Modification To Loan & Security Agreement

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
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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


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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
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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


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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.


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(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 a ...