10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended June 30, 2004

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM              TO             

Commission File Number 0-10723

BOLT TECHNOLOGY CORPORATION

(Exact name of registrant as specified in its charter)

Connecticut	06-0773922
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
Four Duke Place, Norwalk, Connecticut	06854
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (203) 853-0700

Securities registered pursuant to Section 12(b) of the Act:

Title of Class	Name of Each Exchange on Which Registered
Common Stock, without par value	American Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).     YES  ¨    NO  x

The aggregate market value of Common Stock, without par value, held by non-affiliates on December 31, 2003: $18,408,000.

As of September 20, 2004 there were 5,414,357 shares of Common Stock, without par value, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Definitive Proxy Statement for 2004 Annual Meeting, which will be filed no later than 120 days after June 30, 2004 are incorporated by reference in Part III to the extent stated in this report.

Note Regarding Forward-Looking Statements

Forward-looking statements in this Form 10-K, future filings by the Company with the Securities and Exchange Commission, the Company’s press releases and oral statements by authorized officers of the Company are intended to be subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These include statements about anticipated financial performance, future revenues or earnings, business prospects, new products, anticipated market performance, planned production and shipping of products, expected cash needs and similar matters. Investors are cautioned that all forward-looking statements involve risks and uncertainty, including without limitation (i) the risk of technological change relating to the Company’s products and the risk of the Company’s inability to develop new competitive products in a timely manner, (ii) the risk of decreased demand for the Company’s products due to fluctuations in energy industry activity, (iii) the Company’s reliance on certain significant customers, (iv) risks associated with a significant amount of foreign sales, and (v) the risk of fluctuations in future operating results. The Company believes that forward-looking statements made by it are based on reasonable expectations. However, no assurances can be given that actual results will not differ materially from those contained in such forward-looking statements. The words “estimate,” “project,” “anticipate,” “expect,” “predict,” “believe” and similar expressions are intended to identify forward-looking statements.

PART I

Preliminary Note: In this annual report on Form 10-K, we refer to Bolt Technology Corporation and its subsidiaries as “we,” “our,” “us,” “the registrant” or “the Company,” unless the context clearly indicates otherwise.

ITEM 1. Business

The Company was organized as a corporation in 1962. We operate in two business segments: geophysical equipment and industrial products. Our geophysical equipment segment develops, manufactures and sells marine seismic energy sources and underwater electrical connectors and cables, air gun signature hydrophones and pressure transducers used by the marine seismic industry. Our industrial products segment develops, manufactures and sells miniature industrial clutches, brakes and sub-fractional horsepower electric motors. See Notes 2 and 9 to the Consolidated Financial Statements for information regarding industry segments and sales by geographic areas.

The Company consists of three operating units: Bolt Technology Corporation (“Bolt”), A-G Geophysical Products, Inc. (“A-G”) and Custom Products Corporation (“Custom Products”). Bolt and A-G are in the “geophysical equipment” segment. Bolt manufactures and sells air guns and replacement parts, and A-G manufactures and sells underwater cables, connectors and hydrophones. Custom Products, which is in the “industrial products” segment, manufactures and sells miniature industrial clutches and brakes and sells sub-fractional horsepower electrical motors.

Geophysical Equipment

Marine Air Guns

Energy sources, such as our air guns, used in seismic exploration create elastic waves at frequencies that readily travel to great depths in the earth. As elastic waves travel through the earth, portions are reflected by variations in the underlying rock layers and the reflected energy is received as signals by devices known as hydrophones. A shipboard unit containing electronic recording equipment converts the signals to digital form. By using computer programs with complex calculations to manipulate the processed seismic data, geoscientists can

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model and visualize the subsurface through the creation and analysis of spatial representations. The analysis of seismic and other geological data is an important factor in decisions to drill exploratory and development wells. Because of the significant expense associated with drilling oil and gas wells, decisions on whether or where to drill are critical to the overall process. A seismic exploration vessel may tow 60 to 70 air guns along with multiple hydrophone streamers of 6,000 to 10,000 meters in length. The air guns are fired simultaneously every 75 to 150 feet along the survey line. Over the past several years, improvements in drilling success rates through the use of advanced seismic survey techniques, particularly 3-D techniques, substantially increased the demand for seismic data. As a result, 3-D surveys utilizing these advanced technologies have gained increasing acceptance in the oil and gas industry as an exploration risk management tool. Moreover, 3-D surveys are increasingly employed in field development and reservoir management activities.

The precise shot to shot repeatability of our marine air guns and their reliability of operation make them especially beneficial for use in 3-D surveys.

The Company’s “long-life” marine air guns, introduced in the 1990s, extend the period between routine air gun maintenance cycles. These guns also provide improved high peak sound pressure levels and improved frequency spectrum as compared with older models. These improved characteristics are advantageous to geoscientists in designing 3-D surveys. A retro-fit kit, which incorporates the improvements of the long-life guns, allows users to easily upgrade older air gun models to the long-life standard.

In fiscal 2000, the Company completed the initial development of its Annular Port Air Gun (“APG Gun”). This new design provides significant improvements in both operating efficiency and acoustic output. The principal feature of the APG Gun is an annulus containing the air chamber and shuttle valve surrounding a hollow passage through which air supply hoses and electrical control cables are routed. This new configuration permits the implementation of simplified multi-gun arrays that produce less towing drag while being easier to deploy and retrieve than conventional air gun arrays. Significant improvements in operating efficiency are also achieved by shielding fragile hoses and cables from the effects of the high pressure air blast released from the air gun. In fiscal 2001 through fiscal 2003, the Company continued to test and refine the APG Gun technology, and in late fiscal 2003 the Company received the first order for APG Guns, which were shipped in the first quarter of fiscal 2004. The APG Guns are being utilized for reservoir management purposes in 4-D seismic surveys in existing oil and gas fields. 4-D seismic surveys consist of a series of 3-D seismic surveys conducted over an identical survey line utilizing a grid of permanently implanted seismic sensors on the ocean bottom. Comparing the results of these time-lapse surveys allows reservoir engineers to more effectively target additional production drilling sites and manage production over the life of the field.

The Company sells various models of air guns that range in price from $3,000 to $76,000. A majority of the air guns sold are priced in the $10,000 range. A significant source of the Company’s revenue comes from the sale of replacement parts.

Underwater Cables, Connectors and Hydrophones

The Company’s marine cables and connectors are injection molded of thermoplastic polyurethane designed for use with marine air gun firing lines, bulkhead connectors and other underwater connectors required in seismic vessel operations.

The Company’s signature hydrophones and pressure transducers are designed for use with marine air guns in a high shock environment. The purpose of the hydrophone and pressure transducer is for near field measurements of the outgoing energy waveforms from air guns and pressure monitoring.

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The Company’s cables and connectors, and our hydrophones and pressure transducers, are used with marine air guns manufactured by the Company as well as air guns manufactured by others.

In fiscal 2004, the Company completed development of stage one of its digital Seismic Source Monitoring System (“SSMS”). SSMS will be utilized by marine seismic contractors to measure air gun depth, air pressure, and “near field” energy output for each gun array to enhance the accuracy and therefore the usefulness of 3-D seismic survey data. No sales of SSMS were recorded in fiscal 2004 but, based on interest expressed by potential customers, the Company currently anticipates initial sales of this product in fiscal 2005.

Industrial Products

The Company’s Industrial Products segment spans two basic disciplines: power transmission (miniature industrial clutches and brakes) and motion control (sub-fractional horsepower electric motors). The Company’s clutch and brake products include a complete line of mechanical and pneumatic precision miniature slip clutches, one-way clutches, toothed jaw clutches and torque limiters. A slip clutch will start to slip once its torque setting is exceeded. This feature is useful as overload protection, constant tensioning or functional torque, in different industrial applications. Among other applications, our clutches and brakes are used in airplane video systems, hospital beds, barcode labelers and banking machines. Unit prices range from $7 to $400.

In addition, the Company offers an electromagnetic clutch and brake product line which includes high performance engage/disengage clutches and brakes, power off brakes, magnetic particle clutches and brakes and multiple plate slip clutches. Applications include high speed mailing machines, packaging machines, elevators, machine tools and robotics. Unit prices range from $50 to $1,500.

The Company’s motor line is comprised of A.C. and D.C. sub-fractional horsepower motors and gear motors. These are available in various shapes and offer several design options (speed, voltage, etc.). Applications include air conditioning systems, valve timers, vending machines, point of purchase displays and business machines. Capacity ranges from 3 to 10 watts. Unit prices range from $4 to $20.

Foreign Sales

During fiscal 2004, 2003 and 2002, approximately 56%, 46% and 58%, respectively, of the Company’s sales were derived from customers outside the United States. See Note 9 to the Consolidated Financial Statements for information regarding the geographic distribution of sales.

Backlog

Geophysical Equipment

Because of the short period between order and shipment dates for the principal portion of geophysical equipment sales, the dollar amount of current backlog is not considered to be a reliable indication of future sales.

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Industrial Products

As of June 30, 2004, we had an order backlog of $741,000 as compared to $960,000 at June 30, 2003. We estimate that substantially all of the backlog as of June 30, 2004 will be shipped during the fiscal year ending June 30, 2005. Although the backlog at June 30, 2004 decreased from June 30, 2003, the Company believes that sales for fiscal 2005 may improve over fiscal year 2004 due to anticipated continuing improvement in the U.S. economy.

Competition

Geophysical Equipment

Our marine air guns compete primarily with marine air guns manufactured by Input/Output, Inc. and Sercel Inc., a subsidiary of Compagnie Generale de Geophysique. The Company’s principal competitor for connectors and cables is Input/Output, Inc. We believe that technology, product reliability and durability are the primary bases of competition in the market for our geophysical equipment and that the remaining competitive factors in the industry are field product support and price. The Company also believes that it can compete effectively with respect to each of these factors, although there can be no assurance that the sales of our geophysical equipment will not be adversely affected if current competitors or others introduce equipment with better performance or lower price.

Industrial Products

The Company cannot determine with accuracy its relative competitive position in the market for industrial products. The industry in which we operate is characterized by active and substantial competition. No single company dominates the market for the types of products we manufacture. Our competitors include both larger and smaller manufacturers and divisions of larger diversified companies with substantial financial resources. Principal competitive factors in the market for our industrial products include quality, service, reliability and price. Our products also compete with other torque control devices to solve design problems.

Marketing

Geophysical Equipment

The Company’s principal customers for geophysical equipment are worldwide marine seismic exploration contractors, who operate seismic vessels for collection of seismic data in accordance with their customers’ specifications or for their own seismic data libraries, and foreign national oil and gas companies.

Marketing of our geophysical equipment is principally performed by salaried sales personnel, all of whom are based in the United States. We also use sales agents for individual sales in certain foreign countries. In general, we market our products and services through our sales force, together with our technical services and engineering staffs, primarily to representatives of major geophysical contractors. The principal marketing techniques used are direct sales visits to current and potential customers, product demonstrations and participation at industry trade shows and meetings.

In general, products are sold on standard 30-day credit terms. In certain instances, we require our customers to furnish letters of credit payable upon shipment or provide advance payments. In limited cases, the Company allows customers extended payment terms of up to 12 months. We consider these practices to be consistent with industry practice overall.

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Industrial Products

The Company’s industrial products are sold primarily to original equipment manufacturers (“OEMs”). OEMs use our products to solve torque related problems which will provide lower installed cost and high reliability, thereby lowering production and service costs. Our engineering staff and independent sales representatives continually work in close collaboration with OEMs to determine the appropriate product for the specific application. Sales are made on standard 30-day credit terms. We sell our industrial products primarily in the United States.

Research and Development

Our ability to compete successfully depends upon, among other things, the development of new products as well as the improvement of the technical capabilities of our existing products. During the fiscal years 2004, 2003, and 2002, we spent $208,000, $206,000 and $253,000, respectively, to develop new products and to upgrade existing products. The Company’s primary research and development efforts over the last three years have been focused on the development and field testing of the APG Gun and SSMS.

Employees

As of June 30, 2004, we employed 86 people on a full-time basis, all of whom are employed in the United States. The Company is not a party to any collective bargaining agreement and has had no work stoppages. The Company believes that relations with employees are good.

Manufacturing and Raw Materials

The Company manufactures and assembles its geophysical equipment in Norwalk, Connecticut and Cypress, Texas and manufactures its industrial products in North Haven, Connecticut. Our manufacturing and assembly operations consist of machining or molding the necessary components and assembling and testing the final product. We maintain adequate levels of inventory to enable us to satisfy customer requirements within the shortest amount of time. The raw materials used in our products, sourced from multiple suppliers, are generally in adequate supply. For some marine air gun orders, we occasionally supply auxiliary equipment such as compressors, air gun controllers or towing equipment manufactured by others. We have not experienced any supply problems with respect to these auxiliary items. Because we manufacture based on customer orders, no inventory of fully assembled finished products is maintained. We consider our practices to be consistent with the industry.

Regulatory Matters

We believe that we are currently in compliance with the requirements of environmental and occupational health and safety laws and regulations. Compliance with such laws and regulations has not resulted in significant expense in the past and we do not foresee the need for substantial expenditures to ensure compliance with such laws and regulations as they currently exist.

Intellectual Property

We seek to protect our intellectual property by means of patents, trademarks and other measures. We currently own more than 23 United States patents and 30 patents in foreign countries relating to the manufacture of our products, with expiration dates from 2004 to 2021. These patents have been of value in the growth of our business and may continue to be of value in the future. However, our business is generally not dependent upon the protection of any patent and would not be materially affected by the expiration thereof.

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Major Customers

Geophysical Equipment

Historically, a significant portion of our sales has been attributable to a few large customers. In fiscal 2004, WesternGeco LLC (“Western”), Compagnie Generale de Geophysique (“CGG”) and Veritas DGC, Inc. (“Veritas”) accounted for 7%, 9% and 10% of consolidated sales, respectively. In fiscal year 2003, Western and Veritas each accounted for 12% of consolidated sales and CGG accounted for 7% of consolidated sales. The loss of Western, Veritas or CGG as a customer or a significant decrease in the amount of their purchases could have a material adverse effect on the Company.

Industrial Products

No customer accounted for more than 10% of consolidated revenue in fiscal year 2004.

ITEM 2. Properties

The following table sets forth certain information with respect to the Company’s principal properties, all of which are leased:

Location	Nature of Property	Approximate Area (Sq. Feet)	Expiration Date of Lease
Norwalk, Connecticut	Manufacturing	21,600	2008
Norwalk, Connecticut	Administration/Engineering/Sales	6,600	2008
Houston, Texas	Sales Office	150	2005
North Haven, Connecticut	Administration/Manufacturing	6,500	2009
Cypress, Texas	Administration/Manufacturing	30,000	2005

Geophysical equipment is manufactured and assembled in the Norwalk, Connecticut and Cypress, Texas facilities. Industrial products are manufactured in the North Haven, Connecticut facility. In the opinion of the Company’s management, the properties described above are in good condition and repair and are suitable and adequate for the Company’s purposes. The properties are currently fully utilized on a one-shift basis, which provides sufficient productive capacity.

The Company has an option to renew both Norwalk, Connecticut leases for an additional five-year period.

The building located in Cypress, Texas is leased from the former shareholder of A-G Geophysical Products, Inc. which was acquired by the Company in April 1999. The Company has an option to purchase the facility for $1,000,000 during the term of the lease which expires in April 2005. The Company presently intends to exercise this option prior to its expiration.

ITEM 3. Legal Proceedings

The Company is not aware of any material pending litigation or proceedings to which it or any of its subsidiaries are a party or to which any of its properties are subject.

ITEM 4. Submission of Matters to a Vote of Security Holders

None.

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PART II

ITEM 5. Market for Registrant’s Common Equity and Related Stockholder Matters

Our Common Stock is listed on the American Stock Exchange under the symbol “BTJ.” The following table sets forth the high and low sales prices for our Common Stock for the quarters indicated:

Fiscal 2004	High		Low
First Quarter	$	4.70	$	3.25
Second Quarter		4.30		3.71
Third Quarter		4.67		3.65
Fourth Quarter		4.70		3.67
Fiscal 2003	High		Low
First Quarter	$	4.99	$	3.54
Second Quarter		4.05		2.80
Third Quarter		3.25		2.82
Fourth Quarter		3.60		2.90

The number of stockholders of record at September 13, 2004 was 262. We believe that the number of beneficial owners is substantially greater than the number of record holders, because a large portion of our Common Stock is held of record in broker “street names.”

We have not paid a dividend since 1985. We do not intend to pay cash dividends on our Common Stock in the foreseeable future. Any decision to pay cash dividends will depend upon our growth, profitability, financial condition and other factors that the Board of Directors may deem relevant.

No employee stock options to purchase shares of Common Stock were exercised during fiscal year 2004 and 2003. Employee stock options to purchase an aggregate of 40,000 shares of Common Stock were exercised during fiscal year 2002. The stock options were granted under the Bolt Technology Corporation Amended and Restated 1993 Stock Option Plan. These shares were acquired pursuant to cashless exercises which resulted in exercising optionees receiving an aggregate of 5,624 shares of Common Stock. The issuance of the Common Stock was exempt from registration under the Securities Act of 1933 (the “Act”) pursuant to Section 4(2) of the Act.

Equity Compensation Plan Information

The following table sets forth aggregate information for the Bolt Technology Corporation Amended and Restated 1993 Stock Option Plan, which is the Company’s only equity compensation plan in effect as of June 30, 2004, and which has been approved by the Company’s stockholders:

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options, warrants and rights (b)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders	335,000	$3.20	—
Equity compensation plans not approved by security holders	—	—	—
Total	335,000	$3.20	—

Under the terms of the plan, no options can be granted subsequent to June 30, 2003.

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ITEM 6. Selected Financial Data

The following table has been derived from the Company’s audited financial statements and sets forth selected consolidated financial data with respect to the Company and its subsidiaries. This information should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and accompanying notes provided elsewhere in this Form 10-K.

	Years Ended June 30,
	2004			2003			2002		2001		2000
(In thousands, except per share amounts)
Income Statement Data:
Sales	$	14,806		$	10,842		$	17,991	$	15,496	$	14,748
Costs and expenses:
Cost of sales		9,135			7,116			9,967		8,912		7,968
Research and development		208			206			253		271		348
Selling, general and administrative		4,170			3,873			4,520		4,250		4,257
Amortization of goodwill		—			—			—		660		660
Interest expense (income), net		(15	)		(18	)		162		332		425
		13,498			11,177			14,902		14,425		13,658
Income (loss) before income taxes		1,308			(335	)		3,089		1,071		1,090
Provision (benefit) for income taxes		455			(174	)		1,218		675		557
Net income (loss)	$	853		$	(161	)	$	1,871	$	396	$	533
Per Share Data:
Earnings (loss) per common share:
Basic	$	0.16		$	(0.03	)	$	0.35	$	0.07	$	0.10
Diluted	$	0.16		$	(0.03	)	$	0.35	$	0.07	$	0.10
Average number of common shares outstanding:
Basic		5,414			5,414			5,412		5,409		5,387
Diluted		5,489			5,414			5,416		5,414		5,408
Financial Data:
Working capital	$	9,330		$	8,331		$	8,479	$	5,572	$	7,791
Total assets		22,574			21,776			22,860		24,734		25,038
Current portion of long-term debt		—			—			—		3,600		1,700
Long-term debt		—			—			—		—		3,600
Stockholders’ equity		21,392			20,539			20,700		18,829		18,433
Cash dividends paid		—			—			—		—		—

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ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following management’s discussion and analysis should be read together with the Consolidated Financial Statements and accompanying notes and other detailed information appearing elsewhere in this Form 10-K. This discussion includes forward-looking statements about the demand for our products and future results. Please refer to the “Note Regarding Forward-Looking Statements” section of this Form 10-K.

Overview

Sales of the Company’s geophysical products are generally related to the level of worldwide oil and gas exploration and development activity which is dependent, primarily, on oil and gas prices. During fiscal 2003, despite high oil and gas prices, the energy industry became increasingly more cautious on marine seismic exploration spending. This slowdown in marine seismic activity was industry-wide. During fiscal 2003, the Company did not ship any complete energy source systems until late in the fourth quarter, and sales of air gun replacement parts and underwater electrical connectors were depressed. Because of the slowdown in marine seismic activity, seismic contractors significantly reduced the size of their fleets. Such fleet contraction has resulted in lower sales of geophysical equipment, including the Company’s air guns and underwater connectors. Although marine seismic exploration activity continues to be depressed, there has been improvement during fiscal 2004. Based on the high price of oil and increased worldwide energy demand, proposals that the Company has outstanding and the current level of customer inquiries, the Company currently anticipates marine seismic exploration activity to continue to improve into fiscal 2005.

Sales in the industrial products segment improved during fiscal 2004 reflecting the continuing improvement in the U.S. economy resulting in the addition of new customers and higher volume from existing customers.

Liquidity and Capital Resources

As of June 30, 2004, the Company considers current cash and cash equivalent balances and projected cash flow from operations adequate to meet foreseeable operating needs. However, as discussed below under “Year Ended June 30, 2004,” in the event the Company exercises the option for the purchase of the land and building in Cypress, Texas, the Company may consider obtaining financing for such purchase.

Year Ended June 30, 2004

At June 30, 2004, the Company had $2,890,000 in cash and cash equivalents. For the year ended June 30, 2004, cash and cash equivalents increased by $968,000. Cash flow from operating activities after changes in operating assets and liabilities was $1,090,000 for the year ended June 30, 2004, primarily due to net income adjusted for depreciation and deferred income taxes partially offset by higher accounts receivable.

For the year ended June 30, 2004, the Company used $122,000 for capital expenditures funded from operating cash flow. The Company estimates that capital expenditures for fiscal year 2005 will be approximately $150,000. The Company expects to fund these capital expenditures from operating cash flow.

The Company has an option to purchase the land and building in Cypress, Texas where A-G is located for $1,000,000. The option expires in April of 2005, concurrent with the present lease expiration date. The Company currently believes that it will exercise the purchase option prior to its expiration date. In this regard, the Company is considering, among other things, when it will exercise the option and how it will fund the exercise price. Should external financing for all or a portion of the exercise price be deemed appropriate, the Company believes that it could obtain such financing at competitive terms.

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Since a relatively small number of customers account for the majority of the Company’s geophysical equipment sales, the consolidated accounts receivable balance tends to be concentrated in a small number of customers. At June 30, 2004 and 2003, the five customers with the highest balances due represented 40% and 46%, respectively, of the accounts receivable balances on those dates.

Year Ended June 30, 2003

At June 30, 2003, the Company had $1,922,000 in cash and cash equivalents. For the year ended June 30, 2003, cash and cash equivalents increased by $448,000. Cash flow from operating activities after changes in operating assets and liabilities was $519,000 for the year ended June 30, 2003, primarily due to a decrease in the level of accounts receivable partially offset by the fiscal 2003 net loss, higher inventories and lower accrued liabilities.

For the year ended June 30, 2003, the Company used $71,000 for capital expenditures.

In May 2002, the Company entered into a one-year $1,500,000 unsecured line of credit agreement with a bank to support working capital requirements. The Company never borrowed under this facility which expired in May 2003.

In October 1998, the Company’s Board of Directors approved a stock repurchase program under which the Company was authorized to buy up to 500,000 shares of its Common Stock in open market or private transactions. Although the program remains authorized, the Company has not repurchased any shares and currently has no plan to make repurchases.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet financing arrangements. In addition, the Company does not have any relationship with unconsolidated entities or any special purpose entities and has not issued any guarantees.

Contractual Obligations

The Company has no long-term borrowings, capital leases, purchase obligations or other long-term liabilities at June 30, 2004 and 2003. The Company is obligated for minimum lease payments as of June 30, 2004 under several operating leases for its facilities as follows:

Contractual Obligations	Total		Payments Due by Period
			Less than 1 year		1-3 years		3-5 years		More than 5 years
Operating Lease Obligations	$	1,349,000	$	452,000	$	666,000	$	231,000	—

Such amounts are exclusive of any “additional rent” for taxes, utilities or similar charges, under triple net leases. See Note 8 to the Consolidated Financial Statements under “Lease Commitments,” for further information regarding future payments and other information relating to such leases.

Securities and Exchange Commission Informal Inquiry

By letter dated January 23, 2004, the Company was informed that the staff of the Securities and Exchange Commission (the “Staff”) had begun an informal inquiry regarding certain corporate and accounting matters. In its letter, the Staff stated that the inquiry should not be construed to indicate that any federal securities laws had been violated or to reflect on the integrity of any person, the Company or its securities. Although the Company believes that it has acted properly and legally and is voluntarily cooperating with the Staff’s informal inquiry, it can neither predict the length, scope or results of the informal inquiry, or the impact, if any, on its operations. To date, the Company has complied with the information requests of the Staff.

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Results of Operations

Year Ended June 30, 2004 Compared to Year Ended June 30, 2003

Sales for the year ended June 30, 2004 increased by $3,964,000 or 37%, from the year ended June 30, 2003. Sales of geophysical equipment increased by $3,611,000 or 44% primarily due to several complete energy source systems sales of traditional guns which amounted to $2,243,000 and the first sale of the Company’s Annular Port Guns which amounted to $594,000. The remainder of the increase was attributable to higher sales of air gun replacement parts and underwater electrical connectors reflecting increased marine seismic activity. In contrast, sales of complete energy source systems sales during year ended June 30, 2003 amounted to only $395,000. Industrial products sales for the year ended June 30, 2004 increased by $353,000 or 13% from the year ended June 30, 2003 primarily reflecting higher volume associated with the gradual improvement in the domestic economy and the addition of new customers.

Consolidated cost of sales as a percentage of consolidated sales was 62% for the year ended June 30, 2004 versus 66% for the year ended June 30, 2003. Cost of sales as a percentage of sales for the geophysical segment decreased from 69% for the year ended June 30, 2003 to 63% for the year ended June 30, 2004, due primarily to higher manufacturing efficiencies associated with the 44% sales increase. Increases to the inventory valuation reserve in fiscal 2004 and 2003 were $243,000 and $282,000, respectively. These amounts were charged to cost of sales. Cost of sales as a percentage of sales for the industrial products segment increased from 55% for the year ended June 30, 2003 to 56% for the year ended June 30, 2004 due primarily to higher compensation costs.

Research and development expense in fiscal 2004 was $2,000 more than in the prior fiscal year, reflecting work on the development of a new product, the Seismic Source Monitoring System, and a reduction in spending on the Annular Port Gun project.

Selling, general and administrative expenses increased by $297,000 or 8% for the year ended June 30, 2004 versus the year ended June 30, 2003, primarily due to increased bad debt expense ($121,000) and higher professional fees ($99,000). Higher professional fees relate primarily to costs associated with the Securities and Exchange Commission’s informal inquiry.

The Company conducted, with the assistance of an independent valuation firm, an annual impairment test of goodwill balances as of July 1, 2004 and 2003. The results of these tests indicated that there was no impairment of the July 1, 2004 and 2003 goodwill balances.

The provision for income taxes for the year ended June 30, 2004 was $455,000, an effective tax rate of 35%, which was higher than the federal statutory rate of 34% primarily due to the effect of state income taxes and nondeductible expenses, partially offset by exempt income relating to foreign sales. The provision for income taxes for the year ended June 30, 2003 was a benefit of $174,000 reflecting a loss before income taxes of $335,000 and an increase in net deferred tax assets partially offset by state income taxes.

The above-mentioned factors resulted in a net income for the year ended June 30, 2004 of $853,000 compared to net loss of $161,000 for the year ended June 30, 2003.

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Year Ended June 30, 2003 Compared to Year Ended June 30, 2002

Sales for the year ended June 30, 2003 decreased by $7,149,000 or 40%, from the year ended June 30, 2002. Sales of geophysical equipment decreased by $7,315,000 or 47%, reflecting the industry-wide slowdown in marine seismic activity due to cautious exploration spending by energy companies which, in turn, resulted in lower demand for air guns, air gun replacement parts and underwater connectors by seismic marine exploration contractors, which are the Company’s major customers. This decrease was partially offset by a $166,000 or 7% increase in sales of industrial products compared to the year ended June 30, 2002, as that business began to show improvement from the prior year due to improved conditions in the domestic economy. With such improvement, this segment was able to add new customers and achieve higher sales volumes from existing customers.

Consolidated cost of sales as a percentage of consolidated sales increased from 55% for the year ended June 30, 2002 to 66% for the year ended June 30, 2003. This increase was due primarily to the geophysical equipment segment. Cost of sales for the geophysical equipment segment increased from 55% for the year ended June 30, 2002 to 69% for the year ended June 30, 2003, due primarily to lower manufacturing efficiencies associated with the 47% sales decrease mentioned above. In addition, cost of sales for the geophysical equipment segment for the year ended June 30, 2003 includes a charge of $282,000 to increase the inventory valuation reserve to recognize that the current supply of certain inventory items exceeds estimated future demand resulting from the industry-wide slowdown in marine seismic activity during the year ended June 30, 2003. There was no increase to the inventory valuation reserve during the year ended June 30, 2002. Cost of sales for the industrial products segment decreased from 56% for the year ended June 30, 2002 to 55% for the year ended June 30, 2003 reflecting slightly higher manufacturing efficiencies resulting from the 7% increase in sales.

Research and development expense decreased by $47,000 or 19% for fiscal year 2003 over fiscal year 2002 because a major research and development program, the APG Gun, reached near completion in the fourth quarter of fiscal year 2002.

Selling, general and administrative expenses decreased by $647,000 or 14% for the year ended June 30, 2003 versus the year ended June 30, 2002, primarily due to lower compensation costs ($408,000) and lower bad debt expense ($191,000).

The Company conducted, with the assistance of an independent valuation firm, an annual impairment test of goodwill balances as of July 1, 2003 and 2002. The results of these tests indicated that there was no impairment of the July 1, 2003 and 2002 goodwill balances.

Interest expense for the year ended June 30, 2003 was zero versus $194,000 for the year ended June 30, 2002. The reason for this decrease was the payment in full in April 2002 of the note issued in connection with the A-G Geophysical Products, Inc. acquisition.

The provision for income taxes for the year ended June 30, 2003 was a benefit of $174,000 reflecting a loss before income taxes of $335,000 and an increase in net deferred tax assets partially offset by state income taxes. The provision for income taxes for the year ended June 30, 2002 was $1,218,000, an effective tax rate of 39%, which was higher than the federal statutory rate of 34% primarily due to the effect of state income taxes.

The above-mentioned factors resulted in a net loss for the year ended June 30, 2003 of $161,000 compared to net income of $1,871,000 for the year ended June 30, 2002.

13

Critical Accounting Policies

The methods, estimates and judgments the Company uses in applying the accounting policies most critical to its financial statements have a significant impact on the results the Company reports in its financial statements. The Securities and Exchange Commission has defined the most critical accounting policies as the ones that are most important to the portrayal of the Company’s financial condition and results, and requires the Company to make its most difficult and subjective judgments.

Based on this definition, the Company’s most critical policies include: recording of inventory reserves; deferred taxes; and the potential impairment of goodwill. These policies are discussed below. The Company also has other key accounting policies, including policies for revenue recognition and establishment of bad debt reserves. The Company believes that these other policies either do not generally require it to make estimates and judgments that are as difficult or as subjective, or that it is less likely that they would have a material impact on the Company’s reported results of operations for a given period. See Note 1 to the Company’s Consolidated Financial Statements for additional information.

Although the Company believes that its estimates and assumptions are reasonable, these are based upon information available at the end of each reporting period and involve inherent risks and uncertainties. Actual results may differ significantly from the Company’s estimates and its estimates could be different using different assumptions or conditions.

Inventory Reserves

A significant source of the Company’s revenue arises from the sale of replacement parts required by customers who have previously purchased products. As a result, the Company maintains a large quantity of parts on hand that may not be sold or used in final assemblies for an extended period of time. In order to recognize that certain inventory may become obsolete or have supplies in excess of reasonable supportable sales forecasts, management establishes an inventory valuation reserve. The inventory valuation reserve is a significant estimate made by management and the actual results may differ from this estimate and the difference could be material. Management establishes the inventory valuation reserve by reviewing the inventory for items that should be reserved in full based on a lack of usage for a specified period of time and for which future demand is not forecasted and establishes an additional reserve for slow moving inventory based on varying percentages of the cost of the items. At June 30, 2004 and 2003 approximately $1,828,000 and $3,320,000, respectively, of the raw materials and sub-assemblies inventory were considered slow moving and subject to a reserve provision equal to all or a portion of the cost, less an estimate for scrap value. In many instances, this inventory has been unsold for more than five years from date of manufacture or purchase, and in other instances the Company has more than a five-year supply of inventory on hand based on recent sales volume. At June 30, 2004, the cost of inventory which has more than a five-year supply on hand and the cost of inventory which has had no sales during the last five years amounted to approximately $1,179,000. Management nevertheless believes that this inventory is properly valued and appropriately reserved. Even if management’s estimate were incorrect, that would not result in a current cash charge since the cash required to manufacture or purchase the older inventory was expended in prior years.

The Company records increases in inventory valuation reserves in cost of sales and decreases in inventory valuation reserves when items are scrapped or disposed of. During the fiscal year ended June 30, 2004, the inventory valuation reserve was increased by $279,000 ($243,000 charged to cost of sales). In addition, during fiscal 2004 the Company scrapped or disposed of items which had a cost of $882,000, which represents 59% of the difference between the $1,828,000 and $3,320,000 amounts referred to above, with the remaining decrease attributed to increased sales activity. The inventory valuation reserve balance and activity information is presented in Schedule II-Valuation and Qualifying Accounts for fiscal years 2002, 2003 and 2004.

Deferred Taxes

The Company applies an asset and liability approach to accounting for income taxes. Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the years in which the differences are expected to reverse. The recoverability of deferred tax assets is dependent upon the Company’s assessment of whether it is more likely than not that sufficient future taxable income will be

14

generated in the relevant tax jurisdiction to utilize the deferred tax asset. The Company reviews its internal forecasted sales and pre-tax earnings estimates to make its assessment about the utilization of deferred tax assets. In the event the Company determines that future taxable income will not be sufficient to utilize the deferred tax asset, a valuation allowance is recorded. If that assessment changes, a charge or a benefit would be recorded in the consolidated statement of income. The Company has concluded that no deferred tax valuation allowance was necessary at June 30, 2004 and 2003 because future taxable income is believed to be sufficient to utilize the deferred tax asset. Net deferred tax assets decreased by $372,000 from $816,000 at June 30, 2003 to $444,000 at June 30, 2004 reflecting principally the net decrease in the inventory valuation reserve ($235,000), amortization of goodwill for tax purposes ($99,000) and utilization of the tax loss carry-forward ($52,000). The decrease in the deferred tax asset relating to the inventory valuation reserve was due primarily to the disposal of inventory ($812,000) during fiscal year 2004.

Goodwill Impairment Testing

As required by SFAS No. 142, “Goodwill and Other Intangible Assets,” the Company reviews goodwill for impairment annually or more frequently if impairment indicators arise. Goodwill was tested for impairment as of July 1, 2001, the initial test, and as of each July 1 thereafter through July 1, 2004. All four tests were conducted by management with the assistance of an independent valuation company and the results of such tests indicated no impairment. The Company’s goodwill carrying amounts relate solely to the acquisition of Custom Products and A-G, which are two SFAS 142 reporting units. Bolt, the parent of Custom Products and A-G, is a third reporting unit and has no goodwill. Both Bolt and A-G are in the geophysical equipment segment, and Custom Products is in the industrial products segment. Step one of the goodwill impairment test is to compare the “fair value” of the reporting unit with its “carrying amount.” The fair value of a reporting unit is the amount that a willing party would pay to buy or sell the unit other than in a forced liquidation sale. The carrying amount of a reporting unit is total assets, including goodwill, minus total liabilities. If the fair value of a reporting unit is greater than the carrying value, the Company considers goodwill not to be impaired. If the fair value is below the carrying value, the Company would proceed to the next step, which is to measure the amount of the impairment loss. Any such impairment loss would be recognized in the Company’s results of operations in the period in which the impairment loss arose. The Company’s method of determining the fair value of the Custom and A-G reporting units is to obtain from the valuation company an estimate of the fair value of these reporting units based on up to three different valuation approaches: a) a capitalized cash flow method, b) a market approach that gives consideration to the prices paid for publicly traded stocks, and c) a projected net income approach that examines the projected net income of certain publicly traded stocks and determines a multiple of earnings that the valuation specialist believes should be applied to the business unit’s estimated earnings.

The Company reviewed the estimated fair values utilizing each of the above approaches, and in each of the four annual tests performed, utilized the discounted cash flow method when reviewing for impairment. The results of the other methods were also generally consistent with the Company’s conclusion that goodwill was not impaired. The Company also compared the values from the above approaches to the market capitalization of the Company (including the Bolt unit that has no goodwill reflected in the financial statements) to provide an overall test to ascertain the reasonableness of the approach used. At all annual impairment test dates except July 1, 2003, the Company’s market capitalization exceeded the carrying value of stockholders’ equity at the impairment test date. At July 1, 2003, the Company’s market capitalization was less than the Company’s stockholders’ equity, however this condition was reversed by August 2003 when the market price of the Company’s stock increased.

Goodwill represents approximately 49% of the Company’s total assets at June 30, 2004, and is thus a significant estimate made by management. Even if management’s estimate were incorrect, that would not result in a current cash charge because the Company’s goodwill amounts reflected on its balance sheet arose out of acquisition accounting several years ago. See Notes 1 and 2 to the Company’s Consolidated Financial Statements for additional information concerning goodwill.

Recent Accounting Developments:

Revenue Recognition

In December 2003, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 104 (“SAB 104”), “Revenue Recognition.” SAB 104 supersedes SAB 101, “Revenue Recognition in Financial Statements.” As a result of the issuance of EITF 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables,” the SEC issued SAB 104 primarily to rescind accounting guidance provided by SAB 101 relating to multiple element revenue arrangements. SAB 104’s accounting guidance for multiple element revenue arrangements is the same as EITF 00-21, and the other revenue recognition concepts contained in SAB 101 remain largely unchanged. The Company adopted the provisions of SAB 104 in the third quarter of fiscal year 2004, retroactive to July 1, 2003. The adoption of SAB 104 had no effect on the Company’s financial position at June 30, 2004 or results of operations for the year ended June 30, 2004.

Employer’s Disclosures about Pensions and Other Postretirement Benefits

In December 2003, the FASB issued SFAS No. 132 (Revised 2003) (“SFAS 132 Revised”), “Employers’ Disclosures about Pensions and Other Postretirement Benefits”. The adoption of SFAS 132 Revised will not have any impact on the Company’s disclosures because the Company does not have any defined benefit pension plans or other defined benefit postretirement plans.

15

Consolidation of Variable Interest Entities

In December 2003, the FASB issued Interpretation No. 46 (Revised 2003), “Consolidation of Variable Interest Entities.” The adoption of this revision does not have any impact on the Company’s Consolidated Financial Statements since the Company does not have any variable interest entities.

ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

ITEM 8. Financial Statements and Supplementary Data

The information required under this Item 8 is set forth on pages F-1 through F-18 of this Report.

ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

On March 19, 2003, upon the recommendation of its Audit Committee, the Board of Directors of the Registrant dismissed Deloitte & Touche LLP (“Deloitte”) as the Registrant’s independent auditor, and appointed McGladrey & Pullen, LLP (“McGladrey”) to serve as the Registrant’s independent auditor, for the year ending June 30, 2003.

The audit report of Deloitte on the Consolidated Financial Statements of the Registrant and subsidiaries as of and for the year ended June 30, 2002 did not contain any adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles.

During the Registrant’s two fiscal years ended June 30, 2002, and from July 1, 2002 through March 26, 2003, there were no disagreements between the Registrant and Deloitte on any matter of accounting principles, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to Deloitte’s satisfaction, would have caused Deloitte to make reference to the subject matter of the disagreement in connection with their reports; and there were no reportable events, as described in Item 304(a)(1)(v) of Regulation S-K.

The Registrant provided Deloitte with a copy of the above disclosures. A letter dated March 24, 2003, from Deloitte stating its agreement with such statements is listed under Item 15 as Exhibit 16.1.

During the Registrant’s two fiscal years ended June 30, 2002, and from July 1, 2002 through March 26, 2003, the Registrant did not consult McGladrey with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Registrant’s Consolidated Financial Statements, or any other matters or reportable events described in Items 304(a)(2)(i) and (ii) of Regulation S-K.

ITEM 9A. Controls and Procedures

The chief executive officer and the chief financial officer, with the assistance of key employees throughout the Company, including its subsidiaries, evaluated the Company’s disclosure controls and procedures as of June 30, 2004. Based upon the results of such evaluation, the chief executive officer and chief financial officer have concluded that such disclosure controls and procedures are effective in providing reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company

16

in the reports that it files under the Securities and Exchange Act of 1934 is accumulated and communicated to management, including the principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.

ITEM 9B. Other Information

None.

17

PART III

ITEM 10. Directors and Executive Officers of the Registrant

The information as to directors and executive officers required by Item 10 is incorporated by reference to the information appearing under the captions “Election of Directors,” “Management” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s definitive proxy statement relating to the 2004 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Form 10-K (the “Definitive Proxy Statement”).

ITEM 11. Executive Compensation

The information required by Item 11 is incorporated by reference to the information appearing under the caption “Executive Compensation” in the Definitive Proxy Statement.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by Item 12 is incorporated by reference to the information under the caption “Equity Compensation Plan Information” under Item 5 of this Form 10-K and the information appearing under the captions “Security Ownership of Certain Beneficial Owners” and “Security Ownership of Management” in the Definitive Proxy Statement.

ITEM 13. Certain Relationships and Related Transactions

The information required by Item 13 is incorporated by reference to the information appearing under the caption “Certain Relationships and Related Transactions” in the Definitive Proxy Statement.

ITEM 14. Principal Accountant Fees and Services

The information required by Item 14 is incorporated by reference to the information appearing under the caption “Principal Accountant Fees and Services” in the Definitive Proxy Statement.

18

PART IV

ITEM 15. Exhibits and Financial Statement Schedules

The following are being filed as part of this Annual Report on Form 10-K:

(a) Financial Statements and Financial Statement Schedule

Consolidated Financial Statements

	Page Number
Report of Independent Registered Public Accounting Firm	F-1
Independent Auditors’ Report	F-2
Consolidated Balance Sheets as of June 30, 2004 and 2003	F-3
Consolidated Statements of Income (Loss) for the Years Ended June 30, 2004, 2003 and 2002	F-4
Consolidated Statements of Cash Flows for the Years Ended June 30, 2004, 2003 and 2002	F-5
Notes to Consolidated Financial Statements	F-6 through F-17
Financial Statement Schedule for the Years Ended June 30, 2004, 2003 and 2002
II - Valuation and Qualifying Accounts	F-18

Schedules other than the one listed above are omitted because they are not applicable, or the required information is shown in the financial statements or the notes thereto.

(b) Exhibits

Exhibit No.	Description
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.*
3.1	Amended and Restated Certificate of Incorporation of the Registrant, as further amended (incorporated by reference to Exhibit 3.1 to Form 10-Q for the quarter ended December 31, 2001).
3.2	By-laws of the Registrant, as amended and restated effective January 16, 2002 (incorporated by reference to Exhibit 3.1 to Form 10-Q for the quarter ended March 31, 2002).
10.1	Bolt Technology Corporation Amended and Restated 1993 Stock Option Plan (incorporated by reference to Exhibit 10.1 to Form 10-K for the year ended June 30, 2003).†
10.2	Lease Agreement dated April 20, 1999 between Albert H. Gerrans, Jr. and Bolt Technology Corporation.*

19

10.3	Employment Agreement between Bolt Technology Corporation and Raymond M. Soto effective as of June 10, 1996; Amendment to Employment Agreement between Bolt Technology Corporation and Raymond M. Soto effective as of September 20, 2001 (incorporated by reference to Exhibits 10.1 and 10.2 to Form 10-Q for the quarter ended September 30, 2001).†
10.4	Bolt Technology Corporation Severance Compensation Plan (incorporated by reference to Exhibit 10.4 to Form 10-K for the year ended June 30, 2002).†
10.5	Employment Agreement between Custom Products Corporation and Gerald H. Shaff effective as of January 1, 2003 (incorporated by reference to Exhibit 10.5 to Form 10-K for the year ended June 30, 2003).†
10.6	Lease Agreement dated January 10, 2003 between 381 Connecticut Avenue Corporation and Bolt Technology Corporation (incorporated by reference to Exhibit 10.6 to Form 10-K for the year ended June 30, 2003).
10.7	Lease Agreement dated January 10, 2003 between 381 Connecticut Avenue Corporation and Bolt Technology Corporation (incorporated by reference to Exhibit 10.7 to Form 10-K for the year ended June 30, 2003).
16.1	Letters regarding Change in Accountants (incorporated by reference to Exhibit 16.1 to Form 8-K and Form 8-K/A, each dated March 19, 2003).
21.	Subsidiaries of the Registrant.*
31.1	Certification pursuant to Rule 13a-14(a) / 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).*
31.2	Certification pursuant to Rule 13a-14(a) / 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).*
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).*
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).*

* filed herewith

† Management contract or compensatory plan.

20

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BOLT TECHNOLOGY CORPORATION
By:	/ s / Raymond M. Soto
	Raymond M. Soto
	(Chairman of the Board, President and
	Chief Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/ s / Raymond M. Soto       (Raymond M. Soto)	Chairman of the Board, President, Chief Executive Officer and Director (Principal Executive Officer)	September 24, 2004
/ s / Joseph Espeso       (Joseph Espeso)	Senior Vice President - Finance, Chief Financial Officer and Director (Principal Financial Officer and Principal Accounting Officer)	September 24, 2004
/ s / Kevin M. Conlisk	Director	September 24, 2004
(Kevin M. Conlisk)
/ s / Michael H. Flynn	Director	September 24, 2004
(Michael H. Flynn)
/ s / George R. Kabureck	Director	September 24, 2004
(George R. Kabureck)
/s/ Joseph Mayerick, Jr.	Director	September 24, 2004
(Joseph Mayerick, Jr.)
/ s / Daniel K. McConlogue	Director	September 24, 2004
(Daniel K. McConlogue)
/ s / Gerald H. Shaff	Director	September 24, 2004
(Gerald H. Shaff)
/ s / Gerald A. Smith	Director	September 24, 2004
(Gerald A. Smith)

21

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Bolt Technology Corporation

Norwalk, Connecticut

We have audited the consolidated balance sheets of Bolt Technology Corporation and subsidiaries as of June 30, 2004 and 2003 and the related consolidated statements of income (loss) and cash flows for the years then ended. Our audits also included the financial statement schedule for the years ended June 30, 2004 and 2003 listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Bolt Technology Corporation and subsidiaries as of June 30, 2004 and 2003 and the results of their operations and their cash flows for the years then ended in conformity with U.S. generally accepted accounting principles. Also, in our opinion, such financial statement schedule for the years ended June 30, 2004 and 2003, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/ s / McGladrey & Pullen, LLP

Stamford, Connecticut

September 2, 2004

F-1

INDEPENDENT AUDITORS’ REPORT

Board of Directors and Stockholders

Bolt Technology Corporation

Norwalk, Connecticut

We have audited the accompanying consolidated statement of income and cash flows of Bolt Technology Corporation and subsidiaries for the year ended June 30, 2002. Our audit also included the financial statement schedule for the year ended June 30, 2002 listed in the Index at Item 15. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the consolidated financial statements and financial statement schedule based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the consolidated results of operations and cash flows of Bolt Technology Corporation and subsidiaries for the year ended June 30, 2002 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the financial statement schedule for the year ended June 30, 2002, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/ s / Deloitte & Touche LLP

Stamford, Connecticut

August 15, 2002

F-2

Bolt Technology Corporation and Subsidiaries

Consolidated Balance Sheets

	June 30,
	2004			2003
Assets
Current Assets:
Cash and cash equivalents	$	2,890,000		$	1,922,000
Accounts receivable, less allowance for uncollectible accounts of $60,000 in 2004 and 2003		2,336,000			1,695,000
Inventories		4,687,000			5,078,000
Deferred income taxes		425,000			713,000
Other current assets		174,000			160,000
Total current assets		10,512,000			9,568,000
Plant and Equipment:
Leasehold improvements		351,000			346,000
Geophysical equipment		—			269,000
Machinery and equipment		6,131,000			6,053,000
Equipment held for rental		—			320,000
		6,482,000			6,988,000
Less accumulated depreciation		(5,621,000	)		(6,092,000	)
		861,000			896,000
Goodwill, net		11,084,000			11,127,000
Deferred Income Taxes		19,000			103,000
Other Assets		98,000			82,000
Total assets	$	22,574,000		$	21,776,000
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	461,000		$	480,000
Accrued expenses		721,000			757,000
Total current liabilities		1,182,000			1,237,000
Stockholders’ Equity:
Common stock, no par value, authorized 9,000,000 shares; issued and outstanding 5,414,357 shares		26,152,000			26,152,000
Accumulated deficit		(4,760,000	)		(5,613,000	)
Total Stockholders’ Equity		21,392,000			20,539,000
Total liabilities and stockholders’ equity	$	22,574,000		$	21,776,000

See Notes to Consolidated Financial Statements.

F-3

Bolt Technology Corporation and Subsidiaries

Consolidated Statements of Income (Loss)

	For the Years Ended June 30,
	2004			2003			2002
Revenues:
Sales	$	14,806,000		$	10,842,000		$	17,991,000
Costs and Expenses:
Cost of sales		9,135,000			7,116,000			9,967,000
Research and development		208,000			206,000			253,000
Selling, general and administrative		4,170,000			3,873,000			4,520,000
Interest expense		—			—			194,000
Interest (income)		(15,000	)		(18,000	)		(32,000	)
		13,498,000			11,177,000			14,902,000
Income (loss) before income taxes		1,308,000			(335,000	)		3,089,000
Provision (benefit) for income taxes		455,000			(174,000	)		1,218,000
Net income (loss)	$	853,000		$	(161,000	)	$	1,871,000
Earnings (loss) per share:
Basic	$	0.16		$	(0.03	)	$	0.35
Diluted	$	0.16		$	(0.03	)	$	0.35
Average number of common shares outstanding:
Basic		5,414,357			5,414,357			5,411,890
Diluted		5,488,510			5,414,357			5,416,281

See Notes to Consolidated Financial Statements.

F-4

Bolt Technology Corporation and Subsidiaries

Consolidated Statements of Cash Flows

	For the Years Ended June 30,
	2004			2003			2002
Cash Flows From Operating Activities:
Net income (loss)	$	853,000		$	(161,000	)	$	1,871,000
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization		279,000			281,000			321,000
Deferred income taxes		415,000			(194,000	)		1,053,000
		1,547,000			(74,000	)		3,245,000
Change in operating assets and liabilities:
Accounts receivable		(641,000	)		1,814,000			1,098,000
Inventories		269,000			(344,000	)		(242,000	)
Other assets		(30,000	)		(79,000	)		(4,000	)
Accounts payable		(19,000	)		(15,000	)		(489,000	)
Accrued liabilities		(19,000	)		(737,000	)		70,000
Income taxes payable		(17,000	)		(46,000	)		149,000
Net cash provided by operating activities		1,090,000			519,000			3,827,000
Cash Flows From Investing Activities:
Purchase of property and equipment		(122,000	)		(71,000	)		(82,000	)
Net cash used in investing activities		(122,000	)		(71,000	)		(82,000	)
Cash Flows From Financing Activities:
Repayment of debt		—			—			(3,600,000	)
Net cash used in financing activities		—			—			(3,600,000	)
Net increase in cash		968,000			448,000			145,000
Cash and cash equivalents at beginning of year		1,922,000			1,474,000			1,329,000
Cash and cash equivalents at end of year	$	2,890,000		$	1,922,000		$	1,474,000
Supplemental disclosure of cash flow information:
Cash transactions:
Interest paid	$	—		$	—		$	194,000
Income taxes paid	$	63,000		$	65,000		$	121,000
Non-cash transactions:
Transfer of inventory to plant and equipment	$	122,000		$	—		$	—

See Notes to Consolidated Financial Statements.

F-5

Bolt Technology Corporation and Subsidiaries

Notes To Consolidated Financial Statements

Note 1 – Description of Business and Significant Accounting Policies

The Company consists of three operating units: Bolt Technology Corporation (“Bolt”), A-G Geophysical Products, Inc. (“A-G”) and Custom Products Corporation (“Custom Products”). Bolt and A-G are in the “geophysical equipment” segment. Bolt manufactures and sells marine seismic energy sources (air guns) and replacement parts, and A-G manufactures and sells underwater cables, connectors and hydrophones. Custom Products, which is in the “industrial products” segment, manufactures and sells miniature industrial clutches and brakes and sells sub-fractional horsepower electrical motors.

Principles of Consolidation:

The Consolidated Financial Statements include the accounts of Bolt and its subsidiary companies. All significant intercompany balances and transactions have been eliminated.

Cash and Cash Equivalents:

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Allowance for Uncollectible Accounts:

The allowance for uncollectible accounts is established through a provision for bad debts charged to expense. Accounts receivable are charged against the allowance for uncollectible accounts when the Company believes that collectibility of the principal is unlikely. The allowance is an amount that the Company believes will be adequate to absorb estimated losses on existing accounts receivable, based on the evaluation of the collectibility of accounts receivable and prior bad debt experience. This evaluation also takes into consideration such factors as changes in the nature and volume of the accounts receivable, overall accounts receivable quality, review of specific problem accounts receivable, and current economic and industry conditions that may affect the customer’s ability to pay. While the Company uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic and industry conditions.

Inventories:

Inventories are valued at the lower of cost or market, with cost principally determined on an average cost method which approximates the first-in, first-out method. The Company maintains an inventory valuation reserve to provide for slow moving and obsolete inventory. Amounts are charged to the reserve when the Company scraps or disposes of inventory. See Note 3 to Consolidated Financial Statements for additional information concerning inventories.

Plant and Equipment:

Plant and equipment are stated at cost. Depreciation for financial accounting purposes is computed using the straight-line method over the estimated useful lives of 5 to l0 years for machinery and equipment and rental assets, 1 to l0 years for geophysical equipment, 15 to 30 years for buildings, and over the term of the lease for leasehold improvements. Major improvements which add to the productive capacity or extend the life of an asset are capitalized, while repairs and maintenance are charged to expense as incurred.

F-6

Bolt Technology Corporation and Subsidiaries

Notes To Consolidated Financial Statements

Goodwill:

Goodwill represents the excess cost over the value of net tangible assets acquired in business combinations and until June 30, 2001 was being amortized using the straight-line method over 20 years. Accumulated amortization at June 30, 2004 and 2003 was $1,750,000. Effective July 1, 2001, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” Under SFAS No. 142, goodwill amortization ceased when the new standard was adopted. The standard also required an initial goodwill impairment test in the year of adoption and annual impairment tests thereafter. The initial impairment test of the goodwill balance as of July 1, 2001 and annual impairment tests of the goodwill balance as of July 1, 2002, July 1, 2003 and July 1, 2004 were conducted and the tests indicated no impairment. The tests were conducted by management with the assistance of an independent valuation company. See Note 2 to Consolidated Financial Statements for additional information concerning goodwill.

Revenue Recognition and Warranty Costs:

The Company recognizes sales revenue when it is realized and earned. The Company’s reported sales revenue is based on meeting the following criteria:

1. Manufacturing products based on customer specifications.

2. Delivering product to the customer before the close of the reporting period. Delivery results in the transfer of ownership risk to the customer.

3. Establishing a set sales price with the customer.

4. Collecting the sales revenue from the customer is reasonably assured.

Warranty costs and product returns incurred by the Company have not been significant.

Income Taxes:

The provision for income taxes is determined under the liability method. Deferred tax assets and liabilities are recognized based on differences between the book and tax bases of assets and liabilities using currently enacted tax rates. The provision (benefit) for income taxes is the sum of the amount of income tax paid or payable for the year determined by applying the provisions of enacted tax laws to the taxable income for that year and the net change during the year in the Company’s deferred tax assets and liabilities. See Note 4 to Consolidated Financial Statements for additional information concerning the provision for income taxes and deferred tax assets.

Stock-Based Compensation:

The Company adopted SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure” in 2003 and SFAS No. 123, “Accounting for Stock-Based Compensation” in 1997. Under SFAS No. 123, as amended by SFAS No. 148, companies can, but are not required to, elect to recognize compensation expense for all stock-based awards using a fair value methodology. The Company has adopted the disclosure-only provisions, as permitted by SFAS Nos. 123 and 148. In this regard, the Company applies Accounting Principles Board Opinion No. 25 and related interpretations in accounting for its stock-based plans. Accordingly, no compensation expense is recognized for grants under the Company’s stock option plan.

F-7

Bolt Technology Corporation and Subsidiaries

Notes To Consolidated Financial Statements

Had compensation cost for stock options granted been determined in accordance with the provisions of SFAS No. 123, as amended by SFAS No. 148, net income (loss) and earnings (loss) per share would have been as follows:

	Years Ended June 30,
	2004		2003			2002
Net income (loss), as reported	$	853,000	$	(161,000	)	$	1,871,000
Additional compensation cost determined under the fair value method for all stock option grants, net of income tax effect		101,000		71,000			1,000
Net income (loss), pro forma	$	752,000	$	(232,000	)	$	1,870,000
Basic earnings (loss) per share:
As reported	$	0.16	$	(0.03	)	$	0.35
Pro forma	$	0.14	$	(0.04	)	$	0.35
Diluted earnings (loss) per share:
As reported	$	0.16	$	(0.03	)	$	0.35
Pro forma	$	0.14	$	(0.04	)	$	0.35

See Note 6 to Consolidated Financial Statements for additional information concerning stock options.

Long-Lived Assets:

The Company’s long-lived assets consist of plant and equipment and other current and non-current assets. The Company reviews for the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is considered impaired when anticipated undiscounted cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount. The Company’s reviews as of June 30, 2004 and 2003 did not result in any indicators of impairment and therefore no impairment tests were performed.

Use of Estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements, and the reported amounts of revenues and expenses during the reporting period. The most critical estimates made by the Company are those relating to inventory valuation reserves, goodwill impairment and the realization of deferred tax assets. Actual results could differ from those estimates.

F-8

Bolt Technology Corporation and Subsidiaries

Notes To Consolidated Financial Statements

Computation of Earnings (Loss) Per Share:

Basic earnings (loss) per share is computed by dividing net income (loss) by the average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the average number of common shares outstanding assuming dilution, the calculation of which assumes that all stock options are exercised at the beginning of the period and the proceeds used to purchase shares at the average market price for the period. The following is a reconciliation from basic earnings (loss) per share to diluted earnings (loss) per share for each of the last three years:

	Years Ended June 30,
	2004		2003			2002
Net income (loss) available to common stockholders	$	853,000	$	(161,000	)	$	1,871,000
Divided by:
Weighted average common shares		5,414,357		5,414,357			5,411,890
Weighted average common share equivalents		74,153		—			4,391
Total weighted average common shares and common share equivalents		5,488,510		5,414,357			5,416,281
Basic earnings (loss) per share	$	0.16	$	(0.03	)	$	0.35
Diluted earnings (loss) per share	$	0.16	$	(0.03	)	$	0.35

For the years ended June 30, 2004 and 2002, the calculations do not include options to acquire 28,000 shares and 160,000 shares, respectively, since their inclusion would have been anti-dilutive. For the year ended June 30, 2003, the effect of common stock equivalents relating to stock options was not included in the calculation because to do so would have been anti-dilutive.

Recent Accounting Developments:

Revenue Recognition

In December 2003, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 104 (“SAB 104”), “Revenue Recognition.” SAB 104 supersedes SAB 101, “Revenue Recognition in Financial Statements.” As a result of the issuance of EITF 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables,” the SEC issued SAB 104 primarily to rescind accounting guidance provided by SAB 101 relating to multiple element revenue arrangements. SAB 104’s accounting guidance for multiple element revenue arrangements is the same as EITF 00-21, and the other revenue recognition concepts contained in SAB 101 remain largely unchanged. The Company adopted the provisions of SAB 104 in the third quarter of fiscal year 2004, retroactive to July 1, 2003. The adoption of SAB 104 had no effect on the Company’s financial position at June 30, 2004 or results of operations for the year ended June 30, 2004.

F-9

Bolt Technology Corporation and Subsidiaries

Notes To Consolidated Financial Statements

Employer’s Disclosures about Pensions and Other Postretirement Benefits

In December 2003, the FASB issued SFAS No. 132 (Revised 2003) (“SFAS 132 Revised”), “Employers’ Disclosures about Pensions and Other Postretirement Benefits”. The adoption of SFAS No. 132 Revised will not have any impact on the Company’s disclosures because the Company does not have any defined benefit pension plans or other defined benefit postretirement plans.

Consolidation of Variable Interest Entities

In December 2003, the FASB issued Interpretation No. 46 (Revised 2003), “Consolidation of Variable Interest Entities.” The adoption of this revision does not have any impact on the Company’s Consolidated Financial Statements since the Company does not have any variable interest entities.

Note 2 – Goodwill

The composition of the net goodwill balance at June 30 is as follows:

	2004		2003
A-G (Geophysical Equipment Segment)	$	7,679,000	$	7,679,000
Custom Products (Industrial Products Segment)		3,405,000		3,448,000
	$	11,084,000	$	11,127,000

The acquisition of Custom Products in fiscal year 1998 generated tax deductible goodwill which exceeded the goodwill recorded for book purposes. The goodwill reduction for Custom Products during fiscal year 2004 of $43,000 is a result of the tax benefits generated by the goodwill deductible for tax purposes.

As required by SFAS No. 142, “Goodwill and Other Intangible Assets,” the Company reviews goodwill for impairment annually or more frequently if impairment indicators arise. Goodwill was tested for impairment as of July 1, 2001, the initial test, and as of each July 1 thereafter through July 1, 2004. All four tests were conducted by management with the assistance of an independent valuation company and the results of such tests indicated no impairment. The Company’s goodwill carrying amounts relate solely to the acquisition of Custom Products and A-G, which are two SFAS 142 reporting units. Bolt, the parent of Custom Products and A-G, is a third reporting unit and has no goodwill. Both Bolt and A-G are in the geophysical equipment segment, and Custom Products is in the industrial products segment. Step one of the goodwill impairment test is to compare the “fair value” of the reporting unit with its “carrying amount.” The fair value of a reporting unit is the amount that a willing party would pay to buy or sell the unit other than in a forced liquidation sale. The carrying amount of a reporting unit is total assets, including goodwill, minus total liabilities. If the fair value of a reporting unit is greater than the carrying value, the Company considers goodwill not to be impaired. If the fair value is below the carrying value, the Company would proceed to the next step, which is to measure the amount of the impairment loss. Any such impairment loss would be recognized in the Company’s results of operations in the period in which the impairment loss arose. The Company’s method of determining the fair value of the Custom and A-G reporting units is to obtain from the valuation company an estimate of the fair value of these reporting units based on up to three different valuation approaches: a) a capitalized cash flow method, b) a market approach that gives consideration to the prices paid for publicly traded stocks, and c) a projected net income approach that examines the projected net income of certain publicly traded stocks and determines a multiple of earnings that the valuation specialist believes should be applied to the business unit’s estimated earnings.

The Company reviewed the estimated fair values utilizing each of the above approaches, and in each of the four annual tests performed, utilized the discounted cash flow method when reviewing for impairment. The results of the other methods were also generally consistent with the Company’s conclusion that goodwill was not impaired. The Company also compared the values from the above approaches to the market capitalization of the Company (including the Bolt unit that has no goodwill reflected in the financial statements) to provide an overall test to ascertain the reasonableness of the approach used. At all annual impairment test dates except July 1, 2003, the Company’s market capitalization exceeded the carrying value of stockholders’ equity at the impairment test date. At July 1, 2003, the Company’s market capitalization was less than the Company’s stockholders’ equity, however this condition was reversed by August 2003 when the market price of the Company’s stock increased.

Goodwill represents approximately 49% of the Company’s total assets at June 30, 2004, and is thus a significant estimate made by management. Even if management’s estimate were incorrect, that would not result in a current cash charge because the Company’s goodwill amounts reflected on its balance sheet arose out of acquisition accounting several years ago.

Note 3 – Inventories

Inventories at June 30 consist of the following:

	2004			2003
Raw materials and sub-assemblies	$	4,913,000		$	5,629,000
Work-in-process		368,000			646,000
		5,281,000			6,275,000
Less-Reserve for inventory valuation		(594,000	)		(1,197,000	)
	$	4,687,000		$	5,078,000

A significant source of the Company’s revenue arises from the sale of replacement parts required by customers who have previously purchased products. As a result, the Company maintains a large quantity of parts on hand that may not be sold or used in final assemblies for an extended period of time. In order to recognize that certain inventory may become obsolete or have supplies in excess of reasonable supportable sales forecasts, management establishes an inventory valuation reserve. The inventory valuation reserve is a significant estimate made by management and the actual results may differ from this estimate and the difference could be material. Management establishes the inventory valuation reserve by reviewing the inventory for items that should be reserved in full based on a lack of usage for a specified period

F-10

Bolt Technology Corporation and Subsidiaries

Notes To Consolidated Financial Statements

of time and for which future demand is not forecasted and establishes an additional reserve for slow moving inventory based on varying percentages of the cost of the items. At June 30, 2004 and 2003 approximately $1,828,000 and $3,320,000, respectively, of the raw materials and sub-assemblies inventory were considered slow moving and subject to a reserve provision equal to all or a portion of the cost, less an estimate for scrap value. In many instances, this inventory has been unsold for more than five years from date of manufacture or purchase, and in other instances the Company has more than a five-year supply of inventory on hand based on recent sales volume. At June 30, 2004, the cost of inventory which has more than a five-year supply on hand and the cost of inventory which has had no sales during the last five years amounted to approximately $1,179,000. Management nevertheless believes that this inventory is properly valued and appropriately reserved. Even if management’s estimate were incorrect, that would not result in a current cash charge since the cash required to manufacture or purchase the older inventory was expended in prior years.

The Company records increases in inventory valuation reserves in cost of sales and decreases in inventory valuation reserves when items are scrapped or disposed of. During the fiscal year ended June 30, 2004, the inventory valuation reserve was increased by $279,000 ($243,000 charged to cost of sales). In addition, during fiscal 2004 the Company scrapped or disposed of items which had a cost of $882,000, which represents 59% of the difference between the $1,828,000 and $3,320,000 amounts referred to above, with the remaining decrease attributed to increased sales activity. The inventory valuation reserve balance and activity information is presented in Schedule II-Valuation and Qualifying Accounts for fiscal years 2002, 2003 and 2004.

Note 4 – Income Taxes

Income tax expense (benefit) consists of the following for the three years ended June 30:

	2004			2003			2002
Current:
Federal	$	(32,000	)	$	—		$	—
State		72,000			20,000			165,000
Deferred:
Federal		415,000			(171,000	)		1,053,000
State		—			(23,000	)		—
Income tax expense (benefit)	$	455,000		$	(174,000	)	$	1,218,000

A reconciliation of the federal statutory rate to the effective tax rate reflected in the total provision (benefit) for income taxes is as follows:

	Years Ended June 30,
	2004		2003		2002
Statutory rate	34	%	(34	)%	34	%
State income taxes, net of federal tax benefit	4		(3	)	5
Nondeductible expenses	1		5		1
Reduction in investment tax credit carry-forward	—		—		1
Exempt income from foreign sales	(4	)	(10	)	(2	)
Increase in AMT credit	—		(10	)	—
Effective rate	35	%	(52	)%	39	%

Deferred income taxes under the liability method reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Components of the Company’s net deferred income tax asset at June 30 were as follows:

F-11

Bolt Technology Corporation and Subsidiaries

Notes To Consolidated Financial Statements

	2004			2003
Net deferred tax asset - current:
Tax loss carry-forward	$	170,000		$	222,000
Inventory valuation reserve		232,000			467,000
Allowance for uncollectible accounts		23,000			24,000
Total	$	425,000		$	713,000
Net deferred tax asset - noncurrent:
Alternative minimum tax credit carry-forward	$	310,000		$	310,000
Plant and equipment depreciation		53,000			38,000
Amortization of goodwill		(344,000	)		(245,000	)
Total	$	19,000		$	103,000

Note 5 – Benefit Plans

The Company maintains defined contribution retirement plans covering substantially all employees who satisfy the age and service requirements of the plans. The Company’s contributions to the plans are discretionary, and for the years ended June 30, 2004, 2003, and 2002 amounted to $213,000, $207,000, and $191,000, respectively.

Note 6 – Stock Options

The Company’s 1993 Stock Option Plan provided for the granting of options to purchase up to 550,000 shares of Common Stock of the Company at a price not less than fair market value at date of grant. Options granted to employees are exercisable for a period of up to ten years. The plan also provided for the granting to non-employee directors of options to purchase 3,000 shares of Common Stock each time they were elected directors.

Under the terms of the plan, no options can be granted subsequent to June 30, 2003 but options granted prior to that date shall remain in effect until such options have been exercised or terminated in accordance with the plan and the terms of such options.

A summary of the Stock Option Plan at June 30, 2004, 2003 and 2002 and the changes during the years ended on those dates is presented below.

	2004				2003				2002
	Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Outstanding at beginning of year	357,000		$	3.39	169,000		$	6.24	224,000		$	5.84
Granted	—			—	307,000		$	3.08	3,000		$	4.55
Exercised	—			—	—			—	(40,000	)	$	4.13
Expired	(22,000	)	$	6.32	(119,000	)	$	6.63	(18,000	)	$	5.70
Outstanding at end of year	335,000		$	3.20	357,000		$	3.39	169,000		$	6.24

F-12

Bolt Technology Corporation and Subsidiaries

Notes To Consolidated Financial Statements

The following table summarizes information concerning outstanding and exercisable stock options at June 30, 2004:

	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number Outstanding at June 30, 2004	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable At June 30, 2004	Weighted Average Exercise Price
$3.05-$3.45	307,000	3.6 Years	$	3.08	307,000	$	3.08
$4.38-$4.56	28,000	0.8 Years	$	4.50	28,000	$	4.50
	335,000	3.4 Years	$	3.20	335,000	$	3.20

The estimated fair value of options granted during 2003 and 2002 was $1.09 and $1.36 per share, respectively as estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

	2003		2002
Expected dividend yield	0	%	0	%
Expected stock price volatility	63	%	58	%
Risk-free interest rate	2.59	%	3.47	%
Expected life (years)	5		5

Note 7 – Stockholders’ Equity

Changes in issued Common Stock and Stockholders’ Equity for each of the three years ended June 30, 2004 were as follows:

	Common Stock			Accumulated Deficit			Total
	Shares	Amount
Balance June 30, 2001	5,408,733	$	26,152,000	$	(7,323,000	)	$	18,829,000
Exercise of stock options	5,624		—		—			—
Net income	—		—		1,871,000			1,871,000
Balance June 30, 2002	5,414,357		26,152,000		(5,452,000	)		20,700,000
Net loss	—		—		(161,000	)		(161,000	)
Balance June 30, 2003	5,414,357		26,152,000		(5,613,000	)		20,539,000
Net income	—		—		853,000			853,000
Balance June 30, 2004	5,414,357	$	26,152,000	$	(4,760,000	)	$	21,392,000

Note 8 – Commitments and Contingencies

Concentration of Credit Risk:

Financial instruments which potentially subject the Company to concentrations of credit risk are primarily cash and cash equivalents and trade accounts receivable. The Company believes that the concentration of credit risk in its trade receivables is substantially mitigated by the Company’s ongoing credit evaluation and its short

F-13

Bolt Technology Corporation and Subsidiaries

Notes To Consolidated Financial Statements

collection terms. The Company does not generally require collateral from its customers but, in certain cases, the Company does require the customer to provide a letter of credit or an advance payment. In limited cases the Company will grant customers extended payment terms of up to 12 months. The Company establishes an allowance for uncollectible accounts based upon factors surrounding the credit risk of specific customers. Historically, the Company has not incurred significant credit related losses. The Company invests its excess cash in time deposits with maturities of usually less than one month in an effort to maintain safety and liquidity.

Financial Instruments:

The Company does not hold or issue financial instruments for trading or hedging purposes, nor does it hold interest rate, leveraged, or other types of derivative financial instruments. Fair values of accounts receivable, accounts payable and accrued expenses reflected in the June 30, 2004 and 2003 balance sheets approximate carrying values at those dates.

Lease Commitments:

The following table presents the Company’s future minimum lease payments as of June 30, 2004 relating to its non-cancelable operating leases with terms in excess of one year:

Years Ended June 30,	Amount
2005	$	452,000
2006		333,000
2007		333,000
2008		196,000
2009		35,000
Beyond 2009		—
Total	$	1,349,000

Under such operating leases, rent expense amounted to $512,000, $478,000 and $470,000 for the years ended June 30, 2004, 2003 and 2002, respectively.

The Company’s leases for its Norwalk, Connecticut office and manufacturing facilities expire in 2008. The Company has options to renew such leases for an additional five year period.

The Company’s lease for its North Haven, Connecticut manufacturing facility expires in 2009. The Company does not have an option to renew such lease.

The Company leases a building in Cypress, Texas from the former shareholder of A-G Geophysical Products, Inc. for $10,750 per month. The lease agreement expires in April 2005, and also grants the Company an option to purchase the facility for $1,000,000 during the term of the lease. The Company presently intends to exercise this option prior to its expiration.

F-14

Bolt Technology Corporation and Subsidiaries

Notes To Consolidated Financial Statements

Employment Severance Agreements:

The Company has a severance compensation plan for certain executive officers and key employees of the Company which becomes operative upon their termination if such termination occurs within 24 months subsequent to a change in ownership of the Company, as defined in the plan.

The Company also has an employment agreement with its president and chief executive officer which provides for severance in the case of voluntary or involuntary termination following a change in control. This employment agreement has a term through June 30, 2007, subject to extension as set forth in the agreement.

The aggregate maximum potential severance liability under the above-mentioned agreements approximates $2,730,000 at June 30, 2004. No amounts were due as of that date because no events had occurred which would have triggered such liability.

Litigation:

From time to time, the Company is a party to routine litigation and proceedings that are considered part of the ordinary course of its business. The Company is not aware of any current or pending litigation.

Securities and Exchange Commission Informal Inquiry:

By letter dated January 23, 2004, the Company was informed that the staff of the Securities and Exchange Commission (the “Staff”) had begun an informal inquiry regarding certain corporate and accounting matters. In its letter, the Staff stated that the inquiry should not be construed to indicate that any federal securities laws had been violated or to reflect on the integrity of any person, the Company or its securities. Although the Company believes that it has acted properly and legally and is voluntarily cooperating with the Staff’s informal inquiry, it can neither predict the length, scope or results of the informal inquiry, or the impact, if any, on its operations. To date, the Company has complied with the information requests of the Staff.

Note 9 – Segment and Customer Information

The Company’s reportable segments are “geophysical equipment” and “industrial products.” Bolt Technology Corporation and A-G are in the geophysical equipment segment. Custom Products is in the industrial products segment. The following table provides selected financial information for each segment for the years ended June 30, 2004, 2003 and 2002.

Fiscal Year ended June 30, 2004	Geophysical Equipment		Industrial Products		Total
Sales	$	11,743,000	$	3,063,000	$	14,806,000
Interest income		15,000		—		15,000
Depreciation and amortization		250,000		29,000		279,000
Income before income taxes		775,000		533,000		1,308,000
Segment assets		17,828,000		4,746,000		22,574,000
Fixed asset additions		102,000		20,000		122,000

F-15

Bolt Technology Corporation and Subsidiaries

Notes to Consolidated Financial Statements

Fiscal Year ended June 30, 2003	Geophysical Equipment			Industrial Products		Total
Sales	$	8,132,000		$	2,710,000	$	10,842,000
Interest income		18,000			—		18,000
Depreciation and amortization		247,000			34,000		281,000
Income (loss) before income taxes		(768,000	)		433,000		(335,000	)
Segment assets		17,004,000			4,772,000		21,776,000
Fixed asset additions		69,000			2,000		71,000
Fiscal Year ended June 30, 2002	Geophysical Equipment			Industrial Products		Total
Sales	$	15,447,000		$	2,544,000	$	17,991,000
Interest income		32,000			—		32,000
Interest expense		194,000			—		194,000
Depreciation and amortization		284,000			37,000		321,000
Income before income taxes		2,738,000			351,000		3,089,000
Segment assets		18,165,000			4,695,000		22,860,000
Fixed asset additions		65,000			17,000		82,000

The Company does not allocate income taxes to segments.

The following table reports sales by country for the years ended June 30, 2004, 2003 and 2002. Sales are attributed to each country based on the location of the customer.

	2004		2003		2002
United States	$	6,575,000	$	5,861,000	$	7,509,000
Norway		3,796,000		1,559,000		3,501,000
Peoples Republic of China		896,000		158,000		852,000
United Kingdom		876,000		497,000		1,786,000
France		809,000		947,000		765,000
Singapore		429,000		534,000		1,598,000
Former Soviet Union		377,000		238,000		1,101,000
Japan		350,000		203,000		134,000
Mexico		135,000		291,000		34,000
Canada		133,000		241,000		262,000
Germany		32,000		118,000		185,000
Other		398,000		195,000		264,000
	$	14,806,000	$	10,842,000	$	17,991,000

F-16

Bolt Technology Corporation and Subsidiaries

Notes to Consolidated Financial Statements

A relatively small number of customers has accounted for the Company’s geophysical equipment segment sales. Customers accounting for 10% or more of consolidated sales for 2004, 2003 and 2002 are as follows:

	2004		2003		2002
Customer A	7	%	12	%	17	%
Customer B	10		12		14

Note 10 – Supplementary Information

Accrued expenses at June 30, 2004 and 2003 consist of the following:

	2004		2003
Compensation and related taxes	$	189,000	$	184,000
Compensated absences		272,000		244,000
Commissions payable		137,000		161,000
Professional fees		3,000		10,000
Income taxes payable		55,000		72,000
Other		65,000		86,000
	$	721,000	$	757,000

Note 11 – Quarterly Results (unaudited)

The following table summarizes results for each of the four quarters in the years ended June 30, 2004 and 2003.

	Three Months Ended
	Sept. 30		Dec. 31			March 31			June 30
2004
Sales	$	3,666,000	$	3,501,000		$	3,661,000		$	3,978,000
Cost of sales		2,124,000		2,001,000			2,153,000			2,857,000
Income before taxes		506,000		354,000			318,000			130,000
Net income		341,000		225,000			198,000			89,000
Basic and diluted earnings per share	$	0.06	$	0.04		$	0.04		$	0.02
	Three Months Ended
	Sept. 30		Dec. 31			March 31			June 30
2003
Sales	$	3,094,000	$	2,419,000		$	2,320,000		$	3,009,000
Cost of sales		1,799,000		1,597,000			1,487,000			2,233,000
Income (loss) before taxes		248,000		(269,000	)		(215,000	)		(99,000	)
Net income (loss)		151,000		(178,000	)		(136,000	)		2,000
Basic and diluted earnings (loss) per share	$	0.03	$	(0.03	)	$	(0.03	)	$	0.00

F-17

Bolt Technology Corporation and Subsidiaries

Schedule II - Valuation and Qualifying Accounts

For the Three Years Ended June 30, 2004

			Additions
Description	Balance At Beginning Of Year		Charged To Costs And Expenses		Charged To Other Accounts			Deductions			Balance At End Of Year
Allowance for uncollectible accounts:
2002	$	187,000	$	97,000	$	—		$	(85,000)	(b)	$	199,000
2003		199,000		(94,000)		—			(45,000)	(b)		60,000
2004		60,000		25,000		—			(25,000)	(b)		60,000
Reserve for inventory valuation:
2002	$	915,000	$	—	$	—		$	—		$	915,000
2003		915,000		282,000		—			—			1,197,000
2004		1,197,000		243,000		36,000	(a)		(882,000)	(c)		594,000

(a) Charged to inventory.

(b) Accounts written-off.

(c) Inventory disposed of.

F-18

EX-2.1

EXHIBIT 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 Barnard

(Sellers)

April 20, 1999

TABLE OF CONTENTS

			Page
1.	PURCHASE AND SALE OF STOCK		1
	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
	2.1	Time and Place of Closing	3
	2.2	Sellers’ Performance at Closing	3
	2.3	Buyer’s Performance at Closing	5
3.	SELLERS’ REPRESENTATIONS AND WARRANTIES		6
	3.1	Title to Stock	6
	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	7
	3.5	Due Authorization; Consents	7
	3.6	Capitalization	7
	3.7	Financial Statements	8
	3.8	Real Property	9
	3.9	Leases	9
	3.10	Personal Properties	10
	3.11	Inventories	10
	3.12	Employment Arrangements	11
	3.13	Material Contracts and Arrangements	11
	3.14	Customers; Suppliers	13
	3.15	Accounts Receivable	13
	3.16	Permits, Licenses etc.	14
	3.17	Trademarks, Patents and Similar Rights	14
	3.18	Litigation and Compliance with Laws	15
	3.19	Extraordinary Events	16
	3.20	Insurance Policies	16
	3.21	Powers of Attorney; Bank Accounts	17
	3.22	Tax Returns	17
	3.23	Liabilities	19
	3.24	Books and Records	19
	3.25	Conflicts of Interest	19
	3.26	ERISA	20
	3.27	No Government Authorizations or Approvals Required	21
	3.28	Broker’s Fees	21

	3.29	Environmental	21
	3.30	Products Liability	23
	3.31	Information Technology Systems; Year 2000 Compliance	23
	3.32	Material Information	23
	3.33	Related Assets	24
	3.34	Investment Intent	24
	3.35	Review and Evaluation of Buyer Information	24
4.	BUYER’S REPRESENTATIONS AND WARRANTIES		24
	4.1	Organization and Corporate Power	24
	4.2	Due Authorization; Effect of Transaction	25
	4.3	No Governmental Authorizations or Approvals Required	25
	4.4	Broker’s Fees	25
	4.5	Capitalization	25
5.	CONDITIONS TO OBLIGATIONS OF SELLERS AND BUYER		25
	5.1	Withdrawal by Sellers	25
	5.2	Withdrawal by Buyer	26
	5.3	Notice of Withdrawal	27
6.	COVENANTS OF SELLERS AND THE COMPANY		27
	6.1	Access to Records and Properties Prior to the Closing Date	27
	6.2	Operation of the Business of the Company	28
	6.3	Expenses	31
	6.4	Taxes	31
	6.5	Parties to be Reasonable; Termination	31
	6.6	Notice of Changes	31
	6.7	Preservation of Business	31
	6.8	Litigation	32
	6.9	No Negotiations	32
	6.10	Financial Statements	32
	6.11	Limitations on Disposition	32
7.	SURVIVAL		33
	7.1	Limited Survival of Representations and Warranties	33
	7.2	Other	33
8.	RESTRICTIVE COVENANT		34
	8.1	Non-Competition	34
	8.2	Reasonableness of Restriction	34
	8.3	Modification of Restrictions	35
	8.4	Remedies	35
9.	INDEMNIFICATION		35
	9.1	Indemnification by Sellers and the Company	35

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	9.2	Indemnification by Buyer	35
	9.3	Survival of Indemnification	36
	9.4	Notice and Opportunity to Defend	36
10.	MISCELLANEOUS		36
	10.1	Waiver and Amendment	36
	10.2	Entire Agreement	37
	10.3	Interpretation	37
	10.4	Counterparts	37
	10.5	Notices	37
	10.6	Successors and Assigns	38
	10.7	Governing Law	38
	10.8	Severability	39
	10.9	Publicity	39
	10.10	Further Assurances	39
SCHEDULES
	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
	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
	A:	Buyer Note
	B:	Pledge Agreement
	C:	Guaranty

iii

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

iv

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”).

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

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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 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”).

2. CLOSING.

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;

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(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;

(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;

(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.

4

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;

(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.

5

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 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

6

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, 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,

7

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 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

8

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.

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

9

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.

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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 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 years have 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

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$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 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

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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

(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

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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 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

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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, order, writ, injunction, decree, demand or assessment issued by any court or any Federal, state,

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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,

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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 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

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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 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.

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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 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

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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 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

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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 Company under all Federal, state and local laws, rules, regulations, ordinances, programs, permits, guidances,

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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.

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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 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.

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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. 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.

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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 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

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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 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;

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(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.

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

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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. 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 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,

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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;

(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;

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(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.

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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 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 becomes 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.

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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.

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

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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 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.

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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 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.

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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 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.

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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).

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.

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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

Copy to:

Weycer, Kaplan, Pulaski & Zuber, P.C.

1400 Summit Tower

Eleven Greenway Plaza

Houston, Texas 77046-1104

Attn: Albert S. Weycer, Esq.

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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 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

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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.

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

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Exhibit A

Buyer Note

Exhibit B

Pledge Agreement

Exhibit C

Guaranty

Exhibit D

Security Agreement

Exhibit E

UCC-1 Financing Statement

Exhibit F

Lease Agreement

Exhibit G

Form of Opinion of the Company’s and Sellers’ Counsel

Exhibit H

Gerrans’ Employment Agreement

EX-10.2

EXHIBIT 10.2

LEASE AGREEMENT

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.

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.

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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 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.

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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.

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.

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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.

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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 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.

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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.

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

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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, 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

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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 within

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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.

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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 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.

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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.

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

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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.

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.

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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

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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 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

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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, 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.

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11.6 In the event that Landlord elects to repossess the Premises without terminating 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 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

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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.

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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 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

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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 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

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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 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

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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.

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.

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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 subsequent act by

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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

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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, 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.

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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 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

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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.

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.

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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 CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF TENANT’S OWN SELECTION, TENANT VOLUNTARILY CONSENTS TO THIS WAIVER.

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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

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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 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

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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:

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;

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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

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.

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16.5 Closing Costs.

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.

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.

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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

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EX-21

EXHIBIT 21

SUBSIDIARIES

The following are subsidiaries of the Registrant, Bolt Technology Corporation, a Connecticut corporation:

	State of Incorporation
A-G Geophysical Products, Inc.	Texas
Custom Products Corporation	Connecticut

The names of certain subsidiaries are omitted since such subsidiaries considered in the aggregate would not constitute a significant subsidiary at the end of the year covered by this report.

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Raymond M. Soto, Chairman of the Board, President and Chief Executive Officer of Bolt Technology Corporation, certify that:

1. I have reviewed this annual report on Form 10-K of Bolt Technology Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 24, 2004

/s/ Raymond M. Soto

Chairman of the Board, President and

Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Joseph Espeso, Senior Vice President - Finance and Chief Financial Officer, of Bolt Technology Corporation, certify that:

1. I have reviewed this annual report on Form 10-K of Bolt Technology Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 24, 2004

/s/ Joseph Espeso

Senior Vice President - Finance and

Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Bolt Technology Corporation (the “Company”) on Form 10-K for the fiscal year ended June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Raymond M. Soto, Chairman of the Board, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: September 24, 2004

/s/ Raymond M. Soto

Raymond M. Soto

Chairman of the Board, President and

Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Bolt Technology Corporation (the “Company”) on Form 10-K for the fiscal year ended June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Joseph Espeso, Senior Vice President-Finance and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: September 24, 2004

/s/ Joseph Espeso

Joseph Espeso

Senior Vice President - Finance and

Chief Financial Officer