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U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended June 30, 1995
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from __________ to _________
Commission file number 0-14068
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MEMRY CORPORATION
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(Name of small business issuer in its charter)
Delaware 06-1084424
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
57 Commerce Drive, Brookfield, CT 06804
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (203) 740-7311
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Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
None None
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Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.01 per share
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(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
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Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will 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-KSB or any
amendment to this Form 10-KSB. [ ]
Consolidated revenues of the issuer for the fiscal year ended June 30, 1995 were
$4,729,000.
The aggregate market value of voting stock held by non-affiliates of the
registrant was approximately $5,669,000 on June 30, 1995 based upon
the average of the bid and asked prices on that date.
The number of shares of Common Stock outstanding as of June 30, 1995:
8,009,997. All references to numbers of shares of Common Stock contained
herein with respect to periods prior to August 8, 1994 give effect to the one-
for-ten reverse stock split of the Company's Common Stock (the "Reverse Split")
effected on August 8, 1994.
Transitional Small Business Disclosure Format
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Yes NO X
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Memry Corporation (the "Company"), a Delaware corporation incorporated in 1981,
is engaged in the businesses of developing, manufacturing and marketing products
and components utilizing the properties exhibited by shape memory alloys (the
"Memry Segment"), and manufacturing and marketing metal parts and components
machined on screw machines and smaller metal working machines (the "Wright
Machine Segment"). The Company's principal executive offices are located at 57
Commerce Drive, Brookfield, Connecticut 06804 and its telephone number is (203)
740-7311.
MEMRY SEGMENT
SHAPE MEMORY EFFECT
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Shape memory alloys ("SMAs") possess the ability to change from one shape to
another in response to thermal changes, as well as the ability to return to
their original shape following deformations substantially greater than
deformation from which conventional alloys can recover. SMAs are capable of
producing force and motion at predetermined temperatures, to both control and
drive devices.
An actuator made from SMA can be designed to change its shape when either heated
or cooled, and return to its original position when the temperature condition is
reversed. This ability results from the transformation of the structure of the
SMA from one crystalline form to another in reaction to thermal changes. It is
not related to the normal thermal expansion and contraction properties of most
materials. Due to the crystalline structure change taking place, SMAs also
produce forces many times greater than thermal reactions in such items as bi-
metallic elements.
The major defining properties of SMAs with which the Company works are their
"super-elasticity" and their ability to demonstrate both a "one-way" memory and
a "two way" memory. Unlike an ordinary metal, certain SMAs are capable of fully
recovering their shape after being deformed as much as five percent. This is
more than 50 times the recovery ability of ordinary metals. This so-called
"super-elasticity" is becoming an important feature for a variety of medical
applications. When an actuator is required to perform a single actuation, it is
processed to return to and permanently retain its original shape when it reaches
its actuation temperature, a procedure referred to as imparting "one-way"
memory. The "two-way" actuation system requires that the materials be processed
such that they have their original shape at one temperature and other shapes at
different temperatures. The cycle of shape changes can (if the actuator is so
processed) be made to repeat almost indefinitely in response to temperature
changes. SMA actuation temperatures can be set from approximately -100 degrees
C (-150 degrees F) to 200 degrees C (392 degrees F). Actuators may be in the
form of helical coils, cantilevers (flat bending elements), a torsion member (a
rotating element) or a tubular connector.
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OPERATING DIVISIONS
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The Company's Memry Segment has established two operating divisions: Memry
Technologies, the research and engineering division, and Memry Products, the
marketing and sales division for all SMA-related products and materials. Memry
Technologies, the research and engineering division of Memry Segment, works with
customer-sponsored applied research, government research, grants and internal
funds to develop new products and materials. When these programs result in a
commercially viable activity, they will typically be transferred to the Memry
Products division for marketing, sales, distribution and customer support. The
Memry Products division was established to ensure a commercial focus to all
proprietary products and materials developed by the Company, inclusive of the
MEMRYSAFE(R) anti-scald products, the ULTRAVALVE (TM) shower and bath valve, the
FIRECHECK(R) line of fire safety valves and others. Fabrication and assembly of
all products sold by the Products division, except the ULTRAVALVE (TM), is
performed by the Technologies division. Wright Machine Corporation, a wholly
owned subsidiary of the Company ("Wright"), which owns and operates a
manufacturing facility specializing in screw machine and taper pin products,
assembles the ULTRAVALVE (TM) product and supplies it to the Memry Products
division. The Memry Segment had revenues of $1,013,000 and operating expenses of
$2,854,000 in fiscal 1995, compared to revenues of $558,000 and operating
expenses of $2,746,000 for fiscal 1994.
A. TECHNOLOGIES DIVISION
Memry Technologies ("Technologies"), the Company's research and engineering
division, is engaged in the research and development of both shape memory alloys
and the commercial product applications that flow from this knowledge.
Technologies is engaged in (i) the development of proprietary products,
incorporating SMAs, to be manufactured by the Company, (ii) the development of
SMA-based components pursuant to customer-sponsored development agreements for
incorporation in products manufactured by such customers, and (iii) customer and
government-sponsored research programs.
(I) PROPRIETARY PRODUCTS
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High Damping alloy. The Company has developed a proprietary composition of an
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existing SMA for application in the sporting goods industry. Although it is not
yet known whether the composition is patentable, the Company intends to file
both a trademark registration and a complete patent application in late 1995.
The property in question will allow the energy created when a hard object
strikes the material to be absorbed, without deformation, to a far higher degree
than currently available to manufacturers in the customer industry involved.
The resultant effect on the product involved is believed to be significant and
may therefore have commercial potential.
(II) ORIGINAL EQUIPMENT MANUFACTURER CUSTOMER-SPONSORED PROGRAMS:
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The Company is working on a number of programs to develop SMA components for
customers' products. The Company accepts customer-sponsored
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development contracts when management believes that the customer is likely to
order a successfully developed component or product in sufficient quantity to
justify the allocation of the engineering resources necessary. Whenever
possible, the contracts require the customer to purchase the commercialized
component from the Company, or to pay a royalty if the customer uses another
source. The exclusive supply or royalty arrangements are conditional upon
commercial practicability.
Generally under such programs, the identity of the customer is confidential; the
data, inventions, patents, and intellectual property rights which specifically
relate to the SMA component are either owned by the customer, or in several
instances shared between the Company and the customer; data, inventions,
patents, and intellectual property rights pertaining to the SMA technology that
do not specifically relate to the customer's product are to be owned in all
cases by the Company.
The Company has been working on some of the programs described below, most
specifically including the energy management valve systems, for a number of
years. Because the decision as to when a program is complete and ready for
commercialization belongs to the customer, and not to the Company, the Company
is not able to accurately predict if or when the products will ever come to
market. In any event, there can be no assurances that the development programs
described in the following four paragraphs will result in any manufacturing
order or royalty to the Company.
Valve products. The Company is working with a Canadian utility on valves for an
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energy management system. These valves, one of which has received U.S. patent
approval in joint ownership with the Company, would protect users from scalding
temperatures in the event of a malfunction of other components in the hot water
system. These valves are more complex than the valves utilized in the Company's
MEMRYSAFE(R) and ULTRAVALVE (TM) products described below, in that they would
allocate use of hot water to high-demand time periods.
Automotive. The Company has been working with a major manufacturer of engine
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components to develop a special sealing component made from SMA material.
Trials have been conducted and the Company and the customer are presently
engaged in filing joint patents on the invention. While results are encouraging
there can be no assurances that the customer will proceed to commercialize the
invention or that the Company will manufacture the product should it become
commercial.
Medical. The Company is developing several SMA products and devices, ranging
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from surgical clips, catheter guidance forms, stents and speech pathology tools,
and others using plastic with shape memory properties for orthoscopic
procedures.
Eyeglass Frames. The Company is working with one customer who has received
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patents on certain methods of using SMA in eyeglass frames, and has provided
numerous prototypes now under evaluation by the customer.
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(III) CUSTOMER AND GOVERNMENT-SPONSORED RESEARCH PROGRAMS
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The Company is currently involved in a number of research programs. In July
1993, a two year, Phase II contract was awarded to the Company under the Small
Business Innovation Research ("SBIR") program by the National Institute of
Health to study the use of super-elastic, titanium-based alloys as replacement
for the current nickel-based alloys used in orthodontic procedures. The value
of this contract is $412,625, of which approximately $125,000 was billed during
fiscal 1995. An extension to this contract was granted to the Company in May,
1995, allowing the Company to complete the contract by December 1995. A two
year, Phase II SBIR contract in the amount of $432,586 was awarded to the
Company in December 1993 by the United States Air Force for the development of
SMA-based reusable lock nuts. These lock nuts are intended to ease costly
inventory and logistics problems at United States Air Force maintenance
facilities by eliminating the need to use conventional lock nuts which are worn
out by vibration and have to be frequently changed. Approximately $153,000 was
billed on this contract in fiscal 1995, with the balance to be completed during
fiscal 1996. In March 1995 the Company received a Phase II SBIR contract from
the National Aeronautical and Space Administration ("NASA"), having a value of
$589,000 over a two year period, for the development of shroud rings in the
compressor sections of small jet turbines. Coincident with this program,
Connecticut Innovations, Incorporated (a for-profit quasi-public development
entity of the State of Connecticut), awarded the Company a $50,000 grant to
assist the Company in the commercialization of the results from the NASA
program. The Company was also involved in several smaller programs.
In addition, Technologies expects to receive a $308,000 eighteen-month contract
during fiscal 1996 from McDonnell Douglas for the development of SMA actuated
control surfaces on advanced helicopter blades. Originally scheduled to be
awarded in the fall of 1994, McDonnell Douglas has only recently commenced work
on this program.
Technologies has, over the past several years, completed several other internal
and customer-sponsored research programs which related to SMAs for space
applications, fasteners and coupling applications, experimental valve products,
electrical components, and advance engine components. As opportunities arise,
the Company will continue to pursue funded development programs which advance
the Company's knowledge of shape memory materials and demonstrate clear
potential for commercial products which the Company can manufacture. Several
program proposals are currently awaiting responses from the government or other
customers. Internally funded work will continue in support of the Company's
proprietary products and materials.
Contracts with the U.S. Government are subject to termination or renegotiation
by the U.S. Government pursuant to standard government procurement contract
terms. There can be no assurance that any further development will result from
these research activities or that they will result in the development of any
commercially feasible product or
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component, or, if developed,, that any manufacturing order or royalty will be
received.
The total revenue received from externally funded programs in fiscal 1995 was
approximately $349,000, compared to $239,000 in fiscal 1994. Internally funded
program costs amounted to $17,000 in fiscal 1995 and $168,000 in fiscal 1994.
The cause for this dramatic decrease was primarily lower developmental costs
relating to the MEMRYSAFE(R) products, which are now in production.
B. PRODUCTS DIVISION
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When products, components or alloy compositions developed by Technologies reach
a commercial stage, they are transferred from Technologies to the Products
division, the Company's marketing, sales, distribution and customer support
division. Although the Company has, in the past, acquired product from outside,
the division's primary focus is reaching commercial success on internally
developed product. The division currently markets two major product lines: the
MEMRYSAFE(R) temperature-actuated flow reduction products and the ULTRAVALVE
(TM) electronic combination shower/tub mixing valve. In addition, the division
markets the FIRECHECK(R) line of industrial fire safety valves, custom SMA
materials and Mitsubishi's proprietary shape memory polymer.
(I) MEMRYSAFE(R) PRODUCTS
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The MEMRYSAFE(R) products provide protection from accidental scalding in
showers, bathtubs and sinks by instantly restricting the flow at the point of
outlet prior to the onset of a scalding condition. Fiscal 1995 represented the
first year in which the entire line of auto-resettable valves was available to
the market, commencing with distribution in Australia, followed by Canada and
the U.S. The Company is aware of only one directly competitive product in the
U.S. and another in Australia. The principal alternative to the Company's
products are conventional thermostatic and pressure-balanced mixing valves
which, the Company believes, are both more expensive to manufacture and install,
and less effective in protecting the user from burns.
The MEMRYSAFE(R) products are designed to be sold both as retail retrofit
products as well as components for original equipment manufacturers. The
division sells to distributors with established market positions, original
equipment manufacturers and direct to governmental authorities. Rye Australia
Pty. Limited and the successor distributor in Australia, Edward Keller Pty.
Limited accounted for over 50 percent of the sales of this line in fiscal 1995.
With expanding distribution, primarily in North America, the Australian
proportion of total MEMRYSAFE(R) sales is expected to diminish to less than 15
percent in the current fiscal year. Retail prices in the U.S. range from $7.89
to $24.99.
(I) ULTRAVALVE (TM) PRODUCTS
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The micro-processor controlled ULTRAVALVE (TM) shower and bath valve was
introduced to the plumbing industry in April, 1989, and the first products were
sold in June, 1990. The Company believes that the ULTRAVALVE (TM) systems has
clear performance advantages over other products on the market because it
combines the safety and comfort features of
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thermostatic mixing valves with the ease and accuracy of computer-controlled
temperature setting. As an added safety feature, the ULTRAVALVE (TM) system also
incorporates the Company's patented anti-scald protection. The ULTRAVALVE (TM)
system is assembled at the Company's Wright facility, with certain components
purchased from outside vendors.
In May, 1995 the Company entered into a three year agreement, with American
Standard, Inc. whereby American Standard became the exclusive marketer and
distributor of the ULTRAVALVE (TM) product line in the United States. It is
marketed under both the American Standard and Ideal Standard brand names. The
Company retained rights to market and distribute the line outside the U.S.
The primary competition for this product line are the higher end pressure-
balanced valves manufactured and sold by most major U.S. plumbing companies and
thermostatic valves manufactured by selected European companies such as F.
Grohe. The Company holds three U.S. and two foreign patents on the ULTRAVALVE
(TM), and has patents pending in additional foreign jurisdictions.
(iii) OTHER PRODUCTS
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The Company, in partnership with Paradigm Corporation, entered into a three year
exclusive distribution agreement with Mitsubishi Heavy Industries America, Inc.
("Mitsubishi") in 1991 for the distribution of Mitsubishi's new shape memory
polymer in North America. Although the agreement expired at the end of 1994 and
the Company no longer has any rights of exclusivity, Memry continues to market
this material for potential applications in the medical, consumer goods,
sporting and packaging markets. The Company's sale of Mitsubishi polymers in
fiscal 1995 were $16,000, compared to $30,000 in fiscal 1994. The polymers'
properties are similar to SMA in that they exhibit the ability to transform
their shape due to temperature changes.
The Company's FIRECHECK(R) line of industrial fire safety valves utilizes an SMA
actuator/sensor to protect material supply lines using pneumatically operated
control valves and gas storage cylinders by exhausting pneumatic control
pressure into the atmosphere when an over-temperature condition is sensed,
allowing the open valve to close. The first version of this line was introduced
to the semi-conductor industry late in 1991, for which it received an R&D
Magazine 100 award as one of the nation's 100 best new products. In March 1995
FIRECHECK(R) received Factory Mutual approval, a third party certification as to
its performance and manufacture. The Company is in the process of setting up
distribution for this line with valve automation companies and major valve
distributors, including Conbraco and McMaster Carr. Competition for this
product includes burn-through plastic tubing, expensive infrared monitoring
systems, and sophisticated electronic valving.
A rapidly growing area of activity for the division is the provision of
customer-specific SMA material in both wire and flat rolled form, usually nickel
titanium in its "super-elastic" state. Nearly all such customers are involved
in the medical industry, requiring precise processing controls, extensive
certification and exacting specifications. One such customer, InStent Inc.,
utilizes material
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supplied by the Company for its recently FDA-approved shape memory stent for
bilary application. Competition for the applications being addressed by the
division includes Raychem, US Nitinol, SMA Applications Inc., and several
additional small processors. The Company possesses no patents or trademarks
upon which it is relying in addressing these markets.
C. SUPPLIERS
The Company expects to be able to acquire, from several sources, shape memory
alloys in sufficient quantities for its needs, and does not anticipate any
difficulty in continuing to obtain such supplies.
D. PRODUCTION CAPABILITY AND MANUFACTURING
The Company performs all of the final processing of its SMA requirements in its
facilities in Brookfield, Connecticut, based upon its receipt of the SMAs in the
form of rod or wire from its suppliers. The Company employs two spring winder
production lines and a rolling mill, capable of handling wire diameters from 2mm
to 8 mm, a CNC lathe and a CNC mill, and numerous fixtures and apparatus
specialized for either the processing of the materials or assembly of the
products. During fiscal 1995 the Company relocated its MEMRYSAFE(R) assembly
line from Wright to the Connecticut facility and internalized its capability to
produce the FIRECHECK(R) product line. The Company relies heavily on outside
suppliers for its non-SMA components and expects to continue to do so. Certain
of the programs under development would require the purchase of specialized
equipment if they become commercial. However, the Company anticipates no
difficulty in obtaining such equipment as, and when, needed.
E. COMPETITION
The Company considers its competition on two levels, technologically and for
resultant products. Competition with respect to commercialized products is
discussed supra with respect to the major product lines. See "Products
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Division." Technologically there are several U.S., Japanese and European
industrial concerns with substantially greater resources than the Company
engaged in the supply or use of SMAs. In the U.S., Raychem Corporation
pioneered in the development of SMAs and holds numerous patents in the field.
Although much of its business was divested in the early '90's, Raychem remains
both an important supplier to the Company and a competitor for medical
applications. Special Metals Inc. has become an important alloy provider and,
as of now, has limited participation in the utilization of the alloys. Japanese
participants include Furakawa Electric Co., Sumitomo Co., and Tokin Co., all of
which produce alloys and sell to users in Japan and abroad. European
participants include Krupp AG, Trefimetaux and AMT, a member of the SwissMetal
group of companies. Next to Raychem in the U.S., management believes that the
Beta Group, Inc. is likely the largest firm engaged in the use of SMAs with its
patented position in eyeglass frames.
The Company intends to compete, and advance its position, based on its knowledge
of the processing parameters of the alloys and unique design
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capabilities, particularly in the valving field. Through the conduct of funded
research the Company is able to maintain a depth of technological resource
unique among the non-alloy producing industry participants. The Company
believes that it competes mostly on technological capacity and quality in the
Memry Segment, although price and production capability are also important.
WRIGHT MACHINE SEGMENT
The Company's Wright Machine Segment consists of Wright Machine Corporation
("Wright"), a wholly owned subsidiary of the Company with a 120-year history as
a New England manufacturer of screw machine and taper pin products. Wright
provides these products to the plumbing, electrical, electronic, fire
protection, valve, appliance and automotive markets. Within the overall
activity of Wright, it has three basic business segments: (i) the manufacture of
threaded rings for the plumbing industry, (ii) the manufacture of predominantly
brass parts on screw machines ranging in size between 1.5 inches to 2.5 inches,
and (iii) the manufacture of custom and standard taper pins, most of which are
made of various grades of stainless and carbon steel. Wright also assembles the
ULTRAVALVE (TM) product line for the Memry Products division. Approximately 80%
of Wright's revenues result from sales of screw machined products.
Historically, Wright has had a reputation as a quality producer of brass and
steel parts with superior delivery and performance. However, liquidity
constraints during fiscal 1995 have adversely affected this reputation due to
Wright's difficulty in obtaining timely deliveries of raw materials. The
Company's successful private placement of equity securities in the summer of
1995 (see Note to the Company's financial statements) has enabled Wright to
again obtain raw materials on a timely basis. It is hoped that Wright has
already begun the process of restoring its reputation.
The majority of Wright's customers are within a 300 mile radius of Wright's
factory in Worcester, Massachusetts. However, Wright services customers
throughout the United States. Wright had revenues of $3,716,000 and operating
expenses of $3,667,000 in fiscal 1995, as compared to revenues of $3,707,000 and
operating expenses of $4,476,000 in fiscal 1994. In fiscal 1995, Wright's eight
largest customers accounted for 47% of its total revenues. Obviously, the loss
of one or more of these customers would have a material adverse effect on
Wright's operations.
SUPPLIERS
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Wright buys free cutting brass rod and hollow brass tube at market prices direct
from producers and other suppliers. Stainless and other steel supplies are
provided by a large number of suppliers. These materials are all available from
numerous sources and Wright does not anticipate any difficulties in being able
to acquire any of such materials.
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COMPETITION
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Wright's competition comes from other screw machining job shops, primarily on
the East Coast (in proximity to most of Wright's customers) and, frequently, the
customer's own internal machining capacity. The primary measures of
competitiveness are price, quality and delivery, with price frequently being the
defining measure. There has been a significant contraction in Wright's industry
over the past five years, resulting in fewer but more able competitors. Wright
enacted major cost reduction measures in the spring of 1994 and believes it is
fully competitive today. However, several of the machine shops and many
internal screw machine facilities with which Wright competes have greater
financial strength and similar production capabilities.
PATENTS AND TRADEMARKS
The Company owns two patents relating to the SMA scald-protection valves, the
last of which expires in the year 2010. The Company owns three commercially
material U.S. and one Canadian patent for the ULTRAVALVE (TM) SYSTEM. The
Company has filed for patent protection for the ULTRAVALVE (TM) system in other
countries, including the European Economic Community. U.S. patent protection for
the ULTRAVALVE (TM) product expires in 2007. The Company holds nine other
commercially-material U.S. patents. These include a FIRECHECK (TM) valve patent
which expires in 2003. The Company expects a second FIRECHECK (TM) patent for an
improved version to be issued during calendar year 1995. These patents are
important for protecting the intellectual property of the Company's products in
a competitive marketplace. The Company anticipates filing for additional patents
during fiscal 1996 for both alloys and certain applications.
The Company's patent rights do not dominate the field of SMA utilization, and
most of them do not cover presently proposed products or product components.
The Company's patent rights obviously do not dominate the field of plumbing
products. The Company does believe, however, that its patents provide it with a
leadership position in such technology.
While a U.S. patent is presumed valid, the presumption of validity is not
conclusive, and the scope of a patent's claim coverage, even if valid, may be
less than needed to secure a significant market advantage. Gaining effective
marketing advantage through patents can require the expense, uncertainty and
delay of litigation. Although the Company's technical staff is generally
familiar with the SMA patent environment and has reviewed patent searches when
considered relevant, the Company has not requested any legal opinion to
determine whether any of its contemplated products would infringe on any
existing patents.
The Company has material trademark registrations for the MEMRYSAFE (TM),
SHOWERGARD (TM) and FLOWGARD (TM) trademarks.
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RESEARCH AND DEVELOPMENT
During fiscal 1995, approximately $297,000 was spent on research and development
primarily in the areas of (i) the development of proprietary products
incorporating SMAs to be manufactured by the Company, (ii) the development of
SMA components pursuant to customer-sponsored development arrangements for
potential incorporation in products manufactured by such customers, and (iii)
customer and government-sponsored research programs, as compared to
approximately $147,000 in fiscal 1994. These research and development costs are
borne directly by customers of the Company.
EMPLOYEES
As of June 30, 1995, the Company and its subsidiary had fifty-eight full-time
and three part-time employees. Of the full-time employees, seven were executive
or management personnel and four were science and research personnel. Forty-two
of the full-time employees and all of the part-time employees were employed by
Wright. None of the employees is represented by collective bargaining units.
ITEM 2. DESCRIPTION OF PROPERTY
The Company has a lease, which expires on February 1, 1996, for office and
manufacturing space located at 57 Commerce Drive, Brookfield, Connecticut 06804.
The Company has been in contact with its landlord and expects to renew this
lease at the expiration of its term. The premises have a floor area of
approximately 21,350 square feet, of which approximately 5,500 square feet is
used by the Company for general administrative, executive, and sales purposes,
and approximately 11,350 square feet is used for manufacturing and research and
development operations. The lease provides for an average annual base rental of
$113,000.
In May 1993, the Company sublet approximately 4,500 square feet of its office
space at 57 Commerce Drive, providing rental income of $35,000 annually. In
August the subletor notified the Company that it would be vacating by October
31, 1995.
Wright owns approximately 2.9 acres of land, together with manufacturing and
office facilities, located at 69 Armory Street, Worcester, Massachusetts. Three
buildings have an aggregate floor area of approximately 85,000 square feet, of
which approximately 5,000 square feet is used for general administrative,
executive, and sales purposes, and the remainder for manufacturing screw machine
and taper pin products. The property is subject to a mortgage in favor of
Shawmut Bank, which secures a loan used by Wright to acquire the property. See
"Management Discussion and Analysis or Plan of Operations" and Note 10 to
the Financial Statements for a discussion of the status of the mortgage loan.
Management believes that the existing facilities of the Company and Wright are
suitable and adequate for their present needs and that additional facilities
will be readily available if needed. Management also believes that the
properties are adequately covered by insurance.
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ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings, as set forth below.
Although it is not feasible to predict the outcome of such proceedings or any
claims made against the Company, the Company does not anticipate that the
ultimate liability, if any, will materially affect the Company's financial
position.
Data Switch Corporation v. Memry Corporation, et al. Verdon Corporation owns
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property located at 83 Keeler Avenue, Norwalk, Connecticut (the "Property")
which it leased to New Dimensions in Education, Inc. ("New Dimensions"). New
Dimensions sub-leased the Property to Data Switch Corporation ("Data Switch"),
which in turn sub-leased the Property to the Company. On December 18, 1990,
Data Switch commenced an action in the Connecticut Superior Court against
Verdon, New Dimensions and the Company seeking a declaratory judgment that the
lease was not renewed on June 12, 1990, for an additional five-year term. The
Company supports this request; however, Verdon and New Dimensions have taken the
position that the lease was renewed by the Company. On October 28, 1992, David
O'Toole, successor to Verdon Corporation, filed a cross-complaint against the
Company alleging that the Company intentionally and/or negligently damaged the
Property during the period of its tenancy. Similar allegations were also made
against New Dimensions and Data Switch. O'Toole's allegations fail to include
any specific itemization of the nature or scope of the injuries alleged. No
formal discovery has taken place to date. Trial has been scheduled to commence
in February 1996.
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The Company intends to defend this action vigorously.
Catizone v. Memry Corporation. The Company is a defendant in an action entitled
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Catizone v. Memry Corporation, et al., No 91 Civ. 8023 (United States District
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Court, Southern District of New York). In November 1991, Mr. Pat Catizone
commenced an action against the Company, American Stock Transfer & Trust Co.
("AST&T"), and Mr. Neil E. Rogen, relating to Mr. Catizone's claim of ownership
to 10,000 shares of the Company's Common Stock. In June, 1991, Mr. Catizone
delivered to AST&T a certificate representing 10,000 shares of the Company's
Common Stock in the name of Mr. Rogen and bearing a restrictive transfer legend
and requested that the Company issue a certificate without a restrictive legend
in the name of Mr. Catizone. Mr. Catizone claimed to have acquired the
certificate from Mr. Perry Constantinou as collateral for a loan made some years
earlier, who had in turn acquired the certificate from Mr. Rogen in 1984 or
1985. The Company refused Mr. Catizone's request on the grounds that Mr.
Rogen's transfer to Mr. Constantinou was in violation of the federal securities
laws. Mr. Catizone commenced his action in the Supreme Court of the State of
New York, but the action was removed by the defendants to the United States
District Court for the Southern District of New York. Mr. Catizone is seeking an
order directing the Company to issue an unrestricted certificate representing
10,000 shares of the Company's Common Stock in his name, together with damages
equal to the difference between the market value of the stock from the time that
he first made demand on AST&T through the date of trial, as well as attorneys'
fees and costs. On July 25, 1995, the Court issued an opinion by which it
granted the Company's Motion for Summary Judgment, and judgment was shortly
thereafter entered in the Company's favor. Mr. Catizone has appealed from the
entry of judgment in the Company's favor, which appeal is entitled Catizone v.
-----------
Memry Corp., et al., No. 95-7874, pending before the United States Court of
- ---------- -----
Appeals for the Second Circuit. The Company filed a Motion for Summary Judgment
in September 1993. The Company intends to contest the appeal vigorously.
Neil E. Rogen v. Memry Corporation. In September 1992, Neil E. Rogen, formerly
- ----------------------------------
an officer and director of the Company, brought an action against the Company
for the alleged breach of an employment agreement between Mr. Rogen and the
Company and for indemnification for legal expenses incurred by Mr. Rogen in
connection with an investigation of and subsequent lawsuit against Mr. Rogen by
the Securities and Exchange Commission and certain related and unrelated
lawsuits. Mr. Rogen commenced his action in the United States District Court for
the Southern District of New York. Mr. Rogen sought at least $215,000 plus
interest, costs and attorney's fees as damages for the alleged breach of his
employment agreement, and in excess of $312,000 plus attorney's fees as
indemnification for expenses incurred in connection with the investigation and
the lawsuits. On December 22, 1992, the Company filed an answer and a
counterclaim against Mr. Rogen, alleging breaches of fiduciary duty and
unauthorized acts by Mr. Rogen and seeking monetary damages for the same. In
April 1994, the Company moved for summary judgment with respect to all counts of
Mr. Rogen's complaint. On May 23, 1995, the Court issued an opinion by which it
granted the Company's Motion for Summary Judgment on grounds of improper venue.
Judgment was subsequently entered in the Company's favor on May 31, 1995. No
appeal has been taken from the judgment entered in the Company's favor. Counsel
for Mr. Rogen has indicated that he intends to refile the action in a different
venue. The Company intends to contest the case vigorously.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
12
<PAGE>
PART II
ITEM 5. MARKET FOR THE COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the OTC Bulletin Board (through which
various market dealers make the market of the Company's Common Stock and trades
are reported through what is commonly known as the "pink sheets") under the
symbol MRMY. Prior to August 8, 1994, the Company's Common Stock was traded
under the symbol MRMT. On August 8, 1994, the Company effected a one-for-ten
reverse stock split (the "Reverse Split") of its Common Stock. It should be
noted that all references to Common Stock (both number of shares and per share
prices) have been adjusted to reflect the Reverse Split. On June 30, 1995,
there were 1,521 holders of record of the Company's Common Stock.
The following table sets forth, for the periods indicated, the quarterly high
and low representative bid quotations for the Company's Common Stock as reported
by the National Quotations Bureau. Quotations reflect inter-dealer prices,
without retail mark-ups, mark-downs, or commissions, and may not necessarily
represent actual transactions.
<TABLE>
<CAPTION>
Fiscal year ended
June 30 1995 1994
- ----------------- ------------- -------------
High Low High Low
------ ----- ------ -----
<S> <C> <C> <C> <C>
1st Quarter $2.50 $1.00 $4.69 $1.25
2nd Quarter 1.88 0.75 6.56 2.19
3rd Quarter 1.69 0.50 5.00 1.25
4th Quarter 1.38 0.63 2.70 1.25
</TABLE>
The Company has never paid a cash dividend on its Common Stock and the Company
does not contemplate paying any cash dividends on its Common Stock in the near
future. As long as any shares of Series G Preferred Stock are outstanding, the
Company may not declare or pay a dividend on any shares of Common Stock unless
the Company, prior to such declaration or payment, pays or distributes to each
holder of Series G Preferred Stock an amount of cash or other property equal to
the sum of (I) any accrued and unpaid dividends on such share of Series G
Preferred Stock, plus (II) the product of (x) the amount of cash or other
property paid to a holder of one share of Common Stock, multiplied by (y) the
number of shares of Common Stock which each holder of Series G Preferred Stock
would then be able to acquire upon the immediate conversion of all of such
holder's shares of Series G Preferred Stock. In addition, in the event that the
Company has not effected a registration statement to cover the resale of the
common stock underlying outstanding shares of Series G Preferred Stock on or
prior to March 15, 1996, the holders of the Series G Preferred Stock will be
entitled to receive, when, as and if declared by the Board of Directors of the
Company, until such time until such registration has been effected, a quarterly
dividend of $130.00 per share, accruing commencing on March 16, 1996, and shall
be paid pro rata to the holders of the Series G Preferred Stock entitled thereto
in proportion to the number of shares of Series G Preferred Stock owned by each
such holder.
13
<PAGE>
By letter agreement dated May 22, 1995 between Harbour Holdings Limited
Partnership ("Harbour") and the Company, Harbour agreed to accept the issuance
to it by the Company of 747,500 shares of Common Stock as payment in full of
declared, accrued and unpaid dividends in the amount of $598,000 that accrued
prior to June 30, 1993 with respect to shares of Series A Preferred Stock and
Series B Preferred stock held at such time by Harbour. (See "Management's
Discussion and Analysis or Plan of Operation")
The loan agreement between Wright Machine Corporation, a wholly owned subsidiary
of the Company, and Shawmut Bank (described in Note 10 to the financial
statements) restricts Wright from paying dividends to the Company.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(a) LIQUIDITY AND CAPITAL RESOURCES
The Company's consolidated financial statements have been presented on a going
concern basis which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company has incurred net
losses of $2,392,000 and $3,358,000, and negative cash flows from operations of
$1,869,000 and $2,250,000, for the years ended June 30, 1995 and 1994,
respectively. As a result, the Company has a stockholders' deficit of $1,031,000
and its current liabilities exceed its current assets by $2,294,000 as of June
30, 1995. In addition, the Company's subsidiary, Wright Machine Corporation
("Wright"), as of June 30, 1995, had defaulted on its loan agreements which
total $1,078,000 and was subject to a forbearance agreement with its bank (see
Notes 10 and 14). These conditions raise substantial doubt about the Company's
ability to continue as a going concern.
During fiscal 1995, the Company continued to experience the significant
liquidity constraints present in fiscal 1994. The negative cash flow from
operations of $1,869,000 caused the Company to experience raw material shortages
and therefore lower product sales revenues at both segment levels. In addition,
the Company required a $109,000 investment in equipment purchases for
MEMRYSAFE(R) production and shape memory wire processing. Although the Company
did raise additional capital through private placements, $1,622,000 closed in
the last month of the fiscal year and therefore the Company could not experience
any substantial benefits in fiscal 1995 as such benefits relate to increased
revenues for fiscal 1995.
In fiscal 1996, the Company anticipates that it will continue to incur losses
from operations until the fourth quarter, at which time the Company expects to
be cash flow positive. The Company plans to continue to maintain stringent
control on expenses while increasing its revenues and improving gross profit
margins. The Company believes the $2,492,000 of capital raised through private
placement agreements during fiscal 1995 (most of which occurred during the
fourth quarter), and $1,561,000 in the first quarter of fiscal 1996 is
sufficient to cover the Company's working capital requirements for fiscal 1996.
In addition, the Company renegotiated its debt with Wright's bank through July
1, 1996 as described below. However, it is the Company's intent to seek re-
financing with more favorable terms during fiscal 1996 (although there can be no
assurances that the Company will be successful). On October 12, 1995 the Company
amended its Convertible Subordinated Debenture Purchase Agreement with
Connecticut Innovations, Incorporated, described below, and is no longer in
default of covenants thereunder.
The Memry segment's product sales efforts were severely impacted by limited raw
material purchases and customer concerns about production capabilities due to
the liquidity constraints of the past two fiscal years. The capital raised
during the last quarter of fiscal 1995 and the first quarter of fiscal 1996
should alleviate these obstacles. The Company believes that liability and safety
issues for the major original equipment manufacturers ("OEMs") in fiscal 1996
and the public housing sectors, as it related to anti-scalding, will be the
market drivers for increased sales for the MEMRYSAFE(R) product line and to a
lessor extent ULTRAVALVE(TM) products. The Company intends to reduce its
manufacturing costs substantially as it relates to MEMRYSAFE(R) through the
purchase of hard-tooling, although as of October 12, 1995 there are no
commitments to purchase the same. On April 1, 1995 the Company and American
Standard, Inc., a major plumbing OEM, entered into an agreement in which the
Company appointed American Standard as its exclusive sales and marketing
distributor in the United States. In addition, in May 1995 the Company received
a one year blanket purchase order with American Standard, Inc. for 1,000 units
of ULTRAVALVE(TM) product. The shape memory effect wire and wire shapes have the
ability to generate larger sales volumes than in the past due to the numerous
potential medical applications of the NiTi wire. During fiscal 1995, however,
due to the Company's capital expenditure constraints, the Company could not
pursue these potential revenue producing sales. Research and Development has a
Government contract backlog of $949,000 of which $598,000 is expected to be
billed in fiscal 1996. The Wright segment has also suffered liquidity
constraints over the past two fiscal years which has caused it to be adversely
affected in relationship to its timely delivery performance. The Company's
successful private placement of equity in the last quarter of fiscal 1995 and
first quarter of fiscal 1996 has enabled Wright to again obtain the raw
materials necessary to deliver on a timely basis. Wright will be aggressively
approaching current and former customers which it believes have sourced product
elsewhere. Wright also expects to increase its margins through the re-evaluation
of its costing methods and the analyzation of its production efficiency.
On October 12, 1995, the Company amended a Convertible Subordinated Debenture
Purchase Agreement (as so amended, the "Purchase Agreement"), dated as of
December 22, 1994, with Connecticut Innovations, Incorporated ("CII"). Pursuant
to the Purchase Agreement, CII acquired from the Company the following (the "CII
Securities"): (i) a Convertible Subordinated Debenture, dated December 22,
1994, in the principal amount of $763,208, as amended by a First Addendum to
Convertible Subordinated Debenture dated as of October 12, 1995 (as so amended,
the "Debenture") currently convertible into Common Stock, subject to the
limitation set forth below, at a conversion price of $0.80 per share, (ii) a
warrant, dated December 22, 1994, as amended by a First Addendum to Stock
Subscription Warrant (as so amended, the "Class I Warrants"), initially
exercisable to purchase 508,805 shares of Common Stock at a price of $2.15 per
share and currently exercisable, subject to the limitation set forth below, to
purchase 1,176,269 shares of Common Stock at a price of $0.93 per share, (iii) a
warrant, dated December 22, 1994, as amended by a First Addendum to Stock
Subscription Warrant (as so amended, the "Class II Warrants"), initially
exercisable to purchase 305,283 shares of Common Stock at a price of $2.75 per
share and currently exercisable, subject to the limitation set forth below, to
purchase 705,485 shares of Common Stock at a price of $1.19 per share, and (iv)
a warrant, dated December 22, 1994, as amended by a First Addendum to Stock
Subscription Warrant (as so amended, the "Class III Warrants"), initially
exercisable to purchase 100,000 shares of Common Stock at an exercise price of
$1.00 and currently exercisable, subject to the limitation set forth below, to
purchase 100,000 shares at an exercise price of $0.65, such warrant being an
amendment and restatement of a warrant previously held by CII to purchase 10,000
shares of Common Stock at an exercise price of $10.00 per share.
Pursuant to the Purchase Agreement, CII purchased the Debenture, the Class I
Warrants and the Class II Warrants for an aggregate purchase price of $763,208,
comprised of (i) $370,153 in cash, (ii) delivery to the Company by CII of a 10%
Convertible Demand Note of the Company in the principal amount of $334,847 (the
"Note") marked paid in full, and (ii) delivery to the law firm of Finn Dixon &
Herling as escrow agent (the "Escrow Agent") of a check in the amount of $45,000
pursuant to an
14
<PAGE>
Escrow Agreement dated as of December 22, 1994, as amended October 12, 1995,
among the Company, CII and the Escrow Agent. Pursuant to the terms of the
Purchase Agreement, the Company is required to file a registration statement
(the "Registration Statement") to cover, inter alia, the resale by CII of the
----- ----
shares of Common Stock underlying the CII Securities (the "Registrable
Securities") and is required to cause the Registration Statement to become
effective no later than March 15, 1996, maintain the effectiveness of the
Registration Statement for a period of three years from its effective date,
subject to the provisions of the Purchase Agreement, and use its best efforts to
allow CII to continually sell Registrable Securities pursuant to such
Registration Statement free from any stop orders or suspensions by the Company
or advice of counsel to the contrary. The exercise or conversion, as
applicable, of the CII Securities is subject to the limitation that prior to the
earlier to occur of December 20, 1995 or the date on which the Company has
authorized and reserved for issuance a sufficient number of shares to allow for
the full exercise and conversion of the Registrable Securities, (i) none of the
Class I Warrants, the Class II Warrants or the Class III Warrants may be
exercised, and (ii) the Debenture may not be converted at a per share price
other than $1.50.
CII has been granted a "put" right if (i) at any time before the earlier of
October 12, 2005 and the date on which CII ceases to hold at least 35% of the
Registrable Securities the Company ceases to (a) maintain its corporate
headquarters and a majority of its shape memory business operations in the State
of Connecticut, (b) base its president and chief executive officer, all of its
administrative and financial staff, all of its marketing and customer service
staff (excluding individuals specific to Wright only), and all of its research
and development staff in the State of Connecticut, (c) conduct a majority of its
operations in the aggregate (including manufacturing and production), directly
or through subcontractors and through licensed operations, in the State of
Connecticut (excluding Wright's business related to the production of screw
machine products and taper pins), and (d) maintain its principal bank accounts
with banks located in the State of Connecticut, excluding all banks associated
with Wright; or (ii) the Company fails (a) to cause the effectiveness of the
Registration Statement by March 15, 1996, (b) to keep the Registration Statement
effective for an aggregate of 120 days during any rolling twelve month period,
or (c) to have authorized and unissued shares of Common Stock reserved for the
full exercise and conversion of the CII Securities by December 20, 1995. Upon
CII's exercise of its put, the Company shall be obligated to purchase from CII
all CII Securities and Registrable Securities held at that time by CII for a
price equal to the greater of (i) the amount of CII's investment plus an amount
calculated to yield to CII a compounded rate of return of 25% per annum plus, in
the case of Common Stock issued upon the exercise of the Class I Warrants, the
Class II Warrants or Class III Warrants, any exercise price paid to acquire
Common Stock, or (ii) the difference between (x) the product of the current
market price per share of the Common Stock included within or acquirable upon
the exercise or conversion of the CII Securities, minus (y) any exercise prices
that would have to be paid upon the full exercise of the remaining Class I
Warrants, Class II Warrants and Class III Warrants included within the CII
Securities and the Registrable Securities.
15
<PAGE>
As of July 20, 1995, Shawmut Bank, N.A. (the "Bank") and Wright Machine
Corporation ("Wright") executed a Third Amendatory Agreement to Revolving Loan,
Term Loan and Security Agreement by which the Bank has agreed to extend the
termination date of its revolving loan to Wright to July 1, 1996, if not sooner
demanded, subject to Wright's continued compliance with certain covenants
included in the Revolving Loan, Term Loan and Security Agreement dated February
7, 1990 as amended to date (as so amended, the "Loan Agreement"). The Bank also
agreed that the final installment on the mortgage note and term note evidencing
indebtedness owed by Wright to the Bank would be set at July 1, 1996. Among
other things, the Loan Agreement requires Wright to pay transaction fees of
$1,500 per month for the period from July 1, 1995 through September 30, 1995,
$3,000 per month for the period from October 1, 1995 through December 31, 1995,
$4,500 per month for the period from January 1, 1996 through March 31, 1996, and
$6,000 per month for the period from April 1, 1996 through June 30, 1996.
However, if Wright meets or exceed certain projected net income levels for the
six months ended December 31, 1995 and continues to meet or exceed projected
monthly net income levels thereafter, then the monthly fee will remain at
$3,000. If at any time after December 31, 1995, however, Wright fails to meet
or exceed net income projections, the fee will increase to $4,500 per month for
the next three months and to $6,000 per month for any months thereafter in which
there are outstanding obligations of Wright owed to the Bank. Interest on the
revolving loan, mortgage loan and term loan has been reset to the Bank's base
rate plus 4%. The Company also reaffirmed its guaranty of all Wright's
obligations to the Bank and reaffirmed its subordination of certain obligations
owed by Wright to the Company to the obligations owed by Wright to the Bank.
There can be no assurance that the Company and Wright will not be in breach of
the Loan Agreement in the future, or that the Bank will agree to a further
extension or a forbearance in such event.
(b) Results of Operations
REVENUES
- --------
Sales: Overall revenues increased to $4,729,000 in fiscal 1995 from $4,265,000
- -----
in fiscal 1994, an increase of $464,000, or 11%. Revenues relating to the Memry
Segment were responsible for 98% of the increase.
Memry Sales. Revenues relating to the Memry Segment increased to $1,013,000 in
fiscal 1995 from $558,000 in fiscal 1994, an increase of $456,000. Sales of the
MEMRYSAFE(R) and ULTRAVALVE (TM) product lines were $462,000 in fiscal 1995 as
compared with $174,000 in fiscal 1994. Sales of SMA, shape memory effect wire
and wire shapes, shape memory polymers and FIRECHECK(R) were approximately
$186,000 as compared with $130,000 in fiscal 1994. Research and development
revenues in fiscal 1995 increased $111,000, or 44%, to $365,000, compared to
fiscal 1994 revenues of $254,000. The increase in research and development
revenues is the result of a full fiscal year's worth of revenues from two
government contracts which were awarded during 1993. The backlog of government-
sponsored contracts is $949,000 which includes $551,000 on the three-year NASA
contract awarded in March 1995.
16
<PAGE>
Wright Sales. Wright Machine Segment sales remained relatively flat at
$3,716,000 in fiscal 1995 versus $3,707,000 in 1994, as a result of continued
liquidity constraints which interfered with the ability of Wright to make raw
material purchases. The contract backlog decreased to approximately $1,200,000
at June 30, 1995 as compared with $1,927,000 at June 30, 1994.
COST AND EXPENSES
- -----------------
Manufacturing Costs. Manufacturing costs decreased to $3,850,000 in fiscal
- -------------------
1995 from $4,003,000 in fiscal 1994, a decrease of $153,000, or 4%. The overall
gross profit margin in fiscal 1995 was 12%, as compared to 6% in fiscal 1994.
Memry Manufacturing Costs. Memry Segment's manufacturing costs were $612,000 in
fiscal 1995 and $476,000 in fiscal 1994, an increase of $136,000, or 29%, with
margins of 6% and (57)%, respectively. The increase in margin is attributable
to the increase in sales and a decrease in the re-engineering costs of the
MEMRYSAFE(R) products.
Wright Manufacturing Costs. Wright Machine Segment's manufacturing costs for
fiscal 1995 were $3,238,000 as compared with $3,527,000 in fiscal 1994. The
reduction of $289,000 in costs, or 15%, is primarily due to the impact for a
full fiscal year of the one-third reduction of total staff which took place in
April 1994. Wright's profit margin improved to 14% in fiscal 1995 versus (3)%
in fiscal 1994.
Research and Development Costs. Research and development costs were $297,000 in
fiscal 1995 compared to $147,000 in fiscal 1994. This increase of $150,000, or
102%, was due to the increase in the research and development contract revenue
and related subcontractor expenses of $71,000.
General, Selling and Administrative Expenses ("GS&A"). Overall GS&A was reduced
- -----------------------------------------------------
in fiscal 1995 $221,000, or 9%, to $2,374,000 in fiscal 1995 from $2,595,000 in
fiscal 1994. The reduction is due to the absence in fiscal 1995 of non-recurring
expenses of a $210,000 officer's bonus and a severance payment in fiscal 1994 of
$79,000, offset by $88,000 in litigation settlements.
Depreciation and Amortization Expense. Depreciation expense was $240,000 in
- -------------------------------------
fiscal 1995 as compared with $274,000 in fiscal 1994. The $34,000, or 12%,
increase is primarily a result of assets becoming fully depreciated, offset by
the purchase of a $60,000 rolling mill in November 1994 and the $49,000 purchase
of other assets.
Interest Expense. Interest expense increased in fiscal 1995 to $360,000 from
- ----------------
$295,000 in fiscal 1994, an increase of $65,000, or 22%. This increase is
primarily due to additional fees charged by Wright's bank for extending the
terms of its forbearance agreement.
17
<PAGE>
Net Loss.
- --------
Overall. Net loss for fiscal 1995 was ($2,392,000) as compared to ($3,358,000)
- -------
for fiscal 1994, an improvement of $966,000, or 29%. This improvement is the
result of the absence of a $300,000 write-off of ULTRAVALVE (TM) inventory, a
full year's benefit of reduced staffing at Wright, stringent cost containment
and improved margins.
Memry Segment. Memry Segment's net loss for fiscal 1995 was ($1,981,000) as
compared with fiscal 1994's net loss of ($2,329,000). The improvement of
$348,000, or 15%, is the result of improved margins and stringent costs
containment.
Wright Segment. Wright Machine Segment's net loss in fiscal 1995 was ($411,000)
as compared to ($1,028,000) in fiscal 1994. Wright's $617,000 improvement, or
60%, is primarily the result of the impact for a full fiscal year of the one-
third reduction in staffing which occurred in April of 1994 and the absence of
the $300,000 write-off of ULTRAVALVE (TM) inventory made in fiscal 1994.
In November 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 112 "Accounting for Postemployment Benefits,"
which was required to be implemented by the Company in fiscal 1995. Because the
Company generally does not provide such benefits, the adoption of this statement
was not material to the Company's fiscal 1995 financial results.
ITEM 7. FINANCIAL STATEMENTS
Index to Financial Statements
-----------------------------
Independent Auditor's Report-- F-1
Report of Independent Auditors-- F-2
Financial Statements
Consolidated Balance Sheet-- F-3
As of June 30, 1995
Consolidated Statement of Operations-- F-4
For Years ended June 30, 1995 and 1994
Consolidated Statement of Stockholders' Deficit-- F-5
For Years ended June 30, 1995 and 1994
Consolidated Statement of Cash Flows-- F-6
For Years ended June 30, 1995 and 1994
Notes to Consolidated Financial Statements-- F-7
18
<PAGE>
PART III
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On June 19, 1995, Ernst & Young LLP ("E&Y") resigned as independent auditors of
the Company. A Form 8-K was filed on June 26, 1995 by the Company with the
Securities and Exchange Commission (the "Commission") to report this event. On
September 20, 1995, the Company engaged McGladrey & Pullen, LLP ("M&P") as its
independent auditors, and filed a Form 8-K on September 27, 1995 with the
Commission to report this event. Because E&Y resigned, rather than having been
dismissed by the Company, neither the Company's Board of Directors nor the
Company made a decision to change accounting firms. The Company does not have a
separate audit committee of the Board of Directors. In connection with E&Y's
audits of the Company's financial statements for each of the two fiscal years
ended June 30, 1993 and June 30, 1994, respectively, and through the date of the
subsequent interim periods ending June 19, 1995 (the date of E&Y's resignation
as the Company's independent auditors), E&Y and the Company have not had any
disagreements on any matters of accounting principles or practices, financial
statement disclosure or auditing scope and procedures which disagreements, if
not resolved to E&Y's satisfaction, would have caused E&Y to make a reference to
the subject matter of the disagreements in E&Y's report. E&Y has not performed
any procedures with respect to interim periods after fiscal 1994 year end.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.
Directors
- ---------
The following table lists the names and ages of the five members of the Board of
Directors, their positions with the Company and the year in which each director
was first elected or appointed as a director of the Company.
<TABLE>
<CAPTION>
Positions with Director
Name Age the Company Since
- -------------------------- --- ------------------------- --------
<S> <C> <C> <C>
James G. Binch 48 President, CEO, Treasurer 1989
& Chairman of the Board
Nicholas J. Grant 80 Director 1986
John A. Morgan 49 Director 1989
W. Andrew Krusen, Jr. 47 Director 1994
Jack Halperin 49 Director 1994
</TABLE>
Certain information regarding the Directors is set forth below. Directors are
elected until the next annual meeting of stockholders and until their successors
are duly elected and qualified.
JAMES G. BINCH has been President and Chief Executive Officer of the Company
since December 11, 1991, Chairman of the Board since September 24, 1993 and
Treasurer since July 19, 1994. He was the President and a director of Trinity
Capital Corporation, a merchant banking firm, from its inception in June of 1987
to August 1994. He has been the President, Chief Executive Officer and the sole
shareholder of Harbour Investment Corporation, the general partner of Harbour
Holdings Limited Partnership, an investment management company, since its
inception in June 1992. He is also a limited partner of Harbour Holdings
Limited Partnership. From 1985 to 1987 he served as President and Chief
Operating Officer of Lummus Crest, Inc., the principal engineering subsidiary of
Combustion Engineering, Inc., with annual revenues of $300,000,000 and
approximately 4,000 employees. From 1980 to 1985, Mr. Binch served as Vice
President, Corporate Strategic Planning for
19
<PAGE>
Combustion Engineering, Inc., a manufacturing and engineering firm. Mr. Binch
also serves as a director of Perkins Paper, Ltd., a public company based in
Montreal, and Gulfstar Energy, Inc., an oil and gas company based in Houston,
Texas. Mr. Binch is a graduate engineer from Princeton University. He also
holds an M.B.A. from the Wharton School of the University of Pennsylvania.
NICHOLAS J. GRANT was a Director of the Massachusetts Institute of Technology's
Center for Materials Science and Engineering from 1968 to 1976, and has been its
Abex Professor in Advanced Materials since 1976. Dr. Grant is a Fellow of the
American Society for Metals, a Fellow of the American Institute of Mining and
Metallurgy, a Fellow of the American Academy of Arts, a Member of the National
Academy of Arts and Sciences, and a member of the National Academy of
Engineering. He has published over 380 technical and scientific articles,
including several books. He is a director of Instron Corp., a producer of
instruments and systems for worldwide materials testing; CGM Corp. and Capital
Development Funds, both mutual funds; and National Forge Co., a producer of high
alloy steel and related components. He is also a director of Engineered
Precision Casting Corp., Kimball Physics Corp. and Capital Growth Management.
JACK H. HALPERIN, ESQ., has practiced corporate and securities law in New York
for more than 20 years. Since 1987 he has been in private practice,
concentrating on international financing transactions. Mr. Halperin holds a
B.A. degree (summa cum laude) from Columbia College and a J.D. from New York
University School of Law, where he was Note-and-Comment Editor of the Law
Review. Mr. Halperin is a director of Alamar Biosciences, Inc., I-Flow
Corporation and Xytronyx, Inc.
W. ANDREW KRUSEN, JR., is a graduate of Princeton University with a Bachelor's
Degree in Geology. Since 1989 he has been President of General Group Holdings,
Inc., a family controlled corporation in real estate development, construction,
leasing and manufacturing. In addition, he is Chairman of the Board of
Directors and a principal shareholder of Dominion Energy and Minerals
Corporation, an oil and gas concern, and a principal shareholder and President
of Dominion Financial Group, Inc., which is a merchant banking operation, and
the Managing General Partner of Dominion Partners. In addition Mr. Krusen is
the President of 169855 Canada Inc. and a General Partner of Krusen-Vogt & Co.
He is a director of Jemison, Inc., Raymond James Trust Company, Morrison
Petroleums, Florida Education Fund, Gulfstar Energy, Inc. and First National
Bank of Tampa.
JOHN A. MORGAN has been a Vice President of Smith Barney, an investment banking
firm, since 1992. Prior to that, Mr. Morgan was a Vice President of Kidder
Peabody & Co. since 1982.
Executive Officers
- ------------------
In addition to Mr. Binch, the Company employs two other executive officers:
Wendy A. Gavaghan and Richard L. Martin. Executive officers are elected until
the next annual meeting of the Board of Directors and until their respective
successors are elected and qualified.
20
<PAGE>
WENDY A. GAVAGHAN, age 41, has been Corporate Controller and Secretary of the
Company since September 24, 1993. From 1989 until 1993 Ms. Gavaghan served as
Controller of Trinity Capital Corporation, and Ms. Gavaghan has served as
Controller of Harbour Investment Corporation since its inception in June 1992.
From 1978 to 1985, Ms. Gavaghan served in a number of positions of increasing
responsibility with Champion International Corporation in Stamford, Connecticut.
From 1983 to 1985 she served as Western Regional Administrative Manager for the
Building Products Division in Denver, Colorado. Following the leveraged buyout
of the plywood operations of this division in 1985, Ms. Gavaghan moved to
Cincinnati, Ohio, where she served as Manager of M.I.S. Application Support for
the new U.S. Plywood Corporation until 1988. Ms. Gavaghan holds a B.S. degree
in accounting from Sacred Heart University.
RICHARD L. MARTIN, age 57, has been Vice President-Memry Technologies Division
of the Company since September 24, 1993. Mr. Martin joined the Company in March
1991 as Director of Engineering. Mr. Martin has nearly 30 years of experience
in product engineering with high precision valves and regulators used in the
semiconductor industry, self-contained breathing equipment and aerospace
systems. Prior to joining the Company, Mr. Martin had served as President of
Martin Technology of Hesperia, California and Technical Director, Product
Management and Development, of the Martin/Carten Division of Harsco Corporation,
which acquired Mr. Martin's company in 1987. He has also worked for Aerojet
General Corporation and Pyronetic Devices, all in California. Mr. Martin has a
B.Sc.M.E. from U.C.L.A.
Compliance with Section 16(a) of the Exchange Act
- -------------------------------------------------
Jack H. Halperin, W. Andrew Krusen, Jr. and John A. Morgan were elected
Directors of the Company on July 19, 1994. None of Messrs. Halperin, Krusen or
Morgan filed a Form 3 with respect to this event. Such Forms 3 should have been
filed with the Commission by July 29, 1994. However, each of Messrs Halperin,
Krusen and Morgan subsequently timely filed, on August 14, 1995, a Form 5 to
report such event. In addition, 10,000 shares were issued to each of Dr. Grant
and Messrs. Halperin, Krusen and Morgan as of June 30, 1995 in consideration of
the services provided by each such individual as a Director. This issuance
should have been reported on a Form 4 for each such person filed with the
Commission by July 10, 1995. However, this issuance was subsequently reported
on a Form 5 for each such person timely filed on August 14, 1995.
With respect to Dr. Grant, in addition to the above-described failure to file a
Form 4, the purchase of 5,000 shares of Common Stock on April 28, 1994 and
15,384 shares of Common Stock on June 22, 1995 should have been reported on
Forms 4 filed with the Commission by May 10, 1994 and July 10, 1995,
respectively. While a Form 5 was not filed by August 14, 1994 to report the
April 28, 1994 transaction, both of these transactions were subsequently
reported on the Form 5 for Dr. Grant timely filed, with respect to the June 22,
1995 purchase, with the Commission on August 14, 1995.
With respect to Mr. Krusen, in addition to the above-described failures to file
a Form 3 and a Form 4, the purchase of 14,286 shares of Common
21
<PAGE>
Stock by Dominion Partners, an entity of which Mr. Krusen is a general partner,
on December 9, 1994 should have been reported on a Form 4 filed with the
Commission by January 10, 1995. However, this transaction was subsequently
reported on the Form 5 for Mr. Krusen timely filed with the Commission on August
14, 1995.
With respect to Mr. Morgan, in addition to the above-described failure to file a
Form 4, (i) the cancellation of options exercisable to purchase 4,000 shares of
Common Stock should have been reported on a Form 5 filed with the Commission on
August 14, 1994, (ii) the purchase on October 2, 1993 of 17,500 shares of Common
Stock should have been reported on a Form 4 filed with the Commission by
November 10, 1993, and (iii) the purchase by a trust as to which Mr. Morgan is a
trustee should have been reported on a Form 4 filed with the Commission by
December 10, 1993. However, all of these transactions were subsequently
reported on the Form 5 for Mr. Morgan filed on August 14, 1995.
James G. Binch, Harbour Investment Corporation and Harbour Holdings Limited
Partnership each timely filed a Form 5 on August 14, 1995 reporting the
following transactions by Harbour Holdings Limited Partnership: conversion on
August 8, 1994 of 480 shares of Series F Preferred Stock into 480,000 shares of
Common Stock, the conversion on May 22, 1995 of 124 shares of Series A Preferred
Stock into 424,426 shares of Common Stock, the conversion on May 22, 1995 of 250
shares of Series B Preferred Stock into 312,500 shares of Common Stock and the
issuance on May 22, 1995 of 747,500 shares of Common Stock as payment in full of
accrued dividends with respect to the Series A and Series B Preferred Stock.
The conversion of the Series F Preferred Stock should have been reported on a
Form 4 filed with the Commission by September 10, 1994, and the other
transactions should have been reported on a Form 4 filed with the Commission by
June 10, 1995. However, Mr. Binch failed to file a Form 5 by August 14, 1994
with respect to the issuance to him on September 23, 1993, subject to subsequent
stockholder approval which was obtained on July 19, 1994, of options exercisable
to purchase 240,000 shares of Common Stock at an exercise price of $4.40 per
share. Mr. Binch is the President, Chief Executive Officer and sole shareholder
of Harbour Investment Corporation, the general partner of Harbour Holdings
Limited Partnership.
22
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth for the fiscal years ended June 30, 1995, 1994
and 1993, certain information regarding the total remuneration paid to the
company's chief executive officer and its next most highly compensated executive
officer. No other executive officer or significant other employee of the Company
received total annual salary and bonus in excess of $100,000 during fiscal 1995.
Summary Compensation Table
--------------------------
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation Awards
----------------------------------- -------------------------------
(a) (b) (c) (g)
Shares of Common
Name & Principal Fiscal Stock Underlying
Position Year Salary $ Bonus ($) Options/SARs(#)
- ---------------- --------- ---------- ------------ -------------------------------
<S> <C> <C> <C> <C>
James G. Binch, President, 1995 $150,000(1) $ -0- 240,000/0 (2)
Chief Executive Officer 1994 $150,000(1) $210,000(3) - 0 -
& Director 1993 $ 95,000(1) $ -0- - 0 -
Edward J. Murphy, V.P. 1995 $120,000 $ 7,500 10,000/1,000 (4)
of the Company and President 1994 $ 25,000 $ -0- - 0 -
Wright 1993 $ - 0 - $ -0- - 0 -
</TABLE>
- --------------
(1) Does not include any amounts which may be deemed to be paid to Mr. Binch
by Harbour Investment Corporation for serving as President of the Company.
See discussion following.
(2) These options are exercisable in five equal annual installments, commencing
on September 24, 1994.
(3) Mr. Binch's bonus consisted of $50,000 in cash and 80,000 shares of the
Company's Common Stock valued at $2.00 a share.
(4) These options vest in two equal annual installments beginning on January 1,
1995.
23
<PAGE>
Option/SAR Grants in Last Fiscal Year
Individual Grants
-----------------
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of Shares % of Total
of Common Stock Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise or Base Expiration
Name Granted (#) Fiscal Year(1) Price($/Share) Date
- ------------------ ------------ --------------- ----------------- -----------
<S> <C> <C> <C> <C>
James G. Binch 240,000/0 (2) 55/0% $4.40 9/24/2003
Edward J. Murphy 10,000/1,000 (3) 2.3/11.3% $2.34 7/19/2004
</TABLE>
- ---------------------------
(1) Assumes full vesting of options.
(2) These options are exercisable in five equal annual installments, commencing
on September 24, 1994.
(3) These options vest in two equal annual installments beginning on January 1,
1995.
Aggregated Option/SAR Exercises in Last
Fiscal Year and FY-End Option/SAR Values
----------------------------------------
<TABLE>
<CAPTION>
(a) (d) (e)
Number of Shares
of Common Stock
Underlying Value of Unexercised
Unexercised Options/ In-the-Money Options/
SARs at FY-end (#) SARs at FY-End (#)
Name Exercisable/Unexercisable Exercisable/Unexercisable
- ----------------- --------------------------- -------------------------
<S> <C> <C>
James G. Binch 240,000 Options Exercisable N/A
Edward J. Murphy 5,000 Options Exercisable N/A
5,000 Options Unexercisable
1,000 SARs Exercisable
----------------------
</TABLE>
Effective September 24, 1993, the Company and James G. Binch entered into a 2-
year employment agreement, which automatically renews for successive 1-year
periods unless or until Mr. Binch or the Company gives notice of its intention
not to renew. Pursuant to said renewal provision, this agreement automatically
renewed for a one-year period effective September 24, 1995. The agreement
entitles Mr. Binch to (i) $20,000 as compensation for services rendered from
24
<PAGE>
October 1, 1992, to December 31, 1992, (ii) an annual salary of $150,000 from
January 1, 1993, (iii) a bonus of $50,000 and 80,000 shares of the Company's
Common Stock as inducement to enter into the contract, and (iv) an option to
purchase up to 240,000 shares of the Company's Common Stock at an exercise price
of $4.40 per share under and pursuant to the Memry Corporation Stock Option
Plan, subject to the approval of such Plan by the Company's stockholders (which
approval was obtained in the first quarter of fiscal 1995). The option is
exercisable in five equal installments, commencing on September 24, 1993, and
will expire on September 24, 2003. The Agreement also provides that if Mr.
Binch's employment is terminated due to either the failure by the Company to
observe or comply with any of the provisions of such agreement (if such failure
has not been cured within 10 days after written notice of same to the Company),
or, at the election of Mr. Binch, upon a change in control of the Company (and
within 6 months of such change in control), Mr. Binch will be entitled to a
lump-sum payment equal to two times his annual salary at the rate in effect
immediately prior to the date of termination.
Mr. Binch is President, the sole director and the sole stockholder of Harbour
Investment Corporation, a Delaware corporation ("HIC"). HIC is managing general
partner of Harbour Holdings Limited Partnership, a Connecticut limited
partnership ("Harbour") and a significant shareholder of the Company. (See Item
11, "Security Ownership of Certain Beneficial Owners and Management"). Pursuant
to Harbour's amended and restated Agreement of Limited Partnership, Harbour
retained HIC to act as its managing general partner, and to perform investment
manager, custodial and administrative services, in consideration of custodial
fees of (i) $465,000 for the period commencing on February 24, 1993, and
continuing through December 31, 1993, and (ii) $350,000 for each of calendar
years 1994 and 1995. One of a number of services performed by HIC for Harbour
is providing the services of Mr. Binch in the capacity of the Company's
President. Because (i) there is no allocation of the annual fee paid by Harbour
to HIC as between providing the services of Mr. Binch as the Company's President
and other services, (ii) HIC does not pay Mr. Binch a salary, and (iii) HIC
incurs numerous expenses in fulfilling its duties to Harbour that must be paid
before it pays either salary or dividends to Mr. Binch, it is impossible to
quantify the amount, if any, that Harbour or HIC could be deemed to be paying
Mr. Binch for serving as President of the Company. Therefore, Mr. Binch's
compensation as set forth in the foregoing compensation table does not include
any such amounts.
Edward J. Murphy's employment with the Company and Wright terminated on
September 22, 1995. Prior to such time, commencing on April 13, 1994, Mr.
Murphy had been Vice President of the Company and President of Wright. The
Company plans to issue to Mr. Murphy 13,000 shares of Common Stock, at an
issuance price of $1.00 per share, pursuant to an agreement reached between the
Company and Mr. Murphy with respect to the termination of his employment.
25
<PAGE>
Compensation of Directors
- -------------------------
Effective November 14, 1994, directors are entitled to receive compensation
comprised of $500 per Board or committee meeting attended in person and 10,000
shares of Common Stock per annum, such fee to be paid in arrears on the last day
of each fiscal year of the Company for such completed fiscal year. The Board
has agreed to waive the cash portion of this compensation until the Company is
in a strengthened cash-flow position and better able to pay this fee. Directors
are reimbursed for expenses reasonably incurred in connection with the
performance of their duties.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth, as of October 12, 1995 and giving effect to the
one-for-ten reverse stock split effected on August 8, 1994, information
regarding beneficial ownership of the Company's Common Stock and Series G
Preferred Stock by (i) each person who is known by the Company to own
beneficially more than 5% of the outstanding Common Stock, or Series G Preferred
Stock (based on information furnished to the Company on behalf of such persons
or otherwise known to the Company), (ii) each of the directors of the Company,
(iii) each of the executive officers named in the Annual Compensation table set
forth under "executive Compensation" below, and (iii) all directors and
executive officers as a group.
26
<PAGE>
COMMON STOCK
<TABLE>
<CAPTION>
Percentage of
Name and Address Amount and Nature of Common Stock
of Beneficial Owner Beneficial Ownership Outstanding (1)
- ------------------- -------------------- ----------------
<S> <C> <C>
Harbour Holdings 2,328,401 (2)(3) 27.5%
Limited Partnership
1281 Main Street
Stamford, Connecticut
06902
Harbour Investment 2,328,401 (2)(3) 27.5%
Corporation
1281 Main Street
Stamford, Connecticut
06902
National Trust Company 3,798,328 (4) 32.4%
Trustee for
Chrysler Canada Ltd.
Pension Fund
21 King Street East
Toronto, Ontario,
Canada
Group Des Assurances 994,307 (5) 12.0%
Nationales ("GAN")
2 Rue Pillet-Will
75009 Paris, France
Connecticut 508,805 (6) 5.9%
Innovations,
Incorporated
40 Cold Spring Road
Rocky Hill, CT 06067
David A. Gardner 500,000 6.2%
Gardner Capital
Corporation
445 Park Avenue
New York, New York
10022
James G. Binch 2,648,401 (2)(3) 30.4%
362 Canoe Hill Road (7)
New Canaan, Connecticut
06840
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Name and Address Amount and Nature of Common Stock
of Beneficial Owner Beneficial Ownership Outstanding (1)
- ------------------- -------------------- ----------------
<S> <C> <C>
Nicholas J. Grant 31,684 3.9
Materials Sciences and
Engineering
Department
Massachusetts Institute
of Technology
Cambridge,
Massachusetts 02139
Jack H. Halperin, Esq. 12,500 *
361 Silver Court
Woodmere, New York
11598
W. Andrew Krusen, Jr. 85,152 (8) 1.1%
Dominion Financial
Group Incorporated
2909 Bay-to-Bay Blvd.,
Suite 600
Tampa, Florida 33629
John A. Morgan 41,184 (9) *
121 Elderwood Avenue
Pelham, New York 10803
All directors and 2,885,921 (10) 33.0%
executive officers as
a group (8 persons)
</TABLE>
SERIES G PREFERRED STOCK
<TABLE>
<CAPTION>
Percentage of
Name and Address Amount and Nature of Common Stock
of Beneficial Owner Beneficial Ownership Outstanding (1)
- ------------------- -------------------- ----------------
<S> <C> <C>
FirstInvest Holding 423 (11) 100%
Ltd. Inc.
Ch. des Primeveres 45
1701 Fribourg, Switzerland
</TABLE>
___________________________________
* Less than one percent.
(1) In each case where shares subject to options or conversion rights are
included as beneficially owned by an individual or group, the percentage
28
<PAGE>
of all shares owned by such individual or group is calculated as if all
such options or conversion rights had been exercised prior to such
calculation.
(2) Mr. Binch is the President, Chief executive Officer and sole shareholder of
Harbour Investment Corporation, the sole general partner of Harbour
Holdings Limited Partnership. He is also individually a limited partner of
Harbour Holdings Limited Partnership, with a limited partnership interest
of less than one percent.
(3) Includes 363,636 shares of Common Stock for which the warrants owned by
Harbour Holdings Limited Partnership may be exercised at an exercise price
of $7.40 per share.
(4) Includes 3,610,828 shares of Common Stock for which the warrants owned by
National Trust Company, Trustee for Chrysler Canada Ltd. Pension Fund may
be exercised at a per share price equal to the lesser of (x) $1.40 or (y)
75% of the fair market value (determined by appraisal) of such a share at
the time of exercise, subject to adjustment upon the occurrence of certain
events, which warrants expire on December 31, 1995. The warrants issued to
National enjoy "most favored nation status," meaning that if a more
favorable price and/or terms are offered by the Company to third parties,
such more favorable terms will automatically attach to the warrants held by
National. The warrants also have dilution protection throughout their
term, meaning that the stock and warrants held by National will, throughout
the term of the warrants, represent approximately the same percentage of
ownership as they did as of October 29, 1992.
(5) Includes 101,250 shares of Common Stock for which warrants beneficially
owned by GAN may be exercised at $5.00 per share, which warrants expire on
December 15, 1997, as well as 116,667 shares of Common Stock for which
warrants beneficially owned by GAN may be exercised at $2.00 per share at
any time from and after October 1, 1995 to and including December 15, 1999.
(6) Includes 508,805 shares of Common Stock into which a Convertible
Subordinated Debenture issued by the Company to CII is currently permitted
to be converted. This table does not include any other CII Security, as
CII does not have the right to exercise such securities within 60 days of
the date hereof. See Note 14 to the Company's financial statements.
However, assuming that at such time as CII has the right to fully exercise
and/or convert the CII Securities, (i) the conversion price with respect to
the Debenture is $0.80, (ii) the exercise price with respect to the Class I
Warrants is $0.93, (iii) the exercise price with respect to the Class II
Warrants is $1.19, (iv) an exercise price with respect to the Class III
Warrants is $0.65, and (v) the number of shares of Common Stock outstanding
is the same as the number outstanding on October 11, 1995, at such time CII
would beneficially own 2,935,764 shares of Common Stock, or 26.6% of the
Common Stock outstanding.
(7) Includes options to purchase 240,000 shares of the Company's Common Stock
at $4.40 per share.
29
<PAGE>
(8) Includes 47,152 shares of Common Stock owned by Dominion Partners, 20,000
shares of Common Stock owned by 169855 Canada Inc., and 8,000 shares of
Common Stock owned by Krusen-Vogt & Co. Mr. Krusen is the President and a
principal shareholder of Dominion Financial Group, Inc. which is the
managing General Partner of Dominion Partners, President of 169855 Canada
Inc., a General Partner of Krusen-Vogt & Co.
(9) 1,307 of such shares of Common Stock are owned jointly by Mr. Morgan and
his wife, Deborah Morgan. Another 120 of such shares of Common Stock are
owned solely by Mrs. Morgan, and Mr. Morgan disclaims beneficial ownership
of such 120 shares. Another 10,000 of such shares are owned by a trust for
Annette Morgan for which Mr. Morgan is the trustee.
(10) See preceding footnotes.
(11) FirstInvest Holding Ltd. Inc. ("FirstInvest") is not currently permitted to
convert any shares of Series G Preferred Stock into shares of Common Stock.
However, pursuant to the terms of Securities Purchase Agreements executed
between the Company and FirstInvest, the Company is obligated to (i)
convene a meeting of the Company's stockholders as soon as possible, but in
any event prior to the end of 1995, for the purpose of amending the
Company's Certificate of Incorporation to increase the number of authorized
shares of Common Stock from 10,000,000 to 25,000,000, and (ii) at such
meeting, cause such proposed amendment (the "Capitalization Amendment") to
be adopted. From and after the date of the filing of the Capitalization
Amendment with the Delaware Secretary of State, FirstInvest will be
permitted to convert each of its shares of G Preferred into 10,000 shares
of Common Stock (which conversion ratio is subject to adjustment.)
30
<PAGE>
ITEM 12. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS
The original holder of the Company's Series A Preferred Stock and Series B
Preferred Stock (collectively the "Preferred Stock"), Harbour Holdings Limited
Partnership ("Harbour"), which as of October 11, 1995 was the beneficial owner
of more than five percent of the Common Stock, agreed to permit the Company to
defer dividends due on the Preferred Stock it held beginning with the first
quarter of fiscal 1992, except to the extent that the Company has positive cash
flow. The Company was to accrue any such deferred dividends until such time as
they are paid. Harbour waived all dividends accruing after June 30, 1993 on the
Preferred Stock. By letter agreement dated May 22, 1995, Harbour agreed to
accept the issuance of 747,500 shares of Common Stock, valued at $0.80 per
share, as payment in full of accrued dividends in the amount of $598,000. By
same letter agreement, Harbour agreed to convert, and simultaneously did
convert, 124 shares of Series A Preferred Stock of the Company and 250 shares of
Series B Preferred Stock of the Company into 424,426 shares, of Common Stock and
312,500 shares of Common Stock, respectively.
In April 1994 the Company and Harbour entered into a Securities Exchange
Agreement providing for the exchange by Harbour of 480,000 shares of Common
Stock of the Company owned by Harbour for 480 shares of the Company's Series F
Preferred Stock, which exchange was effected simultaneously with the execution
of such Securities Exchange Agreement. This exchange was necessary in order to
allow the Company to cancel the Common Stock so exchanged in order to be able to
provide a sufficient number of authorized but unissued shares of Common Stock to
complete certain private placements of the Company's Common Stock. Upon
consummation of the Reverse Split on August 8, 1994, the Series F Preferred
Stock was converted back into 480,000 shares of Common Stock. Mr. Binch is the
President, Chief Executive Officer and sole shareholder of Harbour Investment
Corporation, the sole general partner of Harbour. He is also individually a
limited partner of Harbour, with a limited partnership interest of less than one
percent.
Pursuant to a Convertible Subordinated Debenture Purchase Agreement, dated as of
December 22, 1994 and amended as of October 12, 1995, the Company issued to CII
the following securities: (i) a Convertible Subordinated Debenture dated
December 22, 1994 from the Company to CII in the principal amount of $763,208
(the "Debenture"), (ii) a warrant dated December 22, 1994 to purchase 508,805
shares of Common Stock at an initial price of $2.15 per share (the "Class I
Warrants"), (iii) a warrant dated December 22, 1994 to purchase 305,283 shares
of Common Stock at an initial price of $2.75 per share (the "Class II
Warrants"), and (iv) a warrant dated December 22, 1994 to purchase 100,000
shares of Common Stock at an exercise price of $1.00, such warrant being an
amendment and restatement of a warrant previously held by CII to purchase 10,000
shares of Common Stock at an exercise price of $10.00 per share (the "Class III
Warrants," and collectively with the Debenture, the Class I Warrants and the
Class II Warrants, the "CII Securities"). See Note 14 to the Company's
Financial Statements. As of October 12, 1995, CII beneficially owned more than
five percent of the Common Stock.
On December 23, 1994, the Company sold to Banque pour L'Industrie Francaise
(ref. GAN) ("GAN") 116,667 shares of Common Stock at a per share purchase
31
<PAGE>
price of $1.50, for an aggregate purchase price of $175,000. GAN was also
issued a warrant to purchase 116,667 additional shares of Common Stock at an
exercise price of $2.00 per share, but this warrant may not be exercised until
October 1, 1995. Furthermore, on June 5, 1995, the Company sold to GAN 307,690
shares of Common Stock at a per share purchase price of $0.65, for an aggregate
purchase price of $199,998.50. As of October 12, 1995, GAN beneficially owned
more than five percent of the Common Stock.
On June 25, 1995 and July 17, 1995, FirstInvest Holding Ltd. Inc.
("FirstInvest") purchased 193 shares and 230 shares, respectively, of Series G
Preferred Stock of the Company at a per share price of $6,500, for an aggregate
purchase price of $2,749,500. At the time of this transaction, FirstInvest
was not a holder of any securities of the Company, and such transaction was
negotiated on an arm's length basis. FirstInvest is not currently permitted to
convert any shares of Series G Preferred Stock into shares of Common Stock.
However, pursuant to the terms of Securities Purchase Agreements executed
between the Company and FirstInvest, the Company is obligated to (i) convene a
meeting of the Company's stockholders as soon as possible, but in any event
prior to the end of 1995, for the purpose of amending the Company's Certificate
of Incorporation to increase the number of authorized shares of Common Stock
from 10,000,000 to 25,000,000, and (ii) at such meeting, cause such proposed
amendment (the "Capitalization Amendment") to be adopted. From and after the
date of the filing of the Capitalization Amendment with the Delaware Secretary
of State, FirstInvest will be permitted to convert each of its shares of G
Preferred into 10,000 shares of Common Stock (which conversion ratio is subject
to adjustment). As of October 12, 1995, FirstInvest beneficially owned more than
five percent of the Series G Preferred Stock.
32
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Memry Corporation and Subsidiary
Brookfield, Connecticut
We have audited the accompanying consolidated balance sheet of Memry
Corporation and subsidiary as of June 30, 1995, and the related consolidated
statements of operations, stockholders' deficit, and cash flows for the year
then ended. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Memry Corporation and subsidiary as of June 30, 1995, and the consolidated
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that Memry Corporation will continue as a going concern. As more fully
described in Notes 1 and 10, the Company has incurred net losses and negative
cash flow from operations and has working capital and stockholders' deficits.
In addition, the Company's subsidiary, Wright Machine Corporation, was in
default on its loan agreements and was subject to a forbearance agreement
with its bank as of June 30, 1995. There are also pending claims against the
Company as more fully described in Note 12, the ultimate outcome of which cannot
be determined at this time and, accordingly, no provision for any liability that
may result has been made in the accompanying consolidated financial statements.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern. Management's plans in regard to these matters are described
in Note 1. These consolidated financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classifications of liabilities that
may result from the outcome of these uncertainties.
McGLADREY & PULLEN, LLP
New Haven, Connecticut
October 6, 1995, except for Note 14 as to
which the date is October 12, 1995
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Memry Corporation and Subsidiaries
We have audited the consolidated statement of operations, stockholders'
deficit and cash flows of Memry Corporation and subsidiaries for the year
ended June 30, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated results of operations and cash flows
of Memry Corporation and subsidiaries for the year ended June 30, 1994 in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that Memry Corporation will continue as a going concern. As more fully
described in Notes 1 and 10, the Company has incurred net losses and negative
cash flow from operations and has working capital and stockholders' deficits.
In addition, the Company's subsidiary, Wright Machine Corporation, has
defaulted on its loan agreements and is subject to a forbearance agreement
with its bank. There are also pending claims against the Company as more
fully described in Note 12, the ultimate outcome of which cannot be determined
at this time and, accordingly, no provision for any liability that may result
has been made in the accompanying financial statements. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are described in Note
1. These financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classifications of liabilities that may result from the
outcome of this uncertainty.
Ernst & Young, LLP
Boston, Massachusetts
September 2, 1994, except for
Notes 1, 6, 7 and 10, as to which
the date is November 3, 1994
F-2
<PAGE>
MEMRY CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
JUNE 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS (Note 10)
<S> <C>
Current Assets
Cash and cash equivalents $ 1,145,000
Accounts receivable, less allowance of $53,000 691,000
Inventories, net (Note 3) 849,000
Prepaid expenses and other 24,000
------------
TOTAL CURRENT ASSETS 2,709,000
------------
Property, Plant and Equipment, net (Notes 4 and 10) 1,233,000
------------
Other Assets
Patents, at cost, net of accumulated amortization of $57,000 5,000
Deposits 32,000
------------
37,000
------------
$ 3,979,000
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable and accrued expenses (Note 5) $ 2,189,000
Notes payable (Note 10) 1,163,000
Mortgage loan payable (Note 10) 910,000
Revolving loan (Note 10) 570,000
Term note payable (Note 10) 167,000
Current portion of capital lease obligations (Note 11) 4,000
------------
TOTAL CURRENT LIABILITIES 5,003,000
------------
Capital Lease Obligations, less current portion 7,000
------------
Commitments and Contingencies (Notes 11 and 12)
Stockholders' Deficit (Note 6)
Preferred stock, $100 par value, authorized 100,000 shares of
Series G, issued and outstanding shares - 193 19,000
Common stock, $.01 par value; authorized shares - 10,000,000; issued
and outstanding shares - 8,009,997 80,000
Additional paid-in capital 29,874,000
Accumulated deficit (31,004,000)
------------
TOTAL STOCKHOLDERS' DEFICIT (1,031,000)
------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 3,979,000
============
</TABLE>
See Notes to Consolidated Financial Statements.
-F3-
<PAGE>
MEMRY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1995 AND 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
---------- -----------
<S> <C> <C>
Product sales $ 4,729,000 $ 4,265,000
Cost of Sales
Manufacturing 3,850,000 4,003,000
Research and development 297,000 147,000
----------- -----------
GROSS PROFIT 582,000 115,000
----------- -----------
Operating Expenses
General, selling and administrative 2,374,000 2,604,000
Depreciation and amortization 240,000 274,000
Writedown of inventory - 300,000
----------- -----------
2,614,000 3,178,000
----------- -----------
OPERATING LOSS (2,032,000) (3,063,000)
Interest Expense (Note 10) 360,000 295,000
----------- -----------
NET LOSS $(2,392,000) $(3,358,000)
=========== ===========
Weighted average number of common shares outstanding 5,353,222 4,228,718
----------- -----------
Net loss per common share $(0.45) $(0.79)
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
-F4-
<PAGE>
MEMRY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
YEARS ENDED JUNE 30, 1995 AND 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------------------- -----------------------------
Shares Par Shares Par Additional Paid-in Accumulated
Issued Value Issued Value Capital Deficit
--------- ---------- ----------- ------------- ------------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Balance as of June 30, 1993 374 $ 37,000 2,823,812 $28,000 $22,913,000 $(25,254,000)
Issuance of common stock - - 2,316,833 23,000 3,999,000 -
Conversion of common stock - - (480,000) (5,000) (43,000) -
Series F preferred stock
issued 480 48,000 - - - -
Net loss - - - - - (3,358,000)
------ --------- ----------- ---------- ----------- ------------
Balance as of June 30, 1994 854 85,000 4,660,645 46,000 26,869,000 (28,612,000)
Issuance of common stock - - 1,384,926 15,000 1,106,000 -
Series A preferred stock
converted (124) (12,000) 424,426 4,000 8,000 -
Series B preferred stock
converted (250) (25,000) 312,500 3,000 22,000 -
Series F preferred stock
converted (480) (48,000) 480,000 5,000 43,000 -
Conversion of Dividend on
Series A & B - - 747,500 7,000 591,000 -
Series G preferred stock
issued 193 19,000 - - 1,235,000 -
Net loss - - - - - (2,392,000)
------ --------- ----------- ---------- ----------- ------------
BALANCE AS OF JUNE 30, 1995 193 $ 19,000 8,009,997 $80,000 $29,874,000 $(31,004,000)
====== ========= =========== ========== =========== ------------
</TABLE>
See Notes to Consolidated Financial Statements.
-F5-
<PAGE>
MEMRY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED ENDED JUNE 30, 1995 AND 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Net loss $(2,392,000) $(3,358,000)
Cash Flows From Operating Activities
Adjustments to reconcile net loss to net cash used in operating activities
Noncash compensation - 160,000
Write-off of inventory (Ultravalve) - 300,000
Depreciation and amortization 240,000 274,000
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable (9,000) 47,000
Decrease in inventories 132,000 218,000
Increase (decrease) in prepaid expenses and other 12,000 (16,000)
Increase in accounts payable and accrued expenses 142,000 76,000
Other 6,000 49,000
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (1,869,000) (2,250,000)
----------- -----------
Cash Flows From Investing Activities
Purchases of property, plant and equipment (109,000) (189,000)
----------- -----------
Cash Flows From Financing Activities
Proceeds from sale of common stock 2,492,000 4,096,000
Common stock issuance costs (119,000) (234,000)
Payments on capitalized lease obligations (7,000) (28,000)
Payments on deferred lease (9,000) -
Net payments on revolving credit line (149,000) (64,000)
Proceeds from short-term borrowings 856,000 130,000
Principal payments on long-term debt (142,000) (1,283,000)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,922,000 2,617,000
----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 944,000 178,000
Cash and cash equivalents, beginning of year 201,000 23,000
----------- -----------
Cash and cash equivalents, end of year $ 1,145,000 $ 201,000
=========== ===========
Supplemental Disclosure of Cash Flow Information
Cash payments for interest $ 283,000 $ 305,000
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
-F6-
<PAGE>
MEMRY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995 and 1994
- --------------------------------------------------------------------------------
Note 1. Going Concern
The Company's consolidated financial statements have been presented on a going
concern basis which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company has
incurred net losses of $2,392,000 and $3,358,000, and negative cash flows from
operations of $1,869,000 and $2,250,000, for the years ended June 30, 1995 and
1994, respectively. As a result, the Company has a stockholders' deficit of
$1,031,000 and its current liabilities exceed its current assets by $2,294,000
as of June 30, 1995. In addition, the Company's subsidiary, Wright Machine
Corporation ("Wright"), as of June 30, 1995, had defaulted on its loan
agreements which total $1,078,000 and was subject to a forbearance agreement
with its bank (see Notes 10 and 14). These conditions raise substantial doubt
about the Company's ability to continue as a going concern.
In fiscal year 1996, the Company anticipates that it will continue to incur
losses from operations until the fourth quarter, at which time the Company
expects to be cash flow positive. The Company plans to continue to maintain
stringent control on expenses while increasing its revenues and improving
gross profit margins. The Company believes the capital raised of $2,492,000,
through private placement agreements during fiscal 1995 (most of which
occurred during the fourth quarter), and $1,561,000 in the first quarter of
fiscal 1996 is sufficient to satisfy the Company's working capital
requirements for fiscal 1996. In addition, the Company renegotiated Wright's
debt with its bank through July 1, 1996 (see Note 14). However, it is the
Company's intent to seek refinancing with more favorable terms during fiscal
1996, although there can be no assurances that the Company will be successful.
On October 12, 1995, the Company amended its Convertible Subordinated
Debenture Purchase Agreement with Connecticut Innovations, Incorporated (see
Note 14).
Note 2. Summary of Significant Accounting Policies
Nature of Business
- ------------------
Memry Corporation, a Delaware corporation incorporated in 1981, is engaged in
the businesses of developing, manufacturing and marketing products and
components utilizing the properties exhibited by shape memory alloys, and
manufacturing and marketing metal parts and components machined on screw
machines and smaller metal working machines.
Principles of Consolidation
- ---------------------------
The financial statements include the accounts of Memry Corporation and Wright,
its wholly-owned subsidiary. All significant intercompany transactions have
been eliminated in consolidation.
F-7
<PAGE>
MEMRY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995 and 1994
- --------------------------------------------------------------------------------
Concentrations of Credit Risk
- -----------------------------
Financial instruments which potentially subject the Company to concentration
of credit risk consist principally of cash and cash equivalents.
The Company places its cash and cash equivalents with high quality financial
institutions. At June 30, 1995, the total amount by which cash on deposit in
these institutions exceeds the federally insured limit is approximately
$1,000,000.
Cash and Cash Equivalents
- -------------------------
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid investments with a maturity of three months or
less, when purchased, to be cash equivalents.
Inventories
- -----------
Inventories consist principally of screw machine, taper pin, plumbing products
and shape memory alloys. Inventories are stated at the lower of cost
(determined on the first-in, first-out method) or market.
Prepaid Expenses and Other
- --------------------------
Included in prepaid expenses and other as of June 30, 1995, is a note
receivable from a former director in the amount of $9,000.
Property, Plant and Equipment
- -----------------------------
Property, plant and equipment is stated at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the
respective assets, ranging from three to thirty years. Leasehold improvements
are amortized over the life of the lease, or the improvements' estimated
useful life, if shorter.
Patent Costs
- ------------
Patent costs are amortized using the straight-line method over periods ranging
from thirteen to sixteen years.
Product Sales
- -------------
Revenues from product sales are recognized when the related products are
shipped.
F-8
<PAGE>
MEMRY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995 and 1994
- --------------------------------------------------------------------------------
Research and Development Costs
- ------------------------------
Research and development costs are expensed as incurred. The revenues received
(principally from the U.S. Government) in connection with these projects, which
approximate the costs incurred, are recognized as services are rendered. Some of
the Company's research and development projects are customer sponsored and
typically provide the Company with the production rights or pay a royalty to the
Company if a commercially viable product results.
Income Taxes
- ------------
The Company files a consolidated federal income tax return and its individual
subsidiary files its own state tax return. Taxes are calculated on a separate
company basis.
Net Loss Per Common Share
- -------------------------
The net loss per common share is based on the net loss from operations plus
Preferred Stock dividends and the weighted average number of shares of Common
Stock outstanding during each year. Common stock equivalents have been excluded
from the computation of the net loss per common share because inclusion of such
equivalents is antidilutive.
Reclassifications
- -----------------
Certain amounts in the 1994 financial statements have been reclassified to
conform with the 1995 presentation.
Note 3. Inventories
Inventories as of June 30, 1995 are summarized as follows:
Raw materials and supplies $ 109,000.00
Work-in-process 217,000.00
Finished goods 523,000.00
------------
$ 849,000.00
============
During the year ended June 30, 1994, as a result of historically slow sales,
the Company wrote down ULTRAVALVE(TM) inventory by $300,000 to a net carrying
value of $280,000, which represented an estimated two years supply of
inventory. No additional write down was necessary as of June 30, 1995.
F-9
<PAGE>
MEMRY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995 and 1994
- --------------------------------------------------------------------------------
Note 4. Property, Plant and Equipment
Property, plant and equipment as of June 30, 1995 is summarized as follows:
Land $ 166,000.00
Buildings and improvements 942,000.00
Tooling and equipment 2,013,000.00
Leasehold improvements 98,000.00
-------------
3,219,000.00
Less accumulated depreciation 1,986,000.00
-------------
$1,233,000.00
=============
Note 5. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses as of June 30, 1995 include $50,000 of
compensation payable to an officer and $62,000 in interest payable to related
parties.
Note 6. Stockholders' Deficit
On July 19, 1994, the stockholders approved a decrease in the authorized shares
of Common Stock from 50,000,000 to 10,000,000 and approved a one-for-ten reverse
split of Common Stock effective August 8, 1994, which reduced the number of
shares outstanding from approximately 45,356,446 to 4,535,645. The stated par
value was not changed from $.01. Due to the reverse stock split, a total of
$420,000 was reclassified from the Company's Common Stock account to the
Company's additional paid-in capital account. All share amounts and per share
prices have been restated to retroactively reflect the reverse stock split.
Series A Preferred Stockholders were entitled to receive dividends in preference
to any declaration or payment of any dividend on Common Stock or other equity
securities of the Company. Dividend provisions of the Series B Preferred Stock
were equivalent to those of the Series A Preferred Stock except dividends
declared must be paid first to the holders of the Series A Preferred Stock. On
September 30, 1993, the holder of the Series A and Series B Preferred Stock
(Harbour Holdings) agreed to waive all dividends accruing on its Preferred Stock
after June 30, 1993. During the year ended June 30, 1995, all outstanding shares
of Series A and B Preferred Stock were converted into Common Stock of the
Company. Additionally, the amount of the Series A and B Preferred Stock
dividends deferred but accrued of $598,000 was converted into Common Stock of
the Company. Mr. Binch, the President and CEO of the Company, is also the
President, Chief Executive Officer and sole stockholder of Harbour Investment
Corporation, the sole general partner of Harbour Holdings. He is also a limited
partner in Harbour Holdings Limited Partnership. No shares of Series A and B
Preferred Stock are currently outstanding.
On March 29, 1994, the Company entered into a Securities Exchange Agreement with
Harbour Holdings Limited Partnership ("Harbour"), whereby Harbour received 480
shares of Series F Preferred Stock in exchange for 480,000 shares of the
Company's Common Stock. The holders of the Series F Preferred
F-10
<PAGE>
MEMRY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995 and 1994
- --------------------------------------------------------------------------------
Stock would be paid dividends only if the Company should declare dividends on
the Common Stock. The amount of the dividends would be based on the number of
shares exchanged. This transaction was necessary in order to allow the Company
to cancel the Common Stock so exchanged in order to be able to provide a
sufficient number of authorized but unissued shares of Common Stock to complete
certain private placements of the Common Stock. Upon consummation of the one-
for-ten reverse stock split on August 8, 1994, the Series F Preferred Stock was
converted into 480,000 shares of Common Stock. Since after such conversion no
shares of Series F Preferred Stock were outstanding, on November 9, 1994, the
Company filed with the Delaware Secretary of State a certificate eliminating
reference to the Series F Preferred Stock from the Company's Certificate of
Incorporation.
On June 26, 1995 and July 17, 1995, FirstInvest Holding Ltd. Inc.
("FirstInvest") purchased 193 shares and 230 shares, respectively, of Series G
Preferred Stock of the Company at a per share price of $6,500, for an aggregate
purchase price of $2,749,500. FirstInvest is not currently permitted to convert
any shares of Series G Preferred Stock into shares of Common Stock. However,
pursuant to the terms of Securities Purchase Agreements executed between the
Company and FirstInvest, the Company is obligated to (i) convene a meeting of
the Company's stockholders as soon as possible, but in any event prior to the
end of 1995, for the purpose of amending the Company's Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
10,000,000 to 25,000,000, and (ii) at such meeting, cause such proposed
amendment (the "Capitalization Amendment") to be adopted. From and after the
date of the filing of the Capitalization Amendment with the Delaware Secretary
of State, FirstInvest will be permitted to convert each of its shares of Series
G Preferred Stock into 10,000 shares of Common Stock (which conversion ratio is
subject to adjustment). As of October 12, 1995, FirstInvest beneficially owned
more than five percent of the Series G Preferred Stock.
At a Board of Directors meeting held on September 24, 1993, 80,000 shares of
Common Stock were granted to an officer as inducement for signing an employment
contract. These shares were issued in the second quarter of fiscal 1994 at a
price of $2.00 per share and an expense of $160,000 was recognized by the
Company.
During the year ended June 30, 1995, 40,000 shares of the Company's Common Stock
were issued to its Directors as renumeration for services provided and an
expense of $26,000 was recognized by the Company.
On January 31, 1991, the Company obtained a $1.5 million loan from National
Trust Company, trustee for Chrysler Canada ltd. Pension Fund ("National"), due
on October 31, 1991. National subsequently modified the terms of the loan which
resulted in the conversion of $700,000 of the loan into 87,500 shares of Common
Stock in fiscal years 1991 and 1992, repayment of the remaining principal
balance of $800,000 on November 2, 1993 (although $162,000 of interest remains
accrued and unpaid), and issuance of warrants to purchase, at such time, 115,000
shares of the Company's Common Stock at a per share price equal to the lesser of
(x) $1.40 or (y) 75% of the fair market value (determined by appraisal) of such
a share at the time of exercise, subject to adjustment upon the occurrence of
certain events, exercisable through December 1995.
F-11
<PAGE>
MEMRY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995 and 1994
- --------------------------------------------------------------------------------
The warrants issued to National enjoy "most favored nation" status, meaning that
if a more favorable price and/or terms are offered by the Company to third
parties, such more favorable terms will automatically attach to the warrants
held by National. The warrants have dilution protection throughout their term,
meaning that the shares of Common Stock into which the warrants held by National
are exercisable throughout the term of the warrants will represent approximately
the same percentage of ownership as they did as of October 29, 1992. These
warrants may currently be exercised to purchase 3,610,828 shares of the
Company's Common Stock.
Note 7. Stock Option Plans
Pursuant to the Company's incentive stock option plan approved by the
stockholders, options are granted at prices equal to the fair market value of
the Company's stock on the dates of grant, and are exercisable in cumulative
installments over a 10 year period. Other pertinent information related to the
plan during fiscal 1995 is as follows:
Under option, beginning of year -
Granted 436,500.00
Terminated and cancelled -
Exercised -
------------
Under option, end of year 436,500.00
============
Options exercisable, end of year 287,500.00
============
Available for grant, end of year 163,500.00
============
Average Price
-------------
Granted during the year $ 3.28
Exercised during the year $ N/A
Under option, end of year $ 3.28
Until September 23, 1993, the Company also maintained an Employees Stock Option
Plan (the "Employees Plan") and a Directors Stock Option Plan (the "Directors
Plan"). The Employees Plan provided for the granting of non-qualified stock
options to key employees to purchase not more than 100,000 shares of Common
Stock. The Directors Plan provided for the granting of non-qualified stock
options to directors to purchase not more than 50,000 shares of Common Stock.
Options granted under the Plans were exercisable at prices determined by the
Executive Committee of the Company's Board of Directors on the date each option
was granted. Options granted under the Employees Plan were exercisable in
various installments and expired on the third through sixth anniversaries from
the date of grant. Options granted under the Directors Plan were exercisable in
various installments and expired on the fourth through sixth anniversaries of
the date the director was first elected. In addition, options exercisable under
the Directors Plan were forfeited if, during the year preceding the period the
options become exercisable, the Director attended fewer than 75% of the total
meetings of the Board and Committees on which the Director served.
F-12
<PAGE>
MEMRY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995 and 1994
- --------------------------------------------------------------------------------
The Employees Plan provided for a three-month exercise period after termination
of employment without cause. The Directors Plan provided that any Director who
was not reelected to the Board of Directors was entitled to exercise options
during the period beginning on the date his term as a Director expired and
ending on the earlier of the date occurring three months after such expiration
date or the expiration date of the option. The Directors Plan specified that
each non-employee director was eligible to be granted options to purchase up to
6,000 shares of Common Stock upon such Director's election to the Board of
Directors. At a Board of Directors meeting held on September 24, 1993, the
Directors Stock Option Plan and the Employees Stock Option Plan were terminated
and the directors agreed to the cancellation of their outstanding options under
the Directors Stock Option Plan. The maximum aggregate amount that could have
been received by the Company from the exercise of all options outstanding on
September 23, 1993 under both plans was $15,625.
Summarized below are the shares of Common Stock issuable pursuant to warrants,
stock options and conversion of the Preferred Stock as of June 30, 1995 and
1994. The following table does not include 480 shares of Series F Preferred
Stock which were outstanding as of June 30, 1994 but were subsequently converted
into 480,000 shares of Common Stock on August 8, 1994.
<TABLE>
<CAPTION>
June 30, June 30,
1995 1994
--------- ---------
<S> <C> <C>
Warrants 6,088,891 1,999,126
Stock options outstanding 436,500 -
Options available 163,500 -
--------- ---------
6,688,891 1,999,126
Issuable upon conversion of
Preferred Stock 1,930,000 604,757
--------- ---------
8,618,891 2,603,883
========= =========
</TABLE>
Note 8. Income Taxes
Effective July 1, 1993, the Company changed its method of accounting for
income taxes from the deferred method to the liability method as required by
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes".
There was no cumulative effect upon adoption of SFAS No. 109 as of July 1,
1993, and the new Statement had no effect on the tax provision or net loss for
fiscal 1995 or 1994.
Deferred income taxes reflect the net effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. For financial
reporting purposes, a valuation allowance of $12.3 and $11.6 million has been
recognized as of June 30, 1995 and 1994, respectively, to reflect the
estimated amount of operating loss carryforwards and temporary differences
which may not be realized. The approximate effect of carryforwards and
temporary differences that give rise to deferred tax assets and liabilities as
of June 30, 1995 and 1994, are as follows:
F-13
<PAGE>
MEMRY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995 and 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, June 30,
1995 1994
------------ ------------
<S> <C> <C>
Deferred tax assets:
Accounts receivable reserves $ 21,500 $ 14,000
Inventory reserves 304,200 378,000
Capitalization of inventory costs 38,600 80,000
Vacation accruals 21,000 37,000
Depreciation and amortization 45.500 74,000
Research and development credit
carryforwards 160,000 160,000
Net operating loss carryforwards 11,678,800 10,884,000
------------ ------------
Total deferred tax assets 12,269,600 11,627,000
Valuation allowance (12,269,600) (11,627,000)
------------ ------------
Net deferred tax assets $ - $ -
============ ============
</TABLE>
As of June 30, 1995, the Company has net operating loss carryforwards for
income tax purposes of approximately $30 million, which expire beginning in
1998. In addition, the Company has tax credit carryforwards available to
offset future taxable income aggregating approximately $160,000 which expire
in various amounts from 1998 through 2008. As a result of numerous equity
transactions as discussed in Note 6, the net operating loss carryforwards and
the unused tax credits are significantly limited as to ultimate amounts of
these tax attributes which may be utilized and the periods for which they will
apply.
Note 9. Fourth Quarter Adjustments
The 1994 fourth quarter results include year-end adjustments increasing the
loss by $437,000 ($0.09 per share), principally attributable to the write-down
of the ULTRAVALVETM product inventory and a book-to physical adjustment of
$124,000.
Note 10. Revolving Loan, Notes Payable, Mortgage Payable and Term Loan Payable
The revolving loan, notes payable, mortgage payable and term note payable as
of June 30, 1995 are summarized below:
<TABLE>
<S> <C>
Revolving loan $ 570,000
=============
Notes payable $ 1,163,000
=============
Mortgage loan, due in monthly
installments of $3,700 $ 910,000
=============
Term loan, due in monthly
installments of $8,333,
including interest $ 167,000
=============
</TABLE>
In connection with the acquisition of Wright, Wright entered into a revolving
loan, term loan and security agreement (collectively, the "Loan Agreement")
which is guaranteed by the Company. The Loan Agreement includes a revolving
loan, a mortgage and a term loan. The revolving loan, as amended by a
Forbearance Agreement dated April 11, 1995 provides a revolver limit equal to
the lesser of the sum of
F-14
<PAGE>
MEMRY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995 and 1994
- --------------------------------------------------------------------------------
80% of eligible accounts receivable plus 40% of net inventories not to exceed
$350,000 (and on and after May 15, 1995 not to exceed $300,000) less a reserve
of $60,000 (to be increased to $100,000 on or prior to May 15, 1995), or
$1,150,000.
The term loan is collateralized by machinery and equipment having a net book
value of $51,520 and the mortgage loan is collateralized by land and building
with net book values of $166,000 and $771,000, respectively, all as of June
30, 1995.
The Loan Agreement requires payments received on accounts receivable by Wright
to be applied against the outstanding balances on the revolving and term
loans. In addition, the Loan Agreement prohibits Wright from paying dividends
to the Company and making advances to officers of Wright and prohibits the
Company from applying intercompany charges against Wright.
The term loan and mortgage loan have been classified as current as the Company
was in default under the terms of the Forbearance Agreement as of June 30,
1995 (as further described below and in Note 14).
As of July 1, 1992, Wright was in violation of certain covenants of the Loan
Agreement and the Company was in violation of its minimum cash balance
requirement. On October 8, 1992, Wright received permanent waivers of these
loan covenant violations. In connection therewith, the terms of the Agreement
were amended for the year ending June 30, 1993 to include revised covenants,
collateralization of the Company's $250,000 minimum cash balance commitment,
and a commitment by the Company to contribute $600,000 of working capital to
Wright.
As of June 30, 1993 Wright failed to comply with the financial covenants
contained in the revised loan agreement dated October 8, 1992, including, but
not limited to, the Company's failure to invest additional equity in Wright
and to collateralize its guaranty of the obligations of Wright. As of
November 1993, Wright had not cured these existing defaults or repaid any of
the loans and requested the bank to forbear from accelerating the loan
payments and enforcing the existing defaults through December 31, 1993.
The bank agreed to a Forbearance Agreement, which agreement was executed as of
November 15, 1993; however, Wright was required to paydown an additional
$350,000 of its debt to the bank and the Company was required to place as
collateral $150,000 in the form of a Certificate of Deposit. Wright and its
bank also agreed that the interest rate on the term loan, the mortgage loan
and the revolving loan be increased from the lender's base rate plus 1%, to
the lender's base rate plus 4% (13.00% as of June 30, 1995). On March 11th,
June 29th, October 7th, October 12th, 1994, and April 11, 1995 the Forbearance
Agreement was further amended. Pursuant to the terms of the April 11, 1995
agreement the bank agreed to forbear from accelerating the loan payments and
enforcing the existing defaults through July 1, 1995 upon certain conditions.
(See Note 14)
Notes payable consists of a 12% note payable to an officer of the Company, a
4% note payable to a significant shareholder of the Company's stock, and a 12%
and 6% note payable to companies in which an officer of the Company exerts
significant influence. It also consists of a $763,000 debt to Connecticut
Innovations, Incorporated. The debt was to be convertible into common stock
had the Company filed, with the Securities and Exchange Commission, a
registration statement on or before February 28, 1995. That
F-15
<PAGE>
MEMRY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995 and 1994
- --------------------------------------------------------------------------------
event did not occur, therefore, the Company was in default of this agreement as
of June 30, 1995. The Company has since executed a First Amendment to the
Convertible Subordinated Debenture Purchase Agreement (see Note 14). This debt
has been classified as current because it became due on demand following the
default of the agreement.
Interest expense to related parties approximated $31,000 and $18,000 for the
years ended June 30, 1995 and 1994, respectively.
Note 11. Leases
The Company leases telephone equipment and a copier under noncancellable leases.
These leases have been recorded as capital leases and are included in the
accompanying consolidated balance sheet under the caption "Property, Plant and
Equipment".
Future minimum lease payments by years and in the aggregate under these capital
leases consist of the following as of June 30, 1995:
Capital
Leases
-------------
1996 $ 5,000.00
1997 4,000.00
1998 4,000.00
-------------
13,000.00
Less amount representing interest 2,000.00
-------------
Present value of future minimum
lease 11,000.00
Less current maturities 4,000.00
-------------
$ 7,000.00
=============
Rent expense under operating leases for the years ended June 30, 1995 and 1994
amounted to $114,000 and $113,000, respectively.
Note 12. Contingencies
Wright maintains a defined contribution plan (401K) which covers substantially
all of its employees. There was no expense recognized for this plan in 1995
as no employees were participating. The expense incurred during 1994 was
$9,360. Contributions are based on specific percentages of employee voluntary
contributions. Employees vest immediately.
The Company has an employment agreement with one executive officer and one
other employee. The executive officer's agreement provides that severance
payments, of two years' salary, to be made to such officer upon a change of
control of the Company. The employee's agreement provides that such employee
may be entitled to receive a bonus based upon his performance, such bonus to
be declared at the sole discretion of the President of the Company.
F-16
<PAGE>
MEMRY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995 and 1994
- --------------------------------------------------------------------------------
Data Switch Corporation v. Memry Corporation, et al.
- ----------------------------------------------------
Verdon Corporation owns property located at 83 Keeler Avenue, Norwalk,
Connecticut (the "Property") which it leased to New Dimensions in Education,
Inc. ("New Dimensions"). New Dimensions subleased the Property to Data Switch
Corporation, which in turn subleased the Property to the Company. On December
18, 1990, Data Switch commenced an action against Verdon, New Dimensions and the
Company seeking a declaratory judgment that the lease was not renewed on June
12, 1990, for an additional five-year term. The Company supports this request;
however, Verdon and New Dimensions have taken the position that the lease was
renewed by the Company. On October 28, 1992, David O'Toole, successor to Verdon
Corporation, filed a cross-complaint against the Company alleging that the
Company intentionally and/or negligently damaged the Property during the period
of its tenancy. Similar allegations were also made against New Dimensions and
Data Switch. O'Toole's allegations fail to include any specific itemization of
the nature or scope of the injuries alleged. No formal discovery has taken place
to date. Trial has been scheduled to commence in February 1996. The Company
intends to defend this action vigorously.
Catizone v. Memry Corporation
- -----------------------------
The Company is a defendant in an action entitled Catizone v. Memry Corporation,
------------------------------
et al, No 91 Civ. 8023 (United States District Court, Southern District of New
- -----
York). In November 1991, Mr. Pat Catizone commenced an action against the
Company, American Stock Transfer & Trust Co. ("AST&T"), and Mr. Neil E. Rogen,
relating to Mr. Catizone's claim of ownership to 10,000 shares of the Company's
Common Stock. In June 1991, Mr. Catizone delivered to AST&T a certificate
representing 10,000 shares of the Company's Common Stock in the name of Mr.
Rogen and bearing a restrictive transfer legend and requested that the Company
issue a certificate without a restrictive legend in the name of Mr. Catizone.
Mr. Catizone claimed to have acquired the certificate from Mr. Perry
Constantinou as collateral for a loan made some years earlier, who had in turn
acquired the certificate from Mr. Rogen in 1984 or 1985. The Company refused Mr.
Catizone's request on the grounds that Mr. Rogen's transfer to Mr. Constantinou
was in violation of the federal securities laws. Mr. Catizone commenced his
action in the Supreme Court of the State of New York, but the action was removed
by the defendants to the United States District Court for the Southern District
of New York. Mr. Catizone is seeking an order directing the Company to issue an
unrestricted certificate representing 10,000 shares of the Company's Common
Stock in his name, together with damages equal to the difference between the
market value of the stock from the time that he first made demand on AST&T
through the date of trial, as well as attorneys' fees and costs. The Company
filed a Motion for Summary Judgment in September 1993. On July 25, 1995, the
Court issued an opinion by which it granted the Company's Motion for Summary
Judgment, and judgment was shortly thereafter entered in the Company's favor.
Mr. Catizone has appealed from the entry of judgment in the Company's favor,
which appeal is entitled Catizone v. Memry Corp., et al., No. 95-7874, pending
-------------------------------
before the United States Court of Appeals for the Second Circuit. The Company
intends to contest the appeal vigorously.
F-17
<PAGE>
MEMRY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995 and 1994
- --------------------------------------------------------------------------------
Neil E. Rogen v. Memry Corporation
- ----------------------------------
In September 1992, Neil E. Rogen, formerly an officer and director of the
Company, brought an action against the Company for the alleged breach of an
employment agreement between Mr. Rogen and the Company and for indemnification
for legal expenses incurred by Mr. Rogen in connection with an investigation
of and subsequent lawsuit against Mr. Rogen by the Securities and Exchange
Commission and certain related and unrelated lawsuits. Mr. Rogen commenced
his action in the United States District Court for the Southern District of
New York. Mr. Rogen is seeking at least $215,000 plus interest, costs and
attorney's fees as damages for the alleged breach of his employment agreement,
and in excess of $312,000 plus attorney's fees as indemnification for expenses
incurred in connection with the investigation and the lawsuits. On December
22, 1992, the Company filed an answer and a counterclaim against Mr. Rogen,
alleging breaches of fiduciary duty and unauthorized acts by Mr. Rogen and
seeking monetary damages for the same. In April 1994, the Company moved for
summary judgment with respect to all counts for Mr. Rogen's Complaint. On May
23, 1995, the Court issued an Opinion by which it granted the Company's Motion
for Summary Judgment on grounds of improper venue. Judgment was subsequently
entered in the Company's favor. Counsel for Mr. Rogen has indicated that he
intends to refile the action in a different venue. The Company intends to
contest the case vigorously.
SFC Valve Corporation vs. Wright Machine Corporation
- ----------------------------------------------------
The Company had been named in a suit SFC Valve Corporation vs. Wright Machine
Corporation. This suit was settled by the Company during fiscal year ended
June 30, 1995 for $70,000.
Note 13. Segment Information
The Company is principally engaged in two business segments: Memry Segment
("Memry") and Wright Machine Segment ("Wright"). All businesses are located
domestically. Wright includes the manufacturing and marketing of metal parts and
components machined on screw machines and smaller metal working machines. Memry
is engaged in developing, manufacturing and marketing products and components
utilizing the properties exhibited by shape memory alloys. Memry's revenues
include product development contracts for outside customers. Memry expenses
include internally funded research as well as all costs associated with outside
clients. There were no significant intersegment sales or transfers.
Operating loss is total revenue less operating expenses, excluding interest.
Identifiable assets of each segment are the assets used by that segment in its
operations, excluding general corporate assets. General corporate assets are
principally cash, deposits and other receivables.
F-18
<PAGE>
MEMRY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995 and 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, June 30,
1995 1994
----------------------
(in thousands)
<S> <C> <C>
Revenues
Wright $ 3,716 $ 3,707
Memry 1,013 558
------- -------
Total operating revenues $ 4,729 $ 4,265
======= =======
Operating loss
Wright $ (136) $ (844)
Memry (1,896) (2,219)
------- -------
Total operating loss $(2,032) $(3,063)
======= =======
Interest (360) (295)
------- -------
Net loss $(2,392) $(3,358)
======= =======
Assets
Wright $ 1,752 $ 2,898
Memry 2,227 408
------- -------
Total assets $ 3,979 $ 3,306
======= =======
Depreciation and Amortization
Wright $ 185 $ 230
Memry 55 44
------- -------
$ 240 $ 274
======= =======
Capital Expenditures
Wright $ 15 $ 18
Memry 94 171
------- -------
$ 109 $ 189
======= =======
</TABLE>
Depreciation and amortization includes depreciation and amortization of
capital assets, including patents.
Note 14. Subsequent Events
On October 12, 1995, the Company amended a Convertible Subordinated Debenture
Purchase Agreement (as so amended, the "Purchase Agreement"), dated as of
December 22, 1994, with Connecticut Innovations, Incorporated ("CII").
Pursuant to the Purchase Agreement, CII acquired from the Company the
following (the "CII Securities"): (i) a Convertible Subordinated Debenture,
dated December 22, 1994, in the principal amount of $763,208, as amended by a
First Addendum to Convertible Subordinated Debenture dated as of October 12,
1995 (as so amended, the "Debenture") currently convertible into Common Stock,
subject to the limitation set forth below, at a conversion price of $0.80 per
share, (ii) a warrant, dated December 22, 1994, as amended by a First Addendum
to Stock Subscription Warrant (as so amended, the "Class I Warrants"),
initially exercisable to purchase 508,805 shares of Common Stock at a price of
$2.15 per
F-19
<PAGE>
MEMRY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995 and 1994
- --------------------------------------------------------------------------------
share and currently exercisable, subject to the limitation set forth
below, to purchase 1,176,269 shares of Common Stock at a price of $0.93 per
share, (iii) a warrant, dated December 22, 1994, as amended by a First
Addendum to Stock Subscription Warrant (as so amended the "Class II
Warrants"), initially exercisable to purchase 305,283 shares of Common Stock
at a price of $2.75 per share and currently exercisable, subject to the
limitation set forth below, to purchase 705,485 shares of Common Stock at a
price of $1.19 per share, and (iv) a warrant, dated December 22, 1994, as
amended by a First Addendum to Stock Subscription Warrant (as so amended, the
"Class III Warrants"), initially exercisable to purchase 100,000 shares of
Common Stock at an exercise price of $1.00 and currently exercisable, subject
to the limitation set forth below, to purchase 100,000 shares at an exercise
price of $0.65, such warrant being an amendment and restatement of a warrant
previously held by CII to purchase 10,000 shares of Common Stock at an
exercise price of $10.00 per share.
Pursuant to the Purchase Agreement, CII purchased the Debenture, the Class I
Warrants and the Class II Warrants for an aggregate purchase price of
$763,208, comprised of (i) $370,153 in cash, (ii) delivery to the Company by
CII of a 10% Convertible Demand Note of the Company in the principal amount of
$334,847 (the "Note") marked paid in full, and (ii) delivery to the law firm
of Finn Dixon & Herling as escrow agent (the "Escrow Agent") of a check in the
amount of $45,000 pursuant to an Escrow Agreement dated as of December 22,
1994, as amended October 12, 1995, among the Company, CII and the Escrow
Agent. Pursuant to the terms of the Purchase Agreement, the Company is
required to file a registration statement (the "Registration Statement") to
cover, inter alia, the resale by CII of the Shares of Common Stock underlying
the CII Securities (the "Registrable Securities") and is required to cause the
Registration Statement to become effective no later than March 15, 1996,
maintain the effectiveness of the Registration Statement for a period of three
years from its effective date, subject to the provisions of the Purchase
Agreement, and use its best efforts to allow CII to continually sell
Registrable Securities pursuant to such Registration Statement free from any
stop orders or suspensions by the Company or advice of counsel to the
contrary. The exercise or conversion, as applicable, of the CII Securities is
subject to the limitation that prior to the earlier to occur of December 20,
1995 or the date on which the Company has authorized and reserved for issuance
a sufficient number of shares to allow for the full exercise and conversion of
the Registrable Securities, (i) none of the Class I Warrants, the Class II
Warrants nor the Class III Warrants may be exercised and (ii) the Debenture may
not be converted at a per share price other than $1.50.
CII has been granted a "put" right if (i) at any time before the earlier of
October 12, 2005 and the date on which CII ceases to hold at least 35% of the
Registrable Securities the Company ceases to (a) maintain its corporate
headquarters and a majority of its shape memory business operations in the
State of Connecticut, (b) base its president and chief executive officer, all
of its administrative and financial staff, all of its marketing and customer
service staff (excluding individuals specific to Wright only), and all of its
research and development staff in the State of Connecticut, (c) conduct a
majority of its operations in the aggregate (including manufacturing and
production), directly or through subcontractors and through licensed
operations, in the State of Connecticut (excluding Wright's business related
to the production of screw machine products and taper pins), and (d) maintain
its principal bank accounts with banks located in the State of Connecticut,
excluding all banks associated with Wright; or (ii) the Company fails (a) to
cause the effectiveness of the Registration Statement by March 15, 1996, (b)
to keep the Registration Statement
F-20
<PAGE>
MEMRY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995 and 1994
- --------------------------------------------------------------------------------
effective for an aggregate of 120 days during any rolling twelve month period,
or (c) to have authorized and unissued shares of Common Stock reserved for the
full exercise and conversion of the CII Securities by December 20, 1995. Upon
CII's exercise of its put, the Company shall be obligated to purchase from CII
all CII Securities and Registrable Securities held at that time by CII for price
equal to the greater of (i) the amount of CII's investment plus an amount
calculated to yield to CII a compounded rate of return of 25% per annum plus, in
the case of Common Stock issued upon the exercise of the Class I price paid to
acquire Common Stock, or (ii) the difference between the product of the current
market price per share of the Common Stock included within or acquirable upon
the exercise prices that would have to be paid upon the full exercise of the
remaining Class I Warrants, Class II Warrants and Class III Warrants included
within the CII Securities and the Registrable Securities.
As of July 20, 1995, Shawmut Bank, N.A. (the "Bank") and Wright executed a
Third Amendatory Agreement to Revolving Loan, Term Loan and Security Agreement
by which the Bank has agreed to extend the termination date of its revolving
loan to Wright to July 1, 1996, if not sooner demanded, subject to Wright's
continued compliance with certain convenants included in the Revolving Loan,
Term Loan and Security Agreement dated February 7, 1990 as amended to date (as
so amended, the "Loan Agreement"). The Bank also agreed that the final
installment on the mortgage note and term note evidencing indebtedness owed by
Wright to the Bank would be set at July 1, 1996. Among other things, the Loan
Agreement requires Wright to pay transaction fees of $1,500 per month for the
period from July 1, 1995 through September 30, 1995, $3,000 per month for the
period from October 1, 1995 through December 31, 1995, and $4,500 per month
for the period from January 1, 1996 through March 31, 1996, and $6,000 per
month for the period from April 1, 1996 through June 30, 1996. However, if
Wright meets or exceeds certain projected net income levels for the six months
ended December 31, 1995 and continues to meet or exceed projected monthly net
income levels thereafter, then the monthly fee will remain at $3,000. If at
any time after December 31, 1995, however, Wright fails to meet or exceed net
income projections the fee will increase to $4,500 per month for the next
three months and to $6,000 per month thereafter in which there are outstanding
obligations of Wright owed to the Bank. Interest on the revolving loan,
mortgage loan and term loan has been reset to the Bank's base rate plus 4%.
The Company also reaffirmed its guaranty of all Wright's obligations to the
Bank and reaffirmed its subordination of certain obligations owed by Wright.
There can be no assurance that the Company and Wright will not be in breach of
the Loan Agreement in the future, or that the Bank will agree to a further
extension or a forbearance in such event.
F-21
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The Exhibits listed in the Index to Exhibits following the Signature Page
herein are filed as part of this Annual Report on Form 10-KSB.
(b) Reports on Form 8-K
Forms 8-K were filed on June 26, 1995 and September 27, 1995 with respect
to disclosure regarding Item 4. - Changes in Registrant's Certifying
Accountants.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MEMRY CORPORATION
Date: October 13, 1995 By: /s/ James G. Binch
------------------- ----------------------
James G. Binch
President, CEO,
Treasurer and
Chairman of the Board
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 in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ James G. Binch President, CEO, Treasurer October 13, 1995
- ---------------------- and Chairman of the Board
James G. Binch (Principal Executive Officer)
/s/ Wendy A. Gavaghan Controller October 13, 1995
- --------------------- (Principal Financial
Wendy A. Gavaghan Officer)
/s/ Nicholas J. Grant Director October 13, 1995
- ---------------------
Nicholas J. Grant
/s/ Jack Halperin Director October 13, 1995
- ----------------------
Jack Halperin
/s/ W. Andrew Krusen Director October 13, 1995
- ----------------------
W. Andrew Krusen
/s/ John A. Morgan Director October 13, 1995
- ----------------------
John A. Morgan
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description of Exhibit Page
- ------- ---------------------- ----------
<S> <C> <C>
3.1 Certificate of Incorporation of the Company,
as amended
3.2 By-Laws of the Company, as amended
10.1 Sub-lease on Keeler Avenue Facility (11)
dated February 21, 1988, including main
lease and interim lease.
10.2 Agreement of sale between Memrysafe, Inc. (1)
and Speakman Company
10.3 Distribution Agreement dated June 21, 1990, (3)
between Memry Plumbing Products, a wholly
owned subsidiary of the Company, and
Ferguson Enterprises, Inc.
10.4 Revolving Loan, Term Loan, and Security (3)
Agreement dated February 6, 1990, between
Wright Machine Corporation and Shawmut Bank
(formerly known as Connecticut National Bank)
10.5 Guaranty Agreement dated February 7, 1990, (3)
between the Company and the Connecticut
National Bank
10.6 Commission Sales Agreement, dated October 5, (3)
1987, between Apogee Technology Corporation
and the Company
10.7 Employment Agreement, dated January 1, 1990, (3)
between the Company and Ming H. Wu
10.8 Employment Agreement, dated February 6, 1990, (3)
between Wright Machine Corporation and
Thomas Mack
10.9 Amendment to Sublease Agreement for (3)
Keeler Avenue Facility
10.10 Compensation Agreement, dated December (4)
18, 1990, between the Company and Richard
L. Martin
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description of Exhibit Page
- ------- ---------------------- ----------
<S> <C> <C>
10.11 Distribution Agreement dated as of (4)
November 19, 1990, between Mitsubishi
Heavy Industries America, Inc. and
Memry-Paradigm
10.12 First Amendatory Agreement, dated October 11, (4)
1991, to Revolving Loan, Term Loan, and
Security Agreement, dated February 6, 1990,
between Wright Machine Corporation and Shawmut
Bank (formerly known as The Connecticut National
Bank)
10.13 Reaffirmation of Guaranty, dated October 11, (4)
1991, of the Guaranty of the Company to Shawmut
Bank (formerly known as The Connecticut National
Bank)
10.14 Lease Agreement, dated January 24, 1991, (4)
between the Company and Brookfield Commerce,
relating to 57 Commerce Drive, Brookfield, CT
10.15 SBIR Contract, dated August 6, 1992, between the (8)
Company and the U.S. Air Force
10.16 Form of Securities Purchase Agreement used in (5)
connection with the November 6, 1991, private
placement
10.17 Warrant Issued to Connecticut Innovations, (5)
Inc. ("CII") as of March 1, 1992
10.18 Second Amendatory Agreement, dated October 8, (8)
1992, to Revolving Loan, Term Loan, and Security
Agreement, dated February 6, 1990, between Wright
Machine Corporation and Shawmut Bank (formerly
known as Connecticut National Bank)
10.19 Reaffirmation and Amendment of Guaranty, dated (8)
October 8, 1992, of the Guaranty of the Company
to Shawmut Bank (formerly known as Connecticut
National Bank) dated February 7, 1991
10.20 Waiver by Shawmut Bank (formerly known as (8)
Connecticut National Bank) of certain provisions
of the Revolving Loan, Term Loan, and Security
Agreement, dated February 6, 1990, between the
Bank and Wright Machine Corporation
10.21 Letter Agreement between the Company and Chrysler (9)
Financial extending the term of a loan due to
Chrysler Canada Ltd. Pension Fund
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description of Exhibit Page
- ------- ---------------------- ----------
<S> <C> <C>
10.22 Securities Purchase Agreement between the (10)
Company and David A. Gardner, dated
January 4, 1993
10.23 Securities Purchase Agreement between the (10)
Company and Michael J. Hayes and Christina
Hayes, dated January 4, 1993
10.24 Securities Purchase Agreement between the (11)
Company and Donald J. Resnick, dated
January 4, 1993
10.25 Securities Purchase Agreement between the (11)
Company and Montreal Trust Company of Canada,
dated March 5, 1993
10.26 Securities Purchase Agreement between the (11)
Company and Dominion Partners, dated
March 12, 1993
10.27 Securities Purchase Agreement between the (11)
Company and Moore & Company, dated
April 14, 1993
10.28 Employment Agreement, dated September 24, (12)
1993, between the Company and James G. Binch
10.29 Placement Agreement, dated May 21, 1993, (12)
between the Company and American Equities
Overseas, Inc.
10.30 Form of Securities Purchase Agreement used (12)
in connection with the May 21, 1993, foreign
private placement
10.31 Placement Agreement, dated September 8, (12)
1993, between the Company and American
Equities Overseas, Inc.
10.32 Warrant issued to American Equities Overseas (12)
Inc., pursuant to Placement Agreement of
September 8, 1993
10.34 Placement Agreement, Dated November 22, (12)
1993, between the Company and American
Equities Overseas, Inc.
10.34 Warrant issued to American Equities Overseas (12)
Inc., pursuant to Placement Agreement of
November 22, 1993
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description of Exhibit Page
- ------- ---------------------- ----------
<S> <C> <C>
10.35 Form of Securities Purchase Agreements used (12)
in connection with the September 29, 1993 and
December 3, 1993, foreign private placements
10.36 Form of Securities Purchase Agreement used (12)
in connection with the 1993 U.S. private
placement
10.37 Amendment, dated as of October 31, 1992, (12)
to Note Agreement between the Company and
National Trust Company, trustee for
Chrysler Canada, Ltd. Pension Fund
10.38 Warrant issued to National Trust Company, (12)
trustee for Chrysler Canada, Ltd. Pension
Fund, pursuant to the Amendment to Note
Agreement dated as of October 31, 1992
10.39 Agreement, dated January 25, 1993, between (12)
the Company and Sciatec, Inc.
10.40 Agreement, dated September 30, 1993, (12)
between the Company and Harbour Holdings
Limited Partnership and relating to the
Company's Preferred Stock
10.41 Memry Corporation Stock Option Plan adopted (13)
as of July 19, 1994
10.42 SBIR Contract dated July 1, 1993, between the (13)
Company and the National Institute of Health
10.43 SBIR Contract dated December 3, 1993, between (13)
the Company and the U.S. Air Force
10.44 SBIR Contract dated December 9, 1993 between (13)
the Company and NASA
10.45 Letter Agreement dated as of October 12, 1994 (13)
between the Company and Harbour Holdings Limited
Partnership regarding Series A Preferred stock
conversion calculation
10.46 Employee Non-Disclosure Agreement, dated as of (13)
October 18, 1994, between the Company and
James G. Binch
10.47 Employee Non-Disclosure Agreement, dated as of (13)
January 24, 1994, between the Company and
Wendy A. Gavaghan
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description of Exhibit Page
- ------- ---------------------- ----------
<S> <C> <C>
10.48 Employee Agreement on Inventions and Patents, (13)
dated as of February 17, 1994, between the
Company and Richard L. Martin
10.49 Employee Non-Disclosure Agreement, dated as of (13)
February 17, 1994, between the Company and
Richard L. Martin
10.50 Convertible Subordinated Debenture Purchase (14)
Agreement, dated as of December 22, 1994,
between the Company and CII
10.51 Convertible Subordinated Debenture in the (14)
principal amount of $763,208.00, dated
December 22, 1994, from the Company to CII
10.52 Escrow Agreement, dated as of December 22, 1994, (14)
among the Company, CII and Finn Dixon &
Herling as escrow agent
10.53 Letter Agreement, dated May 22, 1995, between
Harbour Holdings Limited Partnership and the
Company regarding conversion of Series A and
Series B Preferred Stock and issuance of shares
of Common Stock as payment in full of accrued
dividends.
10.54 Third Amendatory Agreement, dated July 20, 1995,
to Revolving Loan, Term Loan, and Security
Agreement, dated February 6, 1990, between Wright
Machine Corporation and Shawmut Bank Connecticut,
N.A. (formerly known as Connecticut National Bank)
10.55 Notes and Mortgage Modification Agreement, dated
as of July 20, 1995, between Wright Machine
Corporation and Shawmut Bank Connecticut, N.A.
10.56 Reaffirmation and Amendment of Subordination
Agreement, dated July 20, 1995, from the Company
to Shawmut Bank Connecticut, N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description of Exhibit Page
- ------- ---------------------- ----------
<S> <C> <C>
10.57 Reaffirmation of Guaranty, dated July 20, 1995,
from the Company to Shawmut Bank Connecticut, N.A.
10.58 Form of Securities Purchase Agreement relating
to sales of shares of Series G Preferred Stock of
the Company
10.59 First Amendment to Convertible Subordinated Debenture
Purchase Agreement, dated October 11, 1995, between
the Company and CII
10.60 First Addendum to Convertible Subordinated Debenture,
dated October 11, 1995, made by the Company and agreed
to by CII
10.61 First Addendum to Stock Subscription Warrant (re:
Warrant No. 94-4), dated October 11, 1995, made by the
Company and agreed to by CII
10.62 First Addendum to Stock Subscription Warrant (re:
Warrant No. 94-5), dated October 11, 1995, made by the
Company and agreed to by CII
10.63 First Addendum to Stock Subscription Warrant (re:
Warrant No. 94-6), dated October 11, 1995, made by the
Company and agreed to by CII
10.64 Amendment to Escrow Agreement, dated October 11, 1995,
among the Company, CII and Finn Dixon & Herling as
escrow agent
11.1 Statement regarding computation of per share
earnings on both a primary and fully diluted basis
21.1 Information regarding Wright Machine Corporation (12)
</TABLE>
- -------------------------------
(1) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1989.
(2) Incorporated by reference to the Company's Current Report on Form 8-K filed
January 2, 1990.
(3) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1990.
(4) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1991.
<PAGE>
(5) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1991.
(6) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended March 30, 1992.
(7) Incorporated by reference to the Company's Current Report on Form 8-K filed
on April 9, 1992.
(8) Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the fiscal year ended June 30, 1992.
(9) Incorporated by reference to the Company's Quarterly Report on Form 10-QSB
for the Fiscal Quarter ended September 30, 1992.
(10) Incorporated by reference to the Company's Quarterly Report on Form 10-QSB
for the Quarter ended December 31, 1992.
(11) Incorporated by reference to the Company's Quarterly Report on Form 10-QSB
for the Quarter ended March 31, 1993.
(12) Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the fiscal year ended June 30, 1993.
(13) Incorporated by reference to the Company's Annual Report on Form
10-KSB for the fiscal year ended June 30, 1994.
(14) Incorporated by reference to the Company's Registration Statement on Form
SB-2, filed with the Commission on November 8, 1994, as amended by
Amendment No. 1 filed with the Commission on January 17, 1995.
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
MEMORY METALS, INC.
1. The name of the Corporation is
MEMORY METALS, INC.
2. The address of its registered office in the State of Delaware is
No. 100 West-Tenth Street, in the City of Wilmington, County of Newcastle. The
name of its registered agent at such address is The Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted
is:
To invent, develop, market, license, sell and/or acquire, as a principal
partner and/or joint venturer, specialty metals and machine parts or other
objects made therefrom.
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
4. The total number of shares of Common Stock which the Corporation
shall have authority to issue is one million (1,000,000), and the par value of
each of such shares is One Cent ($.01), amounting in the aggregate to Ten
Thousand Dollars ($10,000.00).
5. The name and address of the incorporator is as follows:
Jerry Cohen 50 Court Street
Newton, MA 02160.
6. The Corporation is to have perpetual existence.
7. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
To make, alter, or repeal the bylaws of the Corporation.
<PAGE>
To authorize and cause to be executed mortgages and liens upon the real
and personal property of the Corporation.
To set apart out of any of the funds of the Corporation available for
dividends a reserve or reserves for any proper purpose and to abolish any such
reserve in the manner in which it was created.
By a majority of the whole board, to designate one or more committees,
each committee to consist of one or more of the directors of the Corporation.
The board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. The bylaws may provide that in the absence or disqualification
of a member of a committee, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute
a quorum, may unanimously appoint another member of the board of directors to
act at the meeting in the place of any such absent or disqualified member. Any
such committee, to the extent provided in the resolution of the board of
directors, or in the bylaws of the Corporation, shall have and may exercise all
the powers and authority of the board of directors in the management of the
business and affairs of the corporation and may authorize the seal of the
corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
certificate of incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease, or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending the bylaws of the Corporation; and, unless the resolution or bylaws
expressly so provide, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock.
When and as authorized by the stockholders in accordance with statute, to
sell, lease, or exchange all or substantially all of the property and assets of
the Corporation, including its goodwill and its corporate franchises, upon such
terms and conditions and for such consideration, which may consist in whole or
in part of money or property including shares of stock in, and/or other
securities of,
<PAGE>
any other corporation or corporations, as its board of directors shall deem
expedient and for the best interests of the Corporation.
3. Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder hereof, or on the
application of any receiver or receivers appointed for the Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for the Corporation under the provisions of Section 279 of Title 8 of
the Delaware Code, order a meeting of the creditors or class of creditors,
and/or the stockholders or class of stockholders of the Corporation, as the
case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths (3/4) in value of the creditors
or class of creditors, and/or of the stockholders or class of stockholders of
the Corporation, as the case may be, agree to any compromise or arrangement or
to any reorganization of the Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders of this Corporation, as the case may be,
and also on this Corporation.
9. Meetings of stockholders may be held within or without the State of
Delaware, as the bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
board of directors or in the bylaws of the Corporation. Elections of directors
need not be by written ballot unless the bylaws of the Corporation shall so
provide.
<PAGE>
10. The Corporation reserves the right to amend, after, change, or
repeal any provision contained in this certificate of incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
I. THE UNDERSIGNED, being the incorporator hereinbefore names, for the
purposes of forming a corporation pursuant to the General Corporation Law of
the State of Delaware, do make this certificate, hereby declaring and
certifying that his is my act and deed and the facts herein stated are true,
and accordingly have hereunto set my hand this 4th day of November 1981.
/s/ Jerry Cohen
------------------------
Jerry Cohen
Commonwealth of Massachusetts )
) ss
County of Middlesex )
BE IT REMEMBERED that on this 4th day of November, 1981, personally
appeared before me, a Notary Public for the Commonwealth of Massachusetts,
Jerry Cohen, a party to the foregoing instrument, known to me personally to be
such, and acknowledged it to be his free act and deed, and that the facts
stated therein are true.
GIVEN under my hand and seal of office the day and year aforesaid.
/s/Grisella G. Slofasow
-----------------------------
Notary Public
My commission expires: August
20, 1987
<PAGE>
Certificate of Amendment No. 1
To
Certificate of Incorporation
Memory Metals, Inc.
----------------------------------
MEMORY METALS, INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That the Board of Directors of said corporation on February
28, 1983 adopted a resolution proposing and declaring advisable that the
amendment of the certificate of incorporation set forth in Exhibit A hereto be
made.
SECOND: The holder of all the outstanding shares of said corporation
voted on February 28, 1983 to authorize the amendment set forth in said
resolution.
THIRD: That the aforesaid amendment was duly adopted in accordance
with the applicable provisions of Sections 242 and 222 of the General
Corporation Law of the State of
Delaware.
FOURTH: That the capital of said corporation shall not be reduced
under or by reason of said amendment.
<PAGE>
IN WITNESS WHEREOF, said Memory Metals, Inc. has caused this certificate
to be signed by Gerald Grosof, its President, and attested by Mary Teufel, its
Assistant Secretary, this 28th day of February, 1983.
MEMORY METALS, IN.
By:/s/ Gerald Grosof
--------------------------
Gerald Grosof
President
ATTEST:
By:/s/ Mary Teufel
-------------------------------------
Mary Teufel, Assistant Secretary
<PAGE>
Exhibit A
RESOLVED, that the Certificate of Incorporation of MEMORY METALS, INC.
(the "corporation") be amended as follows:
By deleting Article Fourth thereof and substituting the following:
FOURTH: The total number of shares of all class stock which the
corporation shall have authority to issue is Ten Million One Hundred Thousand
(10,100,000) shares consisting of (a) Ten Million (10,000,000) shares of common
stock of the par value of One Cent ($.01) per share and (b) One Hundred
Thousand (100,000) shares of preferred stock of the par value of One Hundred
Dollars ($100.000) per share.
The designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions, of the preferred stock are as
follows:
A. The preferred stock may be issued from time to time in one or more
series. Subject to the limitations set forth herein and any limitations
prescribed by law, the board of directors is expressly authorized, prior to
issuance of any series of preferred stock, to fix by resolution or resolutions
providing for the issue of any series the number of shares included in such
series and the designation, relative powers, preferences and rights, and the
qualifications, limitations or restrictions of such series. Pursuant to the
foregoing general authority vested in the board of directors, but not in
limitations of the power conferred on the board of directors thereby and by the
General Corporation Law of the State of Delaware, the board of directors is
expressly authorized to determine with respect to each series of preferred
stock:
(1) the designation or designations of such series and the number
of shares (which number from time to time may be decreased by the board
of directors, but not below the number of such shares of such series then
outstanding, or may be increased by the board of directors unless
otherwise provided in creating such series) constituting such series;
(2) the rate or amount and times at which, and the preference and
conditions under which, dividends shall be payable on shares of such
series, the status of such dividends as cumulative or noncumulative, the
date or dates from which dividends, if cumulative, shall accumulate, and
the status of such shares as participating or non-participating after the
payment of dividends as to which such shares are entitled to any
preference;
(3) the rights and preference, if any, of the holders of shares
of such series upon the liquidation, dissolution or winding up of the
assets of, the corporation, which amount may vary depending upon whether
such liquidation, dissolutions or winding up is voluntary or involuntary
and, if voluntary, may vary at different dates, and the status of the
shares of such series as participating or non-participating after the
satisfaction of any such rights and preferences;
(4) the full or limited voting rights, if any, to be provided for
shares of such series, in addition to the voting rights provided by law;
<PAGE>
(5) the times, terms and conditions, if any, upon which shares of
such series shall be subject to redemption, including the amount the
holders of shares of such series shall be entitled to receive upon
redemption (which amount may vary under different conditions or at
different redemption dates) and the amount, terms, conditions and manner
of operation of any purchase, retirement or sinking fund to be provided
for the shares of such series.
(6) the rights, if any, of holders of shares of such series
and/or of the corporation to convert such shares into, or to exchange
such shares for, shares of any other class or classes or of any other
series of the same class, the prices or rates of conversion or exchange,
and adjustments thereto, and any other terms and conditions applicable to
such conversion or exchange;
(7) the limitations,if any, applicable while such series is
outstanding on the payment of dividends or making of distributions on, or
the acquisition or redemption of, common stock or any other class or
shares ranking junior either as to dividends or upon liquidation, to the
shares of such series;
(8) the conditions or restrictions, if any, upon the issue of any
additional shares (including additional shares of such series or any
other series or of any other class) ranking on a parity with or prior to
the shares of such series either as to dividends or upon liquidation; and
(9) any other relative powers, preferences and participating,
optional or other special rights, and the qualifications, limitations or
restrictions thereof, of shares of such series; the provisions of this
Certificate of Incorporation or the General Corporation Law of the State
of Delaware as then in effect.
All shares of preferred stock shall be identical and of equal rank except in
respect to the particular that may be fixed by the board of directors as
provided above, and all shares of each series of preferred stock shall be
identical and of equal rank except in respect to the particulars that may be
fixed by the board of directors as provided.
<PAGE>
Certificate of Amendment No. 2
To
Certificate of Incorporation
Of
Memory Metals, Inc.
------------------------------------
MEMORY METALS, INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware. DOES HEREBY
CERTIFY:
FIRST: That the Board of Directors of said corporation on February
23, 1989 and April 25, 1989 adopted resolutions proposing and declaring
advisable that the amendment of the certificate of incorporation set for in
Exhibit A hereto be made.
SECOND: That the shareholders of said corporation, at a Special
Meeting held on May 31, 1989, voted to authorize the amendment set forth in
said resolution.
THIRD: That the aforesaid amendment was duly adopted in accordance
with the applicable provisions of Sections 242 and 222 of the General
Corporation Law of the State of Delaware.
FOURTH: That the capital of said corporation shall not be reduced
under or by reason of said amendment.
<PAGE>
IN WITNESS WHEREOF, said Memory Metals, Inc. has caused this certificate
to be signed by Stephen M. Fisher, its President, and attested by John W.
Johnston, its Secretary, this 1st day of June, 1989.
MEMORY METALS, INC.
By:/s/ Stephen M. Fisher
---------------------------
Stephen M. Fisher,
President
ATTEST:
By:/s/ John W. Johnston
----------------------------
John W. Johnston
Secretary
<PAGE>
EXHIBIT A
RESOLVED, that the Certificate of Incorporation of MEMORY METALS, INC.
(the "corporation") be amended as follows:
FIRST: By deleting Article 1 thereof and substituting the following:
1. The name of the Corporation is Memry Corporation.
SECOND: By deleting the first paragraph of Article 4 thereof and
substituting the following:
4. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is Fifteen Million One Hundred
Thousand (15,100,000) shares consisting of (a) Fifteen Million (15,000,000)
shares of common stock of the par value of One Cent ($.01) per share and (b)
One Hundred Thousand (100,000) shares of preferred stock of the par value of
One Hundred Dollars ($100.00) per share.
THIRD: By adding a new Article 12. to read as follows:
12. To the fullest extent permissible under the General Corporation Law
of the Sate of Delaware, as the same exists of may hereafter be amended, a
director's personal liability to the Corporation and its shareholders for
monetary damages for breach of his fiduciary duty as a director is hereby
eliminated, except for liability (i) for any breach of director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
the law, (iii) for improper dividend payment or unlawful stock purchases or
redemption, or (iv) for any transaction from which the director derived an
improper personal benefit. Any repeal or modification of this Article shall
not adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification.
<PAGE>
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING MEMRY TECHNOLOGIES, INC. AND
MEMRY PLUMBING PRODUCTS CORPORATION INTO
MEMRY CORPORATION
(Pursuant to Section 253 of the Delaware General Corporation Law)
Memry Corporation, a Delaware corporation (the "Corporation") does hereby
certify:
FIRST: That the Corporation was incorporated and duly organized
pursuant to the General Corporation Law of the State of Delaware.
SECOND: That the Corporation owns all of the outstanding shares of
each class of the capital stock of Memry Technologies, Inc., a Delaware
corporation ("Subsidiary Corporation No. 1").
THIRD: That the Corporation owns all of the outstanding shares of
each class of the capital stock of Memry Plumbing Products Corporation, a
Delaware corporation ("Subsidiary Corporation No. 2").
FOURTH: That the Corporation, by resolutions duly adopted by its
Board of Directors on the 24th day of September, 1993, determined to merge with
and into itself its subsidiaries, Subsidiary Corporation No. 1 and Subsidiary
Corporation No. 2, pursuant to Section 253 of the General Corporation Law of
the State of Delaware, and that said resolutions on the conditions set forth in
such resolutions:
RESOLVED: That the Corporation merge with and into itself its
subsidiaries, Subsidiary Corporation No. 1 and Subsidiary Corporation No. 2,
and assume all of said subsidiaries' liabilities and obligations:
FURTHER RESOLVED: That the President and the Secretary of the
Corporation be and they hereby are, jointly and severally, authorized and
directed to make, execute and acknowledge a certificate of ownership and merger
setting forth a copy of the resolutions so to merge said Subsidiary Corporation
into the Corporation and to assume said subsidiaries' liabilities and
obligations and the date of adoption thereof and to file the same in the office
of the Secretary of the State of Delaware and a certified copy thereof in the
Office of the Recorder of Deeds of New Castle County, and to do all acts and
things whatsoever whether within or without the State, of Delaware, as may be
necessary and proper to effect the merger.
<PAGE>
IN WITNESS WHEREOF, said Corporation has caused this certificate to be
signed by James G. Binch, its President, and attested by Wendy Gavaghan, its
Secretary, this 27th day of September, 1993.
MEMRY CORPORATION
By:/s/ James G. Binch
----------------------------------
James G. Binch, President
ATTEST:
/s/ Wendy Gavaghan
- -------------------------------
Wendy Gavaghan, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
MEMRY CORPORATION
MEMRY CORPORATION, a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify:
First: That the Board of Directors of the Corporation on April 13, 1994
adopted resolutions proposing and declaring advisable that the amendments to
the certificate of incorporation set forth in Exhibit A hereto be made.
Second: That the stockholders of the Corporation, at the annual meeting
of stockholders held on July 19, 1994, voted to authorize the amendments
set forth in said resolution.
Third: That the aforesaid amendments were duly adopted in accordance
with the applicable provisions of Sections 222 and 242 of the General
Corporation Law of the State of Delaware.
Fourth: That the effective date of the foregoing amendments will be
August 8, 1994.
IN WITNESS WHEREOF, the Corporation has caused this certificate to
be signed by James G. Binch, its President, and attested to by Wendy Gavaghan,
its Secretary, this 27th day of July, 1994.
MEMRY CORPORATION
By: /s/ James G. Binch
----------------------------
Name: James G. Binch
Title: President
Attest:
By: /s/ Wendy Gavaghan
---------------------------
Name: Wendy Gavaghan
Title: Secretary
<PAGE>
EXHIBIT A
---------
RESOLVED, that Article 4 of the Certificate of Incorporation be amended by
adding a final paragraph as follows:
Each ten shares of Common Stock of the Company, par value $0.01 per
share, either issued and outstanding or held by the Company as treasury stock,
immediately prior to the time this amendment becomes effective shall be and are
hereby automatically reclassified and changed (without any further act) into
one fully-paid and nonassessable share of the Common Stock of the Company, par
value $0.01 per share, without increasing of decreasing the amount of stated
capital or paid-in surplus of the Company, provided that no fractional shares
shall be issued. Shareholders otherwise entitled to fractional share interests
as a result of the foregoing reclassification and change shall be entitled to
receive in lieu of such fractional share scrip (in bearer or registered form,
as the proper officers of the Company may determine) which shall entitle the
holder to receive a full share upon the surrender of such scrip aggregating a
full share. Such scrip shall be issued subject to the condition that it shall
become void if not exchanged for certificates representing full shares on or
before the date three years after the effective date of this amendment.
RESOLVED, that the Certificate of Incorporation of the Company be amended by
deleting the first paragraph of Article 4 thereof and substituting the
following.
4. The total number of shares of all classes of stock which the Corporation
shall have authority to issue is Ten Million One Hundred Thousand (10,100,000)
shares consisting of (a) Ten Million (10,000,000) shares of common stock of the
par value of One Cent ($0.01) per share and (b) One Hundred Thousand (100,000)
shares of preferred stock of the par value of One Hundred Dollars ($100.00) per
share.
<PAGE>
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES G PREFERRED STOCK
OF
MEMRY CORPORATION
The undersigned, James G. Binch, hereby certifies that:
A. He is the duly elected and acting President of Memry Corporation, a
Delaware corporation (the "Corporation").
B. Pursuant to authority given by the Corporation's Certificate of
Incorporation, the Board of Directors of the Corporation has duly adopted the
following recitals and resolutions:
WHEREAS, the Certificate of Incorporation of the Corporation provides for
two classes of shares known as Common Stock and Preferred Stock;
WHEREAS, the Board of Directors of the Corporation is authorized by the
Certificate of Incorporation to provide for the issuance of the shares of
Preferred Stock in series, and by filing a certificate pursuant to the
applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in each such series, and to fix the
designation, powers, preferences and rights of the shares of each such series
and the qualifications, limitations or restrictions thereof;
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby
designates a Series G Preferred Stock and fixes and determines the powers,
rights, preferences, qualifications, limitations and restrictions relating to
the Series G Preferred Stock as follows:
1. Designation. The Board of Directors of the Corporation hereby
-----------
designates a new series of Preferred Stock as "Series G Preferred Stock."
2. Authorized Number. The number of shares constituting the
-----------------
Series G Preferred Stock shall be 800 shares. The rights, preferences and
restrictions of, and other matters relating to, the Series G Preferred Stock
are as set forth below.
3. Dividends. (a) In the event that the Corporation has not
---------
effected the registration described in Section 4.2 of the Securities Purchase
Agreement, dated as of June 14, 1995 (the "Securities Purchase Agreement"),
between the Corporation and the purchasers set forth therein, on or prior to
March 15, 1996, other than a failure to effect such a registration caused by
the failure of any of the parties entitled to have their shares registered to
comply with the relevant provisions of Section 4 of the Securities Purchase
Agreement (such failure, where not so excused, being hereinafter referred to as
a "Registration Default"), then the holders of the Series G Preferred Stock
shall be entitled to receive, when, as and if declared by the Board of
Directors of the Corporation, out of funds legally available for that purpose,
until such time, if any, as such a registration has been effected, a quarterly
<PAGE>
dividend of $130.00 per share (the "Dividend Amount"). Upon the occurrence of
a Registration Default, such Dividend Amount shall accrue on each March 16,
June 16, September 16 and December 16 thereafter, commencing on March 16, 1996,
occurring prior to the date on which either such a registration has been
effected or such a registration would be effected but for the failure of any of
the parties entitled to have their shares registered pursuant to the terms of
the Securities Purchase Agreement to comply with the provisions of Section 4
thereof (hereinafter referred to as a "Cure"). All such dividends on the
Series G Preferred Stock shall be paid to the holders of record at the close of
business on the date specified by the Board of Directors at the time such
dividend is declared; provided, however, that such date shall not be
-------- -------
more than 60 days nor less than 10 days prior to the applicable dividend
payment date. All dividends shall be fully cumulative and shall accrue on each
March 16, June 16, September 16 and December 16 from the date of a Registration
Default until the time of the Cure, whether or not declared, whether or not the
Corporation shall have sufficient funds available for the payment of required
dividends and whether or not the Corporation shall otherwise then have the
power to declare or pay dividends, without interest. All dividends paid on
Series G Preferred Stock pursuant to this Section 3(a) shall be paid pro
---
rata to the holders of the Series G Preferred Stock entitled thereto, in
- ----
proportion to the number of shares of Series G Preferred Stock owned by each
such holder.
(b) So long as any shares of Series G Preferred Stock are outstanding,
the Corporation shall not declare, pay or set apart for payment any dividend or
make any distribution on, or directly or indirectly purchase in respect of any
redemption, sinking fund or other similar obligation, any shares of Common
Stock or any warrants, rights, calls or options exercisable for or convertible
into Common Stock, or make any distribution in respect thereof, either directly
or indirectly, whether in cash or obligations of the Corporation or other
property, and shall not permit any corporation or other entity directly or
indirectly controlled by the Corporation to purchase or redeem any of the
Common Stock or any warrants, rights, calls or options exercisable for or
convertible into any of the Common Stock, unless prior to or concurrently with
such declaration, payment, setting apart for payment, purchase, redemption or
distribution, as the case may be, the Corporation shall pay or distribute to
each holder of Series G Preferred Stock an amount of cash or other property
equal to the sum of (I) any accrued and unpaid dividends on such share of
Series G Preferred Stock pursuant to Section 3(a) above, plus (II) the product
of (x) the amount of cash or other property paid to a holder of one share of
Common Stock, multiplied by (y) the number of shares of Common Stock which each
holder of Preferred Stock would then be able to acquire upon the immediate
conversion of all of such holder's shares of Series G Preferred Stock into
Common Stock pursuant to Section 6(a) below.
4. Liquidation Preference
----------------------
(a) In the event of any voluntary or involuntary liquidation,
distribution of assets (other than the payment of dividends as provided in
Section 3 above), dissolution or winding up of the Corporation (collectively, a
"Liquidation"), and after payment in full of all debts and other obligations of
the Corporation, the holders of each share of Series G Preferred Stock then
outstanding shall be entitled to be paid out of the remaining assets of the
Corporation available for distribution to its stockholders, whether such assets
are capital, surplus or earnings, an amount in cash equal to the sum of
(i)$6,500.00, plus (ii) any accrued but unpaid dividends thereon pursuant to
Section 3(a) above, plus (iii) any declared but unpaid dividends thereon
pursuant to Section 3(b) above (such sum being hereinafter referred to as the
"Liquidation Amount"), before any payment shall be made or any assets
distributed to the holders of any of the Common Stock. If the assets of the
Corporation shall be insufficient to pay in full the Liquidation Amount to all
holders of Series G Preferred Stock, then such assets will be distributed among
the holders of the Series G Preferred Stock ratably in proportion to the
respective amounts that would be payable on such shares pursuant to this
Section 4(a) if all amounts payable thereon were paid in full.
<PAGE>
(b) Any transaction involving any acquisition of the Corporation,
whether by consolidation or merger (resulting in the exchange of the
outstanding shares of capital stock of the Corporation for cash, securities or
other property), or any sale of all or substantially all of the assets of the
Corporation (any such consolidation, merger or sale, an "Event"), shall be
deemed to be a Liquidation for the purposes of this Section 4; provided,
--------
however, that the Corporation's obligations under Section 4(a) shall be
- -------
satisfied with respect to the Series G Preferred Stock by the distribution to
the holders of shares of Series G Preferred Stock, pursuant to the terms of
such Event, of securities or other property in an amount equal in value (as
determined in good faith by the Board of Directors) to the Liquidation Amount
per share of Series G Preferred Stock held by them.
(c) The liquidation payment with respect to each outstanding
fractional share of Series G Preferred Stock, if any, shall be equal to a
ratably proportionate amount of the liquidation payment made with respect to
each outstanding share of Series G Preferred Stock.
5. Voting Rights; Protective Provisions
------------------------------------
(a) In addition to the rights specified in Paragraphs (b) and (c)
of this Section 5, and any other rights provided in the Corporation's By-Laws
or by applicable law, each share of Series G Preferred Stock shall entitle the
holder thereof to such number of votes as shall equal the number (including any
fraction to one decimal place) of shares of Common Stock into which each such
share of Series G Preferred Stock is convertible, as provided in Section 6
below, as of the record date for the determination of the stockholders entitled
to vote on such matters or, if no record date is established, as of the date
such vote is taken or any written consent of stockholders is solicited, and
each such holder shall be entitled to vote on all matters as to which holders
of Common Stock shall be entitled to vote in the same manner and with the same
effect as such holders of Common Stock, voting together with the holders of
Common Stock as one class. In all cases where the holders of shares of the
Series G Preferred Stock have the right to vote separately as a class, in
addition to the voting rights described above, all such holders shall be
entitled to one vote for each share of Series G Preferred Stock them.
(b) So long as not less than 230 shares of the Series G
Preferred Stock (as constituted on the date hereof) remain outstanding, the
holders of the Series G Preferred Stock, voting separately as one class, shall
have the exclusive right to elect one director. Subject to such right of the
holders of the Series G Preferred Stock, all directors shall be elected by the
vote of the holders of the Common Stock and the Series G Preferred Stock,
voting together as a single class as provided for in Section 5(a) above.
(c) So long as not less than 230 shares of the Series G
Preferred Stock (as constituted on the date hereof) remain outstanding, the
Corporation shall not, without the affirmative consent or approval of the
holders of shares representing at least two thirds of the voting power of the
Series G Preferred Stock then outstanding, voting together as a single class
(but separately from the Common Stock), given by written consent in lieu of a
meeting or by vote at a meeting called for such purpose for which notice shall
have been given to the holders of the Series G Preferred Stock, (i) in any
manner authorize, reclassify or create any class of capital stock ranking,
either as to payment of dividends or distribution of assets, or both, prior to
or on a parity with the Series G Preferred Stock, (ii) in any manner alter or
change the designations or the powers, preferences or rights, or the
qualifications, limitations or restrictions of the Series G Preferred Stock in
any material respect prejudicial to the holders thereof, (iii) increase the
number of authorized shares of Common Stock above 25,000,000, or increase
the number of authorized shares of Preferred Stock, (iv) sell all or any
substantial portion of its assets, or merge or consolidate with any other
entity or entities, or voluntarily dissolve, liquidate or wind up or carry out
any partial liquidation or distribution or transaction in the nature of a
partial
<PAGE>
liquidation or distribution, (v) issue any equity securities other than (X)
Series G Preferred Stock sold prior to July 15, 1995, (Y) stock options, Common
Stock and other equity securities pursuant to the Corporation's currently
existing stock option plan, and (Z) Common Stock issued upon the exercise
and/or conversion of all currently outstanding securities and/or the securities
described in clauses (X) and (Y) above.
6. Conversion
----------
(a) Subject to and upon compliance with the provisions of this
Section 6, the holder of any shares of Series G Preferred Stock shall have the
right, at such holder's option, at any time and from time to time from and
after the date (the "Capitalization Amendment Date") of the filing of the
Certificate of Amendment (as hereinafter defined), to convert any number of
shares of Series G Preferred Stock into such whole number of fully paid and
nonassessable shares of Common Stock as is equal to the quotient obtained by
dividing (a) the product of the Original Issuance Price (as hereinafter
defined) multiplied by the number of shares of Series G Preferred Stock being
converted, by (b) the Conversion Price (as hereinafter defined) (as last
adjusted and then in effect) for such shares of Series G Preferred Stock being
converted (such Conversion Price being subject to adjustment as set forth in
Section 6(e) below), by surrender of the certificate or certificates
representing the shares of Series G Preferred Stock so to be converted in the
manner provided in Section 6(c) below. The "Certificate of Amendment" shall
mean a Certificate of Amendment to the Corporation's Certificate of
Incorporation increasing the number of authorized shares of Common Stock from
10,000,000 to 25,000,000. The "Original Issuance Price" shall be
$6,500.00. The Conversion Price at which shares of Common Stock shall be
issuable upon conversion of shares of Series G Preferred Stock shall be $0.65;
provided, however, that the Conversion Price shall be subject to
- -------- -------
adjustment as set forth in Section 6(e) below. The holder of any shares of
Series G Preferred Stock exercising the aforesaid right to convert such shares
into shares of Common Stock shall be entitled to payment of any declared and
unpaid dividends payable with respect to such shares up to and including the
Conversion Date (as hereinafter defined).
(b) Upon the first to occur of (i) the "Market Price of the Common
Stock" (as defined below) exceeding $1.50 per share for thirty consecutive
business days, or (ii) the conversion into Common Stock pursuant to Section
6(a) above of a sufficient number of shares of Series G Preferred Stock such
that not more than 150 of such shares of Series G Preferred Stock remain issued
and outstanding (such events in clauses (i) and (ii) being collectively
referred to as an "Event of Conversion"), all shares of Series G Preferred
Stock then outstanding shall, by virtue of, and simultaneously with, the
occurrence of the Event of Conversion and without any action on the part of the
holder thereof, be deemed automatically converted into such number of fully
paid and nonassessable shares of Common Stock as the holder thereof could
voluntarily convert such Series G Preferred Stock into pursuant to Section 6(a)
above. The holder of any shares of Series G Preferred Stock whose shares are
automatically converted into shares of Common Stock shall be entitled to
payment of any declared and unpaid dividends payable with respect to such
shares up to and including the Conversion Date (as hereinafter defined).
"Market Price of the Common Stock" shall mean (a) on business days on which the
Common Stock is traded on an exchange, the closing sale price of the Common
Stock on such exchange on such day, and (b) on business days on which the
Common Stock is not traded on an exchange, but is traded over-the-counter, the
closing bid price of the Common Stock on such day, in either case as reasonably
determined by the Corporation.
(c) The holder of any shares of Series G Preferred Stock may
exercise the conversion right pursuant to Section 6(a) hereof as to any part of
such shares by delivering to the Corporation during regular business hours, at
the office of any transfer agent of the Corporation for the Series G Preferred
<PAGE>
Stock or at such other place as may be designated by the Corporation, the
certificate or certificates for the shares to be converted, duly endorsed or
assigned in blank or to the Corporation (if required by it), accompanied by
written notice stating that the holder elects to convert such shares and
stating the name or names (with address) in which the certificate or
certificates for the shares of Common Stock are to be issued. Conversion shall
be deemed to have been effected (a) with respect to conversions under Section
6(a) hereof, on the date when the aforesaid delivery is made, and (b) with
respect to conversions under Section 6(b) hereof, on the date of the occurrence
of the Event of Conversion; and such date, in either case, is referred to
herein as the "Conversion Date." As promptly as practicable thereafter, the
Corporation shall issue and deliver to or upon the written order of such
holder, at such office or to the place designated by such holder, a certificate
or certificates for the number of full shares of Common Stock to which such
holder is entitled, a check or cash in respect of any fractional interest in a
share of Common Stock as provided in Section 6(d) hereof and a check or cash in
payment of all declared and unpaid dividends (to the extent permissible under
law), if any, with respect to the shares of Series G Preferred Stock so
converted up to and including the Conversion Date; provided, however,
-------- -------
that in the event of a conversion pursuant to Section 6(b) above, the
Corporation may withhold such certificate or certificates for Common Stock,
along with any such check, until such time as the holder of the Series G
Preferred stock makes the delivery of a stock certificate and written notice
described in the first sentence of this Section 6(c) with respect to
conversions being made pursuant to Section 6(a). The person in whose names the
certificate or certificates for Common Stock are to be issued shall be deemed
to have become a stockholder of record on the applicable Conversion Date unless
the transfer books of the Corporation are closed on that date, in which event
he shall be deemed to have become a stockholder of record on the next
succeeding date on which the transfer books are open, but the applicable
Conversion Price shall be that in effect on the Conversion Date. Upon
conversion pursuant to Section 6(a) of only a portion of the number of shares
covered by a certificate representing shares of Series G Preferred Stock
surrendered for conversion, the Corporation shall issue and deliver to or upon
the written order of the holder of the certificate so surrendered for
conversion, at the expense of the Corporation, a new certificate covering the
number of shares of Series G Preferred Stock representing the unconverted
portion of the certificate so surrendered, which new certificate shall entitle
the holder thereof to dividends (to the extent declared) on the shares of
Series G Preferred Stock represented thereby to the same extent as if the
certificate theretofore covering such unconverted shares had not been
surrendered for conversion.
(d) No fractional shares of Common Stock or scrip shall be issued
upon conversion of shares of Series G Preferred Stock. If more than one share
of Series G Preferred Stock shall be surrendered for conversion at any one time
by the same holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate number of
shares of Series G Preferred Stock so surrendered. Instead of any fractional
shares of Common Stock which would otherwise be issuable upon conversion of any
shares of Series G Preferred Stock, the Corporation shall pay a cash adjustment
in respect of such fractional interest in an amount equal to that fractional
interest of the Conversion Price in effect on the date of such conversion.
Fractional interests shall not be entitled to dividends, and the holders of
fractional interests shall not be entitled to any rights as stockholders of the
Corporation in respect of such fractional interests.
(e) The Conversion Price shall be subject to adjustment from time
to time as follows:
(i) If the Corporation shall at any time after the date of the filing
hereof actually issue or be deemed to have issued any shares of Common Stock,
other than Excluded Stock (as hereinafter defined), without consideration or
for a consideration per share less than the Conversion Price, as in effect
immediately prior to the issuance or deemed issuance of such Common Stock, then
the Conversion Price in effect immediately prior to such issuance shall
forthwith be lowered, effective as
<PAGE>
of the date of such issuance, to the price at which Common Stock is actually or
deemed to have been so sold.
For the purposes of determining any adjustment of the Conversion Price
pursuant to this Section 6(e)(i), the following provisions shall be applicable:
(A) In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid therefor
after deducting therefrom any discounts, commissions or other expenses
allowed, paid or incurred by the Corporation for any underwriting or
otherwise in connection with the issuance and sale thereof.
(B) In the case of the issuance of Common Stock for a consideration in
whole or in part other than cash, the consideration other than cash shall
be deemed to be the fair market value thereof as determined in good faith
by the Board of Directors, irrespective of any accounting treatment.
(C) In the case of the issuance of (i) options, warrants or other rights
to purchase or acquire Common Stock (whether or not at the time
exercisable), (ii) securities by their terms convertible into or
exchangeable for Common Stock (whether or not at the time so convertible
or exchangeable) or (iii) options, warrants or other rights to purchase
or acquire such convertible or exchangeable securities:
(1) the shares of Common Stock deliverable upon exercise of such
options, warrants or other rights to purchase or acquire Common
Stock shall be deemed to have been issued at the time such options,
warrants or other rights were issued and for a consideration equal
to the consideration (determined in the manner provided in
subdivisions (A) and (B) above), if any, received by the
Corporation upon the issuance of such options, warrants or rights
plus the minimum purchase price provided in such options, warrants
or rights for the Common Stock covered thereby;
(2) the shares of Common Stock deliverable upon conversion of or
in exchange for any such convertible or exchangeable securities or
upon the exercise of options, warrants or other rights to purchase
or acquire such convertible or exchangeable securities and
subsequent conversion or exchange thereof, shall be deemed to have
been issued at the time such securities were issued or such
options, warrants or other rights were issued and for a
consideration equal to the consideration received by the
Corporation for any such securities and related options, warrants
or other rights (excluding any cash received on account of accrued
interest or accrued dividends), plus the additional consideration,
if any, to be received by the Corporation upon the conversion or
exchange of such securities or the exercise of any related options,
warrants or other rights (the consideration in each case to be
determined in the manner provided in subdivisions (A) and (B)
above);
(3) upon any change in the number of shares or the consideration
per share to be received by the Corporation upon exercise of any
such options, warrants or rights or conversion of, or exchange for,
such convertible or exchangeable securities, including, but not
limited to, a change resulting from the anti-dilution provisions
thereof, the Conversion Price as then in effect shall forthwith be
<PAGE>
readjusted to such Conversion Price as would have been obtained had
an adjustment been made upon the issuance of such options,
warrants, rights or convertible or exchangeable securities on the
basis of such change;
(4) in the event that all of such options, warrants or rights are
not exercised or all of such securities are not converted or
exchanged, then upon the expiration or cancellation of such
options, warrants or rights, or the termination of the right to
convert or exchange all such convertible or exchangeable
securities, if the Conversion Price was adjusted upon the issuance
thereof, the Conversion Price shall forthwith be readjusted to such
Conversion Price as would then be in effect if such options,
warrants or rights had not been issued;
(5) no further adjustment of the Conversion Price shall be made
for the actual issuance of Common Stock upon the exercise,
conversion or exchange of any such convertible or exchangeable
securities, options, warrants or other rights ; and
(6) in no event shall the Conversion Price be increased pursuant
to subclauses (1), (2) and (3) of this Section 6(e)(i).
(ii) For purposes of this Section 6, "Excluded Stock" shall mean (A)
Common Stock issued to employees, consultants, officers, directors or founders
of the Corporation, or options or other rights to purchase or acquire such
Common Stock, or securities by their terms convertible into or exchangeable for
such Common Stock or options or other rights to purchase or acquire Stock or
options or other rights to purchase or acquire rights for such convertible or
exchangeable securities, pursuant to any plan or arrangement in effect as of
June 1, 1995; (B) Common Stock issued as a stock dividend or upon any stock
split or other subdivision or combination of shares of Common Stock; (C) Common
Stock acquirable upon the conversion of Series G Preferred Stock sold at a
gross price of $6,500.00 per share or more; and (D) Common Stock issued or
deemed issued upon the conversion, exchange or exercise of any convertible or
exchangeable securities, warrants, options or other rights outstanding as of
June 1, 1995.
(iii) If, at any time after the date of filing hereof, the number of
shares of Common Stock outstanding is increased by a stock dividend payable in
shares of Common Stock or by a subdivision or stock split of shares of Common
Stock, then, following the record date fixed for the determination of holders
of Common Stock entitled to receive such stock dividend, subdivision or stock
split, the Conversion Price shall be appropriately decreased so that the number
of shares of Common Stock issuable on conversion of each share of Series G
Preferred Stock shall be increased in proportion to such increase in
outstanding shares.
(iv) If, at any time after the date of filing hereof, the number of
shares of Common Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date for such
combination, the Conversion Price shall be appropriately increased so that the
number of shares of Common Stock issuable on conversion of each share of Series
G Preferred Stock shall be decreased in proportion to such decrease in
outstanding shares.
(v) In case, at any time after the date of filing hereof, of any capital
reorganization or any reclassification of the stock of the Corporation (other
than a change in par value or from par value to no par value or from no par
value to par value or as a result of a stock dividend or subdivision, split-up
or combination of shares), each share of Series G Preferred Stock shall after
such reorganization or
<PAGE>
reclassification be convertible into the kind and number of shares of stock or
other securities or property of the Corporation to which the holder of the
number of shares of Common Stock deliverable (immediately prior to the time of
such reorganization or reclassification) upon conversion of such share would
have been entitled upon such reorganizations or reclassifications. The
provisions of this Section 6(e)(v) shall similarly apply to successive
reorganizations or reclassifications.
(vi) All calculations under this Section 6(e) shall be made to the
nearest one-tenth (1/10) of a cent or to the nearest one-tenth (1/10) of a
share, as the case may be.
(vii) In any case in which the provisions of this Section 6(e) shall
require that an adjustment shall become effective immediately after a record
date for an event, the Corporation may defer until the occurrence of such event
(A) issuing to the holder of any share of Series G Preferred Stock converted
after such record date and before the occurrence of such event the additional
shares of capital stock issuable upon such conversion by reason of the
adjustment required by such event over and above the shares of capital stock
issuable upon such conversion before giving effect to such adjustment and (B)
paying to such holder any amount in cash in lieu of a fractional shares of
capital stock pursuant to Section 6(e)(vi); provided, however, that the
-------- -------
Corporation shall deliver to such holder a due bill or other appropriate
instrument evidencing such holders' right to receive such additional shares,
and such cash, upon the occurrence of the event requiring such adjustment.
(f) Whenever the Conversion Price shall be adjusted as provided in
Section 6(e), the Corporation shall forthwith file, at the office of the
transfer agent for the Series G Preferred Stock or at such other place as may
be designated by the Corporation, a statement, signed by its independent
certified public accountants, showing in detail the facts requiring such
adjustment and the Conversion Price that shall be in effect after such
adjustment. The Corporation shall also cause a copy of such statement to be
sent by mail, first class postage prepaid, to each holder of shares of Series G
Preferred Stock at his address appearing on the Corporation's records. Where
appropriate, such copy may be given in advance and may be included as part of a
notice required to be mailed under the provisions of Section 6(g).
(g) In the event that the Corporation shall propose to take any
action of the types described in clauses (i), (iii), (iv) or (v) of Section
6(e), the Corporation shall give notice to each holder of shares of Series G
Preferred Stock, in the manner set forth in Section 6(f), which notice shall
specify the record date, if any, with respect to any such action and the date
on which such action is to take place. Such notice shall also set forth such
facts with respect thereto as shall be reasonably necessary to indicate the
effect of such action (to the extent such effect may be known at the date of
such notice) on the Conversion Price, and the number, kind or class of shares
or other securities or property which shall be deliverable or purchasable upon
the occurrence of such action or deliverable upon conversion of shares of any
series of Series G Preferred Stock. In the case of any action which would
require the fixing of a record date, such notice shall be given at least 20
days prior to the taking of such proposed action.
(h) For the purposes of this Section 6, the sale or other
disposition of any capital stock of the Corporation theretofore held in its
treasury shall be deemed to be an issuance thereof.
(i) The Corporation shall pay all documentary, stamp or other
transactional taxes attributable to the issuance or delivery of shares of
Common Stock of the Corporation upon conversion of any shares of Series G
Preferred Stock; provided, however, that the Corporation shall not be
-------- -------
required to pay any taxes which may be payable in respect of any transfer
involved in the issuance or delivery
<PAGE>
of any certificate for such shares in a name other than that of the holder of
the shares of the Series G Preferred Stock in respect of which such shares are
being issued.
(j) From and after the Capitalization Amendment Date, the
Corporation shall reserve at all times so long as any shares of Series G
Preferred Stock remain outstanding, free from preemptive rights, out of its
treasury stock or its authorized but unissued shares of Common Stock, or both,
solely for the purpose of effecting the conversion of the shares of the Series
G Preferred Stock, a sufficient number of shares of Common Stock to provide for
the conversion of all outstanding shares of the Series G Preferred Stock.
(k) All shares of Common Stock which may be issued in connection
with the conversion provisions set forth herein will, upon issuance by the
Corporation, be validly issued, fully paid and nonassessable and free from all
taxes, liens or charges with respect thereto.
7. Status of Converted Shares. In the event that any shares of
--------------------------
Series G Preferred Stock shall be converted pursuant to Section 6 hereof, the
shares of Series G Preferred Stock so converted shall be cancelled and shall
not be issuable by the Corporation, and this Certificate shall be appropriately
amended to effect the corresponding reduction in the Corporation's authorized
capital stock.
C. The foregoing recitals and resolutions have not been modified,
altered or amended and are presently in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Designations, Preferences and Rights as of the 29th
day of June, 1995.
/s/ James G. Binch
-------------------------
James G. Binch, President
ATTEST:
/s/ Wendy Gavaghan
- ---------------------------
Wendy Gavaghan, Secretary
<PAGE>
EXHIBIT 3.2
MEMRY CORPORATION
A Delaware Corporation
BY-LAWS
ARTICLE I
STOCKHOLDERS
Section 1.1 ANNUAL MEETING.
An annual meeting of stockholders for the purpose of electing directors
and of transacting such other business as may come before it shall be held each
year on the second Tuesday in May at such time and place, either within or
without the State of Delaware, as may be specified by the Board of Directors.
Section 1.2 SPECIAL MEETINGS.
Special meetings of stockholders for any purpose or purposes may be held
at any time upon call of the Chief Executive Officer or a majority of the Board
of Directors, at such time and place either within or without the State of
Delaware as may be stated in the notice. A special meeting of stockholders
shall be called by the Chief Executive Officer upon the written request,
stating time, place, and the purpose or purposes of the meeting, of
stockholders who together own of record a majority of the outstanding stock of
all classes entitled to vote at such meeting.
<PAGE>
Section 1.3 NOTICE OF MEETINGS.
Written notice of stockholders meetings, stating the place, date, and
hour thereof, and, in the case of a special meeting, the purpose or purposes
for which the meeting is called, shall be given by the Chief Executive Officer,
President, any Vice President, the Secretary, or an Assistant Secretary, to
each stockholder entitled to vote thereat at least ten days but not more than
sixty days before the date of the meeting, unless a different period is
prescribed by law.
Section 1.4 QUORUM.
Except as otherwise provided by law or in the Certificate of
Incorporation or these By-Laws, at any meeting of stockholders, the holders of
a majority of the outstanding shares of each class of stock entitled to vote at
the meeting shall be present or represented by proxy in order to constitute a
quorum for the transaction of any business. In the absence of a quorum, a
majority in interest of the stockholders present or the chairman of the meeting
may adjourn the meeting from time to time in the manner provided in Section 1.5
of these By-Laws until a quorum shall attend.
Section 1.5 ADJOURNMENT.
Any meeting of stockholders, annual or special, may adjourn from time to
time to reconvene at the same or some other place, and notice need not be given
of any such adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken. At the adjourned meeting, the
Corporation may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the meeting.
Section 1.6 ORGANIZATION.
<PAGE>
The Chairman of the Board, or in his absence the president, or in his
absence any Vice President, shall call to order meetings of stockholders and
shall act as chairman of such meetings. The Board of Directors or, if the
Board fails to act, the stockholders may appoint any stockholder, director, or
officer of the Corporation to act as chairman of any meeting in the absence of
the Chairman of the Board, President and all Vice President.
The Secretary of the Corporation shall act as secretary of all meetings
of stockholders, but, in the absence of the Secretary, the chairman of the
meeting may appoint any other person to act as secretary of the meeting.
Section 1.7 VOTING.
Except as otherwise provided by law or in the Certificate of
Incorporation or these By-Laws and except for the election of directors, at any
meeting duly called and held at which a quorum is present, a majority of the
votes cast at such meeting upon a given question by the holders of outstanding
shares of stock of all classes of stock of the Corporation entitled to vote
thereon who are present in person or by proxy shall decide such question. At
any meeting duly called and held for the election of directors at which a
quorum is present, directors shall be elected by a plurality of the votes cast
by the holders (acting as such) of shares of stock of the corporation entitled
to elect such directors.
<PAGE>
ARTICLE II
BOARD OF DIRECTORS
Section 2.1 NUMBER AND TERM OF OFFICE.
The business, property, and affairs of the Corporation shall be managed
by or under the direction of a Board of seven directors: provided, however,
that the Board, by resolution adopted by vote of a majority of the then
authorized number of directors, may increase or decrease the number of
directors, except as provided in the next sentence. So long as the Corporation
has outstanding any of its Series A Preferred Stock, the number of directors
may not be changed by an amendment to the Certificate of Incorporation or these
By-Laws without the consent of the holders of a majority of such outstanding
Series A Preferred Stock. The directors shall be elected at the annual meeting
of stockholders, and each shall serve (subject to the provisions of Article IV)
until the next succeeding annual meeting of stockholders and until his
respective successor has been elected and qualified.
Section 2.2 MEETINGS.
Regular meetings of the Board of Directors may be held without notice at
such time and place as shall from time to time be determined by the Board.
Special meetings of the Board of Directors shall be held at such time and
place as shall be designated in the notice of the meeting whenever called by
the Chairman of the Board, the Chief Executive Officer or by a majority of the
directors then in office.
<PAGE>
Section 2.3 NOTICE OF SPECIAL MEETINGS.
The Secretary, or in his absence any other officer of the Corporation,
shall give each director notice of the time and place of holding of special
meetings of the Board of Directors of any committee of the Board of Directors
by mail at least ten days before the meeting, or by telecopy (facsimile),
telegram, cable, radiogram, or personal service at least two days before the
meeting. Unless otherwise stated in the notice thereof, any and all business
may be transacted at any meeting without specification of such business in the
notice.
Section 2.4 QUORUM AND ORGANIZATION OF MEETING.
A majority of the total number of members of the Board of Directors as
constituted from time to time shall constitute a quorum for the transaction of
business, but, if at any meeting of the Board of Directors (whether or not
adjourned from a previous meeting) there shall be less than a quorum present, a
majority of those present may adjourn the meeting to another time and place,
and the meeting may be held as adjourned without further notice or waiver.
Except is otherwise provided by law or in the Certificate of Incorporation or
these By-Laws, a majority of the directors present at any meeting at which a
quorum is present may decide any question brought before such meeting.
Meetings shall be presided over by the Chairman of the Board, if any, or in his
absence by the President, or in the absence of both by such other person as the
directors may select. The Secretary of the Corporation shall act as secretary
of the meeting, but in his absence the chairman of the meeting may appoint any
person to act as secretary of the meeting.
Section 2.5 ACTION WITHOUT MEETING.
<PAGE>
Nothing contained in these By-Laws shall be deemed to restrict the power
of the directors or members of any committee to take any action. required or
permitted to be taken by them, without a meeting.
Section 2.6 TELEPHONE MEETINGS.
Nothing contained in these By-Laws shall be deemed to restrict the power
of members of the Board of Directors, or any committee designated by the Board,
to participate in a meeting of the Board, or committee, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other.
ARTICLE III
OFFICERS
Section 3.1 EXECUTIVE OFFICERS.
The Executive Officers of the corporation shall be the Chairman of the
Board, the President, one or more Vice President, a Treasurer, and a Secretary,
each of whom shall be elected by the Board of Directors. The Board of
Directors may elect or appoint such other officers (including a Controller and
one or more Assistant Treasurers and Assistant Secretaries) as it may deem
necessary or desirable. The Board shall from time to time designate either the
Chairman of the Board or the President as the Chief Executive Officer and/or
Chief Operating Officer of the Corporation and may change such designations in
its sole discretion. Each officer shall hold office for such term as may be
prescribed by the Board of Directors from time to time. Any person may hold at
one time two or more offices.
<PAGE>
Section 3.2 POWERS AND DUTIES.
The Chairman of the Board shall preside at all meetings of the
stockholders and of the Board of Directors. In the absence of the Chairman of
the Board, the President shall perform all the duties of the Chairman of the
Board. The officers and agents of the Corporation shall each have such powers
and authority and shall perform such duties in the management of the business,
property, and affairs of the corporation as generally pertain to their
respective offices, as well as such powers and authorities and such duties as
from time to time may be prescribed by the Board of Directors.
ARTICLE IV
RESIGNATIONS, REMOVALS, AND VACANCIES
Section 4.1 RESIGNATIONS.
Any director or officer of the Corporation, or any member of any
committee, may resign at any time by giving written notice to the Board of
Directors, the Chairman of the Board, the Chief Executive Officer, or the
Secretary of the Corporation. Any such resignation shall take effect at the
time specified therein or, if the time be not specified therein, then upon
receipt thereof. The acceptance of such resignation shall not be necessary to
make it effective.
<PAGE>
Section 4.2 REMOVALS.
The Board of Directors, by a vote of not less than a majority of the
entire Board, at any meeting thereof, or by written consent, at any time, may,
to the extent permitted by law, remove with or without cause from office or
terminate the employment of any officer or member of any committee and may,
with or without cause, disband any committee. Any director or the entire Board
of Directors may be removed, with or without cause, by the holders of a
majority of the shares entitled at the time to vote at an election of
directors.
Section 4.3 VACANCIES.
Any vacancy in the office of any director or officer through death,
resignation, removal, disqualification, or other cause, and any additional
directorship resulting from increase in the number of directors, may be filled
at any time by a majority of the directors then in office (even though less
than a quorum remains) or, in the case of any vacancy in the office of any
director, by the stockholders, and, subject to the provisions of this Article
IV, the person so chosen shall hold office until his successor shall have been
elected and qualified or, if the person so chosen is a director elected to fill
a vacancy, he shall, (subject to the provision of this Article IV) hold office
for the unexpired term of his predecessor.
<PAGE>
ARTICLE V
CAPITAL STOCK
Section 5.1 STOCK CERTIFICATES
The certificates for shares of the capital stock of the corporation shall
be in such form as shall be prescribed by law and approved, from time to time,
by the Board of Directors.
Section 5.2 TRANSFER OF SHARES.
Shares of the capital stock of the Corporation may be transferred on the
books of the Corporation only by the holder of such shares or by his duly
authorized attorney, upon the surrender to the corporation or its transfer
agent of the certificate representing such stock properly endorsed.
Section 5.3 FIXING RECORD DATE.
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion, or exchange or stock, if for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which,
unless otherwise provided by law, shall not be more than sixty nor less than
ten days before the date of such meeting, nor more than sixty days prior to any
other action.
<PAGE>
Section 5.4 REGULATIONS.
The Board of Directors shall have power and authority to make all such
rules and regulations as it may deem expedient concerning the issue, transfer,
registration, cancellation, and replacement of certificates representing stock
of the Corporation.
ARTICLE VI
MISCELLANEOUS
Section 6.1 CORPORATE SEAL.
The corporate seal shall have inscribed thereon the name of the
Corporation and shall be in such form as may be approved from time to time by
the Board of Directors.
Section 6.2 FISCAL YEAR.
The fiscal year of the corporation shall be determined by resolution of
the Board of Directors.
Section 6.3 NOTICES AND WAIVERS THEREOF.
Whenever any notice whatever is required by law, the Certificate of
Incorporation, or these By-Laws to be given to any stockholder, director, or
officer, such notice, except as otherwise provided by law, may be given
personally, or by mail, or in the case of directors or officers, by telegram,
cable, or radiogram, addressed to such address as appears on the books of the
Corporation. Any notice given by telegram, cable, or radiogram shall be deemed
to have been given when it shall have been delivered for transmission and any
notice given by mail shall be deemed to have been given when it shall have been
deposited in the United States mail with postage thereon prepaid. Whenever any
notice is required to be given by law, the Certificate of Incorporation,or
these By-Laws a written waiver thereof, signed
<PAGE>
by the person entitled to such notice, whether before or after the meeting in
the time stated therein, shall be deemed equivalent in all respects to such
notice to the full extent permitted by law.
Section 6.4 STOCK OF OTHER CORPORATION OR OTHER INTERESTS.
Unless otherwise ordered by the Board of Directors, the President, the
Chief Executive Officer and such attorneys or agents of the Corporation as may
be from time to time authorized by the Board of Directors or the President,
shall have full power and authority on behalf of this Corporation to attend and
to act and vote in person or by proxy at any meeting of the holders of
securities of any corporation or other entity in which this Corporation may own
or hold shares or other securities, and at such meetings shall possess and may
exercise all the rights and powers incident to the ownership of such shares or
other securities which this corporation, as the owner or holder thereof, might
have possessed and exercised if present. The President, the Secretary, or such
attorneys or agents, may also execute and deliver on behalf of the Corporation
powers of attorney, proxies, consents, waivers, and other instruments relating
to the shares or securities owned or held by this Corporation.
<PAGE>
ARTICLE VII
AMENDMENTS
The holders of shares entitled at the time to vote for the election of
directors shall have power to adopt, amend, or repeal the By-Laws of the
Corporation by vote of not less than a majority of such shares, and except as
otherwise provided by law, the Board of Directors shall have power equal in all
respects to that of the stockholders to adopt, amend, or repeal the By-Laws by
vote of not less than a majority of the entire Board. However, any By-Laws
adopted by the Board may be amended or repealed by vote of the holders of a
majority of the shares entitled at the time to vote for the election of
directors.
ARTICLE VII
INDEMNIFICATION
The Corporation shall, to the fullest extent permitted by subsections (a)
through (e) of Section 145 of the General Corporation Law of the State of
Delaware (as such statute may, from time to time, be amended), indemnify any
and all persons whom it shall have power to indemnify against any and all
expenses, liabilities and other matters.
<PAGE>
EXHIBIT 10.53
Harbour Holdings Limited Partnership
1281 Main Street
Stamford, Connecticut 06902
May 22, 1995
Memry Corporation
57 Commerce Drive
Brookfield, Connecticut 06804
Re: Series A Preferred Stock and Series B Preferred Stock
-----------------------------------------------------
Dear Sirs:
Reference is made to the 124 shares of Series A Preferred Stock, par
value $1.00 per share, (the "Series A Shares"), and the 250 shares of Series B
Preferred Stock, par value $1.00 per share (the "Series B Shares," and
collectively with the Series A Shares, the "Preferred Shares"), of Memry
Corporation ("Memry") that are owned by Harbour Holdings Limited Partnership
("Harbour") as of the date hereof. Harbour hereby agrees that simultaneously
with the execution of this letter agreement it will convert all of the Series A
Shares into 424,426 shares of Common Stock, par value $0.01 per share, of Memry
("Common Stock") and will convert all of the Series B Shares into 312,500
shares of Common Stock. By execution of this letter agreement, Memry agrees to
issue to Harbour, as payment in full of accrued dividends to date in the amount
of $598,000 with respect to Preferred Shares, 747,500 shares of Common Stock,
representing a per share price of $0.80, and Harbour agrees to accept such
issuance as payment in full of such accrued dividends.
This letter agreement may be signed in any number of counterparts, each
of which shall be deemed an original.
Harbour Holdings Limited Partnership
By: Harbour Investment Corporation, its
general partner
By: /s/ James G. Binch
--------------------------------
Name: James G. Binch
Title: President
<PAGE>
Agreed and Acknowledged by:
Memry Corporation
By: /s/ James G. Binch
-------------------------
Name: James G. Binch
Title: Chairman, President and CEO
Date: May 22, 1995
<PAGE>
EXHIBIT 10.54
THIRD AMENDATORY AGREEMENT TO
REVOLVING LOAN, TERM LOAN AND SECURITY AGREEMENT
------------------------------------------------
THIS AGREEMENT made this 20th day of July, 1995, by and between WRIGHT
MACHINE CORPORATION, a Delaware corporation with its chief executive office
and principal place of business at 69 Armory Street, Worcester, Massachusetts
01603 (hereinafter referred to as the "BORROWER") and SHAWMUT BANK
CONNECTICUT, N.A., a national banking association with an office at 777 Main
Street, Hartford, Connecticut 06115 (hereinafter referred to as the
"LENDER").
W I T N E S S E T H:
-------------------
WHEREAS, the Borrower and the Lender have entered into a Revolving
Loan, Term Loan and Security Agreement dated February 7, 1990 (the "LOAN
AGREEMENT"); and
WHEREAS, the Borrower and the Lender entered into a certain
Forbearance Agreement which was amended on numerous occasions; and
WHEREAS, the Borrower and the Lender amended the Loan Agreement on
October 11, 1991 and on October 10, 1992 and by the Forbearance Agreement and
all amendments thereto; and
WHEREAS, said Forbearance Agreement as amended has been terminated;
and
WHEREAS, the Borrower and the Lender desire to further amend the Loan
Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions hereinafter contained, the Borrower and the Lender hereby agree as
follows:
1. Section 2.1 of the Loan Agreement is deleted in its entirety and
the following is substituted in its place:
"2.1 Revolving Loan. The Lender may loan to the Borrower, at its
--------------
discretion, and the Borrower may borrow from the Lender, from time to time (the
"Revolving Loan"), up to that amount (hereinafter referred to as the
"BORROWING BASE" which is the lesser of:
a. The sum of:
(i) EIGHTY PERCENT (80%) of the Borrower's
Eligible Receivables; PLUS
(ii) FORTY PERCENT (40%) of the Borrower's
Eligible Inventory, but in any event not to
exceed THREE HUNDRED THOUSAND DOLLARS
($300,000); MINUS
(iii) A reserve of ONE HUNDRED THOUSAND DOLLARS
($100,000); OR
<PAGE>
b. ONE MILLION ONE HUNDRED FIFTY THOUSAND DOLLARS
($1,150,000).
Nothing herein shall be construed to require the Lender to
lend up to the Borrowing Base, and nothing shall prohibit the
Lender from lending in excess of the Borrowing Base, all
loans to be at the reasonable discretion of the Lender."
2. The first sentence of Section 2.3 of the Loan Agreement is modified
to read as follows:
"The Revolving Loan shall be payable upon demand without requiring the
Lender first to resort to any other right, remedy or security, but if not
sooner demanded, shall be payable on July 1, 1996."
3. Section 2.4 of the Loan Agreement is deleted in its entirety and
the following is substituted in its place:
"2.4 INTEREST ON THE REVOLVING LOAN. Interest on the Revolving
Loan will be payable monthly in arrears on the first business day of each
month, commencing on the first business day of the month subsequent to the date
of this Loan Agreement, and will be charged to the Borrower upon any and all
balances due to the Lender at that rate which is four (4.0) points in excess of
the Base Rate, said interest to be computed based upon a 360-day per year basis
for the actual number of days elapsed. In the event the Base Rate prevailing
on the Effective Date is subsequently increased or decreased, then, as of the
date of such increase or decrease, an increase or decrease will be made in the
rate of interest which will be charged to the Borrower, so that the interest
rate shall at all times be four (4.0) points in excess of the Base Rate;
provided, however, that at no time shall said interest rate be more than the
rate of interest permitted by the law governing this Loan Agreement. "BASE
RATE" is herein defined to mean the interest rate announced from time to
time by the Lender as its base rate. The Base Rate is not necessarily the
lowest rate available. On the date hereof the Base Rate is 8.75%. The
Borrower agrees to pay the Lender a late charge fee equal to five percent
(5.0%) of any payment due to the Lender which is not received before the
expiration of ten (10) days after the payment is due. It is further agreed
that upon an Event of Default and at any time thereafter, the Borrower shall
pay interest to the Lender at the variable rate set forth herein plus four
(4.0) points (the "DEFAULT RATE") until the Obligations are paid in full.
Notwithstanding the foregoing, the Default Rate shall not be effective
until fifteen (15) days after the occurrence of an Event of Default. In the
event said Event of Default is cured during that time period, the Default Rate
will not be effective. Nothing herein will affect the Lender's exercise of
other remedies upon any such Event of Default."
4. Section 2.9 of the Loan Agreement is deleted in its entirety and
the following is substituted in its place:
"2.9 Termination Date. Unless prior demand has been made on any
----------------
demand Obligation, this Loan Agreement shall terminate on July 1, 1996 (the
"TERMINATION DATE"). Notwithstanding the foregoing, should either the
Lender or the Borrower become adjudicated insolvent or go out of business, the
other party shall have the right to terminate at any time without notice. Upon
the Termination Date, all Obligations, whether or not incurred under this Loan
Agreement or any Supplemental Agreement or otherwise, shall become immediately
due and payable without notice or demand. Notwithstanding termination, until
all Obligations have been fully satisfied, the Lender shall retain its security
interest in all existing Collateral and that arising thereafter; the Borrower
shall continue to assign Receivables
<PAGE>
to the Lender and turn over all collections to the Lender; and, except for
those specific covenants and conditions dealing with the making of advances,
all terms and conditions of all agreements between the Borrower and the Lender
shall remain in full force and effect."
5. Section 2.10 of the Loan Agreement is supplemented by the
following:
"All references to the Term Note shall mean the Term Note as modified by
the Note and Mortgage Modification Agreement annexed hereto as EXHIBIT F."
6. Section 2.11 of the Loan Agreement is supplemented by the
following:
"All references to the Term Note shall mean the Term Note as modified by
the Note and Mortgage Modification Agreement annexed hereto as EXHIBIT F."
7. The Loan Agreement is hereby supplemented by the addition of the
following:
"6.12 TRANSACTION FEES. In addition to all other amounts
----------------
payable hereunder, subject to possible adjustment as set forth in the next
sentence, Borrower shall pay transaction fees of (i) One Thousand Five Hundred
Dollars ($1,500.00) per month for the period from July 1, 1995 through
September 30, 1995, (ii) Three Thousand Dollars ($3,000.00) per month for the
period from October 1, 1995 through December 31, 1995, (iii) Four Thousand Five
Hundred Dollars ($4,500.00) per month for the period from January 1, 1996
through March 31, 1996, and (iv) Six Thousand Dollars ($6,000.00) per month for
the period from April 1, 1996 through June 30, 1996. If Borrower meets or
exceeds its projected net income levels, all as set forth on EXHIBIT E annexed
hereto and made a part hereof, for the six (6) months ending December 31, 1995,
and continues to meet or exceed projected monthly net income levels thereafter,
then the monthly fee will remain at Three Thousand Dollars ($3,000.00) per
month. If the Borrower at any time after December 31, 1995 fails to meet or
exceed monthly net income projections, then the fee will increase to Four
Thousand Five Hundred Dollars ($4,500.00) per month for the next three (3)
months and to Six Thousand Dollars ($6,000.00) per month for any months
thereafter during which any Obligations from Borrower to Lender remain
outstanding. All fees payable pursuant to this Paragraph 6.12 shall be payable
on the first day of each month."
8. The Loan Agreement is hereby supplemented by the addition of the
following:
"6.14 CONFIRMATION OF LOAN BALANCES. Borrower hereby confirms
-----------------------------
the loan balance as of July 18, 1995 as follows: Revolving Loan $580,515.58;
Term Loan $159,666.88; Mortgage Loan $511,305.56, and that Borrower has no
setoffs, defenses, or counterclaims with respect thereto."
9. EXHIBIT A annexed hereto is hereby substituted as EXHIBIT A.
10. Borrower hereby agrees that as of August 4, 1995, all
representations, warranties set forth in the Loan Agreement, as amended, shall
be true and accurate.
11. Upon furnishing of all items set forth on SCHEDULE 2 hereof, Lender
waives such rights as it may have as a result of any and all Events of Default
existing on or prior to the date of this Agreement.
IN WITNESS WHEREOF, the parties have caused these presents to be signed
as of the day and year first above written.
<PAGE>
BORROWER:
WRIGHT MACHINE CORPORATION
By /s/ Edward J. Murphy
--------------------------------
EDWARD J. MURPHY
ITS PRESIDENT
DULY AUTHORIZED
LENDER:
SHAWMUT BANK CONNECTICUT, N.A.
By /s/ Nancy G. Walz
--------------------------------
NANCY G. WALZ
ITS ASSISTANT VICE PRESIDENT
DULY AUTHORIZED
The undersigned hereby acknowledges notice of the foregoing Third
Amendatory Agreement to Revolving Loan, Term Loan and Security Agreement and
agrees to be bound by all the terms, provisions and conditions thereof.
MEMRY CORPORATION
By /s/ James G. Binch
--------------------------------
JAMES G. BINCH
ITS CHAIRMAN, PRESIDENT &
CHIEF EXECUTIVE OFFICER
DULY AUTHORIZED
<PAGE>
EXHIBIT A
OTHER TERMS AND CONDITIONS
--------------------------
12. USE OF PROCEEDS. The proceeds of the Revolving Loan, Term Loan
---------------
and Mortgage Loan shall be and have been used by the Borrower for the
acquisition of the assets and properties of Wright Machine Corporation,
pursuant to a certain Asset Purchase Agreement, dated as of December 12,
1989, and for working capital.
13. GUARANTOR. The payment and performance of the Obligations shall
---------
be unconditionally guaranteed by Memry Corporation, in substantially the
form of EXHIBIT D annexed hereto.
14. MORTGAGE. As further security for payment and performance of the
--------
Obligations, the Borrower will and has delivered to the Lender a valid
and enforceable first mortgage on real estate known as 69 Armory Street,
Worcester, Massachusetts, said mortgage to be in substantially the form
of EXHIBIT F annexed hereto.
15. LIENS AND ENCUMBRANCES. The Collateral may be subject to the
----------------------
following liens and encumbrances:
(a) None
NOTE: As to the interests listed above, the listing thereof in this
Loan Agreement shall not, in any manner whatsoever, be deemed to be an
acknowledgement by the Lender as to the perfection, priority, validity or
enforceability thereof.
16. LOCATION OF COLLATERAL. The Collateral shall be held at the
----------------------
following locations:
(a) 69 Armory Street, Worcester, Massachusetts
The Borrower shall immediately furnish written notification to the Lender
of any change or addition of location of any place of the Borrower's
business or location at which any assets of the Borrower are located or
stored.
17. TRADE NAMES. The Borrower presently conducts its business under
-----------
the following trade names:
(a) Worcester Taper Pin Co.
The Borrower shall immediately furnish written notification to the Lender
of any change of corporate name of the Borrower or the use of any trade
name.
18. ACCOUNTING TERMS. All accounting terms not specifically defined
----------------
in this Loan Agreement shall be construed in accordance with generally
accepted accounting principles and all financial data submitted pursuant
to this Loan Agreement shall be prepared in accordance with such
principles.
19. MINIMUM TANGIBLE NET WORTH PLUS SUBORDINATED DEBT REQUIREMENT.
-------------------------------------------------------------
At all times the sum of Borrower's tangible net worth and subordinated
debt shall be equal to or in excess of
<PAGE>
the amounts shown on SCHEDULE 1 annexed hereto. For purposes of this
paragraph, the term "TANGIBLE NET WORTH" shall mean total assets less
total liabilities, excluding from the determination of total assets (i)
all assets which would be classified as intangible assets, including,
without limitation, goodwill, patents, trademarks, trade names,
copyrights and franchises, (ii) any amounts due to the Borrower from
affiliates, employees, officers or stockholders and (iii) increases
caused by a write-up of assets of the Borrower. For purposes of this
paragraph, "SUBORDINATED DEBT" shall mean that indebtedness which
has been subordinated upon terms and conditions satisfactory to the
Lender.
20. CAPITAL EXPENDITURES. Borrower will not make, directly, or
--------------------
indirectly, capital expenditures for the purchase, fabrication, creation
or lease of fixed assets, including rental on leased items, in excess of
$5,000 per month or $10,000 per quarter.
21. PURCHASE MONEY SECURITY INTEREST. Notwithstanding anything to
--------------------------------
the contrary contained in this Loan Agreement, the Borrower may grant a
purchase money security interest on any equipment hereafter acquired,
without the prior consent of the Lender, if:
(a) the equipment subject to the purchase money security interest is
acquired by the Borrower in the ordinary course of business;
(b) the purchase money security interest on any such equipment is
created contemporaneously with such acquisition;
(c) the obligations secured by the purchase money security interest do
not exceed seventy-five percent (75%) of the lesser of cost or fair
market value as of the time of acquisition of the equipment covered
thereby by the Borrower;
(d) the purchase money security interest shall attach only to the
equipment so acquired;
(e) the expenditure is permitted under PARAGRAPH 9 of this
EXHIBIT A and does not exceed $20,000.00 per annum
(noncumulative from year to year); and
(f) no Event of Default has occurred.
22. LITIGATION. In SECTION 4.1(G) there is an affirmative
----------
covenant with respect to litigation or threat thereof. Excluded from
said covenant is possible claims in connection with the claim against the
Seller which is the subject of a law suit against the Seller and its
principal shareholder brought by SFC Value Corp., Case No. 88-6847 CIV in
the US District Court, Southern District of Florida, and in a related
action, all as fully referenced on SCHEDULE Q of the Asset Purchase
Agreement between Seller and Borrower dated December 12, 1989.
23. CURRENT RATIO. The ratio of Borrower's current assets to
-------------
Borrower's current liabilities shall be as set forth on SCHEDULE 1
annexed hereto.
24. COMPENSATION. Compensation paid by Borrower to its
------------
officers, directors, or shareholders (including bonuses) shall not exceed
$30,000 per quarter.
25. EBITDA. Borrower's earnings before interest, taxes, depreciation
------
and amortization (EBITDA) on a cumulative basis shall not be less than
the amount shown on SCHEDULE 1 annexed hereto.
<PAGE>
26. INTEREST COVERAGE RATIO. The ratio of Borrower's EBITDA to
-----------------------
Interest on a cumulative basis shall not be less than the ratio set forth
on SCHEDULE 1 annexed hereto. For purposes of this paragraph,
"INTEREST" shall mean the interest paid or required to be paid for
the period in question.
27. TOTAL LIABILITIES, ETC. The ratio of (a) total liabilities minus
-----------------------
subordinated debt to (b) the sum of tangible net worth (including
subordinated debt) shall not exceed the ratio set forth in SCHEDULE 1
annexed hereto. ----------
<PAGE>
EXHIBIT 10.55
NOTES AND MORTGAGE MODIFICATION AGREEMENT
-----------------------------------------
THIS AGREEMENT, dated as of July 20, 1995, by and between WRIGHT
MACHINE CORPORATION, a Delaware corporation with a mailing
address of 69 Armory Street, Worcester, Massachusetts 01403 (hereinafter the
"BORROWER") and SHAWMUT BANK CONNECTICUT, N.A. F/K/A THE CONNECTICUT
NATIONAL BANK, a national banking association with an office at 777 Main
Street, Hartford, Connecticut 06115 (hereinafter the "LENDER").
W I T N E S S E T H:
WHEREAS, the Borrower is indebted to the Lender pursuant to that
certain Mortgage Note dated February 7, 1990 (hereinafter the "MORTGAGE
NOTE") from the Borrower to The Connecticut National Bank in the original
principal amount of ONE MILLION FOUR HUNDRED THOUSAND DOLLARS ($1,400,000.00);
and
WHEREAS, the Borrower is indebted to the Lender pursuant to that
certain Term Note dated February 7, 1990 (hereinafter the "TERM NOTE") from
the Borrower to The Connecticut National Bank in the original principal amount
of SEVEN HUNDRED THOUSAND DOLLARS ($700,000.00) (the Term Note and the Mortgage
Note hereinafter collectively called the "NOTES"); and
WHEREAS, to secure the repayment of the Notes inter alia, the
----- ----
Borrower granted to the Lender a certain Mortgage (the "MORTGAGE") on
premises located in the City of Worcester, County of Worcester and Commonwealth
of Massachusetts, and being more particularly described in said Mortgage, which
Mortgage is dated February 7, 1990, and was recorded in Book 12619 at Page 240
of the Worcester County Land Records, and which Mortgage was further amended by
a Note and Mortgage Modification Agreement dated as of December 30, 1994, and
recorded on January 12, 1995, in Book 16821 at Page 250 of the Worcester County
Land Records, which Mortgage was further amended by a Note and Mortgage
Modification Agreement dated as of April 11, 1995, and recorded on
_______________, in Book _____ at Page _____ of the Worcester County Land
Records; and
WHEREAS, to further secure the Notes etc., the Borrower executed and
delivered to the Lender certain documents (collectively, the "LOAN
DOCUMENTS"); and
WHEREAS, as of the date hereof, the outstanding principal balance of
the Term Note is $159,666.88; and the outstanding principal balance of the
Mortgage Note is $511,305.56; and
WHEREAS, the Borrower and the Lender wish to further modify the Notes
and the Mortgage.
NOW THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties agree as follows:
<PAGE>
1. The recitals shown above are true and correct.
2. Paragraph 1 of the Mortgage is hereby modified to read as follows:
"1. A certain revolving loan agreement dated February 7, 1990
(the "REVOLVING LOAN, TERM LOAN AND SECURITY AGREEMENT")
in an amount not to exceed ONE MILLION ONE HUNDRED FIFTY
THOUSAND ($1,150,000.00) together with interest, costs and
expenses thereon (the "REVOLVING LOAN") which Revolving
Loan, Term Loan and Security Agreement, among other matters,
permits advances from time to time by the Lender to the
Borrower and is payable on demand."
3. The Mortgage Note is hereby modified to read as follows (with
respect to schedule of payments):
"Payments of principal shall be made in twelve (12) installments as
follows: eleven (11) equal successive monthly installments each in
the amount of THREE THOUSAND SIX HUNDRED NINETY-FOUR DOLLARS AND
44/100 ($3,694.44) plus accrued interest as hereinafter set forth,
commencing as of August 1, 1995 and continuing on the first day of
each successive month thereafter with the final installment being
due and payable on July 1, 1996, said installment being an amount
equal to the balance of all unpaid principal and accrued interest."
Any other language in the Mortgage Note with respect to payments of principal
shall be superseded by the foregoing.
4. Paragraphs 3 and 4 of the first page of the Term Note are hereby
modified to read as follows (with respect to schedule of payments):
"Payments of principal shall be made in twelve (12) installments as
follows: eleven (11) equal successive monthly installments each in
the amount of SEVEN THOUSAND DOLLARS ($7,000.00) plus accrued
interest as hereinafter set forth, commencing as of August 1, 1995
and continuing on the first day of each successive month thereafter
with the final installment being due and payable on July 1, 1996,
said installment being an amount equal to the balance of all unpaid
principal and accrued interest."
Any other language in the Term Note with respect to payments of principal shall
be superseded by the foregoing.
5. The interest provisions of the Mortgage Note and the Term Note are
hereby modified to read as follows:
"2.4 INTEREST. Interest will be payable monthly in arrears
on the first business day of each month, commencing on the first business
day of the month subsequent to the date of this Note as amended, and will
be charged to the Borrower upon any and all balances due to the Lender at
that rate which is four (4.0) points in excess of the Base Rate, said
interest to be computed based upon a 360-day per year basis for the
actual number of days elapsed. In the event the Base Rate prevailing on
the Date hereof is subsequently increased or decreased, then, as of the
date of such increase or decrease, an increase or decrease will be made
in the rate of interest which will be charged to the Borrower, so that
the interest rate shall at all times be four (4.0) points in excess
of the Base Rate; provided, however, that at
<PAGE>
no time shall said interest rate be more than the rate of interest
permitted by the law governing this Loan Agreement. "BASE RATE"
is herein defined to mean the interest rate announced from time to time
by the Lender as its base rate. The Base Rate is not necessarily the
lowest rate available. On the date hereof the Base Rate is 8.75%. The
Borrower agrees to pay the Lender a late charge fee equal to five percent
(5.0%) of any payment due to the Lender which is not received before the
expiration of ten (10) days after the payment is due. It is further
agreed that upon an Event of Default and at any time thereafter, the
Borrower shall pay interest to the Lender at the variable rate set forth
herein plus four (4.0) points (the "DEFAULT RATE") until the
Obligations are paid in full.
Notwithstanding the foregoing, the Default Rate shall not be effective
until fifteen (15) days after the occurrence of an Event of Default. In the
event said Event of Default is cured during that time period, the Default Rate
will not be effective. Nothing herein will affect the Lender's exercise of
other remedies upon any such Event of Default."
6. All references in the Mortgage to "Mortgagee" shall be deemed to
include Shawmut Bank Connecticut, N.A., its successors and/or assigns.
7. Except as above modified, the rights, privileges, duties and
obligations of the parties hereto under the Mortgage shall remain unchanged and
in full force and effect and nothing herein contained shall operate to release
the Borrower from its liability to pay the Notes and to keep and perform all of
the terms, conditions, obligations and agreements contained in the Loan
Documents, and the Borrower agrees to pay the indebtedness evidenced by the
Notes and secured by the Mortgage with interest and all other payments required
to be made under said Notes and the Mortgage in accordance with the respective
provisions thereof.
8. The copy of the Mortgage Note attached to the Mortgage as
SCHEDULE C is hereby modified in accordance with PARAGRAPHS 3 AND 5
hereof.
9. The copy of the Term Note attached to the Mortgage as SCHEDULE
D is hereby modified in accordance with PARAGRAPH 4 AND 5 hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Note and Mortgage
Modification Agreement to be executed and their respective seals to be affixed
hereto as of the 20th day of July, 1995.
Signed, Sealed and Delivered
in the Presence of:
BORROWER:
/s/ Maryann Schwalbendorf WRIGHT MACHINE CORPORATION
- -------------------------
/s/ James G. Binch By /s/ Edward J. Murphy
- ------------------------- ----------------------------
EDWARD J. MURPHY
ITS PRESIDENT
DULY AUTHORIZED
LENDER:
/s/ Maryann Schwalbendorf SHAWMUT BANK CONNECTICUT, N.A.
- -------------------------
/s/ James G. Binch By/s/ Nancy G. Walz
- ------------------------- ----------------------------
NANCY G. WALZ
ITS ASSISTANT VICE PRESIDENT
DULY AUTHORIZED
<PAGE>
STATE OF CONNECTICUT)
) ss.: Hartford
COUNTY OF HARTFORD )
On this 20th day of July, 1995, before me, the undersigned officer,
personally appeared EDWARD J. MURPHY, as PRESIDENT of WRIGHT MACHINE
CORPORATION, signer and sealer of the foregoing instrument, and acknowledged
the same to be his free act and deed and the free act and deed of said
corporation.
/s/ Susan M. Doro
------------------------------
Commissioner of Superior Court
Notary Public
My Commission Expires:
STATE OF CONNECTICUT)
) ss.: Hartford
COUNTY OF HARTFORD )
On this 20th day of July, 1995, before me, the undersigned officer,
personally appeared NANCY G. WALZ, ASSISTANT VICE PRESIDENT of
SHAWMUT BANK CONNECTICUT, N.A., signer and sealer of the foregoing
instrument, and acknowledged the same to be her free act and deed and the free
act and deed of said banking corporation.
/s/ Susan M. Doro
-----------------------------
Commissioner of Superior Court
Notary Public
My Commission Expires:
<PAGE>
EXHIBIT 10.56
REAFFIRMATION AND AMENDMENT OF SUBORDINATION AGREEMENT
------------------------------------------------------
July 20, 1995
Shawmut Bank Connecticut, N.A.
777 Main Street
Hartford, Connecticut 06115
RE: WRIGHT MACHINE CORPORATION (THE "BORROWER")
-------------------------------------------
Gentlemen:
Reference is made to the Subordination Agreement executed by the
undersigned (the "CREDITOR") and dated March 11, 1994 as amended from time to
time (the "SUBORDINATION AGREEMENT") in favor of SHAWMUT BANK CONNECTICUT, N.A.
(the "LENDER"), pursuant to which the Creditor has subordinated the Secondary
Obligations, as defined in the Subordination Agreement, to the Primary
Obligations, as defined in the Subordination Agreement.
To induce the Lender to enter into the Third Amendatory Agreement to
Revolving Loan, Term Loan and Security Agreement annexed hereto as SCHEDULE "A"
(the "AGREEMENT"), the Creditor hereby:
1. Consents to the Agreement; and
2. Agrees that the Amount of Indebtedness of the first page of the
Subordination Agreement is hereby changed from "$1,006,000.00" to
"$1,452,000.00".
3. Affirms and ratifies the Subordination Agreement and confirms that, (i)
it does irrevocably and unconditionally subordinate to the Lender the Secondary
Obligations to the Primary Obligations upon the terms and conditions set forth
in the Subordination Agreement, (ii) the term Primary Obligations includes,
without limitation, the Agreement, and (iii) the Subordination Agreement remains
unmodified and in full force and effect and binding upon the Creditor.
Witnesses: Very truly yours,
/s/ Maryann Schwalbendorf MEMRY CORPORATION
- -------------------------
/s/ Edward J. Murphy By/s/ James G. Binch
- ------------------------- ----------------------------
JAMES G. BINCH
Its Chairman, President &
Chief Executive Officer
Duly Authorized
<PAGE>
STATE OF CONNECTICUT)
) ss.: Hartford
COUNTY OF HARTFORD )
On this 20th day of July, 1995, personally appeared before me JAMES G.
BINCH, the Chairman, President and Chief Executive Officer of MEMRY CORPORATION,
the signer of the above instrument, and acknowledged the same to be his free act
and deed and the free act and deed of said corporation.
/s/ Susan M. Doro
----------------------------------
Commissioner of the Superior Court
Notary Public
My Commission Expires:
Accepted and agreed to this
20th day of July, 1995.
SHAWMUT BANK CONNECTICUT, N.A.
By/s/ Nancy G. Walz
----------------------------
NANCY G. WALZ
Its Assistant Vice President
Duly Authorized
<PAGE>
EXHIBIT 10.57
REAFFIRMATION OF GUARANTY
-------------------------
July 20, 1995
Shawmut Bank Connecticut, N.A.
777 Main Street
Hartford, Connecticut 06115
Re: WRIGHT MACHINE CORPORATION (THE "BORROWER")
-------------------------------------------
Gentlemen:
Reference is made to the Guaranty executed by the undersigned (the
"GUARANTOR") and dated February 7, 1990, as amended and restated from time to
time, (the "GUARANTY") in favor of THE CONNECTICUT NATIONAL BANK, NOW KNOWN AS
SHAWMUT BANK CONNECTICUT, N.A. (the "LENDER"), pursuant to which the Guarantor
has guaranteed the payment and performance from or by the Borrower of the
Obligations, as defined in the Guaranty, from the Borrower to the Lender.
To induce the Lender to enter into the Third Amendatory Agreement to
Revolving Loan, Term Loan and Security Agreement annexed hereto as SCHEDULE "A"
(the "AGREEMENT"), the Guarantor hereby:
4. Consents to said Agreement;
5. Affirms and ratifies the Guaranty and confirms that, (i) it does
irrevocably and unconditionally guarantee to the Lender the payment and
performance from and by the Borrower of the Obligations from the Borrower to the
Lender, upon the terms and conditions set forth in the Guaranty, (ii) the term
Obligations includes, without limitation, the Agreement, and (iii) the Guaranty
remains in full force and effect, without any offsets, defenses or counterclaims
of any kind whatsoever.
Witnesses: Very truly yours,
/s/ Edward J. Murphy MEMRY CORPORATION
- -------------------------
/s/ Maryann Schwalbendorf By/s/ James G. Binch
- ------------------------- ----------------------------
JAMES G. BINCH
Its Chairman, President &
Chief Executive Officer
Duly Authorized
<PAGE>
STATE OF CONNECTICUT)
) ss.: Hartford
COUNTY OF HARTFORD )
On this 20th day of July, 1995, personally appeared before me JAMES G.
BINCH, the Chairman, President and Chief Executive Officer of MEMRY CORPORATION,
the signer of the above instrument, and acknowledged the same to be his free act
and deed and the free act and deed of said corporation.
/s/ Susan M. Doro
----------------------------------
Commissioner of the Superior Court
Notary Public
My Commission Expires:
Accepted and Agreed to this
20th day of July, 1995
SHAWMUT BANK CONNECTICUT, N.A.
By/s/ Nancy G. Walz
----------------------------
NANCY G. WALZ
Its Assistant Vice President
Duly Authorized
<PAGE>
EXHIBIT 10.58
SECURITIES PURCHASE AGREEMENT
-----------------------------
MEMRY CORPORATION
JUNE 14, 1995
<PAGE>
SECURITIES PURCHASE AGREEMENT
-----------------------------
THIS SECURITIES PURCHASE AGREEMENT ("Agreement") is made as of the 14th day
of June, 1995 by and between MEMRY CORPORATION, a Delaware corporation (the
"Company"), and _______________________, with an address at
_______________________________________________
_________________________________________ (the "Investor").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Securities.
-------------------------------
1.1. Purchase and Sale of Shares of Series G Preferred Stock. Subject
-------------------------------------------------------
to the terms and conditions of this Agreement, the Investor hereby subscribes
for, and upon the Company's acceptance of such subscription on the Closing Date
(as hereinafter defined) as evidenced by the Company's execution of this
Agreement on the Closing Date, the Company agrees to sell and issue to the
Investor, __________________________ (___________) shares (the "Shares") of the
Company's Series G Preferred Stock, par value $100 per share (the "G
Preferred"), for a purchase price of ___________________ ______________________
(__________) (the "Purchase Price"), being $6,500 per share. The sale of the
Shares pursuant hereto is part of an offering (the "Offering"), which Offering
shall terminate not later than July 15, 1995 (the "Termination Date") with
respect to cash sales, and August 31, 1995, with respect to exchanges (as
described below), of a minimum subscription consisting of the cash sale of 308
shares of G Preferred (the "Minimum Subscription") and a maximum subscription
consisting of (a) the cash sale of not more than 538 shares of G Preferred, and
(b) the sale of 55 shares of G Preferred to current investors of the Company who
may exchange previously issued securities of the Company, valued at the original
purchase price paid for such securities, for shares of G Preferred. The
purchasers of shares of G Preferred pursuant to the Offering, collectively with
the Investor, are hereinafter referred to as the "Investors."
1.2 Issuance of Shares; Payment of Purchase Price.
---------------------------------------------
(a) Subject to the terms of paragraph (b) of this Section 1.2, the
Company shall deliver to the Investor a certificate representing the appropriate
number of shares of G Preferred for which the Investor is subscribing (the
"Share Certificate") against delivery to the Company by such Investor of a check
in the amount of the Purchase Price.
(b) Pending the receipt of the Minimum Subscription, the Purchase
Price shall be deposited in a special segregated bank account maintained by the
Company and not used for any other purpose. When, prior to the Termination
Date, at least the Minimum Subscription is obtained, the Share Certificate shall
be issued and the Purchase Price, and all interest earned thereon, shall be
released to the Company (the "Closing," and
<PAGE>
such date, the "Closing Date"). If for any reason the Minimum Subscription is
not obtained by the Termination Date, the Company will return the Purchase Price
to the Investor, without interest.
2. Representations and Warranties of the Investor. The Investor hereby
----------------------------------------------
represents and warrants to the Company, and acknowledges and intends that the
Company rely thereon, as follows:
2.1 The Investor is an "accredited investor" within the meaning of
Rule 501(a) of the Securities Act of 1933, as amended (the "Act"), and qualifies
as such under Rule 501(a)(6) of the Act.
2.2 The Investor will not sell, assign, pledge, transfer, or
otherwise dispose of, whether directly or indirectly, all or any portion of the
Shares or any Common Stock obtained upon the exercise or conversion of the
Shares or as a stock dividend on the Common Stock so obtained (such Common Stock
being hereinafter collectively referred to as the "Underlying Securities"; the
Shares and the Underlying Securities are hereinafter collectively referred to as
the "Securities") to any person or entity without complying with applicable
securities laws;
2.3 The Investor is acquiring the Securities for the Investor's own
account, for investment purposes only and not with a view to any distribution of
such Securities;
2.4 The Investor acknowledges and agrees that the Company has
informed the Investor that the Securities are not registered under any
securities laws, and therefore that (absent registration under or exemption from
applicable securities laws) the Securities are subject to substantial
restrictions on transfer and the Securities may not be transferred for an
indefinite period of time;
2.5 The Investor has investigated the purchase of the Securities to
the extent the Investor deems necessary or desirable, and the Company has
provided the Investor with any assistance in connection therewith which the
Investor has requested. The Investor has such knowledge and experience in
financial and business matters that the Investor is capable of evaluating the
merits and risks of the acquisition of the Securities and of making an informed
investment decision with respect thereto and the Investor has the ability to
bear the economic risk of an investment in the Company and to withstand a
complete loss of its investment. The Investor is financially able to hold the
Securities for an indefinite period of time;
2.6 The Investor is not relying on the Company or any of its
directors, officers, employees, or agents for guidance with respect to tax and
other applicable laws of any jurisdiction, or other economic considerations, and
Investor has been furnished by the Company with all information the Investor has
deemed necessary or appropriate in order to form an informed investment decision
concerning the purchase of the Securities. The Investor has been afforded an
opportunity to ask questions of and receive answers from
<PAGE>
representatives of the Company concerning the terms and conditions of the
Investor's purchase of the Securities and has been afforded the opportunity to
obtain any additional information (to the extent that the Company had such
information or could acquire it without unreasonable effort or expense)
necessary to verify the accuracy of information otherwise furnished by the
Company;
2.7 The Investor understands that no United States federal or state
agency or any agency of any other government has passed upon or made any
recommendation or endorsement of any investment in the Company;
2.8 The Investor has not been organized for the purpose of purchasing
the Securities; and
2.9 The Investor understands that the certificates evidencing the
Securities will bear a legend stating in substance:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH
ACT OR AN OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY
TO THE COMPANY THAT SUCH SALE, OFFER FOR SALE, PLEDGE, HYPOTHECATION OR
OTHER DISPOSITION DOES NOT VIOLATE THE PROVISIONS OF SUCH ACT OR UNLESS
SOLD PURSUANT TO RULE 144 OF SUCH ACT."
provided, however that the Company agrees to cause such legend to be removed
from any certificates representing the Shares after such Shares have been
transferred pursuant to an effective registration under the Act or Rule 144
promulgated thereunder.
3. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents and warrants to the Investor, and acknowledges and intends that the
Investor rely thereon, as follows:
3.1 Authorization. All action on the part of the Company, its
-------------
directors and stockholders necessary for the authorization, execution, delivery
and performance by the Company of this Agreement and the consummation of the
transactions contemplated herein, and for the authorization, execution and
delivery of the Shares, have been taken (except that the Company has not
reserved for issuance shares of Common Stock to be issued upon the conversion of
the Shares nor does the Company currently have authorized and unreserved a
sufficient number of shares of Common Stock to allow for the conversion of the
Shares). This Agreement, including the exhibits hereto, is a valid and binding
obligation of the Company, enforceable in accordance with its terms against the
Company.
<PAGE>
3.2 Disclosure. Neither this Agreement nor any other written
----------
statement furnished to the Investor nor its counsel in connection with the
investment made hereby contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements contained
therein or herein not misleading in the light of the circumstances under which
they were made.
3.3 Capitalization.
--------------
(a) Upon consummation of the Closing, all issued and outstanding
shares of capital stock of the Company will have been duly authorized and
validly issued, will be fully paid and nonassessable and will have been offered,
issued, sold and delivered by the Company in compliance with applicable federal
and state securities laws.
(b) The Company shall (i) convene a meeting of the Company's
stockholders as soon as possible, but in any event prior to the end of 1995 for
the purpose of amending the Company's Certificate of Incorporation to increase
the number of authorized shares of the Company's Common Stock to a number
sufficient to allow for the full exercise and conversion of the Shares, and (ii)
at such meeting, cause such proposed amendment (the "Capitalization Amendment")
to be adopted. Promptly upon the adoption of the Capitalization Amendment, the
Company shall (i) file with the Delaware Secretary of State a Certificate of
Amendment to Certificate of Incorporation giving effect to the Capitalization
Amendment and (ii) immediately upon the effectiveness of such filing, reserve a
sufficient number of shares of Common Stock to allow for the full exercise and
conversion of the Purchased Securities.
3.4 Certificate of Designations. The Company has, on or before the
---------------------------
Closing Date, adopted and filed with the Delaware Secretary of State a
Certificate of Designations, Preferences and Rights of Series G Preferred Stock,
attached hereto as Exhibit A (the "Certificate of Designations").
4. Registration. The Company covenants and agrees as follows:
------------
4.1 Definitions. For purposes of this Section 4:
-----------
(a) The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document;
(b) The term "Registrable Securities" means (i) the shares of Common
Stock of the Investors obtained upon the exercise or conversion of any shares of
G Preferred or as a stock dividend on the Common Stock so obtained and any
shares of Common Stock (whether issued or issuable) of any other persons and
entities which enter into agreements with the Company pursuant to which they
become entitled to the privileges and subject to the restrictions of this
Section 4 (collectively, the "Common Shares"), and (ii) any Common Stock of the
Company issued as (or issuable upon the conversion or
<PAGE>
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
the Common Shares, excluding in all cases, however, any Registrable Securities
(i) sold by a person in a transaction in which its rights under this Section 4
are not assigned, (ii) sold pursuant to a registration, or (iii) saleable under
paragraph (k) of Rule 144 promulgated under the Act.
(c) The number of shares of "Registrable Securities then outstanding"
shall be the number of shares of Common Stock outstanding which are, and the
number of shares of Common Stock issuable pursuant to exercisable or convertible
securities which are, Registrable Securities;
(d) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Section 4.13 hereof; and
(e) The term "Form S-3" means such form under the Act as in effect on
the date hereof or any registration form under the Act subsequently adopted by
the Securities and Exchange Commission (the "SEC") which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.
4.2 Registration.
------------
(a) The Company shall use its best efforts to effect the registration
under the Act of all Registrable Securities on an applicable form (the
"Registration Statement") by March 15, 1996. If the Company fails to effect the
Registration Statement by March 15, 1996, it will continue to use its best
efforts to effect such Registration Statement as soon as possible thereafter.
(b) The Company shall maintain the effectiveness of the Registration
Statement for a period of three years from the effective date therof and shall
use its best efforts to allow the Investor to continually sell Registrable
Securities pursuant to the Registration Statement free from any stop orders or
suspensions by the Company or upon the advice of the Company's counsel or the
Investor's counsel to cease trading. The Company shall furnish to the Investor
copies of all documents filed and correspondence with the SEC relating to the
Registration Statement, and such other information as the Investor shall
reasonably request.
4.3 Piggyback Registration.
----------------------
(a) Whenever the Company proposes to register the sale of any of its
equity securities under the Act other than on Form S-4 or Form S-8 promulgated
under the Act or any similar form then in effect, the Company shall give written
notice thereof to each Holder as soon as practicable (but in any event at least
30 days before such filing), offering such Holder the opportunity to register on
such registration statement such number
<PAGE>
of Registrable Securities as such Holder may request in writing, subject to the
provisions of Section 4.3(b) hereof, not later than 20 days after the date of
the giving of such notice (a "Piggyback Registration"). Upon receipt by the
Company of any such request, the Company shall use reasonable efforts to, or in
the case of an underwritten offering, to cause the managing underwriter or
underwriters to, include such Registrable Securities in such registration
statement(or in a separate registration statement concurrently filed) and to
cause such registration statement to become effective with respect to such
Registrable Securities. If the Company's registration is to be effected pursuant
to an underwritten offering, Registrable Securities registered pursuant to this
Section 4 shall be distributed in accordance with such offering. Notwithstanding
the foregoing, if at any time after giving written notice of its intention to
register its equity securities and before the effectiveness of the registration
statement filed in connection with such registration, the Company determines for
any reason either not to effect such registration or to delay such registration,
the Company may, at its election, by delivery of written notice to each Holder
(A) in the case of a determination not to effect registration, relieve itself of
its obligation to register the Registrable Securities in connection with such
registration or (B) in the case of a determination to delay registration, delay
the registration of such Registrable Securities for the same period as the delay
in the registration of such other equity securities. Each Holder requesting
inclusion in a registration pursuant to this Section 4.3 may, at any time before
the effective date of the registration statement relating to such registration,
revoke such request by delivering written notice of such revocation to the
Company (which notice shall be effective only upon receipt by the Company);
provided, however, that if the Company, in consultation with its financial and
- -------- -------
legal advisors, determines that such revocation would materially delay the
registration or otherwise require a recirculation of the prospectus contained in
the registration statement, then such holder shall have no right to so revoke
its request.
(b) Notwithstanding the foregoing, with respect to any primary
registration that is underwritten and with respect to which the managing
underwriter or underwriters advise the Company of an Underwriters Maximum Number
(as such term is hereinafter defined), then the Company will so notify all
Holders requesting inclusion in such registration and will be required to
include in such registration, to the extent of the Underwriters Maximum Number:
first, any equity securities that the Company proposes to sell for its own
- -----
account; second, the Registrable Securities requested by Holders to be included
------
in such registration and any equity securities requested to be included in such
registration by other holders of such securities allocated pro rata among such
--- ----
Holders and other holders on the basis of the number of securities requested to
be included therein by each such Holder or other holder; provided, however, the
-------- -------
Company shall not be permitted to reduce the number of Registrable Securities
included in such registration to less than 33 1/3% of the number of Registrable
Securities sold in such offering.
(c) If any Piggyback Registration is in the form of an underwritten
offering, the managing underwriter or underwriters and any additional investment
bankers and managers to be used in connection with such registration shall be
selected by the Company (subject to any separate agreement with the holders on
behalf of which a
<PAGE>
secondary underwritten offering is being made). The selection of such
underwriters shall also be subject to the approval by the Holders participating
in such underwritten offering holding a majority of the Registrable Securities
being registered, which approval shall not be unreasonably withheld.
(d) All Holders proposing to distribute their securities through such
underwriting shall (together with the Company and the other holders distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by the Company, and each Holder selling Registrable Securities shall participate
in such underwriting.
(e) If any Holder or other holder disapproves of the terms of any
such underwriting, he may elect to withdraw therefrom by written notice to the
Company and the managing underwriter. Any securities excluded or withdrawn from
such underwriting shall be withdrawn from such registration, and shall not be
transferred in a public distribution prior to 180 days after the effective date
of the registration statement relating thereto, or such other shorter period of
time as the underwriters may require.
(f) The Company shall have the right to terminate or withdraw any
registration initiated by it under this Section 4.3 prior to the effectiveness
of such registration whether or not any Holder has elected to include securities
in such registration.
4.4 Registrations on Form S-3. At any time after the termination of
-------------------------
the effectiveness of the Registration Statement as the Company shall be
qualified for the use of Form S-3, the Holders of at least 25% of the
Registrable Securities shall have the right to request in writing an unlimited
number of registrations of the resale of Registrable Securities on Form S-3,
which request or requests shall (a) specify the number of Registrable Securities
intended to be sold or disposed of and the holders thereof, (b) state the
intended method of disposition of such Registrable Securities and (c) relate to
Registrable Securities having an anticipated aggregate offering price of at
least $500,000; provided, however, the Company shall not be required to effect
-------- -------
such a registration more than once every twelve calendar months.
4.5 Holdback Agreement. If the Company at any time shall register
------------------
shares of Common Stock under the Act for sale to the public, the Investor shall
not sell publicly, make any short sale of, grant any option for the purchase of,
or otherwise dispose publicly of, any Registrable Securities (other than those
shares of Common Stock included in such registration) without the prior written
consent of the Company for a period designated by the Company in writing to the
Investor, which period shall begin not more than 10 days prior to the
effectiveness of the registration statement pursuant to which such public
offering shall be made and shall not last more than 180 days after the effective
date of such registration statement. The Company shall obtain the agreement of
any person permitted to sell shares of stock in a registration to be bound by
and to comply with this Section 4.5 as if such person was an Investor hereunder.
<PAGE>
4.6 Obligations of the Company. Whenever required under this Section
--------------------------
4 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and keep such registration statement
effective until the earlier to occur of the third anniversary of the effective
date of such registration statement and the sale of all of the Registrable
Securities shall by the Investor;
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of the securities covered by such
registration statement;
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them;
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders to
enable the Holders to consummate the disposition in such jurisdictions of such
securities, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions;
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering (each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement);
(f) Notify each Holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Act, of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
made therein not misleading in the light of the circumstances then existing; and
(g) Furnish, at the request of any Holder, on the date that such
Holder's Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 4, if such securities
are being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that
<PAGE>
the registration statement with respect to such securities becomes effective,
(i) an opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders and (ii) a letter, dated such date, from the
independent public accountants of the Company, in form and substance as is
customarily given by independent public accounts to underwriters in an
underwritten public offering, addressed to the underwriters, if any, and the
Holders.
4.7 Obligations of Selling Holders.
------------------------------
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Section 4 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company in writing such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
(b) The Holders of Registrable Securities included in the registration
statement will not (until further notice) effect sales thereof after receipt of
telegraphic or written notice from the Company to suspend sales to permit the
Company to correct or update a registration statement or prospectus.
4.8 Expenses of Registration. All expenses other than underwriting
------------------------
discounts and commissions incurred in connection with registrations, filings, or
qualifications, including (without limitation) all registration, filing and
qualification fees, printers' and accounting fees, fees and disbursements of
counsel for the Company, transportation expenses, mailing expenses, and the fees
and disbursements of counsel for the selling Holders shall be borne and paid by
the Company.
4.9 Underwriting Requirements. In connection with any offering
-------------------------
involving an underwriting of shares being issued by the Company, the Company
shall not be required to include any of the Holders' securities in such
underwriting unless they accept the terms of the underwriting as agreed upon
between the Company and the underwriters selected by it, and then only in such
quantity as will not, in the opinion of the underwriters, jeopardize the success
of the offering by the Company. If the total amount of securities, including
Registrable Securities, requested by shareholders to be included in such
offering exceeds the amount of Securities to be sold other than by the Company
that the underwriters reasonably believe compatible with the success of the
offering, then the Company shall be required to include in the offering only
that number of such securities, including Registrable Securities, which the
underwriters believe will not jeopardize the success of the offering (the
"Underwriters Maximum Number") (subject to the provisions of Section 4.3 hereof
with respect to securities included pursuant to a Piggyback Registration, the
securities so included to be apportioned pro rata among the selling Holders
according to the total amount of securities entitled to be included therein
owned by each selling holder or in such other proportions as shall mutually be
agreed to by such selling Holders).
<PAGE>
4.10 Delay of Registration. No Holder shall have any right to obtain
---------------------
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 4.
4.11 Indemnification. In the event any Registrable Securities are
---------------
included in a registration statement under this Section 4:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder requesting to join in such registration, any
underwriter (as defined in the Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the Act or the
Securities Exchange Act of 1934, as amended (the "1934 Act") against any losses,
claims, damages, or liabilities (joint or several) to which they may become
subject under the Act, the 1934 Act or other federal or state law, insofar as
such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements made therein not misleading, or (iii) any violation or
alleged violation by the Company of the Act, the 1934 Act, any state securities
law or any rule or regulation promulgated under the Act, the 1934 Act or any
state securities law applicable to the Company in connection with any such
Holder, underwriter or controlling person, as incurred, any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided however,
that the indemnity agreement contained in this subsection 4.11(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage liability,
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the Company be
liable in any such case for any such loss, claim, damage, liability, or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by any such Holder, underwriter or
controlling person.
(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers who
has signed the registration statement, each person, if any, who controls the
Company within the meaning of the Act, any underwriter, any other Holder selling
securities in such registration statement and any controlling person of any such
underwriter or other Holder, against any losses, claims, damages, or liabilities
(joint or several) to which any of the foregoing persons may become subject,
under the Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereto) arise out
of or are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written
<PAGE>
information furnished by such Holder expressly for use in connection with such
registration; and such Holder will pay, as incurred, any legal or other expenses
reasonably incurred by any person intended to be indemnified pursuant to this
subsection 4.11(b) in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this subsection 4.11(b) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld.
(c) Promptly after receipt by an indemnified party under this Section
4.11 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 4, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnified party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 4.11, but omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 4.11.
(d) The obligations of the Company and Holders under this Section 4.11
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 4, and otherwise.
4.12 Reports Under Securities Exchange Act of 1934. With a view to
---------------------------------------------
making available to the Holders the benefits of Rule 144 promulgated under the
Act ("Rule 144") and any other rule or regulation of the SEC that may at any
time permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees on
and after the Closing to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) Use its best efforts to enable the Holders to utilize Form S-3 for
the sale of their Registrable Securities;
<PAGE>
(c) File with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) Furnish to any Holder, so long as the Holder owns Registrable
Securities representing two percent (2%) or more of the Company's Common Stock,
(i) forthwith upon request a written statement by the Company that it has
complied with the reporting requirements of Rule 144, the Act and the 1934 Act,
or that it qualifies as a registrant whose securities may be resold pursuant to
Form S-3 (at any time after it so qualifies), (ii) substantially concurrently
with the filing thereof, copies of the annual and quarterly reports of the
Company filed with the SEC and such other reports and documents so filed by the
Company, (iii) as soon as they shall become available to the Company, any and
all audited financial statements of the Company and management letters from the
Company's independent auditors and the Company's response thereto, and (iv) such
other information as may be reasonably requested in availing any Holder of any
rule or regulation of the SEC which permits the selling of any such securities
without registration or pursuant to such form.
4.13 Assignment of Registration Rights. The rights to cause the
---------------------------------
Company to register Registrable Securities pursuant to this Section 4 may be
assigned by a Holder to a transferee or assignee of such securities provided the
Company is, prior to or simultaneously with such transfer, furnished with
written notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being assigned;
and provided, further, that such assignment shall be effective only if
immediately following such transfer the further disposition of such securities
by the transferee or assignee is restricted under the Act.
4.14 Amendment of Registration Rights. Any provision of this Section
--------------------------------
4 may be amended and the observance thereof may be waived (either generally or
in a particular instance and either retroactively or prospectively) only with
the written consent of the Company and the holders of a majority of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
securities purchased under this Agreement at the time outstanding (including
securities into which such securities are convertible), each future holder of
all such securities, and the Company.
5. Covenants of the Company.
-- ------------------------
The Company hereby covenants and agrees as follows:
5.1 Financial Information.
---------------------
(a) The Company shall furnish the following reports to the
Investor:
(i) as soon as practicable after the end of each fiscal quarter
(except the fourth quarter), and in any event within 45 days thereafter, an
unaudited
<PAGE>
income statement and statement of cash flows for such fiscal quarter and an
unaudited balance sheet as of the end of such fiscal quarter; and
(ii) as soon as practicable after the end of each fiscal year, and in
any event within 90 days thereafter, an income statement and statement of cash
flows for such fiscal year, a balance sheet of the Company as of the end of such
fiscal year, and a statement of changes in financial condition for such fiscal
year, audited by independent public accountants of recognized national standing
selected by the Company;
(b) All financial statements provided for above shall be prepared in
accordance with general accepted accounting principles applied on a consistent
basis (except that such unaudited financial statements may be prepared without
footnotes and will be subject to normal year-end audit adjustments).
(c) The Investor agrees that any information obtained by such
Investor pursuant to this Section 4.1 which may be proprietary to the Company or
otherwise confidential shall not be disclosed without the prior written consent
of the Company. The Investor further acknowledges and understands that any
information so obtained which may be considered "inside" non-public information
will not be utilized by the Investor in connection with purchases and/or sales
of the Company's securities except in compliance with applicable state and
federal anti-fraud statutes.
5.2 Access of Records. So long as the Investor holds any shares of G
-----------------
Preferred, the Company will afford the Investor and its counsel and other
authorized representatives, free and full access and opportunity, at all
reasonable times during normal business hours and upon reasonable notice, to all
books, records and properties of the Company and to discuss the business,
affairs and finances of the Company with the officers of the Company. Each
Investor shall maintain the confidentiality of any information obtained by it
pursuant to this Section 5.2 that is not known to the public or among persons
providing similar services and, in connection with the review of any proprietary
or confidential information of the Company by such employees or representatives
execute a non-disclosure agreement with respect to their review of such
proprietary or confidential information.
6. Miscellaneous.
-------------
6.1 Survival of Warranties. The warranties, representations and
----------------------
covenants of the Company and Investor contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing shall in no way be affected by any investigation of the subject matter
thereof made by or on behalf of the Investor or the Company.
6.2 Successors and Assigns. The terms and conditions of this
----------------------
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of
<PAGE>
the parties. Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations, or liabilities under
or by reason of this Agreement, except as expressly provided in this Agreement.
6.3 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of Connecticut as applied to agreements among
Connecticut residents entered into and to be performed entirely within
Connecticut.
6.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.5 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this agreement.
6.6 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given (i) upon personal delivery to the party to be notified, (ii)
48 hours after deposit with the United States Post Office, by registered or
certified mail, postage prepaid and addressed to the party to be notified at the
address indicated for such party on the signature page hereof, or at such other
address as such party may designate by ten (10) days' advance written notice to
the other parties, (iii) upon transmission of a confirmed telecopy to such party
at a telecopier number furnished by such party for such purpose, or (iv) upon
delivery to such address by Federal Express or other courier service.
6.7 Amendments and Waivers. Except as specified in Section 4.14, any term
----------------------
of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the holders of a majority of the outstanding Shares. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any securities purchased under this Agreement at the time outstanding
(including securities into which such securities are convertible), each future
holder of all such securities and the Company.
6.8 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
6.9 Indemnification.
---------------
(a) The Company shall, with respect to the representations,
warranties, covenants and agreements made by the Company herein, indemnify,
defend and
<PAGE>
hold the Investor harmless against all liability, loss or damage, together with
all reasonable costs and expenses related thereto (including legal and
accounting fees and expenses), arising from the untruth, inaccuracy or breach of
any such representations, warranties, covenants or agreements of the Company.
(b) The Investor shall, with respect to the representations,
warranties, covenants and agreements made by the Investor herein, indemnify,
defend and hold the Company harmless against all liability, loss or damage,
together with all reasonable costs and expenses related thereto (including legal
and accounting fees and expenses), arising from the untruth, inaccuracy or
breach of any such representations, warranties, covenants or agreements of the
Investor.
6.10 Remedies. In case any one or more of the covenants and/or
--------
agreements set forth in this Agreement shall have been breached by the Company,
the Investor may proceed to protect and enforce its or their rights either by
suit in equity and/or by action at law, including, but not limited to, an action
for damages as a result of any such breach and/or an action for specific
performance of any such covenant or agreement contained in this Agreement. A
party acting pursuant to this Section 6.10 shall be indemnified against all
liability, loss or damage, together with all reasonable costs land expenses
related thereto (including legal and accounting fees and expenses) in accordance
with Section 6.9.
6.11 Nouns and Pronouns. Whenever the context may require, any
------------------
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice versa.
6.12 Information to be Provided by Investor. Investor agrees to
--------------------------------------
provide to the Company such information as the Company may reasonably request in
order to make accurate and timely required filings and disclosures to its
stockholders and to federal, state and self-regulatory agencies.
6.13 Confidentiality. Any information provided to Investor pursuant
---------------
to this Agreement shall be used by the Investor solely for, and will only be
disclosed to Investor's officers, employees, agents and professional advisors
who need to know such information and who will use such information solely for,
the purpose of evaluating the Investor's investment in the Company and in
furtherance of its interests as an investor in the Company, and the Investor
will, and will cause such officers, employees, agents and professional advisors
to, maintain the confidentiality of all non-public information of the Company
obtained pursuant to this Agreement which is designated by the Company as
confidential and which could not otherwise be legally and legitimately obtained
by the Investor.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
MEMRY CORPORATION
57 Commerce Drive
Brookfield, Connecticut 06804
By:
____________________________
James G. Binch, President
INVESTOR
_______________________________
Name:
Title, if appropriate:
<PAGE>
EXHIBIT 10.59
FIRST AMENDMENT TO CONVERTIBLE SUBORDINATED DEBENTURE
PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO CONVERTIBLE SUBORDINATED DEBENTURE PURCHASE
AGREEMENT (this "First Amendment"), is made this 12th day of October, 1995, by
and between MEMRY CORPORATION, a Delaware corporation (the "Company"), and
CONNECTICUT INNOVATIONS, INCORPORATED, a specially chartered Connecticut
corporation (the "Investor"). All capitalized terms not otherwise defined
herein shall have the meanings ascribed to them in the Convertible Subordinated
Debenture Purchase Agreement dated December 22, 1994 between CII and the Company
(the "Original Agreement").
WITNESSETH:
WHEREAS, pursuant to the Original Agreement, the Company issued to CII a
convertible subordinated debenture (the "Debenture") in the original principal
amount of $763,208 and certain warrants of the Company described therein (the
"Warrants"); and
WHEREAS, the Company failed to effect a registration of the Registrable
Securities acquired by CII on or before February 28, 1995 and to reserve by
September 1, 1995 a sufficient number of authorized and issued shares for the
full exercise and conversion of the Class I Warrants, the Class II Warrants, the
Class III Warrants and the Debenture, and to comply with Sections 5.1 and 5.2 of
the Original Agreement; and
WHEREAS, the Company has requested and CII has agreed to waive the
foregoing defaults upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the promises and the mutual covenants
herein contained, the Company and CII agree as follows:
ARTICLE 1
CONDITIONS TO AMENDMENT
The effectiveness of this First Amendment and the obligations of CII
hereunder are subject to the following conditions:
SECTION 1.1 The Company shall execute and deliver to CII an Addendum to
Convertible Subordinated Debenture in the original principal amount of Seven
hundred Sixty-Three Thousand Two Hundred Eight Dollars ($763,208.00) and having
a final maturity date of December 31, 1999 in form and substance satisfactory to
CII (the "Addendum to Debenture").
<PAGE>
SECTION 1.2 CII shall have received a First Amendment to Escrow Agreement
modifying the terms thereof.
SECTION 1.3 CII shall have received from the Company an Addendum to the
Class I Warrants, and Addendum to the Class II Warrants and an Addendum to the
Class III Warrants, all in form and substance satisfactory to CII.
SECTION 1.4 CII shall have received each of the other documents and items
listed below, all in form and substance satisfactory to CII:
(a) Certificate of the Secretary of the Company, certifying: (i) the
accuracy of the corporate resolutions attached thereto authorizing the
transactions contemplated hereby and the execution of all necessary documents;
(ii) that the Certificate of Incorporation attached thereto has not been amended
and is in full force and effect; (iii) that the Bylaws attached thereto are
accurate and have not been amended and are in full force and effect; and (iv)
that the named officers are incumbent and that their signatories are as shown;
(b) Certificate of Good Standing of recent date issued by the Secretary of
the State of Connecticut for the Company;
(c) Tax clearance letters of recent date from the State of Connecticut
Department of Revenue Services for the Company (corporate business tax and sales
and use tax);
(d) Opinion letter of Company's counsel, Finn Dixon & Herling in form and
substance satisfactory to CII;
(e) A check from the Company made payable to the order of Shipman & Goodwin
in an amount to $3,147.93 for past due fees and expenses; and
(f) A closing check from the Company made payable to the order of Shipman &
Goodwin for its legal fees and expenses incurred in connection herewith.
ARTICLE 2
AMENDMENTS TO ORIGINAL AGREEMENT
CII and the Company do hereby amend the Original Agreement as follows:
SECTION 2.1 The term "Agreement" as used in the Original Agreement shall
mean the Original Agreement, as amended by this First Amendment.
SECTION 2.2 The term "Debenture" as used in the Original Agreement shall
mean the Debenture, as amended by the Addendum thereto.
<PAGE>
SECTION 2.3 The terms "Class I Warrants," "Class II Warrants" and "Class
III Warrants" as used in the Original Agreement shall mean, respectively, the
Class I Warrant, as amended by the Addendum thereto, the Class II Warrant, as
amended by the Addendum thereto and the Class III Warrant, as amended by the
Addendum thereto.
SECTION 2.4 The reference in Section 3.7(c) to "September 1, 1995" shall
be deleted and replaced by "December 20, 1995."
SECTION 2.5 Sections 4.2(a)(i) and 4.2(a)(ii) shall be deleted in its
entirety and replaced by the following:
(i) promptly after December 20, 1995 (or such earlier date as the Company's
annual meeting of stockholders is held), file a registration statement (the
"Registration Statement") covering inter alia, the resale by the Investor of the
----- ----
Registrable Securities acquired by it pursuant to this Agreement, which
registration statement may cover the concurrent registration of the resale of
(A) the shares of Common Stock issued by the Company to certain individuals and
entities prior to the date hereof and to be issued by the Company as set forth
on Schedule B hereto, which shares of Common Stock the Company may be required
to register pursuant to the terms of existing agreement in effect on the date
hereof, and (B) the shares of Common Stock underlying the Company's Series G
Preferred Stock issued by the Company pursuant to that certain Securities
Purchase Agreements dated as of June 14, 1995 and to be issued by the Company
pursuant to the Exchange Offer (as defined in Schedule A), provided, however,
-------- -------
that if the registration is underwritten and a limitation of the number of
shares is required, all of the Registrable Securities shall be included in the
registration and underwriting, (ii) cause such Registration Statement to become
effective no later than March 15, 1996,
SECTION 2.6 The reference to "September 1, 1995" in the definition of
Registration Default in Section 8 shall be deleted and replaced by "December 20,
1995."
SECTION 2.7 The reference to "Closing Date" in the definition of
Expiration Date in Section 8 shall be deleted and replaced by "October 12,
1995."
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
SECTION 3.1 Except as set forth on Schedule A, the Company hereby
restates each of the representations and warranties of the Company contained in
Section 3 of the Original Agreement, and represents and warrants that each such
representation and warranty, as the same may be modified by Schedule A, is true
as of the date of this First Amendment, giving effect to the amendments
contained in Article 2 above.
SECTION 3.2 The Company represents and warrants that it has fully complied
with each of the covenants contained in Section 5 of the Original Agreement and
that there exists no default or Event of Default under the Original Agreement or
Debenture, other than (a) the Company's failure to effect a registration of the
Registrable Securities by February 28, 1995, (b) the Company's failure to
reserve by September 1, 1995 a sufficient number of authorized and issued shares
for the full exercise and conversion of the Class I
<PAGE>
Warrants, the Class II Warrants, the Class III Warrants and the Debenture, and
(c) the Company's failure to comply with Sections 5.1 and 5.2 of the Original
Agreement (together, the "Triggering Defaults").
ARTICLE 4
MISCELLANEOUS
SECTION 4.1 The Company will pay all expenses in connection with the
subject matter of this First Amendment, including the fees and disbursements of
CII's special counsel.
SECTION 4.2 Except as expressly modified herein, all other terms,
conditions and obligations of the Original Agreement are hereby ratified and
confirmed.
SECTION 4.3 CII hereby waives its rights and remedies with respect to the
Triggering Defaults, provided that such waiver shall not extend to or affect any
--------
subsequent default under the Original Agreement, as amended hereby, or impair
any right consequent thereon.
SECTION 4.4 CII has no objection to the Company's withdrawal of the
registration statement filed with the Securities and Exchange Commission (the
"SEC") on November 8, 1994, as amended by Amendment No. 1 filed with the SEC on
January 17, 1995.
<PAGE>
IN WITNESS WHEREOF, this First Amendment has been duly sealed and delivered
by the Company and the Investor as of the date and year first above written.
CONNECTICUT INNOVATIONS, INCORPORATED
By: /s/ James G. Binch
-------------------------------------------
Its President
Duly Authorized
MEMRY CORPORATION
By: /s/ Victor R. Budnick
-------------------------------------------
Its Acting President and Executive Director
Duly Authorized
<PAGE>
SCHEDULE A
----------
The Company restates each of the representations and warranties of the
Company contained in Section 3 of the Original Agreement, except as qualified
and/or modified by the following with respect to each indicated representation
and warranty:
3.1 There are no "side agreements" or other agreements or understandings
with any person or entity, other than the Investor, regarding registration of
securities of the Company under the Securities Act of 1933, as amended, except
for (i) agreements with Trinity Capital Corporation, whose stock in the Company
is now owned by Harbour Investment Corporation, which agreements have been filed
with the Securities and Exchange Commission, (ii) Securities Purchase Agreements
in the Company's standard form (which form for domestic transactions and form
for foreign transactions have previously been given to the Investor) pursuant to
which sales of securities have been sold to domestic individuals and entities,
(iii) Securities Purchase Agreements with David A. Gardner, Michael Hayes,
Donald Resnick, Dominion Partners and Moore & Company which differ from the
standard form only in that they call for registration of the securities
purchased by a date that has already passed, and (iv) Securities Purchase
Agreements in the form of Exhibit A-1 attached hereto pursuant to which shares
of Series G Preferred Stock have been sold. The Company converses with many of
such shareholders regularly and has no reason to believe that any of such
shareholders would assert a claim against the Company as a result of such
failure to register the securities.
3.2 The representation and warranty set forth in Section 3.2 of the
Original Agreement is replaced in its entirety with the following:
As of the date of the Original Agreement, the Company closed, concurrently
with the Investment, or had already closed, on a minimum of $4,000,000, in
addition to the amount provided by the Investor, of payments for the Company's
equity or convertible indebtedness since January 1, 1993. Schedule B attached
to the Original Agreement contains a list of such payments.
3.3 The representation and warranty set forth in Section 3.3 of the
Original Agreement is replaced in its entirety with the following:
The Company's Annual Report on Form 10-KSB for the fiscal year ended June
30, 1994 and the Company's Quarterly Reports on Form 10-QSB for the quarters
ended September 30, 1994, December 31, 1994 and March 30, 1995 are true and
complete in all material respects, and since March 30, 1995, there have not been
any changes in the business, prospects or affairs of the Company which, in the
aggregate, have been, or are expected to be, materially adverse.
3.7(a) The representation and warranty set forth in Section 3.7(a)
of the Original Agreement is replaced in its entirety with the following:
<PAGE>
(a) As of September 1, 1995, the Company's authorized capital stock
consisted of (i) 10,000,000 shares of Common Stock, of $0.01 par value each, of
which 8,101,532 shares (subject to downward adjustment due to the elimination of
fractional shares in conjunction with the Company's one-for-ten reverse stock
split effected on August 8, 1994) was issued and outstanding (2,291,000 shares
have been reserved for issuance upon the conversion of the Company's issued and
outstanding warrants and 508,805 shares have been reserved for issuance to the
Investor upon conversion of the Debenture), and (ii) 100,000 shares of Preferred
Stock, par value $100.00 per share, of which 423 shares of Series G Preferred
Stock are currently outstanding. Except as set forth on Schedule 3.7(a)
attached hereto, the Company has not approved since September 1, 1995 sales of
or agreed to issue any additional shares of the Company's Common Stock.
3.7(b) Schedule E which is referred to in Section 3.7(b) is
replaced by Schedule 3.7(b) attached hereto.
3.7(c) The reference to "September 1, 1995" set forth in Section
3.7(b) is deleted and replaced by "December 20, 1995."
<PAGE>
SCHEDULE 3.7(a)
---------------
The Company is in the process of preparing an exchange offer (the "Exchange
Offer") which will allow the exchange of an aggregate of 348,993 shares of
Common Stock by eleven individuals and entities who purchased such shares
between December 1, 1994 and June 30, 1995, inclusive, for 52.96 shares of
Series G Preferred Stock. The number of shares of Series G Preferred Stock to
be received by each participant in the Exchange Offer is based on the original
purchase price paid by such individual or entity divided by a price of $6,500
per share of Series G Preferred Stock, with the resulting quotient being rounded
to the nearest one-thousandth of a share. The participants in such Exchange
Offer will be granted the same registration, information and conversion rights
granted to all holders of the Series G Preferred Stock. The participants in the
Exchange Offer will not be permitted to exchange any shares of Series G
Preferred Stock until such time as the Company has convened a meeting of
stockholders to increase the authorized number of shares of Common Stock from
10,000,000 to 25,000,000 and caused such amendment to be adopted and filed with
the Delaware Secretary of State. From and after the date of the filing of such
amendment, holders of Shares of Series G Preferred Stock will be permitted to
convert each of their shares of Series G Preferred Stock into 10,000 shares of
Common Stock (which conversion ratio is subject to adjustment, as set forth in
the Certificate of Designations for the Series G Preferred Stock).
In addition, the Company is planning to issue to two current or former
employees of the Company or Wright Machine Corporation an aggregate of 63,000
shares of Common Stock, valued at $1.00 per share.
<PAGE>
SCHEDULE 3.7(b)
---------------
The Company has issued an aggregate of 205,850 options under its Stock
Option Plan as to which no shares of Common Stock have been reserved for
issuance; such shares will be so reserved promptly after the shareholders'
meeting which will take place on or prior to December 20, 1995.
For additional rights, see Schedule 3.7(a).
<PAGE>
EXHIBIT 10.60
FIRST ADDENDUM TO CONVERTIBLE SUBORDINATED DEBENTURE
1. Reference is hereby made to that certain Convertible Subordinated
Debenture in the original principal amount of $763,208 dated December 22, 1994
(the "Debenture") issued by Memry Corporation (the "Company") to Connecticut
Innovations, Incorporated ("CII") pursuant to the convertible subordinated
purchase agreement by and between the Company and CII dated December 22, 1994,
as amended by the First Amendment to Convertible Subordinated Debenture Purchase
Agreement dated as of the date hereof (the "Purchase Agreement").
2. The second paragraph of the Debenture shall be deleted in its entirety
and the following substituted in lieu thereof:
The unpaid principal amount of this Debenture outstanding from time to
time shall bear interest from the date hereof on the basis of a 360-day
year of twelve 30-day months at a rate equal to five percent (5%) per annum
subject to adjustment as herein provided, said interest to be payable in
consecutive semi-annual installments commencing on June 30, 1995 (at which
time all then accrued and unpaid interest shall be due and payable), and
continuing each December 31 and June 30 thereafter, with the final interest
payment to be made on the earlier of December 31, 1999 or the full
conversion of this Debenture pursuant to the terms of Section 2 hereof.
The interest rate hereunder shall be automatically increased by two percent
(2%) on March 15, 1996 and on each June 15, September 15, December 15 and
March 15 thereafter through and including the Effective Date (as defined
below) if the Registration Statement (as defined in the Debenture Purchase
Agreement (defined below)) is not effective by March 15, 1996. The
"Effective Date" shall mean the date the Registration Statement is declared
effective by the Securities and Exchange Commission free from any stop
orders or suspensions by the Company. Payments of principal and interest
are to be made at the address of the Holder designated above or at such
other place as the Holder of this Debenture shall have notified the Company
in writing.
3. The reference in Section 2.1 of the Debenture to "September 1, 1995"
shall be deleted and replaced with "December 20, 1995."
<PAGE>
4. Section 2.2 of the Debenture shall be deleted in its entirety and the
following substituted in lieu thereof:
2.2 Mandatory Conversions. Upon the occurrence of a "Mandatory
---------------------
Conversion Event" (as defined below), the Company has the right at the
option and in the sole discretion of the Company, at any time after March
-----
15, 1995 and on or before the close of business on such date as this
--
Debenture has been paid in full, to covert all or any portion of the unpaid
principal amount hereof into such number of shares of Common Stock as is
equal to the quotient of (x) the principal amount of this Debenture being
so converted divided by (y) the Common Stock Conversion Price then in
effect. A "Mandatory Conversion Event" shall be deemed to have occurred
when both (i) the "Minimum Price Level" (as hereinafter defined) has been
achieved and (ii) the "Other Conditions" (as hereinafter defined) have been
satisfied. The "Minimum Price Level" shall have been achieved at such time
as the closing bid price of the Common Stock exceeds either (A) $2.00 per
share (as currently constituted) for a period of sixty consecutive business
days after the date hereof or (B) $2.50 per share (as currently
constituted) for a period of thirty consecutive business days after the
date hereof, in each case, for which such closing bid price is reported
(provided that, if trades of the Common Stock (rather than bid and asked
quotations) are reported on a stock exchange or National Association of
Securities Dealers' or other quotation bureau listing, then the closing
trade price for such date, rather than the closing bid price, shall be used
for purposes of making this determination). The "Other Conditions" shall
have been deemed satisfied if and when (i) the Company has reserved for
issuance a sufficient number of shares of Common Stock to allow for the
full exercise (A) by the Holder hereof of the conversion rights set forth
in this Section 2 and (B) by the holder of the warrants issued pursuant to
the Debenture Purchase Agreement of the unexercised portion of each such
warrant, (ii) no uncured "Event of Default" (as hereinafter defined) exists
hereunder, and no event has occurred which with the giving of notice or the
passage of time would constitute an Event of Default, (iii) no Registration
Default (as defined in the Debenture Purchase Agreement), exists and no
event has occurred which, with the giving of notice or the passage of time,
would constitute a Registration Default, (iv) all shares of the Company's
outstanding Series G Preferred Stock, par value $100 per share, have been
or are being simultaneously converted into Common Stock, (v) the
<PAGE>
Company is in full compliance with the terms, conditions and covenants of
the Debenture, including but not limited to, the timely payment of
interest, and (vi) the Company shall not have outstanding any preferred
stock or convertible indebtedness (except for convertible indebtedness
which is being converted into Common Stock no later than the conversion
occurring pursuant to this Section 2.2) or other equity securities which
are senior to the Common Stock.
5. Section 2.3(b) of the Debenture shall be deleted in its entirety and
the following substituted in lieu thereof:
"(b) Automatic Reset Provision. The Common Stock Conversion Price
-------------------------
shall be adjusted to equal $0.80 effective as of June 14, 1995."
6. Clauses (i) and (ii) of the second sentence of Section 2.3(d) of the
Debenture shall be deleted in their entirety and the following substituted in
lieu thereof:
"(i) the failure by the Company to comply with the provisions of
Section 4.2(a)(ii) of the Debenture Purchase Agreement by March 15, 1996; (ii)
the expiration of each non-overlapping ninety day period from and after March
16, 1996, that a Registration Statement has not been effected;"
7. The reference in Section 2.7 of the Debenture to "September 1, 1995"
shall be deleted and replaced with "December 20, 1995."
8. The term "Debenture" as used in the Debenture shall mean the
Debenture, as amended by this First Addendum.
9. The term "Debenture Purchase Agreement" as used in the Debenture shall
mean the Purchase Agreement.
<PAGE>
This First Addendum to Convertible Subordinated Debenture dated October 12,
1995 shall be affixed to the Debenture.
MEMRY CORPORATION
By: /s/ James G. Binch
---------------------------
Name: James G. Binch
Title: President
Acknowledged and Agreed:
CONNECTICUT INNOVATIONS, INCORPORATED
By: /s/ Victor R. Budnick
---------------------------
Name: Victor R. Budnick
Title: Acting President and
Executive Director
<PAGE>
EXHIBIT 10.61
FIRST ADDENDUM TO STOCK SUBSCRIPTION WARRANT
1. Reference is hereby made to that certain Stock Subscription Warrant to
purchase 508,805 shares of the Company's Common Stock, par value $0.01 (the
"Warrant") dated December 22, 1994, as evidenced by Warrant Certificate No. 94-
4, issued by Memry Corporation (the "Company") to Connecticut Innovations,
Incorporated ("CII") pursuant to the Convertible Subordinated Debenture Purchase
Agreement by and between the Company and CII dated December 22, 1994, as amended
by the First Amendment to Convertible Subordinated Debenture Purchase Agreement
dated as of the date hereof (the "Purchase Agreement").
2. The definition of "Final Exercise Date" in Section 5(c) of the Warrant
shall be deleted in its entirety and the following substituted in lieu thereof:
(c) "Final Exercise Date" shall mean December 22, 1999; provided,
---------------------
however, that the Final Exercise Date shall be extended for two days for each
one day (or part thereof) between:
(i) February 28, 1995 and the Effective Date (as hereinafter defined);
and
(ii) the effective Date and December 22, 1997 that either (A) the
resale by the Holder of the Warrant Shares is not covered in an effective
registration statement filed by the Company under the Securities Act, or (B)
the Holder may not offer and sell the Warrant Shares pursuant to such a
registration statement, either because the Securities and Exchange
Commission has issued a stop order with respect thereto or the Company has
notified the Holder to suspend trading while the Company prepares an
amendment or supplement or the Holder has suspended trading on the advice of
its or Company's counsel, as the case may be, to the registration statement
and/or the prospectus contained therein.
3. The following Section 5(h) shall be added to the Warrant as follows:
(h) "Effective Date" shall mean the date upon which the Security and
----------------
Exchange Commission declares effective a Registration Statement (as defined in
the Debenture Purchase Agreement) free from any stop orders or suspensions by
the Company.
4. All references to "September 1, 1995" in the Warrant shall be deleted
and replaced by "December 20, 1995".
<PAGE>
5. The terms "Warrants" and "Warrant Certificate" as used in the Warrant
shall mean, respectively, the Warrants, as amended by this First Addendum and
the Warrant Certificate, as amended by this First Addendum.
6. The term "Debenture Purchase Agreement" as used in the Warrant shall
mean the Purchase Agreement.
7. Based on the representations of the Company in the Certificate
attached hereto, the parties agree that, as of the date hereof, the Exercise
Price shall be $0.93.
8. This First Addendum to Stock Subscription Warrant, dated October 12,
1995, shall be affixed to the Warrant.
MEMRY CORPORATION
By: /s/ James G. Binch
---------------------------
Name: James G. Binch
Title: President
Acknowledged and Agreed:
CONNECTICUT INNOVATIONS, INCORPORATED
By: /s/ Victor R. Budnick
-----------------------------
Name: Victor R. Budnick
Title: Acting President and
Executive Director
<PAGE>
EXHIBIT 10.62
FIRST ADDENDUM TO STOCK SUBSCRIPTION WARRANT
1. Reference is hereby made to that certain Stock Subscription Warrant to
purchase 305,283 shares of the Company's Common Stock, par value $0.01 (the
"Warrant") dated December 22, 1994, as evidenced by Warrant Certificate No. 94-
5, issued by Memry Corporation (the "Company") to Connecticut Innovations,
Incorporated ("CII") pursuant to the Convertible Subordinated Debenture Purchase
Agreement by and between the Company and CII dated December 22, 1994, as amended
by the First Amendment to Convertible Subordinated Debenture Purchase Agreement
dated as of the date hereof (the "Purchase Agreement").
2. The definition of "Final Exercise Date" in Section 5(c) of the Warrant
shall be deleted in its entirety and the following substituted in lieu thereof:
(c) "Final Exercise Date" shall mean December 22, 1999; provided,
---------------------
however, that the Final Exercise Date shall be extended for two days for each
one day (or part thereof) between:
(i) February 28, 1995 and the Effective Date (as hereinafter defined);
and
(ii) the effective Date and December 22, 1997 that either (A) the
resale by the Holder of the Warrant Shares is not covered in an effective
registration statement filed by the Company under the Securities Act, or (B)
the Holder may not offer and sell the Warrant Shares pursuant to such a
registration statement, either because the Securities and Exchange
Commission has issued a stop order with respect thereto or the Company has
notified the Holder to suspend trading while the Company prepares an
amendment or supplement or the Holder has suspended trading on the advice of
its or Company's counsel, as the case may be, to the registration statement
and/or the prospectus contained therein.
3. The following Section 5(h) shall be added to the Warrant as follows:
(h) "Effective Date" shall mean the date upon which the Security and
----------------
Exchange Commission declares effective a Registration Statement (as defined in
the Debenture Purchase Agreement) free from any stop orders or suspensions by
the Company.
4. All references to "September 1, 1995" in the Warrant shall be deleted
and replaced by "December 20, 1995".
<PAGE>
5. The terms "Warrants" and "Warrant Certificate" as used in the Warrant
shall mean, respectively, the Warrants, as amended by this First Addendum and
the Warrant Certificate, as amended by this First Addendum.
6. The term "Debenture Purchase Agreement" as used in the Warrant shall
mean the Purchase Agreement.
7. Based on the representations of the Company in the Certificate
attached hereto, the parties agree that, as of the date hereof, the Exercise
Price shall be $1.19.
8. This First Addendum to Stock Subscription Warrant, dated October 12,
1995, shall be affixed to the Warrant.
MEMRY CORPORATION
By: /s/ James G. Binch
----------------------------
Name: James G. Binch
Title: President
Acknowledged and Agreed:
CONNECTICUT INNOVATIONS, INCORPORATED
By: /s/ Victor R. Budnick
--------------------------------
Name: Victor R. Budnick
Title: Acting President and
Executive Director
<PAGE>
EXHIBIT 10.63
FIRST ADDENDUM TO STOCK SUBSCRIPTION WARRANT
1. Reference is hereby made to that certain Amended and Restated Stock
Subscription Warrant to purchase 100,000 shares of the Company's Common Stock,
$0.01 par value (the "Warrant") dated December 22, 1994, as evidenced by Warrant
Certificate No. 94-6, issued by Memry Corporation (the "Company") to Connecticut
Innovations, Incorporated ("CII") pursuant to the Convertible Subordinated
Debenture Purchase Agreement by and between the Company and CII dated December
22, 1994, as amended by the First Amendment to Convertible Subordinated
Debenture Purchase Agreement dated as of the date hereof (the "Purchase
Agreement").
2. The reference to "September 1, 2005" in the first paragraph of the
Warrant shall be deleted and replaced with "the Final Exercise Date (as
hereinafter defined)."
3. The following Sections 5(g) and 5(h) shall be added to the Warrant as
follows:
(g) "Final Exercise Date" shall mean September 1, 2005; provided, however,
---------------------
that the Final Exercise Date shall be extended for two days for each one day (or
part thereof) between February 28, 1995 and the Effective Date (as hereinafter
defined).
(h) "Effective Date" shall mean the date upon which the Security and
----------------
Exchange Commission declares effective a Registration Statement (as defined in
the Debenture purchase Agreement) free from any stop orders or suspensions by
the Company.
4. All references to "September 1, 1995" in the Warrant shall be deleted
and replaced by "December 20, 1995".
5. The terms "Warrants" and "Warrant Certificate" as used in the Warrant
shall mean, respectively, the Warrants, as amended by this First Addendum and
the Warrant Certificate, as amended by this First Addendum.
6. The term "Debenture Purchase Agreement" as used in the Warrant shall
mean the Purchase Agreement.
7. Based on the representations of the Company in the Certificate
attached hereto, the parties agree that, as of the date hereof, the Exercise
Price shall be $0.65.
<PAGE>
8. This First Addendum to Stock Subscription Warrant, dated October 12,
1995, shall be affixed to the Warrant.
MEMRY CORPORATION
By: /s/ James G. Binch
--------------------------
Name: James G. Binch
Title: President
Acknowledged and Agreed:
CONNECTICUT INNOVATIONS, INCORPORATED
By: /s/ Victor R. Budnick
----------------------------
Name: Victor R. Budnick
Title: Acting President and
Executive President
<PAGE>
EXHIBIT 10.64
AMENDMENT TO ESCROW AGREEMENT
-----------------------------
This First Amendment to Escrow Agreement (this "Amendment") is made this
____ day of October, 1995, by and among Memry Corporation, a Delaware
corporation ("Memry"), Connecticut Innovations, Incorporated, a specially
chartered Connecticut corporation ("CII") and Finn Dixon & Herling, as escrow
agent (the "Escrow Agent").
W I T N E S S E T H:
--------------------
WHEREAS, Memry, CII and Escrow Agent are parties to an Escrow Agreement
dated December 22, 1994 (the "Escrow Agreement");
WHEREAS, Memry and CII have entered into a First Amendment to Convertible
Subordinated Debenture Purchase Agreement of even date herewith (the "First
Amendment");
WHEREAS, Memry, CII and Escrow Agent wish to modify the Escrow Agreement to
reflect the amendments made pursuant to the First Amendment.
NOW THEREFORE, in consideration of the premises and of other good and
valuable consideration given to each party hereto, the receipt and sufficiency
of which are hereby acknowledged, Memry, CII and the Escrow Agent agree as
follows:
1. All references to the "Purchase Agreement" shall be deemed references
to the Purchase Agreement, as amended by the First Amendment.
2. The reference in the preamble and in Section 4(a)(ii) to "February 28,
1998" shall be deleted and replaced with "March 15, 1999."
3. The reference in Section 4(a)(iv) to "March 10, 1998" shall be deleted
and replaced with "March 5, 1999."
4. The reference in Section 4(b) to "February 18, 1998" shall be deleted
and replaced with "March 5, 1999."
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of this
12th day of October, 1995.
MEMRY CORPORATION
By: /s/ James G. Binch
----------------------------
Its: President
CONNECTICUT INNOVATIONS, INCORPORATED
By: /s/ Victor R. Budnick
----------------------------
Its: Acting President and
Executive Director
FINN DIXON & HERLING
By: /s/ David I. Albin
---------------------------
a Partner
<PAGE>
Exhibit 11
COMPUTATION OF PER SHARE EARNINGS
Net Loss Per Common Share: The net loss per common share is based on the net
- --------------------------
loss from operations plus Preferred Stock dividends (if any declared) and the
weighted average number of shares of Common Stock outstanding during each year.
Common stock equivalents have been excluded from the computation of the net loss
per common share because inclusion of such equivalents would decrease net loss
per common share.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MEMRY
CORPORATION'S CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED
JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 1,145,000
<SECURITIES> 0
<RECEIVABLES> 786,000
<ALLOWANCES> 71,000
<INVENTORY> 849,000
<CURRENT-ASSETS> 2,709,000
<PP&E> 3,219,000
<DEPRECIATION> 1,986,000
<TOTAL-ASSETS> 3,979,000
<CURRENT-LIABILITIES> 5,003,000
<BONDS> 23,821,000
<COMMON> 80,000
0
19,000
<OTHER-SE> 29,874,000
<TOTAL-LIABILITY-AND-EQUITY> 3,979,000
<SALES> 4,364,000
<TOTAL-REVENUES> 4,729,000
<CGS> 3,850,000
<TOTAL-COSTS> 4,147,000
<OTHER-EXPENSES> 2,374,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 360,000
<INCOME-PRETAX> (2,392,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,392,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,392,000)
<EPS-PRIMARY> (0.45)
<EPS-DILUTED> 0<F1>
<FN>
<F1>Not calculated because inclusion of common stock equivalents would be
anti-dilutive.
</FN>
</TABLE>
