<PAGE>
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
-----------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE EXCHANGE ACT OF 1934
For the transition period from to
---------- ----------
Commission File Number 0-14068
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Memry Corporation
-----------------
(Exact name of small business issuers as specified in its charter)
Delaware 06-1084424
- ------------------------------------------------------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation of organization
57 Commerce Drive, Brookfield, Connecticut 06804
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(Address of principal executive offices)
(203) 740-7311
--------------
(Issuer's telephone number)
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___
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date. As of February 9, 1998, 18,472,412 of
the registrant's common stock, par value $.01 per share, were issued and
outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
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INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets as of December 31, 1997 and
June 30, 1997
Condensed Consolidated Statements of Operations for the three and
six months ended December 31, 1997 and 1996
Condensed Consolidated Statements of Cash Flows for the six
months ended December 31, 1997 and 1996
Notes to the Condensed Consolidated Financial Statements
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II --- OTHER INFORMATION
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MEMRY CORPORATION & SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
================================================================================
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1997
------------------ ------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 179,000 $ 25,000
Accounts receivable, less allowance for doubtful
accounts 2,379,000 2,419,000
Inventories 1,947,000 1,664,000
Prepaid expenses and other 209,000 369,000
Assets of discontinued segment 756,000 936,000
------------------ ------------------
Total current assets 5,470,000 5,413,000
------------------ ------------------
Property, Plant and Equipment, at cost 4,306,000 4,109,000
Less accumulated depreciation (1,588,000) (1,344,000)
------------------ ------------------
2,718,000 2,765,000
------------------ ------------------
Other Assets
Patents and patent rights, less accumulated
amortization 1,801,000 1,868,000
Goodwill, less accumulated
amortization 940,000 974,000
Deferred financing costs, less accumulated
amortization 91,000 103,000
Investments in subsidiary/division - -
Deposits 29,000 29,000
------------------ ------------------
2,861,000 2,974,000
------------------ ------------------
Total assets $ 11,049,000 $ 11,152,000
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 2,635,000 $ 3,054,000
Notes payable 966,000 2,255,000
Reserve for loss on disposal - 90,000
Current maturities of capital lease obligations 17,000 29,000
------------------ ------------------
Total current liabilities 3,618,000 5,428,000
------------------ ------------------
Capital lease obligations, less current maturities 43,000 43,000
Stockholders' Equity
Common stock, $.01 par value; 30,000,000 authorized
shares; shares issued and outstanding:
December 31, 1997 - 18,338,752; June 30, 1997 -
17,029,570 184,000 170,000
Additional paid-in capital 40,176,000 39,630,000
Accumulated deficit (32,973,000) (34,120,000)
------------------ ------------------
Total stockholders' equity 7,388,000 5,681,000
------------------ ------------------
Total liabilities and stockholders' equity $ 11,049,000 $ 11,152,000
================== ==================
</TABLE>
3
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MEMRY CORPORATION & SUBSIDIARY
Consolidated Statements of Operations
For the Three Months Ended December, 1997 and 1996
(Unaudited)
================================================================================
<TABLE>
<CAPTION>
1997 1996
------------------ ------------------
<S> <C> <C>
Revenues
Product Sales $ 4,414,000 $ 2,693,000
Research and development 96,000 140,000
------------------ ------------------
4,510,000 2,833,000
------------------ ------------------
Cost of revenues
Manufacturing 1,822,000 1,423,000
Research and development 172,000 166,000
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1,994,000 1,589,000
------------------ ------------------
Gross profit 2,516,000 1,244,000
------------------ ------------------
Operating expenses
General, selling and administration 1,635,000 1,217,000
Depreciation and amortization 83,000 252,000
------------------ ------------------
1,718,000 1,469,000
------------------ ------------------
Operating income (loss) 798,000 (225,000)
Other income (expense)
Interest Expense (44,000) (72,000)
Gain on disposition of assets - -
------------------ ------------------
(44,000) (72,000)
------------------ ------------------
Income (loss) from continuing operations before income taxes 754,000 (297,000)
Provision for income taxes (115,000) -
------------------ ------------------
Income (loss) from continuing operations 639,000 (297,000)
Discontinued Operations
Loss from discontinued operations - (44,000)
Extraordinary gain on early retirement of debt - -
------------------ ------------------
- (44,000)
------------------ ------------------
Net income (loss) $ 639,000 $ (341,000)
================== ==================
Basic Earnings Per Share:
Income (loss) from continuing operations $ 0.04 $ (0.02)
Loss from discontinued operations - -
------------------ ------------------
$ 0.04 $ (0.02)
================== ==================
Diluted Earnings Per Share:
Income (loss) from continuing operations $ 0.03 $ (0.02)
Loss from discontinued operations - -
------------------ ------------------
$ 0.03 $ (0.02)
================== ==================
</TABLE>
4
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MEMRY CORPORATION & SUBSIDIARY
Consolidated Statements of Operations
For the Six Months Ended December, 1997 and 1996
(Unaudited)
================================================================================
<TABLE>
<CAPTION>
------------------ ------------------
1997 1996
------------------ ------------------
<S> <C> <C>
Revenues
Product Sales $ 8,395,000 $ 4,959,000
Research and development 109,000 140,000
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8,504,000 5,099,000
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Cost of revenues
Manufacturing 3,716,000 2,704,000
Research and development 285,000 166,000
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4,001,000 2,870,000
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Gross profit 4,503,000 2,229,000
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Operating expenses
General, selling and administration 2,955,000 1,984,000
Depreciation and amortization 166,000 328,000
------------------ ------------------
3,121,000 2,312,000
------------------ ------------------
Operating income (loss) 1,382,000 (83,000)
Other income (expense)
Interest Expense (99,000) (131,000)
Gain on disposition of assets 25,000 10,000
------------------ ------------------
(74,000) (121,000)
------------------ ------------------
Income (loss) from continuing operations before income taxes 1,308,000 (204,000)
Provision for income taxes (160,000) -
------------------ ------------------
Income (loss) from continuing operations 1,148,000 (204,000)
Discontinued Operations
Loss from discontinued operations - (272,000)
Extraordinary gain on early retirement of debt - 140,000
------------------ ------------------
- (132,000)
------------------ ------------------
Net Income $ 1,148,000 $ (336,000)
================== ==================
Basic Earnings Per Share:
Income (loss) from continuing operations $ 0.07 $ (0.02)
Loss from discontinued operations - -
------------------ ------------------
$ 0.07 $ (0.02)
================== ==================
Diluted Earnings Per Share:
Income (loss) from continuing operations $ 0.06 $ (0.02)
Loss from discontinued operations - -
------------------ ------------------
$ 0.06 $ (0.02)
================== ==================
</TABLE>
5
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MEMRY CORPORATION & SUBSIDIARY
Consolidated Statements of Cash Flows
For the Six Months Ended December 31, 1997 and 1996
(Unaudited)
================================================================================
<TABLE>
<CAPTION>
1997 1996
------------------ ------------------
<S> <C> <C>
Cash Flows From Operating Activities
Net Income (Loss) $ 1,147,000 $ (337,000)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization 358,000 354,004
Gain on early retirement of debt - (140,000)
Non-cash compensation 82,000 65,000
Change in operating assets and liabilities:
Decrease (increase) in accounts receivable 426,000 (942,000)
Decrease (increase) in inventories (265,000) (212,000)
Decrease (increase) in prepaid expenses and other 178,000 17,000
(Decrease) increase in accounts payable and
accrued expenses (684,000) 508,000
(Decrease)increase in unearned revenue - -
(Decrease) increase in other assets 47,000 (20,000)
(Decrease) increase in deferred income - (150,000)
------------------ ----------------
Net cash provided by (used in) operating activities 1,289,000 (856,996)
Cash Flows From Investing Activities
Purchases of property, plant and equipment (198,000) (139,000)
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Net cash provided by (used in) investing activities (198,000) (139,000)
------------------ ----------------
Cash Flows From Financing Activities
Proceeds from sale of common stock, net 477,000 1,000
Proceeds from (repayment of) short-term borrowings (1,263,000) 1,084,000
Principal payments on notes payable (138,000) -
Payments on capital lease obligations (13,000) -
Deferred financing costs - (120,000)
------------------ ----------------
Net cash provided by (used in) financing activities (937,000) 965,000
------------------ ----------------
(Decrease) increase in cash and
cash equivalents 154,000 (30,996)
Cash and cash equivalents, beginning of period 25,000 57,000
------------------ ----------------
Cash and cash equivalents, end of period $ 179,000 $ 26,004
================== =================
</TABLE>
6
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MEMRY CORPORATION & SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note A. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three and six month periods ended December 31, 1997 are not
necessarily indicative of the results that may be expected for the year ending
June 30, 1998 ("fiscal 1998"). For further information, refer to the
consolidated financial statements and footnotes thereto included in the Annual
Report on Form 10-KSB for the year ended June 30, 1997 ("fiscal 1997") of Memry
Corporation (the "Company"), as amended.
During the fourth quarter of fiscal 1997, the Company announced its decision to
cease operations at its wholly-owned subsidiary, Wright Machine Corporation
("Wright"), and to commence the liquidation of Wright's assets. All of Wright's
manufacturing operations ceased on June 5, 1997, and the results of operations
of Wright have therefore been presented as a discontinued operation in the
financial statements.
Additionally, certain 1996 financial statement amounts have been reclassified to
conform with the 1997 financial statement presentation.
Note B. INVENTORIES
Inventories at December 31, 1997 and June 30, 1997, are summarized as follows:
December June
-------- ----
Raw Materials $ 868,000 $ 398,000
Work-in-process 999,000 1,478,000
Finished goods 770,000 478,000
Allowance for slow-moving (690,000) (690,000)
and obsolete inventory ---------- ----------
1,947,000 1,664,000
Note C. EARNINGS PER SHARE
The FASB has issued Statement No. 128, "Earnings per Share," which supersedes
APB Opinion No. 15. Statement No. 128 requires the presentation of earnings per
share by all entities that have common stock or potential common stock, such as
options and warrants, outstanding which trade in a public market. The Company
now presents basic earnings (loss) per share and diluted earnings (loss) per
share in its statement of operations. Basic earnings (loss) per share amounts
are computed by dividing income (loss) from continuing and discontinued
operations by the weighted-average number of common shares outstanding. Diluted
per-share amounts assume exercise of all potential common stock instruments
unless the effect is to reduce the loss or increase the income per common share
from continuing operations.
The Company has initially applied Statement No. 128 for the three month and six
month periods ended December 31, 1997 and, as required by Statement No. 128,
has restated all per share information for the prior periods to conform with the
December 31, 1997 presentation.
For the periods presented, there were no items which changed the income (loss)
from continuing and discontinued operations as presented in the statements of
operations and the amounts used to compute basic and diluted earnings (loss) per
share. The following is information about the computation of weighted-average
shares utilized in the computation of basic and diluted earnings (loss) per
share. For the three month and six month periods ended December 31, 1996, common
stock equivalents have been excluded from the computation of the net loss per
share because inclusion of such equivalents is antidilutive.
<TABLE>
<CAPTION> -------------------------------------
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
12/31/97 12/31/96 12/31/97 12/31/96
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Number of Basic Shares Outstanding 17,542,364 16,674,311 17,284,227 15,340,577
Effect of Dilutive Securities:
Warrants 2,951,760 * 2,849,162 *
Options 416,722 * 330,811 *
-----------------------------------------------------------
Number of Fully Diluted Shares
Outstanding 20,910,846 16,674,311 20,464,220 15,340,577
===========================================================
</TABLE>
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial position and operating
results. Certain statements under this caption may constitute "forward-looking
statements". See Part II "Other Information".
(a) RESULTS OF OPERATIONS
Six Months Ended December 31, 1997 compared to six months ended December 31,
- ---------------------------------------------------------------------------
1996
- ----
Revenues. Revenues from continuing operations increased 67% to $8,504,000 for
the first six months of fiscal year 1998 from $5,099,000 during the same period
in fiscal 1997. The increase of $3,405,000 is primarily due to significantly
increased product sales to Raychem Corporation ("Raychem") pursuant to the
Company's private label/distribution agreement with Raychem, to Raychem as an
original equipment manufacturer, to United States Surgical Corporation and of
shape memory alloy ("SMA") products for various medical applications to various
other customers.
Costs and Expenses. Manufacturing costs (including costs associated with
research and development revenues) increased to $4,001,000 for the six months
ended December 31, 1997 from $2,870,000 during the same six month period in
fiscal 1997. This increase of $1,131,000 or 39% was entirely attributable to the
67% increase in revenues. Due to both increased efficiencies from greater sales
volume and a change in the Company's product mix away from plumbing and consumer
finished products and assemblies and towards higher margin medical industry
products, the Company's gross margin from sales increased to 53% for the six
months ended December 31, 1997, from a 44% margin in the comparable period in
fiscal 1997.
General, selling and administrative expenses (including amortization) increased
$809,000, or 35%, to $3,121,000 for the six months ended December 31, 1997, as
compared to $2,312,000 during the same period of fiscal 1997. This increase is
primarily attributable to the greater size of the Company and its operations.
Interest expense decreased to $99,000 in the first half of fiscal 1998 from
$131,000 in the comparable period of fiscal 1997. The decrease was due to (i)
lower interest rates of the Company's credit facilities with its lender, when
compared to higher interest rates of its prior credit facility which was
refinanced in the first quarter of fiscal 1997 and (ii) a reduced average
balance in the Company's revolving line of credit as compared to the same period
in fiscal 1997. The Company recorded a provision for income taxes of $160,000
for the first six months of fiscal 1998. No such provision was recorded for the
first half of fiscal 1997. Such provision reflects an effective tax rate less
than the statutory rate due principally to the benefits arising from net
operating loss carryforwards available to the Company.
Net Income. Primarily as a result of the Company's 67% increase in revenues and
a proportionately smaller increase in manufacturing costs and general, selling
and administrative expense, the Company was able to realize income from
continuing operations of $1,148,000 for the six month period ended December 31,
1997 as compared with a loss from continuing operations of $204,000 for the same
period in fiscal 1997. For the same reasons, the Company realized net income of
$1,148,000 for the first half of fiscal 1998, as opposed to a net loss of
$336,000 for the first half of fiscal 1997.
8
<PAGE>
Three Months Ended December 31, 1997 compared to three months ended
- ---------------------------------------------------------------------
December 31, 1996
- -----------------
Revenues. Revenues from continuing operations increased 59% to $4,510,000 for
the second quarter of fiscal year 1998 from $2,833,000 during the same period in
fiscal 1997. The increase of $1,677,000 is primarily due to significantly
increased product sales to Raychem Corporation ("Raychem") pursuant to the
Company's private label/distribution agreement with Raychem, to United States
Surgical Corporation and of shape memory alloy ("SMA") products for various
medical applications.
Costs and Expenses. Manufacturing costs (including costs associated with
research and development revenues) increased to $1,994,000 for the three months
ended December 31, 1997 from $1,589,000 during the same three month period in
fiscal 1997. This increase of $405,000 or 26% was attributable to the 59%
increase in revenues. Due to both increased efficiencies from greater sales
volume and a change in the Company's product mix away from lower margin
industrial applications and into higher margin medical device and medical
assemblies business, the Company's gross margin from sales increased to 56% for
the three months ended December 31, 1997, from a 44% margin in the comparable
period in fiscal 1997.
General, selling and administrative expenses (including amortization) increased
$249,000 or 17%, to $1,718,000 for the three months ended December 31, 1997, as
compared to $1,469,000 during the same period of fiscal 1997. This increase is
primarily attributable to the Company's recent efforts to higher additional
professional employees and manufacturing staff to support increased sales
volume. Interest expense decreased to $44,000 in the second quarter of fiscal
1998 from $72,000 during the comparable quarter of fiscal 1997. The decrease was
due primarily to a reduced average balance in the Company's working capital line
of credit as compared to the same period in fiscal 1997. The Company recorded a
provision for income taxes of $115,000 for the second quarter of fiscal 1998. No
such provision was recorded for the second quarter of fiscal 1997. Such
provision reflects an effective tax rate less than the statutory rate due
principally to the benefits arising from net operating loss carryforwards
available to the Company.
Net Income. Primarily as a result of the Company's 59% increase in revenues and
a significantly smaller relative increase in manufacturing costs, the Company
was able to realize income from continuing operations of $639,000 for the three
month period ended December 31, 1997 as compared with a loss from continuing
operations of $297,000 for the same period in fiscal 1997. For the same reasons,
the Company realized net income of $639,000 for the second quarter of fiscal
1998, as opposed to net loss of $ 341,000 for the second quarter of fiscal 1997.
9
<PAGE>
(b) LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997, the Company's cash and cash equivalents balance was
$179,000, an increase of $154,000 from $25,000 at the start of fiscal 1998. Cash
provided by operations was $1,289,000 for the six months ended December 31,
1997. Offsetting in part the cash provided by operations was cash used in
investing activities of $198,000 for the purchase of property, plant and
equipment, and $937,000 used in financing activities, primarily to repay debt.
Cash provided by operations of $1,289,000 for the six months ended December 31,
1997 represents a significant improvement from the comparable period in fiscal
1997 when $856,996 was used for operations (including discontinued operations).
This improvement is primarily due to increased sales volume, with accompanying
increased margins, the shut down of Wright and an increase in receivables. Cash
used in financing activities for the six month period ended December 31, 1997
was $937,000 as opposed to $965,000 of cash provided by financing activities for
the comparable period in fiscal 1997. The $937,000 of cash used in financing
activities during the six months ended December 31, 1997 was for debt reduction
of $1,414,000 offset by $477,000 of proceeds from the sale of common stock and
the exercise of outstanding warrants to purchase common stock. During the six
months ended December 31, 1996 cash provided by financing activities consisted
of increased bank borrowings needed to finance increased sales volume which
generated much higher receivables. Working capital at December 31, 1997 was
$1,852,000, up significantly from a working capital deficit of $15,000 at June
30, 1997.
On August 9, 1996, the Company entered into a term and revolving loan agreement
with Affiliated Business Credit Corporation ("ABCC"), a commercial financing
subsidiary of First Union Bank, allowing up to $2.635 million of aggregate
borrowings in the form of a term loan and a revolver. The term loan is a five
year $1.135 million loan, with principal payable in monthly installments of
approximately $19,000. Due to payments on the term loan, including a prepayment
upon the sale of Wright's machinery and equipment, the unpaid balance of the
term loan as of December 31, 1997 was $337,000. The entire unpaid balance, if
not earlier demanded, is due and payable on July 31, 2001; provided, however,
that ABCC has the right to accelerate the loan and require full payment upon
demand. Interest on the term loan accrues at the rate of prime plus 2.25%. The
revolving credit facility provides for borrowings at the lesser of $1.5 million
or the sum of (a) 80% of eligible accounts receivable plus (b) the lesser of
$500,000 or 25% of eligible inventory. Borrowings pursuant to the revolving loan
agreement are due upon demand and bear interest, payable monthly, at prime plus
2%. As of December 31, 1997 the Company had $260,000 outstanding on the
revolving line of credit and had unused availability under the line of credit of
$1,240,000. The loan documents contain standard covenants, including
restrictions on dividends and other payments, and provide for security interests
in substantially all of the Company's consolidated assets. At the August 9, 1996
closing, Wright's debt to Fleet Bank was repaid with a $140,000, or 16%,
discount.
The Company has in the past grown through acquisitions (including both the
acquisition of Raychem's nickel-titanium product line and the Company's earlier
acquisition of Wright) and, as part of its continuing growth strategy, the
Company expects to continue to evaluate and pursue opportunities to acquire
other companies, assets and product lines that either complement or expand the
Company's existing businesses. The Company intends to use available cash from
operations, when and if available, and sales of equity to finance any such
10
<PAGE>
acquisitions that may be sought in the future. The Company does not currently,
however, contemplate any material acquisitions for fiscal 1998.
The Company intends to spend between $600,000 and $800,000 on capital
expenditures prior to fiscal 1998 year end in order to handle its expected
continuing increased sales volume of SMA materials and expansion into the
medical device and medical assebly business. The Company expects that it will be
able to pay for these expenditures out of existing working capital and/or cash
flow generated from its operations during the current fiscal year.
In connection with a December 1994 subordinated debt financing, the Company
granted Connecticut Innovations, Incorporated ("CII"), currently the holder of
both common stock and warrants of the Company, a "put" right if: (i) at any time
before the earlier of June 28, 2006 and the date on which CII ceases to hold at
least 35% of the common stock underlying the convertible securities originally
issued to it, the Company ceases to (a) maintain its corporate headquarters and
all of its product business operations in the State of Connecticut (including
the assembly of all products to be sold to U.S. Surgical Corporation), excluding
business operations relating to Wright's production of screw machine products
and taper pins and the Company's components and sub-assembly business acquired
from Raychem, (b) base its president and chief executive officer, a majority of
its senior executives, and all of its administrative, financial, research and
development, marketing and customer service staff relating to its product
business (subject to the same inclusions and exclusions as clause (a)) in the
State of Connecticut, (c) conduct all of its operations relating to its product
business directly or through subcontractors and through licensed operations in
the State of Connecticut (subject to the same inclusions and exclusions as
clause (a)), 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 to keep the Registration Statement on Form S-2 that went
effective on January 31, 1997 (the "Registration Statement"), covering the offer
and sale by certain of the Company's shareholders (including CII) of up to
3,550,630 shares (including up to 3,041,963 shares beneficially owned by CII) of
the Company's common stock, in effect for an aggregate of 120 days during any
rolling twelve month period during the three years which the Company is required
to maintain the effectiveness of the Registration Statement. Upon CII's exercise
of its put, the Company shall be obligated to purchase from CII all the
Company's Common Stock then owned by CII and underlying warrants then owned by
CII at a price equal to the greater of the then current market price of the
Company's common stock or $2.00 per share, less, in either event, the aggregate
amount of unpaid exercise prices of all warrants put to the Company. Using $4.00
per share as the put price per share, the aggregate put price that would have to
be paid by the Company if the put were exercised would be approximately
$11,209,000. If CII were to have the right to put its securities and were to
choose to exercise that right, it would obviously have a serious adverse effect
on the Company's liquidity and the Company would most likely have to seek equity
financing to be able to meet its obligations to CII. However, the Company
believes that it has the ability to insure that its operations do not move from
Connecticut in a manner that would trigger CII's put, and the Company intends to
cause the Registration Statement to be maintained in a manner that would prevent
CII's put from being operative.
The Company believes that the combination of its improved operating profits and
its historical ability to raise equity capital will be sufficient to meet the
Company's working capital requirements in the short-term (assuming that CII's
put
11
<PAGE>
rights are not triggered and exercised and, as stated above, the Company intends
not to cause said put rights to become exercisable).
The Company does not expect that there are any contingencies, other than as set
forth above, which would have a material effect on the Company's financial
condition, future operating results and/or liquidity.
PART II - OTHER INFORMATION
The statements in this quarterly report on Form 10-QSB that are not historical
fact constitute "forward-looking statements". Said forward-looking statements
involve risks and uncertainties which may cause the actual results, performance
or achievements of the Company and its subsidiary to be materially different
from any future results, performance or achievements, express or implied by such
forward-looking statements. These forward-looking statements are identified by
their use of forms of such terms and phrases as "expects", "intends", "goals",
"estimates", "projects", "plans", "anticipates", "should", "future", "believes"
and "scheduled".
The variables which may cause differences include, but are not limited to, the
following: general economic and business conditions; competition; success of
operating initiatives; operating costs; advertising and promotional efforts; the
existence or absence of adverse publicity; changes in business strategy or
development plans; the ability to retain management; availability, terms and
deployment of capital; business abilities and judgement of personnel;
availability of qualified personnel; labor and employee benefit costs;
availability and costs of raw materials and supplies; and changes in, or failure
to comply with, government regulations. Although the Company believes that the
assumptions underlying the forward looking statements contained herein are
reasonable, any of the assumptions could be inaccurate, and therefore, there can
be no assurance that the forward-looking statements included in this filing will
prove to be accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives and expectations of the Company will be achieved.
ITEM 2. CHANGES IN SECURITIES
On October 10,1997, the Company sold 10,000 shares of its common stock to each
of James Proft, Phillipe Poncet and Ray Serna upon exercise of warrants by each
such individual to purchase shares of the Company's common stock at a price of
$0.01 per share. Messrs. Proft, Poncet and Serna are all employees of the
Company, and Mr. Proft is an executive officer of the Company. The offers and
sales to such individuals were exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to Section
4(2) of the Securities Act and Regulation D promulgated thereunder. On October
23, 1997, the Company issued 874 shares of its common stock to each of its four
non-employee directors as compensation for services rendered to the Company by
such directors during the Company's fiscal quarter ended September 30, 1997. The
offers and sales to such non-employee directors were exempt from the
registration requirements of the Securities Act pursuant Section 4(2) of the
Securities Act and Regulation D promulgated thereunder. On November 25, 1997,
the Company sold 1,127,214 shares of its common stock to Raychem Corporation
("Raychem") upon the full exercise by Raychem of its warrant to purchase
1,130,000 shares of the Company's common stock at a purchase price of $0.01 per
share on a net-exercise
12
<PAGE>
basis, whereby Raychem's equity interest in some warrants was used to pay the
purchase price for the warrants being exercised. The offer and sale to Raychem
was exempt from the registration requirments of the Securities Act pursuant to
Sections 3(a)(9) and 4(2) of the Securities Act. On October 30, 1997, and
December 15, 1997, respectively, the Company sold 43,525 and 83,080 shares of
its common stock to American Equities Overseas, Inc. ("AEO") (some of the shares
were registered in the name of Republic New York Securities Corp. for the
benefit of AEO), for a purchase price of $2.00 per share upon the exercise of
certain warrants held by AEO. The offer and sale to AEO upon the exercise of
such warrants were exempt from the registration requirements of the Securities
Act pursuant to Section 4(2) of the Securities Act and Regulation D thereunder.
On December 23, 1997, the Company sold 19,867 shares of its common stock to
James G. Binch, the Company's Chairman, President and Chief Executive Officer,
and a director, in exchange for the forgiveness by Mr. Binch of a $60,000
promissory note issued to him by the Company (a price of $3.02 per share). The
offer and sale to Mr. Binch was exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) of the Securities Act.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On December 10, 1997, the Company held its annual meeting of stockholders. At
such meeting, the Company's five directors, James G. Binch, Nicholas J. Grant,
Jack H. Halperin, Esq., W. Andrew Krusen, Jr. and John A. Morgan were re-elected
to the Company's Board of Directors by the vote specified below:
<TABLE>
<CAPTION>
No. of Votes Broker
Nominee For Against/Withheld Abstentions Non-Votes
- ------- --- ---------------- ----------- ---------
<S> <C> <C> <C> <C>
James G. Binch 14,877,322 5,138 0 0
Nicholas J. Grant 14,847,607 34,853 0 0
Jack H. Halperin, Esq.. 14,877,582 4,878 0 0
W. Andrew Krusen, Jr. 14,877,607 4,853 0 0
John A. Morgan 14,877,582 4,853 0 0
</TABLE>
In addition, the Company's stockholders approved the Company's 1997 Long-Term
Incentive Plan, by a vote of 9,939,159 in favor, 41,583 opposed and 29,864
abstaining.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit
Number Description of Exhibit
- ------ ----------------------
10.1 Memry Corporation's 1997 Long-Term Incentive Plan, as amended.
10.2 Form of Nontransferable Incentive Stock Option Agreement under the
Company's 1997 Long-Term Incentive Plan (for non-California
employees).
10.3 Employment Agreement, dated as of the 29th day of October, 1997,
between Thomas D. Carey and the Company.
10.4 Letter Agreement, dated December 23, 1997, between James G. Binch and
the Company relating to the exchange of a promissory note for the
Company's common stock.
27 Financial Data Schedule
13
<PAGE>
(b) REPORTS ON FORM 8-K
On December 30, 1997, the Company filed a Current Report on Form 8-K reporting
the extension of the expiration date for a series of 414,525 warrants to
purchase shares of the Company's common stock at a price of $5.00 per share from
December 15, 1997 to June 15, 1998.
14
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by undersigned, thereunto duly
authorized.
Memry Corporation
-----------------
Date: February 12, 1998 /s/ James G.Binch
----------------- -------------------------------
James G. Binch
President, CEO, Treasurer and Chairman
of the Board
Date: February 12, 1998 /s/ Thomas D. Carey
----------------- -------------------------------
Thomas D. Carey
Chief Financial Officer
15
<PAGE>
EXHIBIT 10.1
Memry Corporation's 1997 Long-Term Incentive Plan, as Amended
<PAGE>
MEMRY CORPORATION'S 1997 LONG-TERM INCENTIVE PLAN
SECTION 1. PURPOSES. The purposes of Memry Corporation's 1997 Long-Term
Incentive Plan, as amended (the "Plan") are to encourage selected key employees
and the directors of Memry Corporation (the "Company") and its Affiliates (as
hereinafter defined) to acquire a proprietary and vested interest in the growth
and performance of the Company and to generate an increased incentive to
contribute to the Company's future success and prosperity, thereby enhancing the
value of the Company for the benefit of stockholders and the ability of the
Company to attract and retain individuals of exceptional talent.
SECTION 2. DEFINITIONS. As used in the Plan, the following terms shall have
the meanings set forth below:
(a) "Award" shall mean any Option, Stock Appreciation Right, Limited Stock
Appreciation Right, Restricted Stock Award, Performance Share or any other
right, interest, or option granted pursuant to the provisions of the Plan.
(b) "Award Agreement" shall mean any written agreement, contract, or other
instrument or document evidencing any Award granted hereunder and signed by both
the Company and the Participant or by both the Company and a Non-Employee
Director.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to
time, including the rules, regulations, and interpretations promulgated
thereunder.
(e) "Committee" shall mean the Compensation Committee of the Board, composed of
not less than two directors each of whom is a Non-Employee Director.
(f) "Company" shall mean Memry Corporation.
(g) "Dividend Equivalent" shall mean any right granted pursuant to Section 14(i)
hereof to receive an equivalent amount of interest or dividends with respect to
the number of shares covered by an Award.
(h) "Employee" shall mean any salaried employee of the Company or of any
Affiliate.
(i) "Fair Market Value" shall mean, with respect to any property, the market
value of such property determined by such methods or procedures as shall be
established from time to time by the Committee.
(j) "Incentive Stock Option" shall mean an Option granted under Section 6 hereof
that is intended to meet the requirements of Section 422 of the Code or any
successor provision thereto.
<PAGE>
(k) "Limited Stock Appreciation Right" shall mean a Stock Appreciation Right
that can only be exercised in the event of a change in control, according to the
definition and provisions of Section 8 of the Plan.
(l) "Non-Employee Director" shall mean a person described in both (i) Rule 16b-
3(b)(3) promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended, or any successor definition adopted
by the Securities and Exchange Commission, and (ii) Treasury Regulation Section
1.162-27(e)(3)(i), or any successor provision, adopted by the Department of the
Treasury.
(m) "Non-qualified Stock Option" shall mean an Option granted to a Participant
under Section 6 hereof that is not intended to be an Incentive Stock Option.
(n) "Option" shall mean any right granted to a Participant under the Plan
allowing such Participant to purchase Shares at such price or prices and during
such period or periods as the Committee shall determine.
(o) "Participant" shall mean an Employee who is selected by the Committee to
receive an Award under the Plan.
(p) "Payment Value" shall mean the dollar amount assigned to a Performance
Share which shall be equal to the Fair Market Value per Share on the close of
business on the last day of a Performance Cycle.
(q) "Person" shall mean any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, or government or
political subdivision thereof.
(r) "Performance Cycle" or "Cycle" shall mean the period of time selected by
the Committee during which the performance is measured for the purpose of
determining the extent to which an award of Performance Shares has been earned.
(s) "Performance Goals" shall mean the objectives established by the Committee
for a Performance Cycle, for the purpose of determining the extent to which
Performance Shares which have been contingently awarded for such Cycle are
earned.
(t) "Performance Share" shall mean an Award granted pursuant to Section 10
hereof which shall represent the right, subject to the terms set forth in
Section 10 hereof, to either one Share or the Payment Value in cash of one
Share.
(u) "Restricted Stock" shall mean any Share issued with the restriction that the
holder may not sell, transfer, pledge, or assign such Share and with such other
restrictions as the Committee, in its sole discretion, may impose (including,
without limitation, any restriction on the right to vote such Share, and
<PAGE>
the right to receive any cash dividends), which restrictions may lapse
separately or in combination at such time or times, in installments or
otherwise, as the Committee may deem appropriate.
(v) "Restricted Stock Award" shall mean an award of Restricted Stock under
Section 9 hereof.
(w) "Shares" shall mean shares of the common stock of the Company, $0.01 par
value per share, and such other securities of the Company as the Committee may
from time to time determine.
(x) "Stock Appreciation Right" shall mean any right granted to a Participant
pursuant to Section 7 hereof to receive, upon exercise by the Participant, the
excess of (i) the Fair Market Value of one Share on the date of exercise or, if
the Committee shall so determine in the case of any such right other than one
related to any Incentive Stock Option, at any time during a specified period
before the date of exercise over (ii) the grant price of the right as specified
by the Committee, in its sole discretion, on the date of grant, which shall not
be less than the Fair Market Value of one Share on such date. Any payment by
the Company in respect of such right may be made in cash, Shares, other
property, or any combination thereof, as the Committee, in its sole discretion,
shall determine.
(y) "Stockholder Meeting" shall mean the annual meeting of stockholders of the
Company held each year.
SECTION 3. ADMINISTRATION. The Plan shall be administered by the Committee.
The Committee shall have full power and authority, subject to such orders or
resolutions not inconsistent with the provisions of the Plan as may from time to
time be adopted by the Board, to: (i) select the Employees of the Company to
whom Awards may from time to time be granted hereunder; (ii) determine the type
or types of Award to be granted to each Participant hereunder; (iii) determine
the number of Shares to be covered by each Award granted hereunder; provided,
however, that Shares subject to any form of award granted to any individual
employee during any calendar year shall not exceed a total of 300,000 Shares;
(iv) determine the terms and conditions, not inconsistent with the provisions of
the Plan, of any Award granted hereunder; (v) determine whether, to what extent
and under what circumstances Awards may be settled in cash, Shares or other
property or canceled or suspended; (vi) determine whether, to what extent and
under what circumstances cash, Shares and other property and other amounts
payable with respect to an Award under this Plan shall be deferred either
automatically or at the election of the Participant; (vii) interpret and
administer the Plan and any instrument or agreement entered into under the Plan;
(viii) establish such rules and regulations and appoint such agents as it shall
deem appropriate for the proper administration of the Plan; and (ix) make any
other determination and take any other action that the Committee deems necessary
or desirable for administration of the Plan. Decisions
<PAGE>
of the Committee shall be final, conclusive and binding upon all persons,
including the Company, any Participant, any stockholder, and any Employee of the
Company or of any Affiliate. Notwithstanding the above, the Committee shall not
have discretion with respect of any Shares granted to Non-Employee Directors
pursuant to Section 11 hereof. A majority of the members of the Committee may
determine its actions and fix the time and place of its meetings.
SECTION 4. SHARES SUBJECT TO THE PLAN.
(a) Subject to adjustment as provided in Section 4(b), the total number of
Shares available for grant under the Plan shall be 2,000,000 Shares. In
addition, any Shares issued by the Company through the assumption or
substitution of outstanding grants from an acquired company shall not reduce the
shares available for grants under the Plan. Any Shares issued hereunder may
consist, in whole or in part, of authorized and unissued shares or treasury
shares. If any Shares subject to any Award granted hereunder are forfeited or
such Award otherwise terminates without the issuance of such Shares or of other
consideration in lieu of such Shares, the Shares subject to such Award, to the
extent of any such forfeiture or termination, shall again be available for grant
under the Plan.
(b) In the event of any merger, reorganization, consolidation, recapitalization,
stock dividend, or other change in corporate structure affecting the Shares,
such adjustment shall be made in the type and aggregate number of Shares which
may be delivered under the Plan or such other securities to be delivered in
place thereof, and in the number of Shares subject to outstanding Options
granted under the Plan, and in the value or number of Shares subject to Awards
granted under the Plan as may be determined to be appropriate by the Committee,
in its sole discretion, provided that the number of Shares subject to any Award
shall always be a whole number, and provided further, that the number of Shares
granted to Non-Employee Directors pursuant to Section 11 hereof and the number
of Shares subject in the future to be granted pursuant to Section 11 hereof
shall be subject to adjustment only as set forth in Section 11.
SECTION 5. ELIGIBILITY. Any Employee (excluding any member of the Committee)
shall be eligible to be selected as a Participant. All Non-Employee Directors
shall automatically be eligible to receive Awards pursuant to Section 11.
SECTION 6. STOCK OPTIONS. Options may be granted hereunder to Participants
either alone or in addition to other Awards granted under the Plan. Any Option
granted to a Participant under the Plan shall be evidenced by an Award Agreement
in such form as the Committee may from time to time approve. Any such Option
shall be subject to the following terms and conditions and to such additional
terms and conditions, not inconsistent with the provisions of the Plan, as the
Committee shall deem desirable:
<PAGE>
(a) Option Price. The purchase price per Share purchasable under an Option
shall be determined by the Committee in its sole discretion; provided that such
purchase price in the case of Incentive Stock Options shall not be less than the
Fair Market Value of the Share on the date of the grant of the Option; provided
further that the purchase price per Share for an Incentive Stock Option granted
to an Employee who, at the time of grant, owns stock having more than 10 percent
of the total combined voting power of all classes of stock of the Company (a
"Ten Percent Stockholder"), shall not be less than 110 percent of the Fair
Market Value on the date of grant, all as determined by the Committee.
(b) Option Period. The term of each Option shall be fixed by the Committee in
its sole discretion; provided that no Incentive Stock Option shall be
exercisable after the expiration of ten years from the date the Option is
granted; provided further that no Incentive Stock Option granted to an Employee
who is a Ten Percent Stockholder shall be exercisable after the expiration of
five years from the date the Option is granted.
(c) Exercisability. Options shall be exercisable at such time or times as
determined by the Committee at or subsequent to grant.
(d) Method of Exercise. Subject to the other provisions of the Plan and any
applicable Award Agreement, any Option may be exercised by the Participant in
whole or in part at any time or times, and the Participant may make payment of
the option price in such form or forms, including, without limitation, payment
by delivery of cash, Shares or other consideration, or through an arrangement
with a broker in which the Participant delivers to the Company an irrevocable
notice of exercise accompanied by the broker's payment in full and an
irrevocable instruction to the Company to deliver the Shares issuable upon
exercise to the broker for the Participant's account.
(e) Incentive Stock Options. In accordance with rules and procedures
established by the Committee, the aggregate Fair Market Value (determined as of
the time of grant) of the Shares with respect to which Incentive Stock Options
held by any Participant which are exercisable for the first time by such
Participant during any calendar year under the Plan (and under any other benefit
plans of the Company or subsidiary of the Company) shall not exceed $100,000 or,
if different, the maximum limitation in effect at the time of grant under
Section 422 of the Code, or any successor provision, and any regulations
promulgated thereunder. The terms of any Incentive Stock Option granted
hereunder shall comply in all respects with the provisions of Section 422 of the
Code, or any successor provision, and any regulations promulgated thereunder.
SECTION 7. STOCK APPRECIATION RIGHTS. Stock Appreciation Rights may be granted
hereunder to Participants either alone or in addition to other Awards granted
under the Plan and may, but need not, relate to a specific Option granted under
Section 6. The provisions of Stock Appreciation Rights need not be the same
with
<PAGE>
respect to each recipient. Any Stock Appreciation Right related to a Non-
qualified Stock Option may be granted at the same time such Option is granted or
at any time thereafter before exercise or expiration of such Option. Any Stock
Appreciation Right related to an Incentive Stock Option must be granted at the
same time such Option is granted. In the case of any Stock Appreciation Right
related to any Option, the Stock Appreciation Right or applicable portion
thereof shall terminate and no longer be exercisable upon the termination or
exercise of the related Option, except that a Stock Appreciation Right granted
with respect to less than the full number of Shares covered by a related Option
shall not be reduced until the exercise or termination of the related Option
exceeds the number of shares not covered by the Stock Appreciation Right. Any
Option related to any Stock Appreciation Right shall no longer be exercisable to
the extent the related Stock Appreciation Right has been exercised. The
Committee may impose such conditions or restrictions on the exercise of any
Stock Appreciation Right as it shall deem appropriate.
SECTION 8. LIMITED STOCK APPRECIATION RIGHTS.
Limited Stock Appreciation Rights may be granted hereunder to Participants in
relation to any Option or Stock Appreciation Right granted under the Plan. A
Limited Stock Appreciation Right may be granted at the time the Option or Stock
Appreciation Right is granted or at any time thereafter. Limited Stock
Appreciation Rights are exercisable in full for a period of seven months
following the date of a Change in Control as defined in Section 12(b).
(a) Amount of Payment. The amount of payment to which a Participant shall be
entitled upon the exercise of each Limited Stock Appreciation Right shall be
equal to the difference between the Option price of the Shares covered by the
related Option or Stock Appreciation Right and the Market Price of such Shares.
Market Price is defined to be the greater of (i) the highest price of the Shares
paid in connection with a Change in Control and (ii) (a) if the Shares are
traded on an exchange, the highest closing trade price per Share on such
exchange during the 60-day period prior to the Change in Control, and (b) if the
Shares are not traded on an exchange, but are traded over-the-counter, the
average of the highest daily closing bid and ask price per Share during the 60-
day period prior to the Change in Control, in either case as reasonably
determined by the Corporation.
(b) Form of Payment. Payments to Participants upon the exercise of Limited
Stock Appreciation Rights shall be made solely in cash.
(c) Effect of Exercise. If Limited Stock Appreciation Rights are exercised, the
Options and Stock Appreciation Rights related to them cease to be exercisable.
Upon the exercise or termination of the Options or Stock Appreciation Rights,
the related unexercised Limited Stock Appreciation Rights terminate.
<PAGE>
SECTION 9. RESTRICTED STOCK.
(a) Issuance. Restricted Stock Awards may be issued hereunder to Participants,
for no cash consideration or such consideration as may be determined by the
Committee to be appropriate, either alone or in addition to other Awards granted
under the Plan. The provisions of Restricted Stock Awards need not be the same
with respect to each recipient.
(b) Registration. Any Restricted Stock issued hereunder may be evidenced in
such manner as the Committee in its sole discretion shall deem appropriate,
including, without limitation, book-entry registration or issuance of a stock
certificate or certificates. In the event any stock certificate is issued in
respect of shares of Restricted Stock awarded under the Plan, such certificate
shall be registered in the name of the Participant, and shall bear an
appropriate legend referring to the terms, conditions, and restrictions
applicable to such Award.
(c) Forfeiture. Except as otherwise determined by the Committee at the time of
grant, upon termination of employment for any reason during the restriction
period specified in connection with such award, all shares of Restricted Stock
still subject to restriction shall be forfeited by the Participant and
reacquired by the Company; provided that in the event of a Participant's
retirement, permanent disability or death, or in cases of special circumstances,
the Committee may, in its sole discretion, when it finds that a waiver would be
in the best interests of the Company, waive in whole or in part any or all
remaining restrictions with respect to such Participant's shares of Restricted
Stock. Unrestricted Shares, evidenced in such manner as the Committee shall
deem appropriate, shall be issued to the grantee promptly after the period of
forfeiture upon satisfaction of all requirements under the applicable Restricted
Stock Award, as determined or modified by the Committee.
SECTION 10. PERFORMANCE SHARES.
(a) Issuance. Performance Shares may be issued hereunder to Participants either
alone or in addition to other Awards granted under the Plan. The terms of
Performance Shares need not be the same with respect to each recipient.
Performance Shares shall entitle the recipient thereof to convert same into
Shares, cash, or a combination thereof, as determined by the Committee, based
upon satisfaction of pre-determined performance targets or goals. The Committee
shall have sole and complete authority to determine the Employees who shall
receive Performance Shares and the number of such Shares for each Performance
Cycle, and to determine the duration of each Performance Cycle. There may be
more than one Performance Cycle in existence at any one time, and the duration
of Performance Cycles may differ from each other.
(b) Performance Goals. The Committee shall establish Performance Goals for each
Cycle based on any one or more of the following, or
<PAGE>
any other factor the Committee deems to be relevant: the operating earnings, net
earnings, return on equity, income, market share, stockholder return, combined
ratio, level of expenses or growth in revenue. During any Cycle, the Committee
may adjust the Performance Goals for such Cycle as it deems equitable in
recognition of unusual or non-recurring events affecting the Company, changes in
applicable tax laws or accounting principles, or such other factors as the
Committee may determine; provided, however, that no such adjustment shall be
applicable to the extent such adjustment would result in a disallowance of a tax
deduction pursuant to Section 162(m) of the Code.
(c) Determination of Earned Performance Shares. As soon as practicable after
the end of a Performance Cycle, the Committee shall determine the number of
Performance Shares which have been earned on the basis of performance in
relation to the established Performance Goals.
(d) Payment Values. As soon as practicable after the expiration of the
Performance Cycle and the Committee's determination under paragraph (c), above,
the Committee shall determine whether the Participant should be distributed cash
and/or Shares. To the extent that distributions are made in cash, the amount of
cash distributed shall be equal to the number of earned Performance Shares for
which cash is being distributed, times the Payment Value. Award payments made
in cash rather than by the issuance of Shares shall not result in additional
Shares being available under the Plan. To the extent that distributions are
made in Shares, the number of Shares distributed shall be equal to the number of
earned Performance Shares for which Shares are being distributed.
SECTION 11. NON-EMPLOYEE DIRECTORS' STOCK GRANTS.
(a) Grant of Shares. All Non-Employee Directors who remain as such on the last
day of any given fiscal quarter shall be issued quarterly, in arrears, within 60
days of the last day of each fiscal quarter, such number of Shares as shall have
a fair market value equal to $2,500, with such fee being pro-rated for any Non-
Employee Director who serves as such for less than such full fiscal quarter.
For the purposes of the foregoing, the fair market value of a Share shall be the
average of the bid and asked prices per Share on the last trading day of a
particular fiscal quarter.
(b) Adjustment of Award. In case there shall be a merger, reorganization,
consolidation, recapitalization, stock dividend or other change in corporate
structure such that the Shares of the Company are changed into or become
exchangeable for a different security, thereafter the Shares subject to be
granted to Non-Employee Directors pursuant to the provisions of this Section 11
shall be adjusted accordingly.
SECTION 12. CHANGE IN CONTROL.
<PAGE>
(a) In order to maintain the Participants' rights in the event of any Change in
Control of the Company, as hereinafter defined, the Committee, as constituted
before such Change in Control, may, in its sole discretion, as to any Award
(except Shares granted pursuant to Section 11), either at the time an Award is
made hereunder or any time thereafter, take any one or more of the following
actions: (i) provide for the acceleration of any time periods relating to the
exercise or realization of any such Award so that such Award may be exercised or
realized in full on or before a date fixed by the Committee; (ii) provide for
the purchase of any such Award, upon the Participant's request, for an amount of
cash equal to the amount that could have been attained upon the exercise of such
Award or realization of the Participant's rights had such Award been currently
exercisable or payable; or (iii) make such adjustment to any such Award then
outstanding as the Committee deems appropriate to reflect such Change in
Control. In addition, the Committee, upon receiving approval of a majority of
the full Board, may, in its discretion, cause any Award outstanding at such time
to be assumed, or new rights substituted therefor, by the acquiring or surviving
corporation after such Change in Control. The Committee may, in its discretion,
include such further provisions and limitations in any agreement documenting
such Awards as it may deem equitable and in the best interests of the Company.
(b) A "Change in Control" shall be deemed to have occurred if (i) any Person
other than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company, and other than the Company or a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934), directly or indirectly, of securities of the Company representing 25%
or more of the combined voting power of the Company's then outstanding
securities; or (ii) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board and any new Director (other
than a Director designated by a person who has entered into an agreement with
the Company to effect a transaction described in (i) above) whose election by
the Board or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds (2/3) of the Directors then still in office who
either were Directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof.
SECTION 13. AMENDMENTS AND TERMINATION. The Committee may amend, alter or
discontinue the Plan, but no amendment, alteration, or discontinuation shall be
made that would impair the rights of a Participant under an Award theretofore
granted, without the Participant's consent, or that without the approval of the
Stockholders as required by applicable law would:
<PAGE>
(a) except as is provided in Section 4(b) or 11(b) of the Plan, increase the
total number of Shares reserved for the purposes of the Plan;
(b) change the Employees or class of Employees eligible to participate in the
Plan; or
(c) change in any way the Shares provided for in Section 11 of the Plan.
The Committee may amend the terms of any Award theretofore granted (except
Shares granted pursuant to Section 11 hereof), prospectively or retroactively,
but no such amendment shall impair the rights of any Participant without his
consent. The Committee may also substitute new Awards for Awards previously
granted to Participants, including without limitation previously granted Options
having Fair Market Value or higher option prices.
SECTION 14. GENERAL PROVISIONS.
(a) At the sole discretion of the Committee at the time of grant, Awards may be
assignable or transferable by a Participant or a Non-Employee Director; provided
that no Award shall be assignable or transferable unless the exercise of such
Award and subsequent sale may be covered by a Registration Statement on Form S-
8.
(b) The term of each Award shall be for such period of months or years from the
date of its grant as may be determined by the Committee; provided that in no
event shall the term of any Incentive Stock Option, or any Stock Appreciation
Right related to any Incentive Stock Options, exceed a period of ten (10) years
from the date of its grant; provided further that in no event shall the term of
any Incentive Stock Option, or any Stock Appreciation Right related to any
Incentive Stock Option granted to a Ten Percent Stockholder exceed a period of
five (5) years from the date of its grant.
(c) Nothing in this Plan shall confer upon any Employee or Participant any right
to continue in the employ of the Company or any Affiliate or interfere in any
way with the right of any Company or any Affiliate to terminate his or her
employment at any time. No Employee or Participant shall have any claim to be
granted any Award under the Plan and there is no obligation for uniformity of
treatment of Employees or Participants under the Plan.
(d) The prospective recipient of any Award under the Plan shall not, with
respect to such Award, be deemed to have become a Participant, or to have any
rights with respect to such Award, until and unless such recipient shall have
executed an Award Agreement or other instrument evidencing the Award and
delivered a fully executed copy thereof to the Company, and otherwise complied
with the then applicable terms and conditions.
<PAGE>
(e) Subject to Section 13 hereof, the Committee shall be authorized to make
adjustments in performance award standards or in the terms and conditions of
other Awards in recognition of unusual or nonrecurring events affecting the
Company or its financial statements or changes in applicable laws, regulations
or accounting principles. The Committee may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or any Award in the manner
and to the extent it shall deem desirable to carry it into effect. In the event
the Company shall assume outstanding employee benefit awards or the right or
obligation to make future such awards in connection with the acquisition of
another corporation or business entity, the Committee may, in its discretion,
make such adjustments in the terms of Awards under the Plan as it shall deem
appropriate. Notwithstanding the above, the Committee shall not have the right
to make any adjustments in the terms or conditions of Shares granted pursuant to
Section 11 hereof.
(f) The Committee shall have full power and authority to determine any other
type and form of Award beyond those enumerated above to grant a Participant for
the furtherance of the purposes of the Plan.
(g) The Committee shall have full power and authority to determine whether, to
what extent and under what circumstances any Award (other than Shares granted
pursuant to Section 11 hereof) shall be canceled or suspended. In particular,
but without limitation, all outstanding Awards to any Participant shall be
canceled if the Participant, without the consent of the Committee, while
employed by the Company or after termination of such employment, becomes
associated with, employed by, renders services to, or owns any interest in
(other than any nonsubstantial interest, as determined by the Committee), any
business that is in competition with the Company or with any business in which
the Company has a substantial interest as determined by the Committee.
(h) All certificates for Shares delivered under the Plan pursuant to any Award
shall be subject to such stock-transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Shares are then listed, and any applicable Federal or state securities
law, and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
(i) Subject to the provisions of this Plan and any Award Agreement, the
recipient of an Award may, if so determined by the Committee, be entitled to
receive, currently or on a deferred basis, interest or dividends, or interest or
Dividend Equivalents, with respect to the number of Shares covered by the Award,
as determined by the Committee, in its sole discretion, and the Committee may
provide
<PAGE>
that such amounts (if any) shall be deemed to have been reinvested in additional
Shares or otherwise reinvested.
(j) As circumstances may from time to time require, the Committee may in its
sole discretion make available to Participants loans for the purpose of
exercising Options.
(k) The Company shall be authorized to withhold from any Award granted or
payment due under the Plan the amount of withholding taxes due with respect to
an Award or payment hereunder and to take such other action as may be necessary
in the opinion of the Company to satisfy all obligations for the payment of such
taxes. The Company shall also be authorized to accept the delivery of shares by
a Participant in payment for the withholding of federal, state and local taxes
(but not for social security and Medicare taxes) up to the Participant's
marginal tax rate.
(l) Nothing contained in this Plan shall prevent the Board of Directors from
adopting other or additional compensation arrangements, subject to stockholder
approval if such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases.
(m) The validity, construction, and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in accordance with the laws
of the State of Connecticut and applicable Federal law.
(n) If any provision of this Plan is or becomes or is deemed invalid, illegal or
unenforceable in any jurisdiction, or would disqualify the Plan or any Award
under any law deemed applicable by the Committee, such provision shall be
construed or deemed amended to conform to applicable laws or if it cannot be
construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan, it shall be stricken and the
remainder of the Plan shall remain in full force and effect.
SECTION 15. SPECIAL CALIFORNIA PROVISIONS.
Notwithstanding anything to the contrary in the Plan or in any Award Agreement,
no Awards shall be granted to Employees resident in the State of California
unless either (i) the Award agreement entered into in connection with such grant
conforms in all respects with the State of California's Blue Sky Regulations, as
same may be amended (the "California Regulations"), including, without
limitation, the requirements of Rule 260.140.41 of the California Regulations,
or (ii) the offer and sale of Shares upon the exercise of such Award to such
California resident is exempt from the qualification requirements of Section
25110 of the California Corporate Securities Law, as same may be amended.
Without limiting the foregoing, each Option and Award, as the case may be,
granted or made to a California resident and subject to clause (i) immediately
above, shall provide for or comply with, as the case
<PAGE>
may be, each of the following, whether set forth in the applicable Award
Agreement or incorporated therein by reference to the Plan:
(a) subject to any higher minimum purchase price per Share provided for
elsewhere in the Plan, each Option shall have a purchase price per Share which
is not less than 85% of its "fair value" (as defined in Section 260.140.50 of
the California Regulations) on the date of grant;
(b) each Option shall have an exercise period of not more than 120 months from
the date the Option is granted;
(c) each Option shall be nontransferable other than by will or the laws of
descent and distribution;
(d) each Option shall provide for a right to exercise the Option at the rate of
at least 20% per year over 5 years from the date the Option is granted, subject
to reasonable conditions such as continued employment, provided, however, that,
in the case of an Option granted to officers, directors or consultants of the
Company or any of its affiliates, the Option may become fully exercisable,
subject to reasonable conditions such as continued employment, at any time or
during any period established by the Company or any of its affiliates;
(e) each Option shall, unless employment is terminated for "cause", as defined
by applicable law, the terms of the Plan or the applicable Award Agreement or
contract of employment, as the case may be, provide for the right to exercise in
the event of termination of employment, to the extent that the optionee is
entitled to exercise on the date employment terminates, as follows:
(1) At least 6 months from the date of termination if termination was
caused by death or disability; and
(2) At least 30 days from the date of termination if termination was
caused by other than death or disability;
(f) no Performance Shares shall be issued to any California resident unless, at
the time of grant, such person is paid salary by the Company or any of its
affiliates at the rate of $60,000 per annum or more; and
(g) no Award made to a California resident, excluding any Award made to any
officer, director or consultant of the Company or any of its affiliates, shall
provide for the acceleration of any time periods relating to the exercise or
realization of any such Award so that such Award may be exercised or realized in
full on or before a date previously fixed by the Committee.
<PAGE>
EXHIBIT 10.2
Form of Nontransferable Incentive Stock Option Agreement
under
the Company's 1997 Long-Term Incentive Plan
(for non-California employees)
<PAGE>
FORM FOR ISO UNDER MEMRY
CORPORATION 1997 LONG-TERM
INCENTIVE PLAN (CONNECTICUT
EMPLOYEES)
-----------------------------
NONTRANSFERABLE INCENTIVE STOCK
OPTION AGREEMENT dated as of ________
__, 199_, between MEMRY CORPORATION,
a Delaware corporation (the "Company"),
and _______________ (the "Optionee",
which term as used herein shall be deemed
to include any successor to the Optionee
by will or by the laws of descent and
distribution, unless the context shall
otherwise require).
Pursuant to the Company's 1997 Long-Term Incentive Plan (as so
amended, the "Plan"), the Company, acting through the Compensation Committee of
its Board of Directors (the "Committee"), approved the issuance to the Optionee,
effective as of the date set forth above, of an incentive stock option to
purchase up to an ag gregate of [# OF SHARES] shares of Common Stock, $.01 par
value, of the Company (the "Common Stock"), at the price (the "Option Price") of
[not less than 100% of the fair market value of a share of Common Stock on the
date of grant (110%, in the case of a 10% stockholder)] [PRICE] per share, upon
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual premises and
undertakings hereinafter set forth, the parties hereto agree as follows:
I. OPTION; OPTION PRICE. On behalf of the Company, the Committee
--------------------
hereby grants to the Optionee the option (the "Option") to purchase, subject to
the terms and conditions of this Agreement and the Plan (which are incorporated
by reference herein and which in all cases shall control in the event of any
conflict with the terms, definitions and provisions of this Agreement), [# OF
SHARES] shares of Common Stock of the Company at an exercise price per share
equal to the Option Price, which Option is intended to qual ify for federal
income tax purposes as an "incentive stock option" within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"). A copy of
the Plan as in effect on the date hereof has been supplied to the Optionee, and
the Optionee hereby acknowledges receipt thereof.
II. TERM. The term (the "Option Term") of the Option shall commence
----
on the date of this Agreement and shall expire on
<PAGE>
the tenth anniversary of the date of this Agreement [fifth anniversary, in the
case of a 10% stockholder], unless such Option shall theretofore have been
terminated in accordance with the terms hereof or of the Plan.
III. TIME OF EXERCISE. (1) Unless accelerated in the discretion of
----------------
the Committee or as otherwise provided herein, the Option shall become
exercisable as to the total number of shares of Common Stock subject to the
Option as same may be limited in accordance with Exhibit A hereto, for the
periods specified in Exhibit A hereto; provided, however, no part of such Option
-------- -------
may be exercised by the Optionee until such Optionee shall have remained in the
employ of the Company or any corporation which at the time the Option is granted
qualifies as a "subsidiary corporation" of the Company under Section 424(f) of
the Code (any of the aforementioned, a "Participating Company") for at least one
year from the date of grant of the Option, unless employment of the Optionee is
terminated on account of death or a Total Disability (as defined in Section
4(a)(iii) below)./1/ Subject to the provi sions of Sections 5 and 8 hereof,
shares as to which the Option be comes exercisable pursuant to the foregoing
provisions may be purchased at any time thereafter prior to the expiration or
ter mination of the Option.
(2) Anything contained in this Agreement to the contrary
notwithstanding, the Option shall not be exercisable to the extent that the
aggregate Fair Market Value (as defined in the Plan) on the date hereof of all
stock with respect to which incentive stock options are exercisable for the
first time by the Optionee during any calendar year (under the Plan and all
other plans of all Participating Companies) exceeds $100,000.
IV. TERMINATION OF OPTION. A. The unexercised portion of the Option
---------------------
(which portion was otherwise exercisable) shall automatically terminate and
shall become null and void and be of no further force or effect upon the first
to occur of the following:
1. the expiration of the Option Term;
2. the expiration of three months from the date that the
Optionee ceases to be an employee of the Company or any of its subsidiaries
(other than as a result of a Total Disability (as defined in subparagraph
(iii) below), a Resignation (as defined in subparagraph (iv) below) or a
Termination For Cause (as defined in subparagraph (iv) below)); provided,
--------
however, that if the Optionee shall die during such three-month period, the
-------
time of termination of the
- --------------------
/1/ Subject to modification by the Committee to accommodate performance
objectives, if any.
2
<PAGE>
unexercised portion of the Option shall be determined in accordance with
subparagraph (iii) below;
3. the expiration of 12 months from the date that the Optionee
ceases to be an employee of a Participating Company as a result of the
Optionee's complete and permanent inability to perform all of his or her
duties under the terms of his or her employment with any Participating
Company, as determined by the Committee upon the basis of such evidence,
including independent medical reports and data, as the Committee deems
appropriate or necessary (a "Total Disability");
4. immediately if the Optionee ceases to be employed by any
Participating Company if such termination is a voluntary termination by the
Optionee (a "Resignation") or a termination for cause or is otherwise
attributable to a breach by the Optionee of an employee, noncompetition or
other similar agreement with a Participating Company (any such termination,
determined in accordance with paragraph (b) below, a "Termination For
Cause"); provided, however, a retirement in accordance with the terms and
-------- -------
conditions of a retirement plan adopted by a Participating Company shall
not be deemed to be a Resignation;
5. except to the extent permitted by Section 14(a) of the Plan,
the date on which the Option or any part thereof or right or privilege
relating thereto is transferred (otherwise than by will or the laws of
descent and distribution), assigned, pledged, hypothecated, attached or
otherwise disposed of by the Optionee.
B. Any unexercised portion of the Option which was not
exercisable on the date the Optionee ceases to be employed by any Participating
Company shall terminate at midnight on the date on which such employment ceases.
C. The Board of Directors of the Company shall have the power
to determine what constitutes a Termination For Cause, and the date upon which
such Termination For Cause occurs. Any such determination shall be final,
conclusive and binding upon the Optionee.
D. Anything contained herein to the contrary notwithstanding,
the Option shall not be affected by any change of duties or position of the
Optionee (including a transfer to or from any Participating Company), so long as
the Optionee continues to be an officer or employee of a Participating Company.
V. PROCEDURE FOR EXERCISE. A. The Option may be exercised, from
----------------------
time to time, in whole or in part (but for the purchase of whole shares only),
by delivery of a written notice
3
<PAGE>
(the "Notice") from the Optionee to the Secretary of the Company, which Notice
shall:
1. state that the Optionee elects to exercise the Option;
2. state the number of shares of Common Stock with respect
to which the Option is being exercised (the "Optioned Shares");
3. state the method of payment for the Optioned Shares
pursuant to Section 5(b) hereof;
4. state the date upon which the Optionee desires to
consummate the purchase of the Optioned Shares (which date must be
prior to the termination of such Option and no later than 30 days from
the delivery of such Notice);
5. include any representations of the Optionee required
under Section 8(b) hereof; and
6. if the Option shall be exercised pursuant to Section 10
hereof by any person other than the Optionee, include evidence to the
satisfaction of the Committee of the right of such person to exercise
the Option.
B. Payment of the Option Price for the Optioned Shares shall be
made (i) in cash or by personal or certified check, (ii) by delivery of stock
certificates (in negotiable form) representing shares of Common Stock that have
been owned of record by the Optionee for at least six months prior to the date
of exercise and that have a Fair Market Value on the date of exercise equal to
the product of (A) the number of Optioned Shares which are being purchased
pursuant to the exercise of such Option, multiplied by (B) the applicable Option
Price, (iii) a combination of either of the methods set forth in clauses (i) and
(ii) above, (iv) (A) by arrangements which are acceptable to the Committee and
as permitted by applicable law whereby the Optionee relinquishes a portion of
the Option, or (B) in compliance with any other cashless exercise program
authorized by the Committee for use in connection with the Plan at the time of
such exercise, or (v) in such other consideration as shall be acceptable to the
Committee. For the purpose of the preceding clause (iv)(A), the fair market
value of the portion of the Option that is relinquished shall be the Fair Market
Value at the time of exercise of the number of Optioned Shares subject to the
portion of the Option that is relinquished less the aggregate exercise prices
specified in the Option with respect to such Optioned Shares.
4
<PAGE>
C. The Company shall issue a stock certificate in the name of the
Optionee (or such other person exercising the Option in accordance with the
provisions of Section 10 hereof) for the Optioned Shares as soon as practicable
after receipt of the Notice and payment of the aggregate Option Price for such
shares.
VI. NO RIGHTS AS A STOCKHOLDER. The Optionee shall not have any
--------------------------
privileges of a stockholder of the Company with respect to any Optioned Shares
until the date of issuance of a stock certificate pursuant to Section 5(c)
hereof.
VII. ADJUSTMENTS. If the outstanding shares of Common Stock of the
-----------
Company are increased, decreased, or exchanged for a different number or kind of
shares or other securities, or if additional shares or new or different shares
or other securities are distributed with respect to such shares of Common Stock
or other securities, through merger, consolidation, sale of all of substantially
all of the property of the Company, reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split or other
distribution with respect to such shares of Common Stock or other securities,
then, to the extent permitted by the Company, an appropriate and proportionate
adjustment shall be made in (i) the number and kind of shares or other
securities subject to the Option and (ii) the price for each share or other unit
of any other securities subject to the Option without change in the aggregate
purchase price or value as to which such Option remains exercisable or subject
to restrictions. Any adjustment under this Section 7 shall be made by the
Company's Board of Directors, whose determination as to what adjustments shall
be made and the extent thereof will be final, binding and conclusive. No
fractional interests will be issued under the Plan resulting from any such
adjustment.
VIII. ADDITIONAL PROVISIONS RELATED TO EXERCISE. A. The Option shall
-----------------------------------------
be exercisable only on such date or dates and during such period and for such
number of shares of Common Stock as are set forth in this Agreement.
B. To exercise the Option, the Optionee shall follow the
procedures set forth in Section 5 hereof. Unless at the time of exercise of the
Option there shall be, in the opinion of counsel for the Company, a valid and
effective registration statement under the Securities Act of 1933 (the "'33
Act") and appropriate qualification and registration under applicable state
securities laws relating to the Optioned Shares being acquired pursuant to the
Option, the Optionee shall be required, upon exercise of the Option, to give to
the Company a written representation, in a form reasonably satisfactory to the
Company, that he or she is acquiring the Optioned Shares for his or her own
account for investment and not with a view to, or for sale in connection with,
the resale or distribution of any such shares. The Optionee shall be further
required to agree that he or she will
5
<PAGE>
not sell or transfer any Optioned Shares acquired pursuant to exercise of the
Option until he or she requests and receives an opinion of the Company's counsel
to the effect that such proposed sale or transfer will not result in a violation
of the '33 Act, or a registration statement covering the sale or transfer of the
shares has been declared effective by the Securities and Exchange Commission, or
he or she obtains a no-action letter from the Securities and Exchange Commission
with respect to the proposed transfer.
C. Stock certificates representing shares of Common Stock acquired
upon the exercise of the Option that have not been registered under the
Securities Act shall bear the following legend:
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 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.
IX. NO EVIDENCE OF EMPLOYMENT OR SERVICE. Nothing contained in the
------------------------------------
Plan or this Agreement shall confer upon the Optionee any right to continue in
the employ of a Participating Company or interfere in any way with the right of
a Participating Company (subject to the terms of any separate agreement to the
contrary) to terminate the Optionee's employment or to increase or decrease the
Optionee's compensation at any time.
X. RESTRICTION ON TRANSFER. The Option may not be transferred,
-----------------------
pledged, assigned, hypothecated or otherwise disposed of in any way by the
Optionee, except by will or by the laws of descent and distribution or as may
otherwise be required by law, and may be exercised during the lifetime of the
Optionee only by the Optionee. If the Optionee dies, the Option shall
thereafter be exercisable, during the period specified in Section 4(a)(ii)
hereof, by his or her executors or administrators to the full extent to which
the Option was exercisable by the Optionee at the time of his or her death. The
Option shall not be subject to execution, attachment or similar process. Any
attempted assignment, transfer, pledge, hypothecation or other disposition of
the Option contrary to the provisions hereof, and the levy of any execution,
attachment or similar process upon the Option, shall be null and void and
without effect.
XI. DISQUALIFYING DISPOSITIONS; TAXES. (a) If Optioned Shares are
---------------------------------
disposed of within two years following the date of this
6
<PAGE>
Agreement or one year following the issuance thereof to the Optionee (a
"Disqualifying Disposition"), the Optionee shall, immediately prior to such
Disqualifying Disposition, notify the Company in writing of the date and terms
of such Disqualifying Disposition and provide such other information regarding
the Disqualifying Disposition as the Company may reasonably require.
(b) At the time of a Disqualifying Disposition, the Optionee shall
remit to the Company in cash the amount of any applicable Federal, state and
local withholding taxes and employment taxes.
XII. NOTICES. All notices or other communications which are required
-------
or permitted hereunder shall be in writing and sufficient if 1. personally
delivered, 2. sent by nationally-recognized overnight courier or 3. sent by
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to the Optionee, to the address set forth on the signature
page hereto; and
If to the Company, to:
Memry Corporation
57 Commerce Drive
Brookfield, Connecticut 06804
Attention: Secretary;
or to such other address as the party to whom notice is to be given may have
furnished to each other party in writing in accordance herewith. Any such
communication shall be deemed to have been given (i) when delivered, if
personally delivered, (ii) on the first Business Day (as hereinafter defined)
after dispatch, if sent by nationally-recognized overnight courier and (iii) on
the third Business Day following the date on which the piece of mail containing
such communication is posted, if sent by mail. As used herein, "Business Day"
means a day that is not a Saturday, Sunday or a day on which banking
institutions in the city to which the notice or communication is to be sent are
not required to be open.
XIII. NO WAIVER. No waiver of any breach or condition of this
---------
Agreement shall be deemed to be a waiver of any other or subsequent breach or
condition, whether of like or different nature.
XIV. OPTIONEE UNDERTAKING. The Optionee hereby agrees to take
--------------------
whatever additional actions and execute whatever additional documents the
Company may in its reasonable judgment deem necessary or advisable in order to
carry out or effect one or more of the obligations or restrictions imposed on
the Optionee pursuant to the express provisions of this Agreement.
7
<PAGE>
XV. MODIFICATION OF RIGHTS. The rights of the Optionee are subject
----------------------
to modification and termination in certain events as provided in this Agreement
and the Plan.
XVI. GOVERNING LAW. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Delaware applicable to
contracts made and to be wholly performed therein.
XVII. COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
XVIII. ENTIRE AGREEMENT. This Agreement and the Plan constitute the
----------------
entire agreement between the parties with respect to the subject matter hereof,
and supersede all previously written or oral negotiations, commitments,
representations and agreements with respect thereto.
IN WITNESS WHEREOF, the parties hereto have executed this
Nontransferable Incentive Stock Option Agreement as of the date first written
above.
MEMRY CORPORATION
By:___________________________
Name:
Title:
OPTIONEE:
______________________________
Name: _______________________
Address: ____________________
____________________
____________________
8
<PAGE>
EXHIBIT A
---------
[Intentionally Left Blank]
[Subject to the terms and limitations specified in this Agreement,
one-fifth (1/5) of the aggregate number of options issued hereunder shall become
exercisable on each anniversary of the date of grant on which the Optionee is
employed by the Company.]
<PAGE>
EXHIBIT 10.3
Employment Agreement,
dated as of the 29th day of October, 1997,
between Thomas D. Carey and the Company
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, dated as of the 29th day of October, 1997,
between THOMAS D. CAREY (the "Executive") and MEMRY CORPORATION, a Delaware
corporation (the "Company").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company and the Executive desire to enter into an employment
agreement on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements set forth herein, the parties agree as follows:
1. Employment and Duties. The Company hereby agrees to employ the
---------------------
Executive, and the Executive hereby accepts employment, upon the terms and
conditions set forth herein. During the term of his employment, the Executive
shall diligently and faithfully serve the Company in the capacity of Vice
President of Corporate Development and Chief Financial Officer, or in such other
executive capacity or capacities as the Board of Directors may, from time to
time, direct. The Executive agrees to devote his full business time and
attention to the affairs of the Company. As Vice President of Corporate
Development and Chief Financial Officer, the Executive shall have primary
responsibility for all treasury, controller, financial planning and information
system activities of the Company and shall report to the President and Chief
Executive Officer of the Company. The Executive shall devote his best efforts
and entire business time, services and attention to the advancement of the
Company's business and interests. The Executive shall diligently and faithfully
carry out the policies, programs and directions of the Board of Directors of the
Company.
2. Term. The term of this Agreement shall commence on the date hereof,
----
and shall terminate on the day before the first anniversary of such date.
Thereafter, this Agreement shall be automatically renewed for successive one-
year periods, unless either party notifies the other in writing of his or its
intention not to renew at least six (6) months prior to the date on which the
term of this Agreement would otherwise terminate.
3. Compensation. In consideration of the services rendered by the
------------
Executive, the Company agrees to compensate the Executive as follows:
(a) The Company shall pay to the Executive a signing bonus of $75,000,
of which (i) two-thirds ($50,000) shall be paid to the Executive upon execution
of this Agreement, and (ii) the remaining one-third ($25,000) shall be paid upon
the first anniversary of this Agreement (but if and only if either (i) the
Executive is still in the employ of the Company on October 29, 1998, or (ii) the
Agreement has terminated on October 28, 1998, by virtue of notice sent by the
Company pursuant to Section 2 above where no cause for termination pursuant to
Section 5(b) below exists).
<PAGE>
(b) The Company shall pay to the Executive an annual base salary of
$150,000, payable in accordance with the Company's normal payroll practices in
effect from time to time (but not less frequently than semi-monthly). The
Executive's base salary may be increased from time to time by the Board in
accordance with normal business practices of the Company.
(c) The Executive shall also be eligible to receive additional
compensation in the form of one or more periodic cash bonuses that shall be
determined by and in the sole discretion of the Compensation Committee of the
Board of Directors of the Company. The parties agree and understand that the
form and amount of any such bonuses shall only be determined by said
Compensation Committee upon the completion of the current compensation study
being undertaken by Aon Consulting.
(d) The Company shall grant to the Executive 75,000 Incentive Stock
Options ("ISOs") pursuant to the Memry Corporation Stock Option Plan (the
"Plan"). The exercise price for the Options shall be $3.75. Of such ISOs,
15,000 shall vest as of the date of grant, and, thereafter, an additional 20,000
ISOs shall vest and become exercisable on each of the first, second and third
anniversaries of the date of grant. The ISOs shall all terminate ten years from
the date of grant.
(e) The Company shall grant to the Executive an additional 25,000
Incentive Stock Options ("Part II Options") pursuant to the Plan. The exercise
price for the Part II Options shall be $4.25 per share. The Part II Options
shall vest upon the following schedule: once the price of the Company's Common
Stock equals or exceeds $4.25 per share (based on closing bids, if available, or
closing trades otherwise) for a period of twenty consecutive trading days (the
"Part II Date"), (i) 8,333 Part II Options shall vest on the first anniversary
of the Part II Date, and (ii) an additional 8,333 shares shall vest upon each of
the second and third anniversaries of the Part II Date; provided, however, that
none of the Part II Options shall vest unless and until the Executive remains
employed by the Company on October 29, 1999. The Part II Options shall
terminate ten years from the Part II Date.
(f) The grant to the Executive of both the ISOs and the Part II
Options shall be subject to the Executive executing and delivering to the
Company Nontransferable Incentive Stock Option Agreements with the Company, in
the Company's standard form. The ISOs and the Part II Options shall be subject
to all terms, conditions and limitations set forth in such agreements and the
Plan; provided, however, that in the event of any sale of all or substantially
all of the Company's assets, or any merger or consolidation of which the Company
is not the surviving party, then to the extent that any ISOs or Part II Options
have not yet become exercisable, the Company agrees to cause the exercisability
of such options to be accelerated to the full extent permitted by the Plan.
(g) The Executive shall be entitled to fringe benefits comparable to
the benefits afforded to other executive employees of the Company, including,
but not limited to, coverage under any health, accident, hospitalization,
disability, retirement, life insurance, 401-K and annuity plans, programs or
policies maintained by the Company. In addition, and without limiting the
foregoing, the Company shall provide the Executive with the following:
(i) twenty working days of vacation per calendar year;
(ii) a car allowance of $300.00 per month;
(iii) all customary moving expenses (including, without
limitation, all temporary living expenses incurred by
Executive during the period
2
<PAGE>
from October 29, 1997 through December 31, 1997), mortgage
points, closing costs, brokerage fees (or, if the
Executive sells his house in Cary, North Carolina, without
the assistance of a real estate broker, the Company shall
pay the Executive 2% of the sales price in lieu of such
brokerage fees), title search, etc. In addition, the
Company shall provide a "tax adder" gross up for those
expenses not deductible on the Executive's personal income
taxes; and
(iv) eight paid sick days.
(h) The Executive shall be entitled to reimbursement, in accordance
with Company policy, of all reasonable, ordinary and necessary out-of-pocket
expenses which he incurs on behalf of the Company in the course of performing
his duties hereunder, subject to furnishing appropriate documentation of such
expenses in form and substance satisfactory to the Company.
4. Employee's Covenants.
--------------------
(a) Except as otherwise provided herein, during the term of
employment, as set forth in Section 2 hereof, and for a period of two years
thereafter, the Executive shall not, directly or indirectly in any manner or
under any circumstances or conditions whatsoever, on his own behalf or on behalf
of others, without the express written consent of the Company: (i) be or become
interested, as an individual, partner, principal, agent, clerk, employee,
stockbroker, officer, director, trustee, or in any other capacity whatsoever,
except as a nominal owner of stock of a public corporation, in any business
which is in any way in competition with the business of the Company or any
direct or indirect subsidiaries of the Company (including the Company, the
"Affiliated Companies") within the United States; (ii) solicit any business from
any person or firm which is or was a customer of the Affiliated Companies at the
time of termination of the Executive's employment or within the preceding
twelve-month period; (iii) solicit any person employed by the Affiliated
Companies or render services to any business which competes with the business of
any of the Affiliated Companies.
(b) The Executive acknowledges that some of the information that he
will acquire in the course of his employment with the Company concerning the
Affiliated Companies' policies, business methods, products, systems, customer
lists, marketing programs, ideas, plans concerning business or product
development, and other such matters is valuable proprietary information and may
constitute trade secrets of the Affiliated Companies. Therefore, the Executive
agrees that he shall take all reasonable and necessary steps during the term of
his employment and thereafter to safeguard such information and he shall not
disclose the same to any person or firm, except as necessary in the course of
performing his duties on behalf of the Company hereunder. Further, upon
termination of his employment hereunder, the Executive agrees that he will
deliver to the Company any and all records, files, lists or other documents
containing information within the scope of the foregoing description, including,
without limitation, the Executive's records of contacts with customers and
suppliers and potential customers and suppliers.
(c) The Executive agrees that the Company may not be adequately
compensated by money damages for a breach by the Executive of any of the
covenants contained in this Section 4 and that the Company shall be entitled to
injunctive relief and specific performance in connection therewith, in addition
to all other remedies. Each of the covenants contained in this Section 4 shall
be construed as separate covenants, and if any court shall finally determine
that any of the restraints provided for in any such covenants are too broad as
to this area, activity or time covered, said area, activity or time covered
3
<PAGE>
shall be deemed reduced to whatever extent the court deems reasonable and such
covenants shall be enforced as to such reduced area, activity or time.
(d) The parties hereto agree that the covenants and agreements
contained in this Section 4 are, taken as a whole, reasonable in their scope and
duration, and no party shall raise any issue of the reasonableness of the scope
of duration of any such covenants in any proceeding to enforce any such
covenants.
5. Termination of Employment.
-------------------------
(a) The Executive's employment hereunder may not be terminated prior
to the expiration of the employment period specified in Section 2 hereof except
in accordance with the provisions of this Section 5.
(b) The Executive's employment may be terminated by the Company at any
time for cause. For purposes of this Agreement, "for cause" shall mean
dishonesty materially relating to the Executive's employment, habitual
drunkenness, any substance abuse, commission of a felony, any violation of any
federal procurement statute or regulation, any violation of any state or federal
law relating to the workplace environment (including without limitation laws
relating to sexual harassment or age, sex or other prohibited discrimination) or
any violation of any Company policy adopted in respect of any of the foregoing,
gross incompetence, gross insubordination or any material violation of this
Agreement (which shall include, but not be limited to, a violation of the
confidentiality and non-competition provisions hereof). "For cause" termination
must be accompanied by a written notice to that effect.
(c) If the Executive dies, this Agreement shall terminate effective at
the time of his death; provided, however, that such termination shall not result
-------- -------
in the loss of any benefit or rights which the Executive may have accrued
through the date of his death. If the Executive's employment is terminated
prior to the expiration of the employment period due to his death, the Company
shall make a severance payment to the Executive or his legal representatives
equal to the Executive's regular salary payments through the end of the month in
which such death occurs.
(d) If the Executive becomes disabled, this Agreement may be
terminated, at the Company's option, at the end of the calendar month during
which his disability is determined; provided, however, that such termination
-------- -------
shall not result in the loss of any benefit or rights which the Executive may
have accrued through the date of his disability. If the Executive's employment
is terminated prior to the expiration of the employment period due to his
disability, the Company shall make a severance payment to the Executive or his
legal representative equal to the Executive's regular salary payments for a
period of six (6) months or until payments begin under any disability insurance
policy maintained by the Company for the benefit of the Executive, whichever
period is shorter. For the purposes of this section, the definition of
"disability" shall be the same as that contained in any disability insurance
policy maintained by the Company in effect at the time of the purported
disability, or last in effect, if no policy is then in effect.
(e) If the Company terminates the Executive's employment for any
reason other than upon the termination hereof pursuant to Section 2, for cause,
death or disability, the Executive shall be entitled to receive severance
payments equal to his regular salary payments for a period of six (6) months
after the date of such termination.
4
<PAGE>
6. Effect of Termination. Upon termination of the Executive's employment
---------------------
for any reason whatsoever, all rights and obligations of the parties under this
Agreement shall cease, except that the Executive shall continue to be bound by
the covenants set forth in Section 4 hereof, and the Company shall be bound to
pay to the Executive accrued compensation, including salary and other benefits,
to the date of termination and any severance payments which may be owed under
the provisions of Section 5 hereof.
7. Remedies. The Executive hereby acknowledges that his services are
--------
unique and extraordinary, and are not readily replaceable, and hereby expressly
agrees that the Company, in enforcing the covenants contained in Section 4 of
this Agreement, in addition to any other remedies provided for herein or
otherwise available at law, shall be entitled in any court of equity having
jurisdiction to an injunction restraining him in the event of such a breach,
actual or threatened, of the agreement and covenants contained in Section 4 of
this Agreement.
8. Miscellaneous.
-------------
(a) This Agreement may not be assigned by either party hereto.
(b) In the event that any provision of this Agreement is found by a
court of competent jurisdiction to be invalid or unenforceable, such provision
shall be, and shall be deemed to be, modified so as to become valid or
enforceable, and the remaining provisions of this Agreement shall not be
affected.
(c) This Agreement shall be governed by and construed in accordance
with the law of the State of Connecticut.
(d) No modification of this Agreement shall be effective unless in a
writing executed by both parties.
(e) This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof, and supersedes all prior agreements,
representations and promises by either party or between the parties.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed this instrument as of
the date first above written.
MEMRY CORPORATION
By:/s/ James G. Binch
------------------------------------
Name: James G. Binch
Title: President
/s/ Thomas D. Carey
----------------------------------------
Thomas D. Carey
6
<PAGE>
EXHIBIT 10.4
Letter Agreement,
dated December 23, 1997,
between James G. Binch and the Company
relating to the exchange of a promissory note
for the Company's common stock
<PAGE>
MEMRY CORPORATION
57 Commerce Drive
Brookfield, Connecticut 06804
December 23, 1997
Mr. James G. Binch
362 Canoe Hill Road
New Canaan, CT
Re: Conversion of Debt into Common Equity
-------------------------------------
Dear Mr. Binch:
By your signature set forth below, please confirm that, effective as of
October 31, 1997, you are converting the $60,000 principal amount loan (the
"Loan") made by you to the undersigned into 19,867 shares (the "Shares") of the
undersigned's common stock, par value $0.01 per share (the "Common Stock"). The
certificate representing the aforesaid Shares that will be issued to you shall
contain a restrictive legend to the effect that the offer and sale to you by the
undersigned of the Shares was effected in a transaction exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), by virtue of the exemption from the registration requirements
thereof contained in Section 4(2) thereof, and will only be eligible for resale
in a registered offering or in a transaction exempt from the registration
requirements of the Securities Act.
You will receive interest on the Loan, at the rate previously in effect,
through the close of business today. You and the undersigned each acknowledge
that the price of $3.02 per share at which the Shares were sold to you
represents the average of the closing bid and asked prices of the Common Stock
on today's date, or $3.78, discounted by 20% to reflect the fact that the Shares
will be subject to restrictions on resale.
<PAGE>
Please acknowledge your agreement with the terms and provisions hereof by
signing this letter in the space provided for such purpose below and returning a
copy hereof to the undersigned.
Very truly yours,
MEMRY CORPORATION
By:/s/ Thomas D. Carey
-------------------
Thomas D. Carey
V.P. - Development and C.F.O.
Agreed and accepted as of the date
first set forth above
/s/ James G. Binch
- ------------------
James G. Binch
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS FOUND ON PAGES 3-5 OF THE COMPANY'S FORM 10QSB FOR THE YEAR-TO-DATE
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 179000
<SECURITIES> 0
<RECEIVABLES> 2379000
<ALLOWANCES> 0
<INVENTORY> 1947000
<CURRENT-ASSETS> 5470000
<PP&E> 4306000
<DEPRECIATION> 1588000
<TOTAL-ASSETS> 11049000
<CURRENT-LIABILITIES> 3618000
<BONDS> 0
0
0
<COMMON> 40176184
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 11049000
<SALES> 8395000
<TOTAL-REVENUES> 8504000
<CGS> 3716000
<TOTAL-COSTS> 4503000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 99000
<INCOME-PRETAX> 1308000
<INCOME-TAX> 160000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1148000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
