. Notices.
-------
Any notice or other communication required or permitted to be
delivered to any party under this Note shall be in writing and shall be deemed
properly delivered, given and received when delivered by hand, by certified or
registered mail (postage prepaid), return receipt requested, by courier or
express delivery service or by confirmed facsimile to the address or facsimile
telephone number set forth as follows or to such other address or facsimile
telephone number as such party shall have specified in a written notice given to
the other parties hereto:
To Holder: Post Office Box 694
Hempstead, Texas 77445
Telephone Number: 409.826.6201
Facsimile Number: 409.826.2950
with copy to: Albert S. Weycer, Esq.
Weycer, Kaplan, Pulaski & Zuber, P.C.
Eleven Greenway Plaza
1400 Summit Tower
Houston, Texas 77046-1104
Telephone Number: 713.961.9045
Facsimile Number: 713.961.5341
To Payor: Four Duke Place
Norwalk, Connecticut 06854
Telephone Number: 203.853.0700
Facsimile Number: 203.854.9601
with copy to: Barbara A. Young, Esq.
Levett, Rockwood & Sanders
33 Riverside Avenue
Post Office Box 5116
Westport, Connecticut 06881
Telephone Number: 203.222.0885
Facsimile Number: 203.226.8025
13. Cross-Default.
-------------
Should the Payor and/or A-G Geophysical Products, Inc. be in default
(subject to applicable cure periods) of any of the terms and conditions of said
Guaranty or the Security Agreement and Financing Statement also executed of even
date therewith to secure said
<PAGE>
Guaranty, then this Note shall likewise be deemed to be in default. Should the
Payor be in default (subject to any applicable cure periods) of any of the terms
and conditions of the Lease Agreement also executed of even date herewith by and
between Payor and Albert H. Gerrans, Jr. and Patricia J. Gerrans, then this Note
shall likewise be deemed to be in default.
14. Death, Permanent Disability or Voluntary Termination by Bolt of the
-------------------------------------------------------------------
Employment of Albert H. Gerrans, Jr.
- ------------------------------------
Notwithstanding anything herein contained to the contrary, should
Albert H. Gerrans, Jr. die, become permanently disabled or should his employment
be voluntarily terminated by Payor without cause under the Employment Agreement
of even date herewith, this Note shall immediately be due and payable, including
all principal and interest, within one hundred twenty (120) days after such
death, permanent disability or termination of employment shall have occurred.
BOLT TECHNOLOGY CORPORATION,
a Connecticut corporation
By: /s/ Raymond M. Soto
-----------------------------
Name: Raymond M.Soto
----------------------------------
Title: Chairman and President
---------------------------------
<PAGE>
PLEDGE AGREEMENT Exhibit 4.2
---------------- -----------
This Pledge Agreement ("Pledge Agreement") dated as of April 20, 1999, is
made by Bolt Technology Corporation, a Connecticut corporation ("Pledgor"), in
favor of Albert H. Gerrans, Jr. ("Stockholder").
RECITALS
--------
A. Concurrently herewith, Pledgor has executed that certain non-
negotiable Promissory Note in favor of Stockholder (as such Promissory Note may
from time to time be amended, modified, supplemented or restated, the "Note")
pursuant to which Stockholder has extended credit (the "Loan") to Pledgor, on
the terms and subject to the conditions set forth in the Note, and as
consideration for the purchase of 4,000 shares of A-G Geophysical Products, Inc.
from Stockholder under that certain Stock Purchase Agreement by and between
Pledgor and Stockholder dated of even date herewith (the "Stock Purchase
Agreement").
B. Pledgor is of record and beneficial owner of the securities shown in
Schedule I attached hereto, which Schedule is incorporated herein by this
reference (collectively, the "Pledged Shares").
C. Stockholder is willing to make and maintain the Loan to Pledgor on
and after the date of the Note, only upon the condition, among others, that
Pledgor shall have executed and delivered this Pledge Agreement and shall have
delivered the Pledged Shares to Stockholder in order to secure the Obligation of
Pledgor hereunder.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing Recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and intending to be legally bound, Pledgor hereby represent,
warrant, covenant and agree as follows:
ARTICLE 1
---------
DEFINITIONS
-----------
Section 1.1 - Definitions. All capitalized terms used but not defined
------------------------
herein shall have the respective meanings given to them in the Stock Purchase
Agreement. In addition, the following terms not otherwise defined in the
Preamble or Recitals of this Pledge Agreement shall have the following meanings:
"Act" has the meaning set forth in Section 6.2(c), below.
Page -1-
<PAGE>
"Event of Default" has the meaning set forth in Section 6.1, below.
"Lien" means any mortgage, lien, deed of trust, charge, pledge security
interest or other encumbrance, liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings, provided the same have no priority over any of
Stockholder's security interests; and, liens arising from judgments, decrees or
attachments to the extent and only so long as such judgment, decree or
attachment has not caused or resulted in an Event of Default.
"Obligation" means the Note and other indebtedness of Pledgor to
Stockholder created under, or related to, the Note, including, without
limitation, (a) all principal, (b) all interest, (c) all late charges, (d) all
loan fees and loan charges, and (e) all reasonable collection costs and expenses
relating to the Note or to any collateral for the Note. The term "indebtedness"
is used herein in its most comprehensive sense and includes any and all
advances, debts, obligations and liabilities heretofore, now or hereafter made,
incurred or created, whether voluntary or involuntary and whether due or not
due, absolute or contingent, liquidated or unliquidated, determined or
undetermined, created under, or related to, the Note. "Collection costs" and
"expenses" include, without limitation, all of Stockholder's attorneys' fees and
Stockholder's legal expenses, whether or not suit is instituted, and attorneys'
fees and legal expenses for insolvency proceedings (including efforts to modify
or vacate any automatic stay or injunction), appeals, and any anticipated post-
judgment collection services.
"Person" means any individual, sole proprietorship, partnership, joint
venture, limited liability company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental authority.
"UCC" means the Uniform Commercial Code as the same may, from time to time,
be in effect in the State of Texas; provided, however, in the event that, by
reason of mandatory provisions of law, any or all of the attachment, perfection
or priority of Stockholder's security interest in any collateral is governed by
the Uniform Commercial Code as in effect in a jurisdiction other than the state
of Texas, the term "UCC" shall mean the Uniform Commercial Code as in effect in
such other jurisdiction for purposes of the provisions hereof relating to such
attachment, perfection of priority and for purposes of definitions related to
such provisions.
Section 1.2 - UCC Definitions. Unless otherwise defined herein or the
-----------------------------
context otherwise requires, terms for which meanings are provided in the UCC arc
used in this Pledge Agreement, including its Preamble and Recitals, with such
meanings.
ARTICLE 2
---------
PLEDGE
------
Page -2-
<PAGE>
Section 2.1 - Grant of Security Interest. As security for the full, prompt
----------------------------------------
and complete payment when due (whether at stated maturity, by acceleration or
otherwise) of the Obligation, Pledgor hereby pledges, hypothecates, assigns,
charges, mortgages, delivers, and transfers to Stockholder, and hereby grants to
Stockholder, a continuing security interest in all of the Pledged Shares owned
or held by Pledgor and the certificates representing the Pledged Shares.
Section 2.2 - Delivery of the Pledged Shares. Contemporaneously with the
--------------------------------------------
execution of this Pledge Agreement, Pledgor shall deliver to Stockholder all
certificates representing or evidencing the Pledged Shares. In addition,
Pledgor shall deliver to Stockholder's attorneys, Weycer Kaplan, Pulaski &
Zuber, P.C. ("WKPZ") a duly executed stock power, executed in blank, in the form
attached as Exhibit "A." If an Event of Default shall have occurred and be
continuing, Stockholder may notify Pledgor of its intention to exercise its
rights hereunder, and forward a copy of such notice to WKPZ. Upon receipt of
such copy, WKPZ shall be authorized to deliver such stock power to Pledgor,
without any obligation of WKPZ to make any independent investigation of the
facts stated therein. Pledgor shall receive all certificates, cash, instruments,
and other property or proceeds from time to time received, receivable, or
otherwise distributed in respect of or in exchange for any or all of the Pledged
Shares in trust for Stockholder and shall immediately upon receipt deliver to
Stockholder such certificates, cash, instruments, and other property and
proceeds, together with any necessary endorsement; provided, however, that
Stockholder acknowledges and agrees that Pledgor shall be entitled to receive,
retain and use any and all cash dividends subject to the terms and conditions of
a Security Agreement of even date herewith declared on account of the Pledged
Stock, free and clear of the security interest granted hereunder, unless an
Event of Default shall have occurred and be continuing and Stockholder shall
have notified Pledgor of Stockholder's intention to exercise its rights under
this Section 2.2.
Section 2.3 - Continuing Security Interest. This Pledge Agreement shall
------------------------------------------
create a continuing security interest in the Pledged Shares and shall:
(a) remain in full force and effect until the full and complete and
final payment of the Obligation;
(b) be binding upon Pledgor and its successors, transferees and
assigns; and
(c) inure, together with the rights and remedies of Stockholder
hereunder, to the benefit of Stockholder.
At all times while Stockholder holds the Pledged Stock pursuant to the security
interest granted hereunder, Stockholder shall not take any actions to create, or
permit to be created by any person claiming through Stockholder, any additional
lien or encumbrance on the Pledged Stock, except for the lien created hereunder
or pursuant to Stockholder's exercise of its rights and remedies under Section
6.2 below.
Page -3-
<PAGE>
Upon the complete, full and final payment of the Obligation, the security
interest granted herein shall terminate and all rights to the Pledged Shares
shall revert to Pledgor. Upon any such termination, Stockholder then shall,
deliver to Pledgor, without any representations, warranties or recourse of any
kind whatsoever, except for compliance with this Section 2.3, any and all
certificates and instruments representing or evidencing Pledgor's interest in
the Pledged Shares that had been previously delivered by the Pledgor to
Stockholder and execute and deliver to Pledgor such documents as Pledgor shall
reasonably request to evidence such termination.
Section 2.4 - No Assumption. This Pledge Agreement is executed and
---------------------------
delivered to Stockholder, for the benefit of himself for collateral security
purposes only. Notwithstanding anything herein to the contrary:
(a) Pledgor shall remain liable under the contracts and agreements
affecting the Pledged Shares and shall perform all of its duties and obligations
under such contracts and agreements to the same extent as if this Pledge
Agreement had not been executed; and
(b) the exercise by Stockholder of any of his rights hereunder shall
not release Pledgor from any of its duties or obligations under any such
contracts or agreements affecting the Pledged Shares.
ARTICLE 3
---------
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 3.1 - Representations and Warranties. Subject to the
--------------------------------------------
representations and warranties of Stockholder set forth in the Stock Purchase
Agreement being and remaining true and correct in all material or applicable
respects, Pledgor hereby represents and warrants to Stockholder as follows:
(a) Pledgor is the sole holders of record and the sole beneficial
owner of the Pledged Shares, free and clear of any Lien thereon or affecting
title thereto.
(b) None of the Pledged Shares have been transferred in violation of
the securities registration, securities disclosure or similar laws of any
jurisdiction to which such transfer may be subject.
(c) No consent, approval, authorization or other order of any Person
and no consent or authorization of any governmental authority or regulatory body
is required to be made or obtained by Pledgor either (i) for the pledge by
Pledgor of the Pledged Shares pursuant to this Pledge Agreement or for the
execution, delivery, or performance of this Pledge Agreement by Pledgor; or (ii)
for the exercise by Stockholder of the voting or other rights provided for in
this Pledge Agreement or the remedies in respect of the
Page -4-
<PAGE>
Pledged Shares pursuant to this Pledge Agreement, except as may be required in
connection with such disposition by laws, not otherwise addressed herein,
affecting the offering and sale of securities generally.
(d) The pledge, grant of a security interest in, and delivery of the
Pledged Shares pursuant to this Pledge Agreement, will create a valid first
priority Lien on and in the Pledged Shares securing the payment of the
Obligation assuming (i) continued possession of the Pledged Shares by
Stockholder, and (ii) that Stockholder has no notice prior to or on the date of
delivery of such Pledged Shares of an adverse claim within the meaning of the
UCC.
(e) This Pledge Agreement has been duly executed and delivered by
Pledgor and constitutes a legal, valid, and binding obligation of Pledgor,
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, or other similar laws affecting the rights of
creditors generally or by the application of general equity principles.
The representations and warranties contained in this Pledge Agreement shall
be true, accurate and complete at the time of Pledgor's execution of this Pledge
Agreement, and shall continue to be true, accurate and complete until the
Obligation has been finally and completely paid in full.
ARTICLE 4
---------
COVENANTS
---------
Section 4.1 - Protect Pledged Shares. Pledgor shall not sell, assign,
------------------------------------
transfer, pledge or otherwise encumber the Pledged Shares in any manner except
(a) if such Person purchasing such Pledged Shares or any interest therein shall
first also have become a party to this Pledge Agreement and agreed to be bound
by the terms hereof. Pledgor shall warrant and defend the right and title
granted by this Pledge Agreement to Stockholder in and to the Pledged Shares
(and all right, title and interest represented by the Pledged Shares) against
the claims and demands of all Persons whomsoever.
Section 4.2 - Further Assurances. Pledgor agrees that at any time, and
--------------------------------
from time to time, Pledgor shall promptly execute and deliver all further
instruments, and take all further action that Stockholder may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable Stockholder to exercise and enforce
his rights and remedies hereunder with respect to any of the Pledged Shares.
Section 4.3 - Voting Rights. If an Event of Default shall have occurred and
---------------------------
be continuing and Stockholder shall have notified Pledgor of Stockholder's
intention to exercise Stockholder's voting power under this Section 4.3, Pledgor
agrees:
Page -5-
<PAGE>
(a) that Stockholder may exercise (to the exclusion of Pledgor) the
voting power and all other incidental rights of ownership with respect to the
Pledged Shares and Pledgor hereby grants Stockholder from the date hereof until
the complete, full and final repayment of the Obligation, an irrevocable proxy,
coupled with an interest exercisable under such circumstances, to vote such
Pledged Shares; and
(b) promptly to deliver to Stockholder such additional proxies and
other documents as may be necessary to allow Stockholder to exercise such voting
power.
All payments and proceeds which may at any time and from time to time be held by
Pledgor but which Pledgor are obligated to deliver to Stockholder shall be held
by Pledgor separate and apart from its other property in trust for Stockholder.
Unless an Event of Default shall have occurred and be continuing and Stockholder
shall have given the notice referred to in this Section 4.3, Pledgor shall have
the exclusive voting power with respect to the Pledged Shares and Stockholder
shall, upon the written request of Pledgor, promptly deliver such proxies and
other documents, if any, as shall be reasonably requested by Pledgor which are
necessary to allow Pledgor to exercise voting power with respect to the Pledged
Shares; provided, however, that no vote shall be cast, or consent, waiver or
ratification given or action taken by Pledgor that would impair any Pledged
Shares or be inconsistent with or violate any provision of this Pledge Agreement
or any other security documents executed this date benefitting Stockholder.
ARTICLE 5
---------
STOCKHOLDER
-----------
Section 5.1 - Stockholder Appointed Attorney-In-Fact. Pledgor hereby
----------------------------------------------------
irrevocably appoints Stockholder to be Pledgor's attorney-in-fact with full
authority in the place and stead of Pledgor and in the name of Pledgor or
otherwise, from time to time in Stockholder's discretion after the occurrence
and during the continuance of an Event of Default, to take any action and to
execute any instrument which Stockholder may reasonably deem necessary or
advisable to accomplish the purposes of this Pledge Agreement, including,
without limitation:
(a) after the occurrence and during the continuance of an Event of
Default, to ask, demand, collect, sue for, recover, compromise, receive and give
acquittance and receipts for moneys due and to become due under or in respect of
any of the Pledged Shares;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a), above; and
(c) to file any claims or take any action or institute any proceedings
which Stockholder may deem necessary or desirable for the collection of any of
the Pledged
Page -6-
<PAGE>
Shares or otherwise to enforce the rights of Stockholder with respect to any of
the Pledged Shares.
Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section 5.1 is irrevocable and coupled with an
interest.
Section 5.2 - Stockholder Has No Duty. The powers conferred on Stockholder
-------------------------------------
hereunder are solely to protect his interest in the Pledged Shares and shall not
impose any duty on him to exercise any such powers. Stockholder shall have no
duty as to any Pledged Shares except as provided in Section 2.3 above or
responsibility for (a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Pledged Shares, whether or not Stockholder has or is deemed to have knowledge of
such matters, or (b) taking any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Pledged Shares. Without limiting
the generality of the preceding sentence, Stockholder shall be deemed to have
exercised reasonable care in the custody and preservation of any of the Pledged
Shares if he takes such action for that purpose as Pledgor reasonably requests
in writing at times other than upon the occurrence and during the continuance of
any Event of Default. Failure of Stockholder to comply with any such request at
any time shall not in itself be deemed a failure to exercise reasonable care.
ARTICLE 6
---------
DEFAULTS AND REMEDIES
---------------------
Section 6.1 - Events of Default. Any one or more of the following events
--------------------------------
shall constitute an "Event of Default" hereunder:
(a) If Pledgor defaults in timely payment or performance (including
all cure periods) of the Obligation; or
(b) If Pledgor fails to materially comply with the covenants of
Sections 4.1 and 4.2 above.
and such default or failure under (a) or (b) above is not rectified to
Stockholder's reasonable satisfaction within ten (10) days of written
notification of such noncompliance.
Section 6.2 - Certain Remedies. If any Event of Default shall have
------------------------------
occurred and be continuing:
(a) The Stockholder may exercise in respect of the Pledged Shares, in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party on default under the UCC
(whether or not the UCC applies to the affected Pledged Shares) and also may,
without notice except as specified
Page -7-
<PAGE>
below, sell the Pledged Shares or any part thereof in one or more parcels at
public or private sale, at any of Stockholder's offices or elsewhere, for cash,
on credit or for future delivery, and upon such other terms as Stockholder may
deem commercially reasonable. Pledgor agrees that, to the extent notice of sale
shall be required by law, at least ten (10) days' prior notice to Pledgor of the
time and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification. Stockholder shall not be
obligated to make any sale of Pledged Shares regardless of notice of sale having
been given. Stockholder may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
(b) Stockholder may:
(i) take control of any proceeds of the Pledged Shares, and
(ii) execute (in the name, place and stead of Pledgor)
endorsements, assignments and other instruments of conveyance or transfer with
respect to all or any of the Pledged Shares.
(c) If, at anytime when Stockholder shall determine to exercise his
right provided in (a) above to sell the whole or any part of the Pledged Shares,
such Pledged Shares or the part thereof to be sold shall not, for any reason
whatsoever, be effectively registered under the Securities Act of 1933, as
amended (as so amended the "Act"), Stockholder may, in his discretion (subject
only to applicable requirements of law) sell such Pledged Shares or part thereof
by private sale in such manner and under such circumstances as Stockholder may
deem necessary or advisable, but subject to the other requirements of this
Section 6.2(c), and shall not be required to effect such registration or cause
the same to be effected. Without limiting the generality of the foregoing in
any such event Stockholder may, in his sole discretion, (i) in accordance with
applicable securities laws, proceed to make such private sale notwithstanding
that a registration statement for the purpose of registering such Pledged Shares
or part thereof could be or shall have been filed under the Act; (ii) approach
and negotiate with a single possible purchaser to effect such sale; and (iii)
restrict such sale to a purchaser who will represent and agree that such
purchaser is purchasing for its own account for investment, and not with a view
to the distribution or sale of such Pledged Shares or part thereof. In addition
to a private sale as provided above in this Section 6.2(c), if any of the
Pledged Shares shall not be freely distributable to the public without
registration under the Act at the time of any proposed sale hereunder, then
Stockholder shall not be required to effect such registration or cause the same
to be effected but may, in his sole discretion (subject only to applicable
requirements of law), require that any sale hereunder including a sale at
auction) be conducted subject to such restrictions as Stockholder may, in his
sole discretion, deem necessary or appropriate in order that such sale
(notwithstanding any failure so to register) may be effected in compliance with
the Bankruptcy Code and other laws affecting the enforcement of creditors'
rights and the Act and all applicable state securities laws.
Page -8-
<PAGE>
Section 6.3 - Compliance with Restrictions. Pledgor agrees that in any sale
------------------------------------------
of any of the Pledged Shares, whether at a foreclosure sale or otherwise,
Stockholder is hereby authorized to comply with any limitation or restriction in
connection with such sale as it may be advised by counsel is necessary in order
to avoid any violation of applicable law (including compliance with such
procedures as may restrict the number of prospective bidders and purchasers,
require that such prospective bidders and purchasers have certain qualifications
and restrict such prospective bidders and purchasers to persons who will
represent and a that they are purchasing for their own account for investment
and not with a view to the distribution or resale of such Pledged Shares), or in
order to obtain any required approval of the sale or of the purchaser by any
governmental authority, and Pledgor further agrees that such compliance shall
not result in such sale being considered or deemed not to have been made in a
commercially reasonable manner, nor shall Stockholder be liable nor accountable
to Pledgor for any discount allowed by the reason of the fact that such Pledged
Shares is sold in compliance with any such limitation or restriction.
Section 6.4 - Application of Proceeds. All cash proceeds received by
-------------------------------------
Stockholder in respect of any sale of, collection from, or other realization
upon, all or any part of the Pledged Shares shall be applied, first to the
payment of all reasonable costs and expenses of holding and selling the Pledged
Shares, including, without limitation, attorney's fees and expenses, fees of any
accountants and court costs; second, to the full and complete payment of all of
the Obligation other than the unpaid principal balance of the Loan, and third,
to the full and complete payment of the unpaid principal balance of the Loan.
Any surplus of such cash or cash proceeds held by Stockholder and remaining
after payment in full of all of the Obligation, and the termination of the Note,
shall be paid over to Pledgor or to whomsoever may be lawfully entitled to
receive such surplus.
Section 6.5 - Indemnity and Expenses. Pledgor hereby indemnifies and holds
------------------------------------
harmless Stockholder from and against any and all claims, losses, and
liabilities arising out of or resulting from this Pledge Agreement (including
enforcement of this Pledge Agreement) , except claims, losses, or liabilities
resulting from the gross negligence or willful misconduct of Stockholder. Upon
demand, Pledgor shall pay to Stockholder the amount of any and all reasonable
expenses, including the reasonable fees and disbursements of its counsel and of
any experts and agents (including attorney's fees and expenses, whether related
to a suit or action or any reviews of or appeals from a judgment or decree
therein or in connection with non-judicial action) which Stockholder may incur
in connection with (a) the exercise or enforcement of any of the rights of
Stockholder hereunder, or (b) the failure by Pledgor to perform or observe any
of the provisions hereof.
ARTICLE 7
---------
MISCELLANEOUS PROVISIONS
------------------------
Page -9-
<PAGE>
Section 7.1 - Reinstatement. This Pledge Agreement shall remain in full
---------------------------
force and effect and continue to be effective if at any time payment of the
Obligation, or any part thereof, is, pursuant to applicable law, avoided,
rescinded or reduced in amount, or must otherwise be restored or returned by any
obligee of the Obligation, whether as a "voidable preference," "fraudulent
conveyance," or otherwise, all as though such payment or performance had not
been made. In the event that any payment, or any part thereof, is avoided,
rescinded, reduced, restored, or returned, the Obligation, as the case may be,
shall be reinstated and deemed reduced only by such amount paid and not so
avoided, rescinded, reduced, restored, or returned.
Section 7.2 - Amendments; Waivers. No amendment to or waiver of any
---------------------------------
provision of this Pledge Agreement nor consent to any departure by Pledgor from
any provision in this Pledge Agreement shall in any event be effective unless
the same shall be in writing and signed by Stockholder, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which it is given.
Section 7.3 - Protection of Pledged Shares. Stockholder may from time to
------------------------------------------
time, at his option, perform any act which Pledgor agrees hereunder to perform
and which Pledgor shall fail to perform after being requested in writing so to
perform (it being understood that no such request need be given after the
occurrence and during the continuance of any Event of Default) and Stockholder
may from time to time take any other action which Stockholder may reasonably
deem necessary for the maintenance, preservation or protection of its security
interest in the Pledged Shares, all such actions being for the express benefit
of Stockholder and not Pledgor. The reasonable expenses incurred by Stockholder
in connection therewith shall be payable by Pledgor pursuant to Section 6.5.
Section 7.4 - Addresses for Notices. Any notice or other communication
-----------------------------------
required or permitted to be delivered to any party under this Pledge Agreement
shall be in writing and shall be deemed properly delivered, given and received
when delivered by hand, by certified or registered mail (postage prepaid),
return receipt requested, by courier or express delivery service or by confirmed
facsimile) to the address or facsimile telephone number set forth as follows (or
to such other address or facsimile telephone number as such party shall have
specified in a written notice given to the other parties hereto):
To Stockholder: Post Office Box 694
Hempstead, Texas 77445
Telephone Number: 409.826.6201
Facsimile Number: 409.826.2950
with copy to: Albert S. Weycer, Esq.
Weycer, Kaplan, Pulaski & Zuber, P.C.
Eleven Greenway Plaza
1400 Summit Tower
Page -10-
<PAGE>
Houston, Texas 77046-1104
Telephone Number: 713.961.9045
Facsimile Number: 713.961.5341
To Pledgor: Four Duke Place
Norwalk, Connecticut 06854
Telephone Number: 203.853.0700
Facsimile Number: 203.854.9601
with copy to: Barbara A. Young, Esq.
Levett, Rockwood & Sanders
33 Riverside Avenue
Post Office Box 5116
Westport, Connecticut 06881
Telephone Number: 203.222.0885
Facsimile Number: 203.226.8025
Section 7.5 - Severability; Headings. Wherever possible each provision of
------------------------------------
this Pledge Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Pledge Agreement shall
be prohibited by or invalid under such law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Pledge
Agreement. Section captions used in this Pledge Agreement are for convenience
of reference only, and shall not affect the construction of this Pledge
Agreement.
Section 7.6 - Counterparts. This Pledge Agreement may be executed in any
--------------------------
number of counterparts, each of which when so delivered shall be deemed an
original, but all such counterparts shall constitute but one and the same
instrument. Each such agreement shall become effective upon the execution of a
counterpart hereof or thereof by each of the parties hereto.
Section 7.7 - Governing Law; Entire Agreement. THIS PLEDGE AGREEMENT SHALL
---------------------------------------------
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
OF TEXAS. THIS PLEDGE AGREEMENT CONSTITUTES THE ENTIRE UNDERSTANDING AMONG THE
PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDES ANY
PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to
be duly executed and delivered by their respective duly authorized officers as
of the day and year first above written.
PLEDGOR:
-------
Page -11-
<PAGE>
Bolt Technology Corporation,
a Connecticut corporation
By: /s/ Raymond M. Soto
------------------------------------
Name: Raymond M. Soto
----------------------------------
Title: Chairman and President
---------------------------------
ACCEPTED AND ACKNOWLEDGED:
STOCKHOLDER:
-----------
/s/ Albert H. Gerrans, Jr.
--------------------------------
Albert H. Gerrans, Jr.
Page -12-
<PAGE>
SCHEDULE I
Attached to and forming a part of that certain Pledge Agreement ("Pledge
Agreement") dated as of April 20, 1999, made by Bolt Technology Corporation, a
Connecticut corporation ("Pledgor") in favor of Albert H. Gerrans,
Jr.("Stockholder" ).
======================================================================
Stock
Stock Issuer Class of Stock Certificate Number of Shares
Numbers
======================================================================
A-G Geophysical
Products, Inc. Common Stock 5 4062
======================================================================
<PAGE>
EXHIBIT "A"
STOCK POWER
FOR VALUE RECEIVED, BOLT TECHNOLOGY CORPORATION hereby transfes unto ALBERT
H. GERRANS, JR., FOUR THOUSAND SIXTY-TWO (4,062) SHARES of the Common Stock of
A-G GEOPHYSICAL PRODUCTS, INC. ("Company"), registered in its name on the books
of said Company as represented by Certificate No. 5, and does hereby irrevocably
constitute and appoint ALBERT S. WEYCER as attorney to transfer the foregoing on
the books of said Company, with full power of substitution in the premises,
hereby ratifying and confirming all that my said attorney shall lawfully do by
virtue hereof.
DATED: April 20, 1999
-----------------------
BOLT TECHNOLOGY CORPORATION,
a Connecticut corporation
By:
Name: /s/ Raymond M. Soto
---------------------------------------
Title: Chairman and President
--------------------------------------
IN PRESENCE OF:
________________________________
<PAGE>
SECURITY AGREEMENT Exhibit 4.3
This Security Agreement ("Agreement") dated as of April 20, 1999, is made
by A-G Geophysical Products, Inc., a Texas corporation ("Debtor"), in favor of
Albert H. Gerrans, Jr., a resident of Harris County, Texas (referred to as
"Secured Party"), joined herein by Bolt Technology Corporation, a Connecticut
corporation ("Bolt").
RECITALS
A. Of even date herewith Secured Party and Bolt executed that certain
Stock Purchase Agreement covering, in part, the purchase by Bolt from Secured
Party of Four Thousand (4,000) shares of common stock of Debtor ("Stock").
B. Evidencing a portion of the purchase price of such Stock, Bolt
executed and delivered to Secured Party its Non-Negotiable Promissory Note
("Note") of even date in the aggregate sum of Seven Million and No/100 Dollars
($7,000,000.00), payable to the order of Secured Party.
C. For good and valuable consideration, and as an accommodation to Bolt,
Debtor has agreed to guarantee the payment of said Note.
D. Secured Party is only willing to accept said Note from Bolt in partial
payment of the purchase price upon the condition, among others, that Debtor
shall have executed and delivered to Secured Party its Guaranty of said Note,
which Guaranty is secured by this Security Agreement.
AGREEMENT
NOW, THEREFORE, in order to induce Secured Party to accept such Note as
part payment for such Stock, such Guaranty from Debtor and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and intending to be legally bound, Debtor hereby represents,
warrants covenants and agrees as follows:
SECTION 1
Definitions
1.1 Defined Terms. Unless otherwise defined herein the following terms
shall have the following meanings (such meanings being equally applicable to
both the singular and plural forms of the terms defined):
Page 1 of 16
<PAGE>
"Collateral" shall have the meaning assigned to such term in Section 3 of
this Security Agreement.
"Debtor" shall mean A-G Geophysical Products, Inc.
"Permitted Indebtedness" shall mean:
a. Indebtedness of Debtor in favor of Secured Party arising under this
Agreement.
b. Indebtedness existing on the Closing Date of the Stock Purchase
Agreement.
c. Indebtedness to trade creditors, or, otherwise, incurred in the
ordinary course of business.
d. Indebtedness secured by Permitted Liens.
e. Other indebtedness of Debtor, not exceeding Fifty Thousand and
No/100 Dollars ($50,000.00) in the aggregate.
f. The Guaranty by Debtor of Bolt's obligations under the Commercial
Revolving Loan and Security Agreement between Bolt and Fleet
National Bank, N.A. dated January 5, 1998 (the "Fleet Agreement")
of even date herewith, provided, however, that pursuant to the
terms of Section 26 of such Guaranty to Fleet, such Guaranty to
Fleet shall be of no force and effect while the Guaranty of Debtor
secured hereby is in effect. And it is further acknowledged that in
the event of a foreclosure hereunder, such Guaranty to Fleet shall
be null and void.
g. Extensions, renewal, refunding, refinancings, modifications,
amendments and restatements of any of the items of Permitted
Indebtedness a through e above, provided that the principal amount
thereof is not increased or the terms thereof are not modified to
impose more burdensome terms upon Debtor.
"Permitted Liens" shall mean:
a. Any Liens existing on the Closing Date of the Stock Purchase
Agreement or arising under this Agreement.
b. Liens for taxes, fees, assessments or other governmental charges or
levies, either not delinquent or being contested in good faith by
Page 2 of 16
<PAGE>
appropriate proceedings, provided the same have no priority over
any of Secured Party's security interests.
c. Liens (i) upon or in any equipment acquired or held by Debtor or
any of its Subsidiaries intended to be and is used by Debtor or
its Subsidiaries to secure the purchase price of such equipment
or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment, or (ii) existing on such equipment
at the time of its acquisition, provided that the Lien is
confined solely to the property so acquired and improvements
thereon, and the proceeds of such equipment.
d. Liens on equipment leased by Debtor pursuant to an operating or
capital lease in the ordinary course of business incurred solely
for the purpose of financing the lease of such equipment
(including Liens arising from UCC financing statements regarding
such leases) which equipment is intended to be, and is, used by
Debtor.
e. Liens arising from judgments, decrees or attachments to the
extent and only so long as such judgment, decree or attachment
has not caused or resulted in an Event of Default.
f. Liens arising solely by virtue of any statutory or common law
provision relating to liens, rights of set off or similar rights
and remedies as to deposit accounts or other funds maintained
with a creditor or depository institution.
g. Liens, not otherwise permitted, which Liens do not in the
aggregate exceed Fifty Thousand and No/100 Dollars ($50,000.00)
at any time.
h. Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type
described in clauses a above, provided that any extension,
renewal or replacement Lien shall be limited to the property
encumbered by the existing Lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not
increase.
i. Any future lien which Debtor is required to grant to Fleet Bank,
N.A. under the provisions of Article VII of the Fleet Agreement,
provided such future lien is junior to, and subordinate to, the
security interest granted herein.
"Secured Obligation" means the obligation of Debtor to guarantee (by the
execution and delivery of Guaranty to Secured Party) the payment by Bolt of the
Note to Secured Party under Section 2 below.
Page 3 of 16
<PAGE>
"Secured Party" means Albert H. Gerrans, Jr.
"UCC" means the Uniform Commercial Code as the same may, from time to time,
be in effect in the State of Texas, provided, however, in the event that, by
reason of mandatory provisions of law, any or all of the attachment, perfection
or priority of Secured Party's security interest in any collateral is governed
by the Uniform Commercial Code as in effect in a jurisdiction other than the
State of Texas, the term "UCC" shall mean the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof relating
to such attachment, perfection of priority and for purposes of definitions
related to such provisions.
SECTION 2
Secured Obligation
Bolt has agreed to pay to Secured Party all of the unpaid principal amount
of, and accrued interest on, the Note. Debtor has guaranteed the payment of
said Note by the execution of a Guaranty. Any failure by Debtor forthwith to
pay any of the Secured Obligation when due to Secured Party under such Guaranty,
including any cure periods, shall constitute an "Event of Default" hereunder.
SECTION 3
Grant of Security Interest
As collateral security for the prompt and complete payment and performance
when due, including any cure periods, (whether at stated maturity, by
acceleration or otherwise) of all the Secured Obligation and in order to induce
Secured Party to accept said Note from Bolt as part payment of said Stock, and
said Guaranty from Debtor, Debtor hereby assigns, conveys, mortgages, pledges,
hypothecates and transfers to Secured Party and hereby grants to Secured Party,
a security interest in all of Debtor's right, title and interest in, to and
under the property listed on Attachment A hereto (all of which being herein
collectively called the "Collateral").
SECTION 4
Representations and Warranties
Subject to the representations and warranties set forth in the Stock
Purchase Agreement being true and correct in all material or applicable respects
and subject to the Permitted Liens, Debtor hereby represents and warrants to
Secured Party that:
Page 4 of 16
<PAGE>
4.1 Except for the security interest granted to Secured Party under this
Security Agreement, Debtor is the sole legal and equitable owner of each item of
the Collateral in which it purports to grant a security interest hereunder,
having good, marketable and insurable title thereto free and clear of any and
all liens.
4.2 No effective security agreement, financing statement, equivalent
security or lien instrument or continuation statement covering all or any part
of the Collateral exists, except such as may have been filed by Debtor in favor
of Secured Party pursuant to this Security Agreement.
4.3 This Security Agreement creates a legal and valid first lien security
interest on and in all of the Collateral in which Debtor now has rights, and
upon all filings and other actions necessary or desirable to perfect and protect
such security interest having been duly made or taken, Secured Party shall have
a fully perfected first priority security interest in all of the Collateral in
which Debtor now has rights.
4.4 Debtor owns the Collateral and has the authority to grant this
security interest and to sign this Security Agreement. Such ownership is free
from any set-off, claim, restriction, lien, security interest, or other
encumbrance, except the security interest and the liens for taxes not yet due.
4.5 The Collateral includes one or more of these classifications:
accounts, inventory, documents, chattel paper, and general intangibles.
SECTION 5
Covenants of Debtor
5.1 Protection of Collateral. Debtor will defend the Collateral against
------------------------
all claims and demands adverse to Secured Party's interest in it and will keep
it free from all liens except those for taxes not yet due and from all security
interests except this one and Permitted Liens. The collateral will remain in
Debtor's possession or control at all times, except as otherwise provided in
this Agreement. Debtor will maintain the collateral in good condition and
protect it against misuse, abuse, waste and deterioration except for ordinary
wear and tear resulting from its intended use.
5.2 Insurance. Debtor will insure the Collateral in accord with Secured
---------
Party's reasonable requirements regarding choice of carrier, casualties insured
against and amount of coverage. Policies will be written in favor of Debtor and
Secured Party according to their respective interests. All policies will
provide that Secured Party will receive at least ten (10) days' notice before
cancellation, and the policies or certificates evidencing them will be provided
to Secured Party when issued. Debtor assumes all risk of loss and damage to the
Collateral to the extent of any deficiency in insurance coverage. Debtor
irrevocably appoints Secured Party as attorney-in-fact to collect any return,
unearned premiums and proceeds
Page 5 of 16
<PAGE>
of any insurance on the Collateral and to endorse any draft or check deriving
from the policies and made payable to Debtor.
5.3 Secured Party's Costs. Debtor will pay all expenses incurred by
---------------------
Secured Party in obtaining, preserving, perfecting, defending and enforcing this
security interest or the Collateral and in collecting or enforcing the Note or
the Guaranty. Expenses for which Debtor is liable include, but are not limited
to, taxes, assessments, reasonable attorney's fees and other legal expenses.
These expenses will bear interest from the date ten (10) days after demand at
the highest rate stated in Note that are part of the Secured Obligation, and
Debtor will pay Secured Party this interest on demand at a time and place
reasonably specified by Secured Party. These expenses and interest will be part
of the Secured Obligation and will be recoverable as such in all respects.
5.4 Additional Documents. Debtor will sign any papers that Secured Party
--------------------
may reasonably request to obtain, maintain and perfect this security interest or
to comply with any relevant law. Debtor shall have the right to approve such
papers, which approval will not be unreasonably withheld.
5.5 Notice of Changes. Debtor will immediately notify Secured Party of
-----------------
any material change in the Collateral; change in Debtor's name, address or
location; change in any matter warranted or represented in this Agreement;
change that may affect this security interest; and any event of default.
5.6 Use and Removal of Collateral. Debtor will use the Collateral
-----------------------------
primarily according to the stated classification unless Secured Party consents
otherwise in writing.
5.7 Sale. Debtor will not sell, transfer or encumber other than with
----
respect to the Permitted Liens, any of the Collateral without the prior written
consent of Secured Party.
5.8 Information and Inspection. At the time and in the form specified by
--------------------------
Secured Party, Debtor will furnish Secured Party any reasonable requested
information related to the Collateral, which may include:
a. all information necessary to identify any of the Collateral; and
b. shipping and delivery receipts evidencing the shipment of goods,
and invoices evidencing the receipt of and payment for inventory in Collateral.
During normal business hours and reasonable notice, Debtor will also
allow Secured Party to inspect the Collateral and to inspect and copy all
records relating to the Collateral and the obligation, as long as these are
accomplished without breach of the peace.
Page 6 of 16
<PAGE>
5.9 Parties Liable on the Collateral. Debtor will act at all times to
--------------------------------
preserve the liability of all obligors on the Collateral and preserve the
priority of all security for the Collateral.
5.10 Modification of Collateral. Without the written consent of Secured
--------------------------
Party, Debtor will not agree to any modification of terms in any writing related
to the Collateral, except in the ordinary course of business and not affecting
the Collateral in a material adverse way.
5.11 Additional Covenants of Debtor. Debtor covenants and agrees that
------------------------------
until the Note secured hereby, including all principal and interest due thereon,
is paid in full, Debtor shall observe and comply with all of the following
covenants, the breach of any of same constituting a default hereunder:
a. Debtor shall maintain its corporate existence and good standing
in its jurisdiction of. incorporation and maintain qualification in each
jurisdiction in which Debtor does business. Debtor shall maintain to the extent
consistent with prudent management Debtor's business, enforce all licenses,
approval and agreements.
b. The employment of the Secured Party by Debtor and/or Bolt shall
not be terminated by Debtor or Bolt, except for a termination for cause under
the Employment Agreement executed of even date herewith with Debtor, which has
not been cured during applicable cure periods thereunder.
c. The initial officers of Debtor shall be maintained as follows:
Chairman Raymond Soto
President Albert H. Gerrans, Jr.
Vice President Michael Hedger
Vice President Jeff Gerrans
Secretary Alan Levy
Treasurer Alan Levy
except that changes may be made by Debtor in such officers from time to time,
except for Albert H. Gerrans, Jr.
d. Debtor will not engage in any business other than the businesses
currently engaged in by Debtor and business substantially similar or related
thereto (or incidental thereto).
e. Without Secured Party's prior written consent, Debtor shall not
merge or consolidate, or permit any of its subsidiaries to merge or consolidate,
with or into any other business organization, or acquire, or permit any of its
subsidiaries to acquire, all or substantially all of the capital stock or
property of another person or entity.
Page 7 of 16
<PAGE>
f. Without Secured Party's prior written consent, Debtor shall not
permit any amendment to be made to the Articles of Incorporation or to the
Bylaws of Debtor.
g. Except as otherwise herein provided, Debtor shall not pay any
dividends or make any other distribution or payment on account of or in
redemption, retirement or purchase of any capital stock.
h. The Debtor shall not issue any additional common stock of Debtor,
or any other security of any kind or character.
i. The Debtor shall operate only in the ordinary course of business
in the same manner it has operated during the preceding year, and there shall be
no material change in the operations of the Debtor, without Secured Party's
consent not to be unreasonably withheld.
j. None of the assets of the Debtor shall be mortgaged, pledged or
sold, except in the ordinary course of business or pursuant to Permitted Liens.
k. Debtor shall not borrow any additional funds, except for
Permitted Indebtedness.
l. The following shall at all times require the direct involvement
of Albert H. Gerrans, Jr. to the extent he is available and deems appropriate:
(i) any negotiations for or on behalf of Debtor of proposals
of business from existing or prospective customers of Debtor, including, without
limitation, pricing and in terms of such proposals; and
(ii) any negotiations by Bolt or through its subsidiaries or
affiliated companies (other than Debtor) with existing or prospective customers
of Debtor which directly involve the business of Debtor.
m. Secured Party recognizes that Bolt has many customers and
suppliers in common with the Debtor and this provision and subsection n, below
is not intending to restrict Bolt in the conduct of its business with such
customers and suppliers, provided that it does not involve directly the business
of the Debtor.
n. Bolt (and any of its subsidiaries or affiliated companies, other
than Debtor) shall be prohibited from:
(i) soliciting the employment of any current or future employees
of Debtor; and
(ii) dealing directly with existing or prospective customers of
Debtor except through Debtor itself, when it directly involves the business
conducted by the Debtor.
Page 8 of 16
<PAGE>
o. Debtor agrees that it will not transfer, assign or grant an
exclusive license for any of its proprietary information, including, without
limitation, any inventions, patents, patent applications, or methods of doing
business, to any third parties, including, without limitation, Bolt and its
subsidiaries and its affiliated companies, without the prior written consent of
the Secured Party.
p. Bolt employees assisting in the management of the Debtor or the
Debtor's employees shall consult in advance with the Secured Party before
implementation of any operational changes affecting the Debtor's employees.
q. The Debtor acknowledges and agrees that the Secured Party shall
be entitled to cause Debtor to furnish him with monthly financial statements of
Debtor showing a balance sheet and a profit and loss statement covering the
operations of Debtor during the preceding month, the same to be furnished within
twenty (20) days after the end of each month.
r. Debtor shall at all times maintain a tangible net worth (as
herein defined) that is greater than or equal to $4,000,000.00, calculated
quarterly. "Tangible net worth" is defined to include as of the date of any
determination, Debtor's net worth as reflected on its balance sheet minus all
indebtedness owing from officers or affiliates.
s. Debtor shall at all times maintain a current ratio that is
greater than or equal to 3 to 1, calculated quarterly. The term "current ratio"
as of the date of any determination, shall be the ratio of (i) Debtor's current
assets, to (ii) Debtor's current liabilities.
t. The Debtor shall at all times maintain a maximum debt (loans from
financial institutions) to tangible net worth ratio that is less than or equal
to .08 calculated quarterly.
u. Debtor shall not make a net transfer to Bolt (whether by
dividend, intercompany transfer or otherwise) of any cash of Debtor, which would
cause Debtor's cash or cash equivalents to be less than $500,000.00.
SECTION 6
Rights and Remedies of Secured Party
Generally. Secured Party may exercise the following rights and remedies
---------
after an event of default has occurred, and after the expiration of all
applicable cure periods, and thereafter, during the continuance of such event of
default:
a. take control of any proceeds of the Collateral;
Page 9 of 16
<PAGE>
b. release any Collateral in Secured Party's possession to any
Debtor, temporarily or otherwise;
c. take control of any funds generated by the Collateral, such as
refunds from and proceeds of insurance, and reduce any part of the obligation
accordingly or permit Debtor to use such funds to repair or replace damaged or
destroyed Collateral covered by insurance;
d. demand, collect, convert, redeem, settle, compromise, receipt
for, realize on, sue for and adjust the Collateral either in Secured Party's or
Debtor's name, as Secured Party desire;
e. contact account debtors directly to verify information furnished
by Debtor;
f. notify obligors on the Collateral to pay Secured Party directly;
g. take control of all proceeds of and payments on any Collateral
and apply them against the obligation; and
h. as Debtor's agent endorse any documents or chattel paper that is
Collateral or that represents proceeds of Collateral.
SECTION 7
Events of Default
7.1 Each of the following conditions is an event of default:
a. if Debtor fails to pay any of the Secured Obligation when due and
such default extends beyond the notice and cure period herein provided;
b. if any warranty, covenant or representation made to Secured Party
by or on behalf of Debtor under this Security Agreement proves to have been
false in any material respect when made and such is not cured to Secured Party's
reasonable satisfaction within ten (10) days after written notice;
c. if a receiver is appointed for Debtor or any of the Collateral;
d. if the Collateral is assigned for the benefit of creditors or, to
the extent permitted by law, if bankruptcy or insolvency proceedings commence
against or by any of these parties: Debtor; any partnership of which Debtor is
a general partner; and any maker, drawer, acceptor, endorser, guarantor, surety,
accommodation party or other person liable on or for any part of the obligation;
Page 10 of 16
<PAGE>
e. if any financing statement regarding the Collateral but not
related to this security interest and not favoring Secured Party or evidencing
Permitted Liens is filed and such is nor released within ten (10) days after
written notice;
f. if any lien attaches to any of the Collateral, except for the
Permitted Liens, and such is not released within ten (10) days after written
notice;
g. if any of the Collateral is lost, stolen, damaged or destroyed,
unless it is promptly replaced with Collateral of like quality or restored to
its former condition within ten (10) days after written notice; and
h. if Debtor and/or Bolt fail to comply with the covenants and other
provisions of Section 5.11 hereof and the same are not cured to Secured Party's
reasonable satisfaction within ten (10) days after written notice.
7.2 During the existence of any event of default, Secured Party may
declare the unpaid principal and earned interest of the Note and Guaranty
immediately due in whole or part, enforce the obligation and exercise any rights
and remedies granted by Chapter 9 of the Texas Business and Commerce Code or by
this Agreement, including the following:
a. require Debtor to deliver to Secured Party all books and records
relating to the Collateral;
b. require Debtor to assemble the Collateral and make it available
to Secured Party at a place reasonably convenient to both parties;
c. take possession of any of the Collateral and for this purpose
enter any premises where it is located if this can be done without breach of the
peace;
d. sell, lease, or otherwise dispose of any of the Collateral in
accord with the rights, remedies and duties of a secured party under Chapters 2
and 9 of the Texas Business and Commerce Code after giving notice as required by
those chapters; unless the Collateral threatens to decline speedily in value, is
perishable or would typically be sold on a recognized market, Secured Party will
give Debtor reasonable notice of any public sale of the Collateral or of a time
after which it may be otherwise disposed of without further notice to Debtor; in
this event, notice will be deemed reasonable if it is mailed, postage prepaid,
to Debtor at the address specified in this Agreement at least ten (10) days
before any public sale or ten (10) days before the time when the Collateral may
be otherwise disposed of without further notice to Debtor;
e. surrender any insurance policies covering the Collateral and
receive the unearned premium;
Page 11 of 16
<PAGE>
f. apply any proceeds from disposition of the Collateral after
default in the manner specified in Chapter 9 of the Texas Business and Commerce
Code, including payment of Secured Party's reasonable attorney's fees and court
expenses; and
g. if disposition of the Collateral leaves the Secured Obligation
unsatisfied, collect the deficiency from Debtor.
7.3 Debtor also agrees to pay all fees, costs and expenses of Secured
Party, including, without limitation, reasonable attorney's fees incurred in
connection with the enforcement of any of its rights and remedies hereunder.
7.4 Debtor hereby waives presentment, demand, protest or any notice (to
the maximum extent permitted by applicable law) of any kind in connection with
this Security Agreement or any Collateral.
SECTION 8
Limitation of Secured Party's Duty in Respect of Collateral
Secured Party shall be deemed to have acted reasonably in the custody,
preservation and disposition of any of the Collateral if it takes such action as
Debtor requests in writing, but failure of Secured Party to comply with any such
request shall not in itself be deemed a failure to act reasonably, and no
failure of Secured Party to do any act not so requested shall be deemed a
failure to act reasonably.
SECTION 9
NOTICES
Any notice or other communication required or permitted to be delivered to
any party under this Agreement shall be in writing and shall be deemed properly
delivered, given and received when delivered by hand, by certified or registered
mail (postage prepaid), return receipt requested, by courier or express delivery
service or by confirmed facsimile to the address or facsimile telephone number
set forth as follows or to such other address or facsimile telephone number as
such party shall have specified in a written notice given to the other parties
hereto:
To Secured Party: Post Office Box 694
Hempstead, Texas 77445
Telephone Number: 409.826.6201
Facsimile Number: 409.826.2950
with copy to: Albert S. Weycer, Esq.
Weycer, Kaplan, Pulaski & Zuber, P.C.
Page 12 of 16
<PAGE>
Eleven Greenway Plaza
1400 Summit Tower
Houston, Texas 77046-1104
Telephone Number: 713.961.9045
Facsimile Number: 713.961.5341
To Debtor: Four Duke Place
Norwalk, Connecticut 06854
Telephone Number: 203.853.0700
Facsimile Number: 203.854.9601
with copy to: Barbara A. Young, Esq.
Levett, Rockwood & Sanders
33 Riverside Avenue
Post Office Box 5116
Westport, Connecticut 06881
Telephone Number: 203.222.0885
Facsimile Number: 203.226.8025
SECTION 10
Miscellaneous
10.1 Parties Bound. The Secured Party's rights under this Agreement shall
-------------
inure to the benefit of his heirs, legal representatives, successors and
assigns. If Debtor is more than one, all their representations, warranties and
agreements are joint and several. Debtor's obligations under this Agreement
shall bind Debtor's personal representatives, successors and assigns.
10.2 Waiver. Neither delay in exercise nor partial exercise of any of
------
Secured Party's remedies or rights shall waive further exercise of those
remedies or rights. Secured Party's failure to exercise remedies or rights does
not waive subsequent exercise of those remedies or rights. Secured Party's
waiver of any default does not waive further default. Secured Party's waiver of
any right in this Agreement or of any default is binding only if it is in
writing. Secured Party may remedy any default without waiving it.
10.3 Reimbursement. If Debtor fails to perform any of Debtor's
-------------
obligations, Secured Party may perform those obligations and be reimbursed by
Debtor on demand at the place where the Note is payable for any sums so paid,
including attorney's fees and other legal expenses, plus interest as provided in
Section 5.3. The sum to be reimbursed shall be secured by this Security
Agreement.
10.4 Interest Rate. Interest included in the Secured Obligation shall not
-------------
exceed the maximum amount of nonusurious interest that may be contracted for,
taken, reserved, charged or received under law; any interest in excess of that
maximum amount shall be
Page 13 of 16
<PAGE>
credited to the principal of the Secured Obligation or, if that has been paid,
refunded. On any acceleration or required or permitted prepayment of the Secured
Obligation, any such excess shall be canceled automatically as of the
acceleration or prepayment or, if already paid, credited on the principal amount
of the Secured Obligation or, if the principal amount has been paid, refunded.
This provision overrides other provisions in this and all other instruments
concerning the Secured Obligation.
10.5 Modifications. No provisions of this Agreement shall be modified or
-------------
limited except by written agreement.
10.6 Severability. The unenforceability of any provision of this Agreement
------------
will not affect the enforceability or validity of any other provision.
10.7 After-Acquired Consumer Goods. This security interest shall attach to
-----------------------------
after-acquired consumer goods only to the extent permitted by law.
10.8 Applicable Law. This Agreement will be construed according to Texas
--------------
laws.
10.9 Place of Performance. This Agreement is to be performed in Harris
--------------------
County, Texas.
10.10 Financing Statement. A carbon, photographic or other
-------------------
reproduction of this Agreement or any financing statement covering the
Collateral is sufficient as a financing statement.
10.11 Presumption of Truth and Validity. If the Collateral is sold
---------------------------------
after default, recitals in the bill of sale or transfer will be prima facie
evidence of their truth, and all prerequisites to the sale specified by this
Agreement and by Chapter 9 of the Texas Business and Commerce Code will be
presumed satisfied.
10.12 Singular and Plural. When the context requires, singular nouns
-------------------
and pronouns include the plural.
10.13 Cumulative Remedies. Foreclosure of this security interest by
-------------------
suit does not limit Secured Party's remedies, including the right to sell the
Collateral under the terms of this Agreement. All remedies of Secured Party may
be exercised at the same or different times, and no remedy shall be a defense to
any other. Secured Party's rights and remedies include all those granted by law
or otherwise, in addition to those specified in this Agreement.
10.14 Termination of this Security Agreement. This Security Agreement
--------------------------------------
shall terminate upon the payment and performance in full of the Secured
Obligation.
10.15 Attachments Incorporated. The Attachment A indicated below is
------------------------
attached to this Security Agreement and incorporated into it for all purposes.
Page 14 of 16
<PAGE>
10.16 Notice and Cure. If Debtor defaults under Section 7.1 a hereof,
----------------
Secured Party shall provide Debtor with ten (10) days notice of such default and
the opportunity to cure the same within such ten (10) day period.
IN WITNESS WHEREOF, each of the parties hereto has caused this Security
Agreement to be executed and delivered by its duly authorized officer on the
date first set forth above.
A-G Geophysical Products, Inc.
By:_____________________________________
Name:___________________________________
Title:____________________________________
"Debtor"
Accepted and acknowledged by:
________________________________________
Albert H. Gerrans, Jr.
"Secured Party"
Bolt Technology Corporation
By:_____________________________________
Name:___________________________________
Title:____________________________________
"Bolt"
Page 15 of 16
<PAGE>
Attachment A
Collateral
The Collateral shall consist of all right, title and interest of Debtor in and
to the following:
a. All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located.
b. All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, pacing and shipping
materials, work in process and finished products including such inventory as is
temporarily out of Debtor's custody or possession or in transit and including
any returns upon any accounts or other proceeds, including insurance proceeds,
resulting from the sale or disposition of any of the foregoing and any documents
of title representing any of the above.
c. All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind.
d. All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligation owing to Debtor
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Debtor, whether or not earned by performance, and any
and all credit insurance, Guaranty, and other security therefor, as well as all
merchandise returned to or reclaimed by Debtor.
e. All documents, cash, deposit accounts, securities, securities
entitlements, securities accounts, investment property, letters of credit,
certificates of deposit, instruments and chattel paper now owned or hereafter
acquired relating to the foregoing.
f. All copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work thereof,
whether published or unpublished, now owned or hereafter acquired; all trade
secret rights, including all rights to unpatented inventions, know-how,
operating manuals, license rights and agreements and confidential information,
now owned or hereafter acquired; all mask work or similar rights available for
the protection of semiconductor chips, now owned or hereafter acquired; all
claims for damages by way of any past, present and future infringement of any of
the foregoing.
g. Any and all claims, rights and interests in any of the above and all
substitutions for, additions and accessions to and proceeds thereof.
Page 16 of 16
<PAGE>
Exhibit 10.1
MODIFICATION TO
COMMERCIAL REVOLVING LOAN AND SECURITY AGREEMENT
THIS MODIFICATION TO COMMERCIAL REVOLVING LOAN AND SECURITY AGREEMENT (the
"Modification Agreement") is made as of April 20, 1999, by and between FLEET
NATIONAL BANK, a national banking association having an address at One Landmark
Square, Stamford, Connecticut 06901 (the "Bank"), BOLT TECHNOLOGY CORPORATION, a
Connecticut corporation with an office at Four Duke Place, Norwalk, Connecticut
06854 (the "Borrower"), CUSTOM PRODUCTS CORPORATION, formerly known as Custom
Acquisition Corporation, BOLT INTERNATIONAL CORPORATION, DUKE PLACE INVESTMENTS,
BOLT EXPORT CORPORATION, CRITERION EXPLORATION, INC., STAR GEOPHYSICAL
CORPORATION, and K&B RESOURCES, INC., all with an address of Four Duke Place,
Norwalk, Connecticut 06854 (collectively, the "Guarantor").
BACKGROUND
----------
On January 5, 1998, the Bank and the Borrower entered into a Commercial
Revolving Loan and Security Agreement (the "Loan Agreement") whereby the Bank
made available to the Borrower a reducing loan facility in the maximum principal
amount of $3,500,000.00 by way of a revolving line of credit (the "Revolving
Loan"). The Revolving Loan is evidenced by a Commercial Revolving Promissory
Note dated January 5, 1998 (the "Note"). In accordance with the terms of the
Note, the maximum principal amount currently available to the Borrower
under the
1
<PAGE>
Revolving Loan is $3,000,000.00. The Guarantors have unconditionally guarantied
all indebtedness of Borrower to Bank including, without limitation, the
Revolving Loan.
The Loan Agreement restricts the Borrower, inter alia, from permitting any
----- ----
liens against its properties or assets, incurring any additional indebtedness,
or consolidating or merging with any other corporation or entity, except as may
be permitted under the Loan Agreement. The Borrower now wishes to acquire 100%
of the capital stock of AG Geophysical, Inc. ("AG"), a Texas based manufacturer,
for the total purchase price of $13,600,000.00 (the AG Acquisition"). A portion
of the AG Acquisition purchase price is to be financed by a $7,000,000.00
promissory note from the Borrower in favor of Al Gerrans, sole shareholder of AG
(the "Gerrans Note"). The Gerrans Note is to be secured by AG's grant of a
security interest in the assets of AG in favor of Al Gerrans, and by the
Borrower's pledge of the AG stock being purchased from Al Gerrans. The Borrower
has requested the Bank to modify the Loan Agreement in order to permit the
acquisition and the granting of the security interest, and the Bank is
agreeable, all upon the terms to follow.
AGREEMENT
---------
The Bank and the Borrower agree to modify the Loan Agreement as follows:
1. ENCUMBRANCES. Paragraph 6.03(a) of the Loan Agreement is hereby
------------
amended to provide that the Borrower may cause AG to
2
<PAGE>
grant a security interest in AG's assets in favor of Al Gerrans to secure the
Borrower's obligations under the Gerrans Note.
2. LIMITATION ON INDEBTEDNESS. Paragraph 6.03(b) of the Loan Agreement
--------------------------
is hereby amended to provide that the Borrower may incur up to $7,000,000.00 in
seller financing in connection with the AG Acquisition.
3. LOANS, ADVANCES, INVESTMENTS. Paragraphs 6.03(e) and 6.03(q) of the
----------------------------
Loan Agreement are hereby amended to provide that the Borrower may use the
proceeds of the Revolving Loan to purchase the AG stock.
4. USE OF LOAN PROCEEDS. Paragraph 6.03(k) of the Loan Agreement is
--------------------
hereby amended to provide that the Borrower may also use the proceeds of the
Revolving Loan for the AG Acquisition.
5. BUSINESS OPERATIONS. Paragraph 6.03(n) of the Loan Agreement is
-------------------
hereby amended to provide that the Borrower may also engage in the business
conducted through AG, its wholly owned subsidiary.
6. FINANCIAL COVENANTS. Paragraphs 6.04(a) and 6.04(c) of the Loan
-------------------
Agreement are hereby deleted in their entirety and replaced with the following:
(a) Minimum Tangible Net Worth. Permit its Tangible Net Worth to be
--------------------------
less than $4,275,000.00 at any time. At the Borrower's fiscal year end of June
30, 1999, this level must increase by an amount equal to 75% of the Borrower's
net income for the period from January 1, 1999, through June 30, 1999. Beginning
with the Borrower's fiscal year end of June 30, 2000, this level must increase
each year by an amount equal to 75% of the Borrower's annual net income. This
covenant shall be tested quarterly.
3
<PAGE>
(c) Total Liabilities/Tangible Net Worth. Permit the ratio of its
------------------------------------
Total Liabilities to Tangible Net Worth to be greater than (i) 3.00 to 1.00 at
any time up through and including fiscal quarter ending December 31, 1999, (ii)
2.00 to 1.00 at any time subsequent to fiscal quarter ending December 31, 1999,
but up through and including fiscal quarter ending December 31, 2000, and (iii)
1.25 to 1.00 at any time subsequent to fiscal quarter ending December 31, 2000.
This covenant shall be tested quarterly.
7. FUTURE GRANT OF COLLATERAL. Article VII of the Loan Agreement is
--------------------------
hereby deleted in its entirety and replaced with the following:
The Borrower and the Guarantor hereby pledges, assigns, transfers, and
grants to the Bank a lien and security interest in all of their business
assets including, but not limited to, all Accounts, Chattel Paper,
Documents, Equipment, General Intangibles, Instruments, Inventory
(including work in process), as those terms are defined in the Uniform
Commercial Code, together with all proceeds thereof, in order to secure the
prompt payment and performance of the Obligations, as such term is defined
in the Loan Agreement, which security interests shall only attach and
automatically become effective in the event (a) the Borrower fails to make
a contingent payment required to be made under the Asset Purchase Agreement
dated as of November 14, 1997, by and among the Borrower, Custom Products
Corporation, Gerald Shaff and Carole Shaff, or (b) the Gerrans Note is
accelerated due to a default thereunder (each of the foregoing events is
hereinafter referred to as a "Triggering Event"). Any such Triggering
Event shall be an Event of Default under the Loan Agreement. Borrower and
Guarantor shall each execute a UCC-1 financing statement contemporaneously
with this Agreement which shall be held by Bank's counsel in escrow, to be
filed only upon delivery by Bank of a notice certifying that a Triggering
Event has occurred (a copy of which shall also be delivered simultaneously
by the Bank to Borrower). Upon such filing, the UCC-1 financing statements
shall serve to automatically perfect the security interests granted to the
Bank upon such Triggering Event. This Article VII shall automatically
expire, and the lien and security interest provided herein, and be of no
further force and effect upon the date on which both (a) no further such
contingent payments are to be made under the referenced Asset Purchase
Agreement, and (b) the Gerrans Note has been fully satisfied. Upon such
expiration, the above referenced UCC-1 shall be returned to
4
<PAGE>
the Borrower (or if previously filed, the Bank will file a termination
statement for such filing.
8. SCHEDULE 5(W). Schedule 5(w) of the Loan Agreement is hereby amended
-------------
to include AG Geophysical, Inc. as a subsidiary of the Borrower.
9. EVENTS OF DEFAULT. Paragraphs 8.01(g) and 8.01(h) of the Loan
-----------------
Agreement are hereby amended to allow AG to grant a lien and security interest
in its assets to Al Gerrans in order to secure the Gerrans Note.
10. YEAR 2000 RISK. Borrower has reviewed the "Year 2000 Risk" (that is
--------------
the risk that computer applications used by Borrower may be unable to recognize
and perform without error date-sensitive functions involving certain dates prior
to and any date after December 31, 1999) and represents that it is taking such
action as may be necessary to insure that the Year 2000 Risk will not adversely
affect its business operations and/or financial conditions.
11. REAFFIRMATION OF BORROWER. Borrower hereby acknowledges and reaffirms
-------------------------
the Revolving Loan and its liability for payment thereof. Borrower agrees,
represents, and warrants that (a) no setoff, counterclaim, or defense exists
with respect to its liability under the Revolving Loan and that no other claim
against the Bank exists and waives its right to raise any such setoff,
counterclaim, defense, or claim against the Bank arising out of occurrences on
or prior to the date hereof, (b) all the representations and warranties
contained in the Loan Agreement,
5
<PAGE>
after giving effect to the amendments and modifications contemplated hereby, are
true and correct on and as of the date hereof as though made on and as of the
date hereof, (c) the Borrower has taken all corporate or other action necessary
to make this Modification Agreement and all agreements and instruments executed
in connection herewith the valid and enforceable obligations they purport to be,
and (d) no default or breach under the Loan Agreement after giving effect to the
amendments contemplated hereby, and no event which the passage of time or giving
of notice or both would constitute such a default or breach, exists on the date
hereof.
12. REAFFIRMATION OF GUARANTORS. Each Guarantor hereby acknowledges and
---------------------------
reaffirms their respective Guaranty pursuant to, and in accordance with, the
terms thereof. Each Guarantor agrees that no setoff, counterclaim, or defense
exists with respect to his, her, or its liability under such Guaranty and that
no other claim against the Bank exists and waives its right to raise any such
setoff, counterclaim, defense, or claim against the Bank arising out of
occurrences on or prior to the date hereof. Each Guarantor agrees that in the
event a security interest is granted to the Bank, the Bank shall have the same
rights and remedies against the Guarantor as it has against the Borrower under
the Loan Agreement.
13. CONSENT OF GUARANTORS. Without limiting the generality of the
---------------------
foregoing or of any Guaranty, each Guarantor acknowledges that it is fully aware
of and has consented to this Agreement, and
6
<PAGE>
further acknowledges and agrees that, pursuant to the terms hereof and of the
Guaranties, it remains liable, jointly and severally, for the full amount of the
outstanding Revolving Loan, as amended hereby, and its obligations under its
respective Guaranty continues in full force and effect notwithstanding this
Modification Agreement which shall not, in any way, impair, discharge, or limit
the obligations of any Guarantor to the Bank arising hereunder or under the Loan
Agreement, as amended, or each such Guaranty. Each Guarantor reaffirms that the
provisions of this Modification Agreement shall not be construed as superseding
or limiting their respective Guaranty, each of which continues in full force and
effect. The terms hereof shall be an addition to, and not in lieu of, the terms
of their respective Guaranty.
14. OTHER CHANGES. All other terms and conditions of the Loan Agreement
-------------
shall remain the same and in full force and effect except as specifically
amended herein.
15. JURISDICTION. This Modification Agreement and all other agreements,
------------
documents, and instruments executed in connection herewith or contemplated
hereby shall be governed by and construed in accordance with the laws of the
State of Connecticut.
16. CAPTIONS. The captions are inserted herein only as a matter of
--------
convenience and for reference, and in no way define, limit, describe, or in any
way affect the scope or intent of this Modification Agreement.
7
<PAGE>
17. JURY TRIAL WAIVER. THE BORROWER AND GUARANTORS WAIVE TRIAL BY JURY IN
-----------------
ANY COURT IN ANY SUIT, ACTION, PROCEEDING OR ANY MATTER ARISING IN CONNECTION
WITH OR IN ANY WAY RELATED TO THIS MODIFICATION AGREEMENT OR THE FINANCING
TRANSACTION OF WHICH THIS MODIFICATION AGREEMENT IS A PART OR THE DEFENSE OR
ENFORCEMENT OF ANY OF THE BORROWER'S AND GUARANTORS' RIGHTS AND REMEDIES IN
CONNECTION THEREWITH. THE BORROWER AND GUARANTORS ACKNOWLEDGE THAT THEY MAKE
THIS WAIVER KNOWINGLY, VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER THE
OPPORTUNITY FOR EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH
THEIR ATTORNEYS. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE BANK TO
EXTEND THIS FINANCING COMMITMENT AND TO ENTER INTO THIS MODIFICATION AGREEMENT
WITH RESPECT TO THE REVOLVING LOAN.
Executed to be effective as of the date first set forth above.
THE BORROWER:
Signed in the presence of: BOLT TECHNOLOGY CORPORATION
(As to All)
By: /s/Raymond M.Soto
------------------
__________________________ Raymond M. Soto
Its President, duly authorized
__________________________
THE BANK:
FLEET NATIONAL BANK
By /s/ Andrew H. Harris
-----------------------
Andrew H. Harris
Its Vice President
8
<PAGE>
THE GUARANTORS:
CUSTOM PRODUCTS CORPORATION, formerly known as,
CUSTOM ACQUISITION CORPORATION
By: /s/ Raymond M. Soto
-------------------
Raymond M. Soto
Its President, duly authorized
BOLT INTERNATIONAL CORPORATION
By: /s/ Raymond M. Soto
-------------------
Raymond M. Soto
Its President, duly authorized
DUKE PLACE INVESTMENTS
By: /s/ Raymond M. Soto
-------------------
Raymond M. Soto
Its President, duly authorized
BOLT EXPORT CORPORATION
By: /s/ Raymond M. Soto
-------------------
Raymond M. Soto
Its President, duly authorized
CRITERION EXPLORATION, INC.
By: /s/ Raymond M. Soto
-------------------
Raymond M. Soto
Its President, duly authorized
STAR GEOPHYSICAL CORPORATION
By: /s/ Raymond M. Soto
-------------------
Raymond M. Soto
Its President, duly authorized
K&B RESOURCES, INC.
By: /s/ Raymond M. Soto
-------------------
Raymond M. Soto
Its President, duly authorized
9
<PAGE>
LEASE AGREEMENT Exhibit 10.2
---------------
This Lease Agreement ("Lease") is made and entered into this 20th day of
April, 1999, by and between Albert H. Gerrans, Jr. and Patricia J. Gerrans
(herein collectively called the "Landlord") and Bolt Technology Corporation, a
Connecticut corporation (herein called "Tenant"), for the terms of which,
W I T N E S S E T H:
1. PREMISES
------------
1.1 For and in consideration of the covenants and agreements herein set
forth to be kept and performed by Tenant, and subject to the terms and
conditions set out below, and subject to all matters of record in Harris County,
Texas affecting the Premises herein-described, Landlord does hereby demise and
lease to Tenant, and Tenant does hereby lease and take from Landlord (for the
Term herein stipulated) the premises (including all land and improvements
located thereto), said land containing 4.9693 acres, more or less, described on
Exhibit "A" which is attached hereto and made a part hereof for all purposes
(said land and improvements herein called the "Premises").
2. TERM AND OPTION
-------------------
2.1 Term. The term (referred to herein sometimes as "Term" or "Primary
----
Term") shall be for three (3) years commencing on April 20, 1999, and ending on
April 20, 2002, unless sooner terminated pursuant to any provision hereof.
2.2 Option. Provided Tenant is not in default hereunder, Tenant shall
------
have an option to extend the Term of this Lease for one (1) additional period
(referred to herein as "Extension Term") of three (3)years; such Extension Term
(if the option to extend is exercised) shall commence on the first day following
the expiration of the Primary Term of this Lease and Tenant's option to extend
the Term of this Lease are contingent upon the following conditions being
satisfied:
2.2.1 Tenant shall not be in default under the terms and
conditions of this Lease at the time Tenant elects to exercise such option, and
on the date upon which such option becomes effective; and
2.2.2 Tenant shall have given written notice to Landlord of the
exercise of such option no less than one hundred eighty (180) days prior to the
expiration of the Primary Term. It is understood and agreed that time is of the
essence in all provisions of this Lease. Further, if Tenant fails to timely
exercise the option to extend, then such option and rights to extend the Term of
this Lease shall be null, void and of no force and effect.
Page 1 of 27
<PAGE>
2.2.3 In the event Tenant effectively exercises such option to
extend the Term of this Lease, then all of the terms and provisions of this
Lease applicable during the Primary Term hereof shall likewise be applicable
during the Extension Term, except: (i) after the expiration of the Extension
Term (if the option to extend the Term is exercised) Tenant shall have no
further rights to extend the Term of this Lease, and (ii) the Rent (as herein
defined) which shall be due and payable, in advance, for each month of the
Extension Term shall be Ten Thousand and No/100 Dollars ($10,000.00) multiplied
by a fraction the numerator of which is the Index Number of the Consumer Price
Index (as defined below) for April, 2002, and the denominator of which is the
Index Number of the Consumer Price Index for April, 1999. "CPI," as that term
is used herein, means the Consumer Price Index For All Urban Consumers (Houston,
Texas) of the Bureau of Labor Statistics of the U.S. Department of Labor (for
which 1982-1984 is 100). "Bureau" shall mean the U.S. Department of Labor,
Bureau of Labor Statistics, or any successor agency of the United States that
shall issue the indexes or data referred to in this Article 2.2.3. In the event
that (i) the Bureau ceases to use the 1982-1984 average of 100 as the basis of
calculation, or (ii) a substantial change is made in the number or character of
"market basket" items used in determining the CPI, or (iii) Landlord and Tenant
mutually agree in writing that the CPI does not accurately reflect the
purchasing power of the dollar, or (iv) the CPI shall be discontinued for any
reason, Landlord shall designate from indexes supplied by the Bureau an
alternative index comparable to the CPI together with information which will
make possible the conversion to the alternative index in computing the adjusted
rental. If for any reason the Bureau does not furnish such an index and such
information, the parties shall thereafter accept and use such other index of
comparable statistics on the cost of living for the county in which the Premises
is located, as shall be computed and published by an agency of the United States
or by a responsible financial periodical of recognized authority then to be
selected by Landlord (but subject to reasonable approval by Tenant). In no
event shall the Rent be reduced. If there is a decrease in the CPI then the
Rent in effect shall remain unchanged.
3. RENT
--------
3.1 Tenant shall pay to Landlord as rent ("Rent") for the Premises in
monthly installments of Ten Thousand and No/100 Dollars ($10,000.00), in
advance, on the first day of each month of the Term hereof. Rent for any period
during the Term hereof which is for less than one month shall be a pro rata
portion of the monthly installment. Except as expressly set forth in any
provision of this Lease, Rent shall be payable without notice or demand and
without any deduction, offset, or abatement in lawful money of the United States
of America to Landlord at the address stated herein or to such other persons or
at such other places as Landlord may designate in writing.
3.2 Additional Charge. This Lease is what is commonly called a "Net, Net,
-----------------
Net Lease," it being understood that Landlord shall receive the Rent set forth
in Article 3.1 free and clear of any and all impositions, taxes, real estate
taxes, liens, charges or expenses of any nature whatsoever in connection with
the ownership and operation of the Premises. In addition to the Rent reserved by
Article 3.1, Tenant shall pay to the parties respectively
Page 2 of 27
<PAGE>
entitled thereto all impositions, taxes, real estate taxes, insurance premiums,
operating charges, maintenance charges, construction costs, and any other
charges, costs and expenses which arise or may be contemplated under any
provisions of this Lease during the Term hereof. All of such charges, costs, and
expenses shall constitute additional charges, and upon the failure of Tenant to
pay any of such costs, charges, or expenses, Landlord shall have the same rights
and remedies as otherwise provided in this Lease for the failure of Tenant to
pay Rent. It is the intention of the parties hereto that this Lease shall not be
terminable for any reason by the Tenant and that the Tenant shall in no event be
entitled to any abatement of or reduction in Rent payable hereunder, except as
herein expressly provided. Any present or future law to the contrary shall not
alter this agreement of the parties. Notwithstanding the foregoing, items which
are not customarily included as additional charges or Rent in "Triple Net"
leases, such as income taxes and debt service (both principal and interest), are
specifically excluded from additional charges pursuant to this paragraph.
4. USE
-------
4.1 Use. The Premises shall be used and occupied only for manufacturing,
---
office and warehouse purposes.
4.2 Compliance with the Law. Tenant shall obtain, at its sole cost, all
-----------------------
permits and licenses required for the transaction of its business in the
Premises. Tenant shall, at Tenant's expense, comply promptly with all
applicable statutes, ordinances, rules, laws, regulations, orders, and
requirements in effect during the Term or any part of the Term hereof regulating
the use by Tenant of the Premises. Tenant shall not use or permit the use of the
Premises in any manner that will tend to create waste or a nuisance. Tenant
represents, warrants and covenants to Landlord that any future permitted
construction, enlargements, replacements, alterations, or modifications to the
Premises which are made by Tenant shall comply with the American With
Disabilities Act and all amendments promulgated thereto from time to time at
Tenant's cost.
4.3 Condition of Premises. Tenant hereby accepts the Premises in their
---------------------
condition existing as of the date of the possession hereunder, subject to all
applicable zoning, municipal, county, and state laws, ordinances and regulations
governing and regulating the use of the Premises, and accepts this Lease subject
thereto and to all matters disclosed thereby and by any exhibits attached
hereto. Tenant acknowledges that Landlord has made no representation or warranty
as to the suitability or habitability of the Premises for the conduct of
Tenant's business.
4.4 Insurance Cancellation. Notwithstanding the provisions of Article 4.1,
----------------------
hereinabove, no use shall be made or permitted to be made of the Premises nor
acts done which will cause the cancellation of any insurance policy covering
said Premises; and, if Tenant's use of the Premises causes an increase in said
insurance rates, Tenant shall pay any such increase.
Page 3 of 27
<PAGE>
4.5 Landlord's Rules and Regulations. Tenant shall faithfully observe and
--------------------------------
comply with reasonable rules and regulations that Landlord may from time to time
promulgate. Landlord reserves the right from time to time to make all reasonable
modifications to said rules and regulations. The additions and modifications to
those rules and regulations shall be binding upon Tenant upon delivery of copy
of them to Tenant.
4.6 Landlord represents that to their current actual knowledge, as of the
date of this Lease, the condition of the Premises is in compliance with
applicable statutes, ordinances, laws and regulations, including, but not
limited to, the Americans With Disabilities Act and applicable municipal, county
and state laws, ordinances and regulations.
5. MAINTENANCE, REPAIRS, AND ALTERATIONS
-----------------------------------------
5.1. Tenant's Obligations. Tenant shall, during the Term of this Lease,
--------------------
keep in good order, condition, and repair, (at least as good as that which
existed at the commencement of this Lease) the Premises and every part thereof,
structural or nonstructural and all adjacent sidewalks, landscaping, driveways,
parking lots, fences, and signs located in the areas which are adjacent to and
included with the Premises. Landlord shall incur no expense nor have any
obligation of any kind whatsoever in connection with maintenance of the
Premises, and Tenant expressly waives the benefits of any statute now or
hereafter in effect which would otherwise afford Tenant the right to make
repairs at Landlord's expense or to terminate this Lease because of Landlord's
failure to keep the Premises in good order, condition, and repair.
5.2 Surrender. On the last day of the Term hereof, or on any sooner
---------
termination, Tenant shall surrender the Premises to Landlord in good condition
(the same condition that existed at the commencement of this Lease), broom
clean, ordinary wear and tear expected. Tenant shall repair any damage to the
Premises occasioned by its use thereof, or by the removal of Tenant's trade
fixtures, furnishings, and equipment pursuant to Article 5.4.3, which repair
shall include the patching and filling of holes and repair of structural damage.
5.3 Landlord's Rights. If Tenant fails to perform Tenant's obligations
-----------------
under this Article 5, Landlord may at their option (but shall not be required
to) enter upon the Premises after twenty (20) days' prior written notice to
Tenant (provided Tenant has not performed such obligations during such twenty
(20) days) and put the same in good order, condition, and repair, and the cost
thereof together with interest thereon at the rate of ten percent (10%) per
annum shall become due and payable as additional Rent to Landlord together with
Tenant's next monthly Rent installment.
5.4 Alterations, Additions, and Improvements.
----------------------------------------
5.4.1 Tenant shall not, without Landlord's prior written consent,
make any alterations, improvements, or additions in, on, or about the Premises.
As a condition to
Page 4 of 27
<PAGE>
giving such consent, Landlord may require that Tenant remove any such
alterations, improvements, additions, or utility installations at the expiration
of the Term, and to restore the Premises to their prior condition.
5.4.2 Before commencing any work relating to alterations,
additions, and improvements affecting the Premises, Tenant shall notify Landlord
in writing of the expected date of commencement thereof. Landlord shall then
have the right at any time and from time to time to post and maintain on the
Premises such notices as Landlord reasonably deems necessary to protect the
Premises and Landlord from mechanics' liens, materialmen's liens, or any other
liens. In any event, Tenant shall pay, when due, all claims for labor or
materials furnished to or for Tenant at or for use in the Premises. Tenant shall
not permit any mechanics' or materialmen's liens to be levied against the
Premises for any labor or material furnished to Tenant or claimed to have been
furnished to Tenant or to Tenant's agents or contractors in connection with work
of any character performed or claimed to have been performed on the Premises by
or at the direction of Tenant.
5.4.3 Unless Landlord requires their removal, as set forth in
Article 5.4.1, all alterations, improvements, or additions which may be made on
the Premises shall become the property of Landlord and remain upon and
surrendered with the Premises at the expiration of the Term. Notwithstanding the
provisions of this Article 5.4.3, Tenant's machinery, equipment, and other trade
fixtures other than that which is affixed to the Premises so that it cannot be
removed without material damage to the Premises, shall remain the Property of
Tenant and may be removed by Tenant subject to the provisions of Article 5.2.
5.4.4 All construction work done by Tenant within the Premises
shall be performed in a good and workmanlike manner, in compliance with all
applicable laws, regulations, and governmental requirements, and the
requirements of any contract or deed of trust to which the Landlord may be
party. Tenant agrees to indemnify Landlord and hold it harmless against any
loss, liability or damage resulting from such work, and Tenant shall, if
requested by Landlord, furnish a bond or other security reasonably satisfactory
to Landlord against any such loss, liability or damage.
5.4.5 Tenant agrees that all venting, opening, sealing,
waterproofing or any altering of the roof of the Premises shall be performed by
Landlord's roofing contractor, or other contractor approved in advance of such
work by Landlord.
5.5 Signs. Tenant shall not place, or affix any signs or other objects
-----
upon or to the roof or exterior walls of the Premises or on the interior which
can be seen from the exterior, or paint, or otherwise deface the exterior walls
of the Premises without the prior written consent of Landlord. Any signs
installed by Tenant shall be maintained and repaired solely by Tenant and shall
conform with applicable laws and other restrictions. Tenant shall remove all
signs at the termination of this Lease and shall repair any damage and close any
holes caused or revealed by such removal.
Page 5 of 27
<PAGE>
6. INSURANCE, INDEMNITY
------------------------
6.1 Liability Insurance. Tenant shall obtain and keep in force during the
-------------------
Term of this Lease a policy of comprehensive public liability insurance insuring
Landlord and Tenant against any liability arising out of the ownership, use,
occupancy, or maintenance of the Premises and all areas appurtenant thereto.
Such insurance shall be in an amount of not less than Two Million and No/100
Dollars ($2,000,000.00) for injury to or death of one person in any one accident
or an amount of not less than Two Million and No/100 Dollars ($2,000,000.00) for
injury to or death of more than one person in any one accident or occurrence.
Such insurance shall further insure Landlord and Tenant against liability for
property damage of at least Five Hundred Thousand and No/100 Dollars
($500,000.00). The limits on the amount of insurance coverage provided above
shall not, however, limit the liability of Tenant hereunder. If the Tenant shall
fail to procure and maintain said insurance the Landlord may, but shall not be
required, to procure and maintain the same, but at the expense of the Tenant.
6.2 Property Insurance. Tenant shall obtain and keep in force during the
------------------
Term of this Lease a policy or policies of insurance covering loss or damage to
the Premises in the amount of $1,000,000.00 providing protection against all
perils included within the classification of fire, extended coverage, vandalism,
malicious mischief, special extended perils (all risk) and sprinkler leakage.
Said insurance shall provide for payment for loss thereunder to Landlord and to
the holder of a first mortgage or deed of trust on the Premises, as their
respective interests may appear. If Tenant shall fail to procure and maintain
said insurance, Landlord may, but shall not be required to, procure and maintain
the same, but at the expense of the Tenant.
6.3 Insurance Policies. Insurance required hereunder shall be in companies
------------------
approved by Landlord. Tenant shall deliver prior to possession to Landlord
copies of policies of such insurance or certificates evidencing the existence
and amount of such insurance with loss payable clauses satisfactory to Landlord.
No such policy shall be cancellable or subject to reduction of coverage or other
modification except after ten (10) days' prior written notice to Landlord.
Tenant shall within ten (10) days prior to the expiration of such policies
furnish Landlord with renewals or "binders" thereof, or Landlord may order such
insurance and charge the cost thereof to Tenant, which amount shall be payable
by Tenant upon demand. Tenant shall not do or permit to be done anything which
shall invalidate the insurance policies referred to in this Article 6. Tenant
shall forthwith, upon Landlord's demand, reimburse Landlord for any additional
premiums attributable to any act or omission or operation of Tenant causing such
increase in the cost of insurance.
6.4 Waiver of Subrogation. Tenant and Landlord each waives any and all
----------------------
rights of recovery against the other, or against the officers, employees,
agents, and representatives of the other, for loss of or damage to such waiving
party or its property or the property of others under its control, when such
loss or damage is insured under any insurance policy in force at the time of
such loss or damage. Tenant and Landlord shall,
Page 6 of 27
<PAGE>
upon obtaining the policies of insurance required hereunder, give notice to the
insurance carriers that the foregoing mutual waiver of subrogation is contained
in this Lease.
6.5 Hold Harmless. Tenant shall indemnify, defend and hold Landlord
-------------
harmless from any and all claims arising from Tenant's use of the Premises or
from the conduct of its business or from any activity, work, or things which may
be permitted or suffered by Tenant in or about the Premises and shall further
indemnify, defend, and hold Landlord harmless from and against any and all
claims (including, without limitation, for death or injury to person or persons
or property damage) arising from any breach or default in the performance of any
obligation on Tenant's part to be performed under the provision of this Lease or
arising from any act of Tenant or any of its agents, contractors, employees, or
invitees, and from any and all costs, attorney's fees, expenses, and liabilities
incurred in the defense of any such claim or any action or proceeding brought
thereon. Tenant hereby assumes all risk of damage to the Premises or injury or
death to persons in or about the Premises from any cause, and Tenant hereby
waives all claims in respect thereof against Landlord, excepting where said
damage, injury or death, arises out of the gross negligence or wilful misconduct
of Landlord. Notwithstanding anything herein to the contrary, Landlord shall
indemnify, defend and hold harmless, Tenant from any claims of any nature or
kind which arise from or relate to, or are alleged to arise from or relate to,
any use, business, activity, work or other things permitted to have been done on
the Premises prior to the date hereof.
6.6 Exemption of Landlord from Liability. Tenant hereby agrees that
------------------------------------
Landlord shall not be liable for injury to Tenant's business or any loss of
income therefrom or for damage to the goods, wares, merchandise, machinery or
other property of Tenant, Tenant's employees, invitees, customers, or any other
person or persons in or about the Premises; nor, unless through their gross
negligence or wilful misconduct, shall Landlord be liable for any injury or
death to Tenant's employees, agents, or contractors, and invitees, whether such
damage, injury or death is caused by or results from fire, steam, electricity,
gas, water, or rain, or from the breakage, leakage, obstruction, or other
defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or
lighting fixtures, or from any other cause, whether the said damage, injury or
death results from conditions arising upon the Premises, or from other sources
or places, and regardless of whether the cause of such damage, injury or death
or the means of repairing the same is inaccessible to Landlord or Tenant.
7. DAMAGE OR DESTRUCTION
-------------------------
7.1 In the event the improvements on the Premises are damaged or
destroyed, partially or totally, from any cause whatsoever, whether or not such
damage or destruction is covered by insurance required to be maintained under
Article 6, the Tenant shall repair, restore, and rebuild the Premises to their
condition existing upon the date of commencement of this Lease, excluding any
additions or alterations which were made and paid for by the Tenant, and this
Lease shall continue in full force and effect. Such repair, restoration, and
rebuilding (all of which are herein called the "repair") shall be commenced
Page 7 of 27
<PAGE>
within a reasonable time after such damage or destruction shall be diligently
prosecuted to completion. There shall be no abatement of Rent or any other
obligation of Tenant hereunder by reason of such damage or destruction. The
proceeds of any insurance maintained under Article 6 shall be made available to
Tenant for payment of the cost and expense of the repair, provided, however,
that such proceeds may be made available to Tenant subject to reasonable
conditions including, but not limited to, architect's certification of costs and
retention of a percentage of such proceeds pending final notice of completion.
Notwithstanding anything to the contrary set forth herein, in the event that
such proceeds are not made available to Tenant within ninety (90) days after
such damage or destruction, Tenant shall have the option for thirty (30) days,
commencing on the expiration of such ninety (90) day period of canceling this
Lease. In the event that the insurance proceeds are insufficient to cover the
cost of the repair, then any amount in excess thereof required to complete the
repair shall be paid by Tenant. Provided, however, that Tenant shall not be
required to pay for any insufficiency in insurance proceeds which is the direct
result of complying with any provision of any mortgage on the Premises which
requires the insurance proceeds to be paid to the mortgagee and results in the
mortgagee electing to apply insurance proceeds to the mortgage debt rather than
to be used for repairs. Notwithstanding anything contained herein to the
contrary, this Article 7 shall be subject to the terms of any and all mortgages
on the Premises.
7.2 Damage Near End of Term. If the Premises are partially destroyed or
-----------------------
damaged during the last six (6) months of the Term of this Lease, Landlord may,
at Landlord's option, cancel and terminate this Lease, as of the date of
occurrence of such damage, by giving written notice to Tenant of Landlord's
election to do so within thirty (30) days after the date of occurrence of such
damage. Landlord's election to terminate this Lease will not be a termination
of Tenant's option to purchase the Premises pursuant hereto, if Tenant, after
Landlord exercise its right of termination, within ten (10) days thereafter,
exercises its option to purchase the Premises and concludes the purchase of the
Premises as herein provided. Upon the closing of such purchase, Landlord agrees
to assign all of its right, title and interest in and to any insurance proceeds,
which were recovered or are recoverable, by the Landlord to the Tenant at the
closing.
7.3 Proration. Upon termination of this Lease pursuant to this Article 7,
---------
a pro rata adjustment of Rent based upon a thirty (30) day month shall be made.
8. REAL PROPERTY TAXES
-----------------------
8.1 Payment of Taxes. Tenant shall pay all real property taxes applicable
----------------
to the Premises during the Term of this Lease. All such payments shall be made
at least ten (10) days prior to the delinquency of such payment. Tenant shall
promptly (within ten [10] days after payment) furnish Landlord with satisfactory
evidence that such taxes have been paid. If any such taxes paid by Tenant shall
cover any period of the time prior to or after the expiration of the Term
hereof. Tenant's share of such taxes shall be equitably prorated to cover only
the period of time within the tax fiscal year during which this Lease shall be
in effect, and Landlord shall reimburse Tenant to the extent required. If Tenant
shall fail to
Page 8 of 27
<PAGE>
pay any such taxes, Landlord shall have the right to pay the same, in which case
Tenant shall repay such amount to Landlord with Tenant's next Rent installment
together with interest at the rate of ten percent (10%) per annum.
8.2 Definition of "Real Property" Taxes. As used herein, the term "real
-----------------------------------
property tax" shall include any form of assessment, license fee, Rent tax, levy,
penalty, or tax (other than inheritance or estate taxes), imposed by any
authority having the direct or indirect power to tax, including any city,
county, state, or federal government, or any school, agricultural, lighting,
drainage, or other improvement district thereof, as against any legal or
equitable interest of Landlord in the Premises or in the real property of which
the Premises are a part, as against Landlord's right to Rent or other income
therefrom, or as against Landlord's business of leasing the Premises; and Tenant
shall pay any and all charges and fees which may be imposed by the Environmental
Protection Agency or other similar government regulations or authorities.
8.3 Personal Property Taxes. Tenant shall pay prior to the delinquency
-----------------------
all taxes assessed against and levied upon leasehold improvements, trade
fixtures, furnishings, equipment, trade fixtures, furnishings, equipment, and
all other personal property to be assessed and billed separately from the
Premises.
9. UTILITIES
-------------
9.1 Tenant shall promptly pay, when due, all charges for electricity,
water, gas, telephone service, sewerage service and other utilities furnished to
the Premises. It is expressly agreed that Landlord shall not be liable for any
interruption or failure in any utility services, unless caused by the gross
negligence or wilful misconduct of the Landlord. Further, no such interruption
or failure shall be construed as either a constructive or actual eviction of
Tenant, nor work an abatement of Rent, nor relieve Tenant from fulfilling any
covenant or condition of this Lease. If the interruption or failure is caused
by the gross negligence or willful misconduct of Landlord, then the Rent shall
be abated during the period of such interruption in services.
10. ASSIGNMENT AND SUBLETTING
------------------------------
10.1 Landlord's Consent Required. Tenant shall not voluntarily or by
---------------------------
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Tenant's interest in this Lease or in the Premises
without Landlord's prior written consent. Any assignment to an affiliate of the
Tenant, such as a parent or subsidiary company, shall not require consent,
provided Tenant shall still remain liable on this Lease. Any attempted
assignment, transfer, mortgage, encumbrances, or subletting without such consent
shall be void and shall constitute a breach of the Lease. Any transfer of
Tenant's interest in this Lease or in the Premises from Tenant by merger,
consolidation, or liquidation, or by any subsequent change in the ownership of
thirty percent (30%) or more of the capital stock of Tenant shall be deemed a
prohibited assignment within the meaning of this Article 10.
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<PAGE>
10.2 No Release of Tenant. Regardless of Landlord's consent, no subletting
--------------------
or assignment shall release Tenant of Tenant's obligations to pay the Rent and
to perform all other obligations to be performed by Tenant hereunder for the
Term of this Lease. The acceptance of Rent by Landlord from any other person
shall not be deemed to be a waiver by Landlord of any provision hereof. Consent
to one assignment or subletting shall not be deemed consent to any subsequent
assignment of subletting.
10.3 Assignment by Landlord. In the event of the transfer and assignment
----------------------
by Landlord of its interest in this Lease to a person expressly assuming
Landlord's obligations under this Lease, Landlord shall thereby be released from
any further obligations hereunder (but Landlord shall not be relieved or
released from obligations which may have accrued prior to assignment or transfer
of this Lease by Landlord), and Tenant agrees to look solely to such successor
in interest of the Landlord for performance of such obligations, provided that
Landlord has given Tenant thirty (30) days prior written notice of the identity
of the transferee and transferee's agreement to assume the liability of the
Landlord under the Lease.
10.4 Mortgage of Lease by Tenant. Tenant shall not mortgage, pledge or
---------------------------
otherwise encumber its interest in this Lease or in the Premises.
10.5 Assignment to Subsidiary(ies). Notwithstanding the foregoing
-----------------------------
provisions of this Article 10, Tenant shall have the right to assign this Lease
to a subsidiary of Tenant, provided that the use of the Premises shall not be
changed and that the Tenant shall not be released from its obligations under
this Lease.
11. DEFAULT AND REMEDIES
-------------------------
11.1 The following events (any one or more of them) shall be deemed to be
"Events of Default" by Tenant under this Lease:
11.1.1 Tenant shall fail to pay any Rent, additional Rent, or any
monthly payment, or any other cost, sum, expense, charge or amounts ("Payments")
due to Landlord as herein provided, and such failure shall continue for a period
of ten (10) days after any such Payments are due.
11.1.2 Tenant shall fail to make any payment to third parties as
required by the terms of this Lease, or shall fail to comply with any other
term, provision or covenant of this Lease [other than the payment of the
Payments referred to in Article 11.1.1 above] and shall not cure such failure
within thirty (30) days after written notice thereof to Tenant. The Tenant
shall not be considered in default under this Lease if such curative action
cannot be completed within such thirty (30) day period, and Tenant has commenced
efforts to cure the same within such period and is diligently pursuing the cure
of such default.
Page 10 of 27
<PAGE>
11.1.3 Tenant shall become insolvent, or shall make a transfer in
fraud of creditors, or shall make an assignment for the benefit of creditors.
11.1.4 Tenant shall file a petition under any section or chapter of
the Bankruptcy Code, as amended, or under any similar law or statute of the
United States or any State thereof; or Tenant shall be adjudged bankrupt or
insolvent in proceedings filed against Tenant.
11.1.5 A receiver or Trustee shall be appointed for all of the
Premises or for all or substantially all of the assets of Tenant under this
Lease.
11.1.6 Tenant shall do or permit to be done anything which creates
a lien upon the Premises.
11.1.7 The business operated by Tenant shall be closed for failure
to pay any State sales tax as required, for violation of law, or for any other
reason.
11.1.8 The vacating or abandonment of the Premises by Tenant.
11.1.9 The making by Tenant it of any general assignment, or
general arrangement for the benefit of creditors.
11.1.10 The attachment, execution, or other judicial seizure of
substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease, where such seizure is not discharged within thirty (30)
days.
11.2 Upon the occurrence of any one or more of such Events of Default,
Landlord shall have the option to pursue any one or more of the following
remedies, or any other remedy set forth in this Lease or otherwise permitted by
law, or in equity, without any notice or demand whatsoever (except as expressly
required by the terms of this Lease):
11.2.1 Terminate this Lease in which event Tenant shall immediately
surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may,
without prejudice to any other remedy which it may have for possession or
arrearages in rental, enter upon and take possession of the Premises and expel
or remove Tenant and any other person who may be occupying the Premises or any
part thereof, by force if necessary, without being liable for prosecution or any
claim of damages therefor.
11.2.2 Terminate Tenant's right of possession, without terminating
this Lease, and enter upon and take possession of the Premises and expel or
remove Tenant and any other person who may be occupying the Premises or any part
thereof, by force if necessary, without being liable for prosecution or any
claim for damages therefor.
11.2.3 Enter upon the Premises by force if necessary without being
liable for prosecution or any claim for damages therefor, and do whatever Tenant
is
Page 11 of 27
<PAGE>
obligated to do under the terms of this Lease, and Tenant agrees to reimburse
Landlord on demand for any expenses which Landlord may incur in thus affecting
compliance with Tenant's obligations under this Lease, and Tenant further agrees
that Landlord shall not be liable for any damages resulting to the Tenant from
such action.
11.2.4 The remedies stated herein for an Event of Default by Tenant
are not exclusive, and Landlord shall have the right to pursue any one or more
of the remedies stated above or any other remedy provided by law or in equity.
Forbearance by Landlord to enforce one or more of the remedies herein provided
upon an Event of Default shall not be deemed or construed to constitute a waiver
of such default.
11.3 Exercise by Landlord of any one or more remedies hereunder granted or
otherwise available shall not be deemed to be an acceptance of surrender of the
Premises, whether by agreement or by operation of law, it being understood that
such surrender can be effected only by the written agreement of Landlord and
Tenant.
11.4 In the event Tenant fails or refuses to make timely and punctual
payment of any Rent, additional Rent or other sums payable or charges due under
this Lease as and when the same shall become due and payable, or in the event of
any breach of any of the terms or provisions of this Lease by Tenant, in
addition to the other remedies available to Landlord, Landlord at their option,
shall be entitled, and is hereby authorized, without any notice to Tenant
whatsoever, to enter into and upon the Premises by any peaceable means, and to
change, alter and/or modify the door locks on all entry doors of the Premises,
permanently excluding Tenant and its officers, principals, agents, employees,
representatives and invitees therefrom. In the event that Landlord has either
permanently repossessed the Premises as aforesaid or has elected to terminate
this Lease by reason of Tenant's default, Landlord shall not thereafter be
obligated to provide Tenant with a key to the Premises at any time, regardless
of any amounts subsequently paid by Tenant; provided, however, that in any such
instance, during Landlord's normal business hours and at the convenience of
Landlord, and upon receipt of a written request from Tenant accompanied by such
written waivers and releases as Landlord may require, Landlord may, at their
option, (a) escort Tenant or its authorized representative to the Premises to
retrieve any personal belongings or other property of Tenant not subject to the
Landlord's lien or security interest described herein, or (b) obtain a list from
Tenant of such personal property Tenant intends to remove, whereupon Landlord
shall remove such property and make it available to Tenant at a time and place
designated by Landlord. In the event Landlord elects option (b) above, Tenant
shall pay, in cash and in advance, all costs and expenses estimated by Landlord
to be incurred in removing such property and making it available to Tenant,
including, but not limited to, all moving and/or storage charges theretofore
incurred by Landlord with respect to such property. If Landlord elects to
exclude Tenant from the Premises without permanently repossessing the Premises
or terminating this Lease pursuant to the foregoing, then Landlord shall not be
obligated to permit Tenant entry into the Premises or provide Tenant with a key
to re-enter the Premises until such time as all delinquent Rent and other sums,
including interest and late charges thereon, if any, due under this Lease have
been fully paid, and all other defaults,
Page 12 of 27
<PAGE>
if any, have been completely and timely cured to Landlord's satisfaction (if
such cure occurs prior to actual permanent repossession or termination), and
Landlord has been given assurances by Tenant reasonably satisfactory to Landlord
evidencing Tenant's ability to satisfy its remaining obligations under this
Lease. Landlord's remedies hereunder shall be in addition to, and not in lieu
of, any of its other remedies set forth in this Lease, or otherwise available to
Landlord at law or in equity. It is intended that this paragraph, and the
provisions herein contained, shall supersede and be paramount to any conflicting
provisions of the Texas Property Code, as well as any successor statute
governing the rights of landlords to change locks of commercial tenants.
11.5 In the event Landlord elects to terminate this Lease by reason of an
Event of Default, then notwithstanding such termination, Tenant shall be liable
for and shall pay to Landlord, at the address specified for notice to Landlord
herein the sum of all Rent and other indebtedness accrued to date of such
termination, plus an amount equal to the difference between (a) the total Rent
due plus any other payment required to be made by Tenant hereunder for the
remaining portion of the Lease Term (had such Term not been terminated by
Landlord prior to the date of expiration stated in Article 2), and (b) the then
present value of the then fair rental value of the Premises for such period.
11.6 In the event that Landlord elects to repossess the Premises without
terminat ing this Lease, then Tenant shall be liable for and shall pay to
Landlord at the address specified for notice to Landlord herein all Rent and
other indebtedness accrued to the date of such repossession, plus Rent required
to be paid by Tenant to Landlord during the remainder of the Lease Term until
the date of expiration of the Term as stated in Article 2 hereof, diminished by
any net sums thereafter received by Landlord through reletting the Premises
during said period (after deducting expenses incurred by Landlord as provided in
this Article 11 hereof). In no event shall Tenant be entitled to any excess of
any rental obtained by reletting over and above the rental herein reserved.
Actions to collect amounts due by Tenant to Landlord as provided in this Article
11 may be brought from time to time, on one or more occasions, without the
necessity of Landlord's waiting until expiration of the Lease Term.
11.7 In case of any Event of Default or breach by Tenant, Tenant shall also
be liable for and shall pay to Landlord, at the address specified for notice to
Landlord herein, in addition to any sum provided to be paid above, broker's fees
incurred by Landlord in connection with reletting the whole or any part of the
Premises; the costs of removing and storing Tenant's or other occupant's
property; the costs of repairing, altering, remodeling or otherwise putting the
Premises into condition acceptable to a new tenant or tenants, and all
reasonable expenses incurred by Landlord in enforcing or defending Landlord's
rights and/or remedies hereunder including reasonable attorneys' fees incurred
by Landlord.
11.8 In the event of termination or repossession of the Premises for an
Event of Default, Landlord shall not have any obligation to relet or attempt to
relet the Premises, or any portion thereof, or to collect rental after
reletting; and in the event of reletting, Landlord
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<PAGE>
may relet the whole or any portion of the Premises for any period, for any
rental, to any tenant, and for any use and purpose, which Landlord may desire.
11.9 If Tenant should fail to make any payment or cure any default
hereunder within the time expressly permitted herein, Landlord, without being
under any obligation to do so and without thereby waiving such default, may make
such payment and/or remedy such other default for the account of Tenant (and
enter the Premises for such purpose), and thereupon Tenant shall be obligated
to, and hereby agrees, to pay Landlord, upon demand, all costs, expenses and
disbursements (including reasonable attorneys' fees) incurred by Landlord in
taking such remedial action.
11.10 In the event of any default by Landlord, Tenant's exclusive
remedy shall be an action for damages (Tenant hereby waiving the benefit of any
laws granting it a lien upon the property of Landlord, and/or upon Rent due
Landlord), but prior to any such action Tenant will give Landlord written notice
specifying such default with particularity, and Landlord shall thereupon have
thirty (30) days in which to cure any default; provided, however, Landlord shall
not be considered in default under this Lease if such curative action cannot be
completed within such thirty (30) day period, and Landlord has commenced efforts
to cure within such period and is diligently pursuing the cure of such default.
All obligations of Landlord hereunder will be construed as covenants, not
conditions; and all such obligations will be binding upon Landlord only during
the period of its ownership of the Premises, and not thereafter, provided that
in the event of a transfer (excepting an involuntary transfer such as a
foreclosure) such transferee of Landlord's ownership interest has assumed all of
Landlord's obligations hereunder and that notice has been given to Tenant
pursuant to Section 10.3.
11.11 The term "Landlord" shall mean only the owner, for the time
being, of the Premises, and in the event of the transfer by such owner of its
interest in the Premises, pursuant to Section 10.3 of this Lease, such owner
shall thereupon be released and discharged from all covenants and obligations of
the Landlord thereafter accruing.
11.12 Notwithstanding any other provisions hereof, Landlord shall not
have any personal liability hereunder, provided that in the event of a transfer
(excepting an involuntary transfer such as a foreclosure) such transferee of
Landlord's ownership interest has assumed all of Landlord's obligations
hereunder and that notice has been given to Tenant pursuant to Section 10.3. In
the event of any breach or default by Landlord in any term or provision of this
Lease, Tenant agrees to look solely to the equity or interest then owned by
Landlord in the land and improvements which constitute the Premises; however, in
no event shall any deficiency judgment or any money judgment of any kind be
sought or obtained against Landlord, or any of its partners.
11.13 In the event that Landlord shall have taken possession of the
Premises pursuant to the authority herein granted, then Landlord shall have the
right to keep in place and use all the furniture, fixtures and equipment at the
Premises, including that which is owned by or leased to Tenant at all times
prior to any foreclosure thereon by Landlord or
Page 14 of 27
<PAGE>
repossession thereof by a lessor thereof or third party having a lien thereon.
Landlord shall also have the right to remove from the Premises (without the
necessity of obtaining a distress warrant, writ of sequestration or other legal
process) all or any portion of such furniture, fixtures, equipment and other
property located thereon and place same in storage at any premises within the
county in which the Premises is located; and in such event, Tenant shall be
liable to Landlord for all costs incurred by Landlord in connection with such
removal and storage. Landlord shall also have the right to relinquish possession
of all or any portion of such furniture, fixtures, equipment and other property
to any person ("Claimant") claiming to be entitled to possession thereof who
presents to Landlord a copy of any instrument represented to Landlord by
Claimant to have been executed by Tenant (or any predecessor of Tenant) granting
Claimant the right to take possession of such furniture, fixtures, equipment or
other property, without the necessity on the part of Landlord to inquire into
the authenticity of said instrument's copy or Tenant's or Tenant's predecessor's
signature thereon and without the necessity of Landlord's making any nature of
investigation or inquiring as to the validity of the factual or legal basis upon
which Claimant purports to act; and, Tenant agrees to indemnify and hold
Landlord harmless from all cost, expense, loss, damage and liability incident to
Landlord's relinquishment of possession of all or any portion of such furniture,
fixtures, equipment or other property to Claimant. The rights of Landlord herein
stated shall be in addition to any and all other rights which Landlord has or
may hereafter have at law or in equity; and Tenant stipulates and agrees that
the rights herein granted Landlord are commercially reasonable.
11.14 Late Charges. Tenant hereby acknowledges that late payment by
------------
Tenant to Landlord of Rent and other sums due hereunder will cause Landlord to
incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed on
Landlord by the terms of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of Rent or any other sum due from Tenant shall
not be timely received by Landlord or Landlord's designee, then Tenant shall pay
to Landlord a late charge which shall be additional Rent hereunder equal to ten
percent (10%) of such overdue amount. All parties hereby agree that such late
charge represents a fair and reasonable estimate of the cost Landlord will incur
by reason of late payment by Tenant. Acceptance of such late charge by Landlord
shall in no event constitute a waiver of Tenant's default with respect to such
overdue amount, nor prevent Landlord from exercising any of the other rights and
remedies granted hereunder.
11.15 LANDLORDS LIEN. IN ADDITION TO THE STATUTORY LANDLORD'S LIEN,
--------------
TENANT HEREBY GRANTS TO LANDLORD A SECURITY INTEREST TO SECURE PAYMENT OF ALL
RENT AND OTHER SUMS OF MONEY BECOMING DUE HEREUNDER FROM TENANT, UPON ALL GOODS,
WARES, EQUIPMENT, FIXTURES, FURNITURE, AND OTHER PERSONAL PROPERTY OF TENANT
SITUATED IN OR UPON THE PREMISES, TOGETHER WITH THE PROCEEDS FROM THE SALE OR
LEASE THEREOF, SUCH PROPERTY SHALL NOT BE REMOVED WITHOUT THE CONSENT OF
LANDLORD UNTIL ALL ARREARAGES IN RENT AND OTHER SUMS OF MONEY THEN DUE TO
LANDLORD HEREUNDER SHALL FIRST HAVE BEEN PAID
Page 15 of 27
<PAGE>
AND DISCHARGED. UPON THE OCCURRENCE OF ANY EVENT OF DEFAULT, LANDLORD MAY, IN
ADDITION TO ANY OTHER REMEDIES PROVIDED HEREIN OR BY LAW, ENTER UPON THE
PREMISES AND TAKE POSSESSION OF ANY AND ALL GOODS, WARES, EQUIPMENT, FIXTURES,
AND OTHER PERSONAL PROPERTY OF TENANT SITUATED ON THE PREMISES WITHOUT LIABILITY
OF TRESPASS OR CONVERSION, AND SELL THE SAME AT PUBLIC OR PRIVATE SALE, WITH OR
WITHOUT HAVING SUCH PROPERTY AT THE SALE, AFTER GIVING TENANT REASONABLE NOTICE
OF THE TIME AND PLACE OF ANY SUCH SALE. UNLESS OTHERWISE REQUIRED BY LAW, NOTICE
TO TENANT OF SUCH SALE SHALL BE DEEMED SUFFICIENT IF GIVEN IN THE MANNER
PRESCRIBED IN THIS LEASE AT LEAST TEN (10) DAYS BEFORE THE TIME OF THE SALE. ANY
PUBLIC SALE MADE UNDER THIS PARAGRAPH SHALL BE DEEMED TO HAVE BEEN CONDUCTED IN
A COMMERCIALLY REASONABLE MANNER IF HELD IN THE PREMISES OR WHERE THE PROPERTY
IS LOCATED, AFTER THE TIME, PLACE, AND METHOD OF SALE AND A GENERAL DESCRIPTION
OF THE TYPES OF PROPERTY TO BE SOLD HAVE BEEN ADVERTISED IN A DAILY NEWSPAPER
PUBLISHED IN HARRIS COUNTY, TEXAS, FOR FIVE (5) CONSECUTIVE DAYS BEFORE THE DATE
OF THE SALE. LANDLORD OR ITS ASSIGNS MAY PURCHASE AT A PUBLIC SALE AND, UNLESS
PROHIBITED BY LAW, AT A PRIVATE SALE. THE PROCEEDS FROM ANY DISPOSITION DEALT
WITHIN THIS PARAGRAPH, LESS ANY AND ALL EXPENSES CONNECTED WITH THE TAKING OF
POSSESSION, HOLDING, AND SELLING OF PROPERTY (INCLUDING REASONABLE ATTORNEYS'
FEES AND LEGAL EXPENSES), SHALL BE APPLIED AS A CREDIT AGAINST THE INDEBTEDNESS
SECURED BY THE SECURITY INTEREST GRANTED HEREIN. ANY SURPLUS SHALL BE PAID TO
TENANT OR AS OTHERWISE REQUIRED BY LAW; TENANT SHALL PAY ANY DEFICIENCIES
FORTHWITH. UPON REQUEST BY LANDLORD, TENANT AGREES TO EXECUTE AND DELIVER TO
LANDLORD A FINANCING STATEMENT IN FORM SUFFICIENT TO PERFECT THE SECURITY
INTEREST OF LANDLORD IN THE AFOREMENTIONED PROPERTY AND PROCEEDS THEREOF UNDER
THE PROVISIONS OF THE UNIFORM COMMERCIAL CODE IN FORCE IN THE STATE OF TEXAS.
THE STATUTORY LIEN FOR RENT IS EXPRESSLY RESERVED; THE SECURITY INTEREST HEREIN
GRANTED IS IN ADDITION AND SUPPLEMENTARY THERETO. NOTWITHSTANDING THE FOREGOING,
THIS LANDLORD'S LIEN SHALL BE SUBORDINATE TO ANY LIENS PROVIDED BY TENANT OR A-G
GEOPHYSICAL PRODUCTS, INC. TO LANDLORD RESPECTING THE SECURITY DOCUMENTS
EXECUTED OF EVEN DATE HEREWITH BY THE PARTIES IN CONNECTION WITH THE PURCHASE BY
TENANT OF THE BUSINESS OF A-G GEOPHYSICAL PRODUCTS, INC., OR FOR ANY LIEN FOR
THE PURCHASE BY TENANT OF ANY FURNITURE, EQUIPMENT, INVENTORY OR PERSONAL
PROPERTY.
12. CONDEMNATION
-----------------
12.1 If the Premises or any portion thereof are taken under the power of
eminent domain or sold by Landlord under the threat of the exercise of said
power (all of which is
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<PAGE>
herein referred to as "condemnation"), this Lease shall terminate as to the part
so taken as of the date the condemning authority takes title or possession,
whichever occurs first. If more than twenty-five percent (25%) of the floor area
of any buildings which are part of the Premises or more than twenty-five percent
(25%) of the land area of the Premises not covered with buildings is taken by
condemnation, either Landlord or Tenant may terminate this Lease as of the date
of the condemning authority takes possession by notice in writing of such
election within twenty (20) days after Landlord shall have notified Tenant of
the taking or, in the absence of such notice, then within twenty (20) days after
the condemning authority shall have taken possession.
12.2 If this Lease is not terminated by either Landlord or Tenant, then it
shall remain in full force and effect as to the portion of the Premises
remaining, provided the Rent shall be reduced in proportion to the floor area of
the buildings taken within the Premises as bears to the total floor area of all
buildings located on the Premises. In the event this Lease is not so terminated,
then Landlord agrees, at Landlord's sole cost, to as soon as reasonably possible
restore the Premises to a complete unit of like quality and character as existed
prior to the condemnation. All awards for the taking of any part of the Premises
or any payment made under the threat of the exercise of power of eminent domain
shall be the property of Landlord, whether made as compensation for diminution
of value of the leasehold or for the taking of the fee or as severance damages;
provided, however, that Tenant shall be entitled to any award for loss of or
damage to Tenant's trade fixtures and removable personal property.
Notwithstanding anything contained herein to the contrary, this Article 12 shall
be subject to the terms of any and all mortgages on the Premises.
13. GENERAL PROVISIONS
-----------------------
13.1 Estoppel Certificate.
--------------------
13.1.1 Tenant shall at any time upon not less than ten (10) days'
prior written notice from Landlord execute, acknowledge, and deliver to Landlord
a statement in writing (a) certifying that this Lease is unmodified and in full
force and effect (or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect) and the
date to which the Rent, security deposit, and other charges are paid in advance,
if any, and (b) acknowledging that there are not, to Tenant's knowledge, any
uncured defaults on the part of Landlord hereunder, or specifying such defaults,
if any, which are claimed. Any such statement may be conclusively relied upon
by any prospective purchaser or encumbrancer of the Premises.
13.1.2 Tenant's failure to deliver such statement within such time
shall be conclusive upon Tenant (a) that this Lease is in full force and effect,
without modification except as may be represented by Landlord, (b) that there
are no uncured defaults in Landlord's performance, and (c) that not more than
one (1) month's Rent has been paid in advance.
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13.1.3 If Landlord desires to finance or refinance the Premises, or
any part thereof, Tenant hereby agrees to deliver to any lender designated by
Landlord such financial statements of Tenant as may be reasonably required by
such lender. Such statements shall include the past three (3) years' financial
statements of Tenant. All such financial statements shall be received by
Landlord in confidence and shall be used only for the purposes herein set forth.
Landlord shall give Tenant at least thirty (30) days prior written notice of
their intent to refinance the debt on the Premises. Further, Landlord agrees
that they will not place any additional debt on the Premises or increase the
outstanding balance of any existing debt without the prior written consent of
the Tenant, which consent shall not be unreasonably withheld.
13.2 Landlord's Interests. In the event of any transfer of such title or
--------------------
interest, Landlord herein named (and in case of any subsequent transfers the
then grantor) shall be relieved from and after the date of such transfer of all
liability as respects Landlord's obligations thereafter to be performed provided
that any funds in the hands of Landlord or the then grantor at the time of such
transfer, in which Tenant has an interest, shall be delivered to the grantee.
The obligations contained in this Lease to be performed by Landlord shall,
subject as aforesaid, be binding on Landlord's successors and assigns, only
during their respective periods of ownerships. The foregoing provisions of this
Section 13.2 shall apply only to transfers made in accordance with the
provisions of Section 10.3 hereof.
13.3 Severability. The invalidity of any provision of this Lease, as
------------
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
13.4 Interest on Past-Due Obligations. Except as expressly herein provided,
--------------------------------
any amount due to Landlord not paid when due shall bear interest at ten percent
(10%) per annum from the date due. Payment of such interest shall not excuse or
cure any default by Tenant under this Lease.
13.5 Time of Essence. Time is of the essence.
---------------
13.6 Captions. Article and paragraph captions are not a part hereof, but
--------
are for convenience only.
13.7 Incorporation of Prior Agreements; Amendments. This Lease contains all
---------------------------------------------
agreements of the parties with respect to any matter mentioned herein. No prior
agreement or understanding pertaining to any such matter shall be effective.
This Lease may be modified in writing only, signed by the parties in interest at
the time of the modification.
13.8 Waivers. No waiver by Landlord of any provision hereof shall be deemed
-------
a waiver of any other provision hereof or of any matter subsequent breach by
Tenant of the same or any other provision. Landlord's consent to or approval of
any act shall not be deemed to rendered unnecessary the obtaining of Landlord's
consent to or approval of any
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<PAGE>
subsequent act by Tenant. The acceptance of Rent hereunder by Landlord shall not
be a waiver of any preceding breach by Tenant of any provision hereof, other
than the failure of Tenant to pay the particular Rent so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
Rent.
13.9 Recording. Tenant shall not record this Lease. Any such recordation
---------
shall be a breach under this Lease.
13.10 Holding Over. If Tenant should remain in possession of the
------------
Premises after the expiration or termination of the Term of this Lease, without
the execution by Landlord and Tenant of a new Lease, then Tenant shall be deemed
to be occupying the Premises as a tenant-at-sufferance subject to all the
covenants and obligations of this Lease and at a daily rental of two (2) times
the per-day rental provided hereunder (and which is applicable for the month
preceding the month in which the date of expiration or termination occurs),
computed on the basis of a thirty (30) day month.
13.11 Cumulative Remedies. No remedy or election hereunder shall be
-------------------
deemed exclusive but shall wherever possible be cumulative with all other
remedies at law or in equity.
13.12 Covenants and Conditions. Each provision of this Lease
------------------------
performable by Tenant shall be deemed both a covenant and a condition.
13.13 Binding Effect; Choice of Law. Subject to any provisions hereof
-----------------------------
restricting assignment or subletting by Tenant and subject to provisions of
Article 13.2, this Lease shall bind the parties, their heirs, personal
representatives, successors and assigns. This Lease shall be governed by the
laws of the State of Texas.
13.14 Subordination.
-------------
13.14.1 This Lease, at Landlord's option, shall be subordinate to
any mortgage, deed of trust, or any other hypothecation for security now and
hereafter placed upon the Premises and to any and all advances made on the
security thereof and to all renewals, modifications, consolidations,
replacements, and extensions thereof. Notwithstanding such subordination,
Tenant's right to quiet possession of the Premises shall not be disturbed if
Tenant is not in default and so long as Tenant shall pay the Rent and observe
and perform all of the provisions of this Lease unless this Lease is otherwise
terminated pursuant to its terms. If any mortgagee or trustee shall elect to
have this Lease prior to the lien of its mortgage or deed of trust, and shall
have given written notice thereof to Tenant, this Lease shall be deemed prior to
such mortgage or deed of trust, whether this Lease is dated prior or subsequent
to the date of said mortgage or deed of trust or the date of recording thereof.
13.14.2 Tenant agrees to execute any documents required to
effectuate such subordination or to make this Lease prior to the lien of any
mortgage or deed of trust,
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<PAGE>
as the case may be, and failing to do so within ten (10) days after written
demand does hereby make, constitute, and irrevocably appoint Landlord as Tenant
it's attorney-in-fact and in Tenant's name, place, and stead to do so.
13.15 Attorney's Fees. If either party named herein brings an action to
---------------
enforce the terms hereof or declare rights hereunder, the prevailing party in
any such action, on trial or appeal, shall be entitled to his reasonable
attorney's fees to be paid by the losing party as fixed by the Court.
13.16 Venue. Venue for all purposes shall be Harris County, Texas.
-----
13.17 Landlord's Access. Landlord and Landlord's agents shall have the
-----------------
right to enter the Premises during business hours for the purpose of inspecting
the same, showing the same to prospective purchasers or lenders, and making such
alterations, repairs, improvements, or additions to the Premises, or to the
building of which they are a part, as Landlord may deem necessary or desirable.
Landlord may, at any time, place on or about the Premises any ordinary "For
Sale" signs; and Landlord may, at any time, during the last one hundred twenty
(120) days of the Term hereof place on or about the Premises any ordinary "For
Sale or Lease" signs, all without rebate of Rent or liability to Tenant.
13.18 Auctions. Tenant shall not place any auction sign upon the
--------
Premises or conduct any auction thereon without Landlord's prior written
consent.
13.19 Merger. The voluntary or other surrender of this Lease by Tenant,
------
or a mutual cancellation thereof, shall not work a merger, and shall, at the
option of Landlord, terminate all or any existing subtenancies or may, at the
option of Landlord, operate as an assignment to Landlord of any or all of such
subtenancies.
13.20 Corporate Authority. If Tenant is a corporation, each individual
-------------------
executing this Lease on behalf of said corporation represents and warrants that
he/she is duly authorized to execute and deliver this Lease on behalf of said
corporation in accordance with duly adopted resolution of the Board of Directors
and said corporation or in accordance with a duly adopted resolution of the
Board of Directors of said corporation or in accordance with the Bylaws of said
corporation, and that this Lease is binding upon said corporation in accordance
with its terms.
13.21 Landlord's Liability. Tenant agrees to look solely to Landlord's
--------------------
estate and interest in the land and building (or the [ground] lease of the
building, if applicable) and the Premises for the satisfaction of any right or
remedy of Tenant for the collection of any judgment (or other judicial process)
requiring the payment of money by Landlord, in the event of any liability by
Landlord, and no other property or assets of Landlord (or the partners or
members thereof, if Landlord is other than an individual or corporation) shall
be subject to levy, execution, or attachment or other enforcement procedure for
the satisfaction of Tenant's remedies under or with respect to this Lease, the
relationship of Landlord and Tenant hereunder, or Tenant's use and occupancy of
the Premises or the
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<PAGE>
building, or any other liability of Landlord to Tenant. Upon notification to
Tenant of a transfer of this Lease by Landlord, the Landlord shall be and hereby
is entirely freed and relieved of any and all covenants, obligations, and
liabilities of Landlord hereunder, and it shall be deemed and construed as a
covenant running with the land without further agreement between the parties or
their successors in interest or between the parties or any transferee of title
to the land and building (or any applicable ground lease or any lease of the
building) that the transferee or the lessee has assumed and agreed to carry out
any and all such covenants, obligations, and liabilities of Landlord hereunder.
The limitations of liability set forth in this Section 13.21 shall apply only if
they transfer Landlord's interest is made in accordance with the provisions of
Section 10.3 hereof.
13.22 Agency or Partnership-Gender. Nothing herein contained shall be
----------------------------
deemed or construed by the parties hereto, nor by any third party, as creating
the relationship of principal and agent or of partnership or of joint venture
between parties hereto, it being understood and agreed that neither the method
of computation of rental, nor any other provisions contained herein, nor any
acts of the parties hereto, shall be deemed to create any relationship between
the parties hereto other than the relationship of Landlord and Tenant. Whenever
herein the singular number is used, the same shall include the plural, and words
of any gender shall include each other gender.
13.23 Notice To Mortgagee. At any time when there is outstanding a
-------------------
mortgage, deed of trust or similar security instrument covering Landlord's
interest in the Premises, Tenant may not exercise any remedies for default by
Landlord hereunder unless and until the holder of the indebtedness secured by
such mortgage, deed of trust or similar security instrument shall have received
written notice of such default and a reasonable time [which shall not be less
than sixty (60) days] for curing such default shall thereafter have elapsed.
Landlord agrees that should the Landlord be in default under any such mortgage
and the Tenant cures any such default by making payments directly to such
mortgagee, any amounts paid by the Tenant to such mortgagee can be offset
against all amounts owed the Tenant by the Landlord hereunder.
13.24 Quiet Enjoyment. Landlord agrees that if Tenant shall perform
---------------
all of the covenants and agreements herein required to be performed by Tenant,
Tenant shall, subject to the terms of this Lease, have the peaceable and quiet
enjoyment and possession of the Premises.
13.25 Final Agreement. This Lease contains the entire agreement
---------------
between the parties, and no agreement shall be effective to change, modify, or
terminate this Lease, in whole or in part, unless such agreement is in writing
and duly signed by the party against whom enforcement of such change,
modification or termination is sought.
13.26 Exhibits. All exhibits attached hereto are incorporated herein
--------
by reference and made a part of this Lease for all purposes.
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<PAGE>
13.27 Brokers. The parties hereto acknowledge that neither party hereto
-------
were represented by any real estate brokers, and that no commissions are due to
any brokers whatsoever respecting this Lease.
13.28 Notices. Whenever under this Lease provision is made for any
-------
demand, notice, or declaration of any kind or where it is deemed desirable or
necessary by either party to give or serve any such notice, demand, or
declaration to the other party, it shall be in writing and served by messenger
or sent by United States mail, certified return receipt, postage prepaid,
addressed at the addresses set forth hereinbelow:
To Landlord at: Post Office Box 694
Hempstead, Texas 77445
Telephone Number: 409.826.6201
Facsimile Number: 409.826.2950
with copy to: Albert S. Weycer, Esq.
Weycer, Kaplan, Pulaski & Zuber, P.C.
Eleven Greenway Plaza
1400 Summit Tower
Houston, Texas 77046-1104
Telephone Number: 713.961.9045
Facsimile Number: 713.961.5341
To Tenant at:: Four Duke Place
Norwalk, Connecticut 06854
Telephone Number: 203.853.0700
Facsimile Number: 203.854.9601
with copy to: Barbara A. Young, Esq.
Levett, Rockwood & Sanders
33 Riverside Avenue
Post Office Box 5116
Westport, Connecticut 06881
Telephone Number: 203.222.0885
Facsimile Number: 203.226.8025
14. DTPA WAIVER
----------------
14.1 As a material consideration for Landlord's entering into this Lease,
Tenant acknowledges and agrees as follows:
TENANT HEREBY WAIVES ITS RIGHTS UNDER THE DECEPTIVE TRADE PRACTICES
CONSUMER PROTECTION ACT, SECTION 17.41 ET. SEQ., TEXAS BUSINESS &
COMMERCE CODE, A LAW THAT GIVES
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<PAGE>
CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN
ATTORNEY OF TENANT'S OWN SELECTION, TENANT VOLUNTARILY CONSENTS TO
THIS WAIVER.
15. ENVIRONMENTAL MATTERS
--------------------------
15.1 From and after the commencement of the Term of this Lease, Tenant
shall prevent the presence, use, generation, release, discharge, storage,
disposal, or transportation of any Hazardous Materials on, under, in, above, to,
or from the Premises other than in strict compliance with all applicable
federal, state, and local laws, regulations, and order. For the purposes of this
section, "Hazardous Materials" shall refer to any substances, materials, and
wastes that are or become regulated as hazardous or toxic substances under any
applicable local, state, or federal law, regulation, or order. For occurrences
or events which occur from and after the commencement of the Term of this Lease,
Tenant shall indemnify, defend, and hold Landlord harmless from and against:
15.1.1 Any loss, cost, expense, claim, or liability arising out of
any investigation, monitoring, clean-up, containment, removal, storage, or
restoration work ("Remedial Work") required by or incurred by Landlord or any
nongovernmental entity or person in a reasonable belief that such work is
required by any applicable federal, state, or local law, governmental agency, or
political subdivision; and
15.1.2 Any claims of third parties for loss, injury expense, or
damage arising out of the presence, release, or discharge of any Hazardous
Materials on, under, in, above, to, or from the Premises. In the event any
Remedial Work is so required under any applicable federal, state, or local law,
Tenant shall perform or cause to be performed the Remedial Work in compliance
with such law, regulation, or order. All Remedial Work shall be performed by one
or more contractors under the supervision of a consulting engineer, each
selected by Tenant and approved in advance in writing by Landlord. In the event
Tenant shall fail to commence the Remedial Work in a timely fashion or fail to
prosecute diligently the Remedial Work to completion, Landlord may, but shall
not be required to, cause the Remedial Work to be performed, subject fully to
the indemnification provisions of this paragraph. This Article shall survive the
termination of said Lease.
16. OPTION TO PURCHASE
-----------------------
16.1 Option to Purchase.
------------------
16.1 Landlord hereby gives Tenant the exclusive option ("Option") to
purchase the Premises at any time during the Term of this Lease, subject to the
terms and conditions hereinafter set forth, for a purchase price of One Million
and No/100 Dollars ($1,000,000.00) in cash ("Purchase Price") to be paid at the
Closing (hereinafter defined) in the event Option is exercised by the Tenant.
Tenant must exercise its Option to purchase the Premises by providing Landlord
with written notice of such exercise during
Page 23 of 27
<PAGE>
the Term of this Lease. Should the Tenant fail to exercise its Option for the
purchase of the Premises within the Term of the Lease, then such Option shall be
considered null and void.
16.2 Title Approval. Landlord has delivered to Tenant on the date of
--------------
this Lease a Commitment for Title Insurance dated March 1, 1999 issued by
Stewart Title Company, under G.F. Number 99110602 (the "Commitment") and survey
of the Premises updated as of March 10, 1999 and prepared by E.E. Coon
Surveying, Inc. (the "Survey"). At this time, Tenant has no objections to the
Commitment and Survey referred to in the preceding sentence, and makes no
objection thereto; however, if Tenant exercises its Option to purchase, Landlord
shall cause Tenant to be furnished with an updated Commitment within ten (10)
days after Landlord receives Tenant's exercise of the Option, and Tenant may
within the same ten (10) day period, elect to obtain an updated Survey of the
Premises at its sole cost and expense; and in the event the updated Commitment
or the Survey of the Premises shall reveal any material changes from the
Commitment and/or the Survey delivered as provided for in the first sentence of
this Article 16.2, then Tenant shall have ten (10) days after receipt to make
written objections thereto to Landlord at the address provided herein. Landlord
shall, upon receipt of such objections, have a period of thirty (30) days (from
receipt) within which to cure such objections, and Landlord agrees to utilize
reasonable efforts and due diligence to cure the same, provided; however, that
Landlord shall in no event be required to spend any money or to commence
litigation in order to cure Tenant's objections, except Landlord shall be
obligated to release any additional monetary exceptions created by landlord,
judgment liens and tax liens. If Tenant's objections are not satisfied within
such thirty (30) day period, then Tenant may (i) terminate the exercise of the
Option and at that point neither Landlord nor Tenant shall have any further
rights or obligations with respect to the Option to purchase granted herein
(however, the Lease shall continue in effect if within the Term hereof), or (ii)
waive the unsatisfied objections and close the transaction. In the event Tenant
fails to notify Landlord, in writing, of its election from (i) or (ii) in the
preceding sentence, Tenant shall be deemed to have elected to waive the
unsatisfied objections and shall proceed to the Closing (hereinafter defined) of
the purchase of the Premises as otherwise provided herein.
16.3 Closing. The Closing of the sale pursuant to Tenant's exercise
-------
of the Option (the "Closing") shall take place at a Title Company subject to the
following terms:
16.3.1 The Closing shall occur at a time mutually acceptable
to Landlord and Tenant the later to occur of (i) within forty-five (45) days
after Landlord's receipt of Tenant's written exercise of the Option, or (ii)
when Landlord has removed or released any monetary exceptions created by
Landlord, judgment liens and tax liens.
16.3.2 At the Closing, Landlord shall deliver to Tenant, at
Landlord's sole cost and expense, the following:
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<PAGE>
16.3.2 (a) A duly executed and acknowledged Special Warranty
Deed conveying good and indefeasible title in fee simple to all of the Premises,
free and clear of any and all liens, encumbrances, conditions, easements,
reservations and restrictions except those noted in the Schedule B of the
Commitment. The form of such Special Warranty Deed shall be as specified in
Exhibit "B," attached hereto and made a part hereof.
16.3.2 (b) An Owner's Policy of Title Insurance (the "Title
Policy") issued by Stewart Title Company in the full amount of the Purchase
Price, dated as of Closing, insuring Tenant's fee simple title to the Premises
to be good and indefeasible subject only to those title exceptions permitted
herein, or as may be approved or waived by Tenant in writing, and the standard
printed exceptions contained in the usual form of the Title Policy, provided,
however:
16.3.2 (b)(i) the exception as to area and
boundaries shall be deleted except for "any shortages in area" and if deleted,
such deletion shall be an expense of Tenant;
16.3.2 (b)(ii) the exception as to restrictive
covenants shall be endorsed "None of Record," unless any existing restrictive
covenants are approved (or objection thereto is waived) by Tenant;
16.3.2 (b)(iii) the exception as to taxes shall be
limited to taxes for the current year and subsequent years, and subsequent
assessments for prior years due to changes in land usage or ownership;
16.3.2 (c) A Bill of Sale containing special warranties to
title, conveying title free and clear of all liens, to any personal property
owned by Landlord and specified herein and an assignment of leases, prepaid
rents, and security deposits, and to the extent assignable, licenses and
permits, maintenance, management or other contracts, warranties or guaranties,
duly executed by Landlord which pertain to the Premises;
16.3.2 (d) Furnish evidence of its capacity and authority for
the closing of this transaction;
16.3.2 (e) Execute all other necessary documents to close this
transaction.
16.3.3 At the Closing, Tenant shall perform the following:
16.3.3 (a) Pay the Purchase Price in cash;
16.3.3 (b) Furnish evidence of its capacity and
authority for the closing of this transaction; and
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<PAGE>
16.3.3 (c) Execution of all other necessary documents
to close this transaction.
16.4 Prorations. Assessments, current taxes, and any rents, and
----------
maintenance fees shall be prorated at the date of Closing. If ad valorem taxes
of the year in which the sale is closed are not available on the Closing date,
proration of taxes shall be made on the basis of taxes assessed in the previous
year, with a subsequent cash adjustment of such proration to be made between
Landlord and Tenant, if necessary, when actual tax figures are available. Any
special assessments applicable to the Premises for improvements previously made
to benefit the Premises shall be paid by Landlord. Landlord shall pay to Tenant
at Closing in cash the amount of any deposits paid to Landlord by tenants of the
Premises, including, but not limited to, all rental security, cleaning, utility,
key, damages, and other deposits. All other income and ordinary operating
expenses of the Premises, including, but not limited to, public utility charges,
maintenance, management and other normal operating charges shall be prorated as
of the date of Closing.
16.5 Closing Costs
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16.5.1 Landlord's Expenses. All costs of releasing existing
-------------------
loans and recording the releases; base premium for Owner's Title Policy; survey;
tax statements 1/2 of any escrow fee; preparation of Deed; other expenses
stipulated to be paid by Landlord under other provisions of this Lease.
16.5.2 Tenant's Expenses. All expenses incident to any loan
-----------------
obtained by tenant including procurement fees, preparation of Note, Deed of
Trust, and other loan documents, recording fees, Mortgagee's Title Policy,
prepayable interest, credit reports; 1/2 of any escrow fee; copies of
restrictions, easements, reservations, or conditions affecting the Premises; and
expenses stipulated to be paid by Tenant under other provisions of this Lease.
16.6 Existing Mortgage. In the event Tenant desires to assume
-----------------
Landlord's existing mortgage on the Premises, Tenant shall have the right to do
so and Landlord shall utilize their best efforts in order to obtain approval of
said assumption from any existing lending institution holding a lien on the
Premises. In the event of an assumption, the cash portion of the Purchase Price
to be paid to the Landlord by the Tenant at Closing shall be the difference
between the Purchase Price and the amount of the assumed loan at the time of
Closing. In the event of such assumption, Tenant shall execute a deed of trust
to secure such assumption.
16.7 Memorandum. Contemporaneously with the date hereof, Landlord and
----------
Tenant shall enter into a Memorandum of Option in the form attached hereto and
made a part hereof as Exhibit "C," which shall be the only document to be filed
of record affecting this Lease.
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<PAGE>
17. CROSS DEFAULT
------------------
17. Cross Default. Should Tenant be in default under the promissory note,
-------------
guaranty, security agreement, collateral pledge or any other documentation
executed by the Tenant or A-G Geophysical Products, Inc. of even date herewith
to the Landlord, such default shall likewise constitute an Event of Default
hereunder and the Landlord shall have entitlement to all remedies specified in
Article 11 hereof.
The parties hereto have executed this Lease on the respective dates
specified immediately adjacent to their respective signatures.
LANDLORD
--------
Date: April 20, 1999 /s/ Albert H. Gerrans, Jr.
------------------------------
Albert H. Gerrans, Jr.
Date: April 20, 1999 /s/ Patricia Gerrans
-------------------------------
Patricia Gerrans
TENANT:
------
Bolt Technology Corporation,
a Connecticut corporation
Date: April 20, 1999 By: /s/ Raymond M. Soto
----------------------------
Name: Raymond M. Soto
--------------------------
Title: Chairman and President
-------------------------
Page 27 of 27
