<PAGE>
                                                                   EXHIBIT 10.44

                           COMMERCIAL REVOLVING LOAN,
                        TERM LOAN AND SECURITY AGREEMENT

     This Commercial Revolving Loan, Term Loan and Security Agreement dated
August 9, 1996 among  MEMRY CORPORATION, a Delaware corporation with its chief
executive office and principal place of business at 57 Commerce Drive,
Brookfield, Connecticut 06804 ("MEMRY"), WRIGHT MACHINE CORPORATION, a Delaware
corporation with its chief executive office and principal place of business at
69 Armory Street, Worcester, Massachusetts 01603 ("WRIGHT"; Memry and Wright
collectively, the "BORROWERS"), and AFFILIATED BUSINESS CREDIT CORPORATION, a
Connecticut corporation with an office at 72 Queen Street, Southington,
Connecticut 06489 ("LENDER").

                              ____________________

                                    PREAMBLE

     WHEREAS, Borrowers have requested Lender to extend to Borrowers the
following financial accommodations (collectively, the "LOANS"): (a) a revolving
loan in the maximum aggregate principal amount of up to $1,500,000, and (b) a
term loan in the original principal amount of $1,135,000; and

     WHEREAS, Lender has agreed to extend the Loans to Borrowers on the
conditions set forth below.

     NOW, THEREFORE, for the mutual considerations contained in this Agreement,
Borrowers and Lender agree as follows:

     ARTICLE I.  DEFINITIONS

          SECTION 1.1.  ACCOUNTING TERMS; ETC.

     Unless otherwise defined, all accounting terms shall be construed, and all
computations or classifications of assets and liabilities and of income and
expenses shall be made or determined in accordance with generally accepted
accounting principles consistently applied. As used herein, or in the Financing
Agreements or in any certificate, document or report delivered pursuant to this
Agreement or any other Financing Agreement, the following terms shall have the
following meanings:

     (a) "Account" and "Accounts" shall have the meanings assigned in Section
                                                                      ------- 
8.1(a) hereof.
------

     (b) "Account Debtor" and "Account Debtors" shall mean the person or entity
or persons or entities obligated to Borrowers upon the Accounts.
<PAGE>
 
                                      -2-

     (c) "Agreement" shall mean this Commercial Revolving Loan, Term Loan and
Security Agreement as the same may from time to time be amended, supplemented or
otherwise modified.

     (d) "Arrangement" and "Arrangements" shall have the meaning assigned in
Section 5.1(n) hereof.
--------------

     (e)  "Assignment of Leases and Rents" shall have the meaning assigned in
Section 6.1(1) hereof;
--------------

     (f) "Bank Accounts" shall mean the account described in Section 7.15
                                                             ------------
hereof.

     (g) "Borrowing Base" shall mean an amount equal to the lesser of: (i) One
Million Five Hundred Thousand Dollars ($1,500,000) or (ii) an amount equal to
the aggregate of (1) eighty percent (80%) of Eligible Accounts and (2) the
lesser of (A) twenty-five percent (25%) of Eligible Inventory, or (B) Five
Hundred Thousand Dollars ($500,000).

     (h) "Business Day" shall mean any day other than a day on which commercial
banks in Hartford, Connecticut are required or permitted by law to close.

     (i) "CII Agreement" shall have the meaning assigned in Section 6.1(p)
                                                            --------------
hereof;

     (j) "Collateral" shall mean the property of Borrowers described in Section
                                                                        -------
8.1 hereof.
---

     (k) "Company" and "Companies" shall mean Borrowers and any entities
affiliated with Borrowers in connection with any Plan.

     (l)  "Defaulting Event" shall mean the occurrence of an Event of Default or
the occurrence of any condition or event which but for the giving of notice or
passage of time or both would constitute an Event of Default.

     (m) "Dollar" and the sign "$" shall mean lawful money of the United States
of America.

     (n) "Eligible Accounts" shall mean those Accounts of Borrowers which arise
from the sale of inventory or rendition of services in the ordinary course of
Borrowers' businesses, are subject to Lender's perfected, first lien security
interest and no other lien or security interest, and are evidenced by an invoice
or other documentary evidence satisfactory to Lender. Further, no Account shall
be an Eligible Account if:

     (i) it arises out of a sale made by Borrowers to any 
<PAGE>
 
                                      -3-

affiliate, division, subsidiary or parent of Borrowers or to any person or
entity controlled by or under common control with an affiliate, division,
subsidiary or parent of Borrowers;

     (ii) it is due or unpaid more than ninety (90) days after its original
invoice date;

     (iii) the account debtor is also Borrowers' creditor or supplier, has
disputed liability or made any claim with respect to any other account due from
such account debtor to Borrowers, or the account is otherwise subject to any
defense, counterclaim or offset of or by the account debtor (provided, however,
that Accounts of Borrowers arising out of sales to Raychem Corporation shall not
be ineligible pursuant to this subsection (iii) if Lender has received a "no 
off-set" agreement acceptable in form, scope and substance to Lender in Lender's
sole discretion);

     (iv) the account debtor is located outside the United States (unless such
account is supported by a letter of credit or credit insurance acceptable in
form, scope and substance to Lender in Lender's sole discretion);

     (v) the account debtor is located in New Jersey or Minnesota, unless
Borrowers have (x) filed a Notice of Business Activities Report in the
appropriate office or agency for such state in the then current year, or (y)
received a Certificate of Authority to do business and is in good standing in
such state;

     (vi) the sale giving rise to the account is on a bill-and-hold, guaranteed
sale, sale-and-return, sale on approval, consignment or other repurchase or
return basis, or is evidenced by a Notes or chattel paper;

     (vii) Borrowers have made an agreement with the account debtor for any
deduction from the invoice representing said account except for discounts or
allowances made in the ordinary course of Borrowers' businesses for prompt
payment, which discounts or allowances are reflected in the calculation of the
face value of each respective invoice related thereto;

     (viii) twenty-five percent (25%) or more of the aggregate invoices for an
account debtor are due or unpaid for more than ninety (90) days after their
original invoice date;

     (ix) it arises out of a sale made by the Borrowers to an account debtor
that is the United States Government or any agency or subdivision thereof
(collectively the "GOVERNMENT"), unless Borrowers have complied in all respects
with the Federal Assignment of Claims Act of 1940, or has otherwise satisfied
Lender as to the assignability and collectability of said accounts; or
<PAGE>
 
                                      -4-

     (x) the Lender in its sole discretion deems the Account to be unacceptable
for any reason.

     If there is any dispute as to whether any Account is an Eligible Account,
the determination of Lender shall at all times control.

     (o) "Eligible Inventory" shall mean Memry's inventory of raw materials and
finished goods located at 57 Commerce Drive, Brookfield, Connecticut, 69 Armory
Street, Worcester, Massachusetts, 4065 Campbell Avenue, San Mateo County, Menlo
Park, California, and 220 Jefferson Avenue, Menlo Park, California to the extent
Lender, in its sole discretion, determines that such inventory is eligible for
advance. In addition and without limiting Lender's discretion, Eligible
Inventory shall be net of reserves and returns, valued at the lower of cost or
market (as determined in accordance with the FIFO method of accounting), and
subject to Lender's perfected first security interest and to no other lien or
security interest.  Further and without limiting Lender's discretion, no
inventory shall be eligible if it is:

     (i) deemed by Lender as slow moving or obsolete;

     (ii) not otherwise in good condition and salable through normal trade
channels; or

     (iii) not salable in the ordinary course of Borrowers' businesses.

     (p) "Environmental Laws" shall mean any and all applicable foreign,
federal, state and local statutes, laws, regulations, rules, ordinances, orders,
guidances, policies or common law (whether now existing or hereafter enacted or
promulgated) pertaining to the environment, of any and all federal, state or
local governments and governmental and quasi-governmental agencies, bureaus,
subdivisions, commissions or departments which may now or hereafter have
jurisdiction over Borrowers and all applicable judicial and administrative and
regulatory decrees, judgments and orders, including common law rulings and
determinations, relating to injury to, or the protection of, real or personal
property or human health or the environment, including, without limitation, all
requirements pertaining to reporting, licensing, permitting, investigation,
remediation and removal of emissions, discharges, releases or threatened
releases of Hazardous Materials, chemical substances, pollutants or contaminants
whether solid, liquid or gaseous in nature, into the environment or relating to
the manufacture, processing, distribution use, treatment, storage, disposal,
transport or handling of such Hazardous Materials, chemical substances,
pollutants or contaminants.

     Without limiting the generality of the foregoing, the term "Environmental
Laws" shall encompass each of the following statutes, and regulations
<PAGE>
 
                                      -5-

promulgated thereunder, and amendments and successors to such statutes and
regulations, as may be enacted and promulgated from time to time: Federal
Occupational Safety and Health Act ("OSHA"); the Clean Air Act ("CAA"); the
Toxic Substances Control Act ("TSCA"); the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), as amended by the Superfund
Amendments and Reauthorization Act of 1986 ("SARA"); the Clean Water Act
("CWA"); the Resource Conservation and Recovery Act, as amended by the Hazardous
and Solid Waste Amendments of 1984 ("RCRA"); the Hazardous Materials
Transportation Act; and all applicable Environmental Laws of each state and
municipality in which Borrowers conduct business or locate assets and all rules
and regulations thereunder and amendments thereto, and all similar state and
local laws, rules and regulations.

     (q) "ERISA" shall mean the Employee Retirement Income Security Act of 1974
and all rules and regulations promulgated pursuant thereto, as the same may from
time to time be supplemented or amended.

     (r) "Event of Default" and "Events of Default" shall have the meanings
assigned in Section 9.1 hereof.
            -----------

     (s) "Fidelity Agreements" shall have the meaning assigned in Section 6.1(d)
                                                                  ------------- 
hereof.

     (t) "Fidelity Guarantors" shall have the meaning assigned in Section 6.1(d)
                                                                  --------------
hereof.

     (u) "Financing Agreement" or "Financing Agreements" shall mean this
Agreement, the Notes, the Mortgage, the Assignment of Leases and Rents, the
Indemnity Agreement, the Stock Pledge Agreement, the Patent Security Agreement,
the Trademark Security Agreement and any and all other instruments, agreements
and documents executed in connection herewith or therewith or related hereto or
thereto, together with any amendments, supplements or modifications hereto or
thereto.

     (v) "Fixed Assets" shall mean equipment and other assets of Borrowers
which, by generally accepted accounting principles, must be treated as fixed
assets in financial statements of Borrowers.

     (w) "Government" shall have the meaning assigned in clause (ix) of the
definition of Eligible Accounts.

     (x) "Hazardous Material" shall mean any chemical, compound, material,
mixture or substance: (i) the presence of which requires or may hereafter
require notification, investigation, monitoring or remediation under any
Environmental Law; (ii) which is or becomes defined as a "hazardous waste",
"hazardous material" or "hazardous substance" or "toxic substance" or
<PAGE>
 
                                      -6-

"pollutant" or contaminant" under any present or future applicable federal,
state or local law or under the rules and regulations adopted or promulgated
pursuant thereto, including, without limitation, the Environmental Laws; (iii)
which is toxic, explosive, corrosive, reactive, ignitable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is or becomes
regulated by any governmental authority, agency, department, commission, board,
agency or instrumentality of any foreign country, the United States, any state
of the United States, or any political subdivision thereof to the extent any of
the foregoing has or had jurisdiction over Borrowers; (iv) which contains
without limitation, gasoline, diesel fuel or other petroleum products, asbestos
or polychlorinated biphenyls ("PCBS"); or (v) any other chemical, material or
substance, exposure to, or disposal of, which is now or hereafter prohibited,
limited or regulated by any federal, state or local governmental body,
instrumentality or agency.

     (y) "Indemnifiable Liability" shall have the same meaning assigned in
Section 14.1(a) hereof.
--------------

     (z) "Indemnitee" and "Indemnitees" shall have the meanings assigned in
Section 14.1(a) hereof.
--------------         

     (aa) "Indemnity Agreement" shall have the same meaning assigned in Section
                                                                        -------
6.1(m) hereof.
------        

     (bb) "Inventory" shall have the meaning assigned in Section 8.1(d) hereof.
                                                         -------------         

     (cc) "Lessor's Agreements" shall have the meaning assigned in Section
                                                                   -------
6.1(g) hereof.
------

     (dd) "Life Insurance Assignment" shall have the meaning assigned in Section
                                                                         -------
6.1(e) hereof.
------        

     (ee) "Loan" means a Revolving Loan or the Term Loan and "Loans" means the
Revolving Loans and the Term Loan.

     (ff) "Massachusetts Premises" shall have the meaning assigned in Section
                                                                      -------
6.1(k) hereof.
------

     (gg) "Minimum Balance" shall have the meaning assigned in Section 5.1(a)
                                                               -------------
hereof.

     (hh) "Mortgage" shall have the meaning assigned in Section 6.1(k) hereof.
                                                        --------------        

     (ii) "No Off-Set Agreement" shall have the meaning assigned in
<PAGE>
 
                                      -7-

Section 6.1(o) hereof.
--------------

     (jj) "Note" means the Revolving Promissory Note or the Term Promissory
Note, and "Notes" means the Revolving Promissory Note and the Term Promissory
Note.

     (kk) "Notice of Borrowing" shall have the meaning assigned in Section 2.3
                                                                   -----------
hereof.

     (ll) "Obligation" and "Obligations" mean and include all loans advances,
interest, indebtedness, liabilities, obligations, fees, charges, expenses,
guaranties, covenants and duties at any time owing by Borrowers to Lender of
every kind and description, whether or not evidenced by any note or other
instrument, whether or not for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising,
including, but not limited to, the Loans, the Service Charge, the Termination
Fee, the Minimum Interest Amount, and all other indebtedness, liabilities and
obligations of Borrowers arising under this Agreement and the other Financing
Agreements or otherwise, and all reasonable costs, expenses, fees, charges
incurred by Lender hereunder or otherwise with respect to Borrowers, including,
without limitation, reasonable fees and expenses of attorneys, paralegals and
other professionals incurred in connection with any of the foregoing, or in any
way connected with, involving or relating to the preservation, enforcement,
protection or defense of, or realization under this Agreement, any of the other
Financing Agreements, any related agreement, document or instrument, the
Collateral and the rights and remedies hereunder or thereunder, including
without limitation, all reasonable costs, expenses and fees incurred in
inspecting or surveying mortgaged real estate, if any, or conducting
Environmental studies or tests, and all reasonable costs, expenses and fees
incurred in connection with any "workout" or default resolution negotiations
involving legal counsel or other professionals and further in connection with
any modification, renegotiation or restructuring of the indebtedness evidenced
by this Agreement and/or any of the other Financing Agreements and/or
Obligations.

     (mm) "Patent Security Agreement" shall have the meaning assigned in Section
                                                                         -------
6.1(p) hereof.
------        

     (nn) "Plan" means any employee benefit plan or other plan maintained by
Borrowers or any entity affiliated with Borrowers for employees covered by Title
I of ERISA.

     (oo) "Premises" shall mean the real property located at 57 Commerce Drive,
Brookfield, Connecticut, 69 Armory Street, Worcester, Massachusetts, 4065
Campbell Avenue, San Mateo County, Menlo Park, California and 220 Jefferson
Avenue, Menlo Park, California.
<PAGE>
 
                                      -8-

     (pp) "Prime Rate" shall mean the Prime Rate as published from time to time
in the "Money Rates" section of The Wall Street Journal or any successor
                                -----------------------
publication, or in the event that such rate is no longer published in The Wall
                                                                      --------
Street Journal, a comparable index or reference selected by Lender. The Prime
--------------
Rate need not and may not necessarily be the lowest or most favorable rate.

     (qq) "Receivables" shall have the meaning assigned in Section 8.1(a)
                                                           -------------
hereof.

     (rr) "Release" shall mean any release, emission, disposal, leaching or
migration into the environment (including, without limitation, the abandonment
or disposal of any barrels, containers, or other closed receptacles containing
any Hazardous Materials) or into or out of any property owned, occupied or used
by Borrowers.

     (ss) "Revolving Loan" and "Revolving Loans" shall have the meanings
assigned in Section 2.1 hereof.
            -----------

     (tt) "Revolving Loan Account" shall have the meaning assigned in Section
                                                                      -------
2.3 hereof.
---

     (uu) "Revolving Promissory Note" shall have the meaning assigned in Section
                                                                         -------
2.3 hereof.
---

     (vv) "Service Charge" shall have the meaning assigned in Section 4.3 below.
                                                              -----------       

     (ww) "Stock Pledge Agreement" shall have the meaning assigned in Section
                                                                      -------
6.1(j) hereof.
------

     (xx) "Subordinating Creditor" and "Subordinating Creditors" mean James G.
Binch, Emitzel Holdings SA and Harbour Investment Corporation.

     (yy) "Subordination Agreement" and "Subordination Agreements" shall have
the meaning set forth in Section 6.1(f) hereof.
                         -------------

     (zz) "Subsidiary" and "Subsidiaries" shall mean any corporation or
corporations of which the outstanding shares of any stock having ordinary voting
power is at the time owned by Borrowers and/or by one or more Subsidiaries.

     (aaa) "Term" shall have the meaning assigned in Section 13.1(a) hereof.
                                                     --------------         

     (bbb) "Term Promissory Note" shall have the meaning assigned in Section 3.1
hereof.
<PAGE>
 
                                      -9-

     (ccc) "Termination Fee" shall have the meaning assigned in Section 13.1(b)
                                                                -------------- 
hereof.

     (ddd) "Trademark Security Agreement" shall have the meaning assigned in
Section 6.1(q) hereof.
--------------

     ARTICLE II.  REVOLVING LOANS

          SECTION 2.1.  AMOUNTS.

     Subject to the terms and conditions contained in this Agreement, and so
long as no Defaulting Event has occurred, Lender agrees, in its sole discretion,
to make and remake loans (collectively, the "REVOLVING LOANS" and, individually,
a "REVOLVING LOAN") to Borrowers from time to time until terminated as provided
below in principal amounts not exceeding in the aggregate at any one time
outstanding the Borrowing Base, it being agreed and understood that at no time
shall the maximum aggregate principal amount of the Revolving Loans made by
Lender exceed the Borrowing Base.

          SECTION 2.2.  PAYMENT ON DEMAND.

     ALL OBLIGATIONS OF BORROWERS ARISING UNDER THE REVOLVING LOANS SHALL BE
PAID BY BORROWERS IN FULL UPON DEMAND BY LENDER NOTWITHSTANDING LENDER'S RIGHTS
UPON THE OCCURRENCE OF AN EVENT OF DEFAULT AND WHETHER OR NOT SUCH EVENT OF
DEFAULT HAS OCCURRED.

          SECTION 2.3.  PROCEDURE FOR ADVANCES, NOTICE OF BORROWING, REVOLVING
PROMISSORY NOTE, ETC.

     Within the limits of the Borrowing Base and the Term, so long as Borrowers
are in compliance with all of the terms and conditions of this Agreement and no
Defaulting Event has occurred, Borrowers may request borrowings and may repay
and request reborrowings of Revolving Loans.  Whenever Borrowers desire an
advance, Borrowers shall notify Lender (which notice shall be irrevocable) by
telecopy or telephone of the proposed borrowing.  Such notice (each, a "NOTICE
OF BORROWING") shall specify the date of the proposed borrowing and the amount
proposed to be borrowed.  Each Notice of Borrowing must be received by Lender no
later than 11:00 a.m., Hartford, Connecticut time on the day such borrowing is
requested.  In addition to this Agreement, the Revolving Loans shall be
evidenced by a revolving Promissory Note payable to Lender in the form of
Exhibit A attached hereto (the "REVOLVING PROMISSORY NOTE").  Insofar as
---------                                                               
Borrowers may request and Lender shall make Revolving Loans hereunder, Lender
shall enter such advances as debits on a revolving loan account maintained by
Borrowers with Lender (the "REVOLVING LOAN ACCOUNT").  In order to facilitate
the requesting and making of advances hereunder, each of the Borrowers hereby
appoints Memry as their agent authorized to request, receive and distribute to
the Borrowers advances under the Revolving Loan and to communicate with the
Lender with respect to 
<PAGE>
 
                                      -10-

the Revolving Loan, and Wright hereby accepts such appointment. Lender may also
record to the Revolving Loan Account, in accordance with customary accounting
practices and procedures, (i) all fees, accrued and unpaid interest, late fees,
usual and customary charges for the maintenance and administration of checking
and any other accounts maintained by Borrowers with Lender, and other fees and
charges which are properly chargeable to Borrowers under this Agreement, (ii)
all payments, subject to collection, made by or account of indebtedness
evidenced by the Revolving Loan Account, (iii) all proceeds of Collateral which
are finally paid to Lender in its own office in cash or collected items, and
(iv) other appropriate debits and credits, including without limitation,
payments of interest due hereunder.

          SECTION 2.4.  MONTHLY STATEMENTS.

     On a monthly basis, Lender shall render a statement for the Revolving Loan
Account, which statement shall be considered correct and accepted by Borrowers
and conclusively binding upon Borrowers unless Borrowers notify Lender to the
contrary within ten (10) days of the receipt of said statement by Borrowers.
Lender shall have the right to debit the Revolving Loan Account for all interest
charges on the Revolving Loan as and when the same shall be due and payable, if
not otherwise paid by Borrowers, subject to applicable law.

          SECTION 2.5.  LENDER DISCRETION.

     Nothing herein shall be construed to (a) require Lender to make Revolving
Loans, and/or (b) prohibit Lender from lending in excess of the Borrowing Base,
it being agreed that all such loans and advances shall be at Lender's sole
discretion and shall not establish a pattern or custom binding upon Lender.

     ARTICLE III.  TERM LOAN

          SECTION 3.1.  AMOUNT.

     Subject to the terms and conditions contained in this Agreement, Lender
agrees to make a loan to Borrowers in the original principal amount of
$1,135,000 (the "TERM LOAN").  In addition to this Agreement, the Term Loan
shall be evidenced by a Term Promissory Note payable to Lender in the form of
Exhibit B attached hereto (the "TERM PROMISSORY NOTE").
---------                                              

          SECTION 3.2.  MONTHLY STATEMENTS.

     On a monthly basis, Lender shall render a statement for the Term Loan,
which statement shall be considered correct and accepted by Borrowers and
conclusively binding upon Borrowers unless Borrowers notify Lender to the
contrary within ten (10) days of the receipt of said statement by Borrowers.
Lender shall have the right to debit any account of Borrowers for all principal,
interest and other charges on the Term Loan as and when the same shall be due
and payable, if not otherwise paid by Borrowers.
<PAGE>
 
                                      -11-

     ARTICLE IV.  INTEREST, FEES AND OTHER CHARGES

          SECTION 4.1.  INTEREST.

     (a) INTEREST RATES.

     (i) REVOLVING LOANS.  So long as no Defaulting Event has occurred, each
Revolving Loan shall bear interest (from the date made through and including the
date of payment in full) at a floating rate per annum equal to two percentage
points (2%) above the Prime Rate, on the greater of (i) the actual monthly
balance outstanding under the Revolving Loan, or (ii) a minimum assumed monthly
loan balance of, for the period commencing on the date hereof and continuing for
a period of ninety (90) days from the date hereof, $250,000; for the period
commencing on the date ninety-one (91) days from the date hereof and continuing
through and including the date one hundred eighty (180) days from the date
hereof, $500,000; and thereafter, $750,000 (the "MINIMUM BALANCE").

     (ii) TERM LOAN.  So long as no Event of Default has occurred and shall be
continuing, the Term Loan shall bear interest (from the date made through and
including the date of payment in full) on the outstanding principal amount
thereof at a floating rate per annum equal to two and one-quarter percentage
points (2.25%) above the Prime Rate.

     (b) PAYMENT OF INTEREST. So long as any of the Obligations remain
outstanding, interest on the Loans shall be due and payable without notice or
demand monthly in arrears beginning on September 1, 1996 and continuing on the
first business day of each and every month thereafter.

     (c) DEFAULT INTEREST RATE.  Notwithstanding the foregoing, interest on the
Loans, at all times after the occurrence of an Event of Default and during the
continuance of an Event of Default, and interest on all payments of interest
that are not paid when due, shall accrue at a rate per annum equal to four
percentage points (4.0%) above the applicable interest rates otherwise in effect
under this Agreement.

     (d) CALCULATION OF INTEREST. Interest on the Loans shall be calculated on
the basis of a 360-day year and the actual number of days elapsed.

     (e) LATE PAYMENT.  If any amount due hereunder or under the Notes is not
paid within ten (10) days after the date it is due and payable, without in any
way affecting Lender's right to make demand hereunder or to declare an Event of
Default to have occurred, Lender may in its sole discretion assess a late charge
equal to five percent (5.0%) of such payment against Borrowers, which late
charge shall be immediately due and payable and may be paid by a charge to
Borrowers' loan account as contemplated in Section 2.3
<PAGE>
 
                                      -12-

above.

     (f) LAWFUL INTEREST.  It being the intent of the parties that the rate of
interest and all other charges to Borrowers be lawful, if for any reason the
payment of a portion of interest, fees or charges as required by this Agreement
would exceed the limit established by applicable law which a commercial lender
such as Lender may charge to a commercial Borrowers such as Borrowers, then the
obligation to pay interest or charges shall automatically be reduced to such
limit and, if any amounts in excess of such limits shall have been paid, then
such amounts shall be applied to the unpaid principal amount of the Obligations
or refunded to Borrowers, so that under no circumstances shall interest or
charges required hereunder exceed the maximum rate allowed by law.

          SECTION 4.2.  CLOSING FEES.

     On or before the date hereof, Borrowers shall pay or have paid to Lender
all fees, expenses and other costs incurred by Lender in connection with the
closing of the extension of the Loans (including without limitation, all
attorney's and other professionals' fees and expenses).

          SECTION 4.3.  SERVICE CHARGES.

     Borrowers shall also pay to Lender a monthly service charge of $1,250 for
services rendered by Lender in connection with the maintenance of the Revolving
Loan facility being provided hereunder (the "SERVICE CHARGE"), which Service
Charge shall be due and payable for each month of the Term.  The Service Charge
shall be paid commencing on the first business day of the first month following
the date hereof and continuing on the first business day of each and every month
thereafter until the Revolving Loan is paid in full and any obligation of Lender
to make further advances has been terminated.

          SECTION 4.4.  COMMITMENT FEE.

      On or before the date hereof, Borrowers shall pay or have paid to Lender a
non-refundable commitment fee of $7,500 in connection with the closing of the
Revolving Loan, and a non-refundable origination fee of $5,675 in connection
with the closing of the Term Loan.

          SECTION 4.5.  TERM LOAN PREPAYMENTS.

      Borrower may not make any optional prepayments, in whole or in part, on
the Term Loan.

     ARTICLE V.  REPRESENTATIONS AND WARRANTIES

          SECTION 5.1.  REPRESENTATIONS AND WARRANTIES.

      Each of the Borrowers represents and warrants to Lender that:

     (a) GOOD STANDING AND QUALIFICATION. It is duly organized, validly existing
and in good standing under the laws of the State of Delaware.
<PAGE>
 
                                      -13-

It has all requisite corporate power and authority to own and operate its
properties and to carry on its business as presently conducted and is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction wherein the character of the properties owned or leased by it
therein or in which the transaction of its business therein makes such
qualification necessary, except where such failure to be so qualified would not
have a material adverse effect on the financial condition, assets or operations
of the Borrowers.

     (b) CORPORATE AUTHORITY. It has full power and authority to enter into this
Agreement and the other Financing Agreements to which it is a party, to make the
borrowings contemplated herein, to execute and deliver the Notes and the other
Financing Agreements to which it is a party, and to incur the obligations
provided for herein and therein, all of which have been duly authorized by all
necessary and proper corporate action. No other consent or approval or the
taking of any other action in respect of shareholders or of any public authority
is required as a condition to the validity or enforceability of this Agreement,
the Notes, the other Financing Agreements or any other instrument, document or
agreement delivered in connection herewith or therewith.

     (c) BINDING AGREEMENTS.  This Agreement constitutes, and the Notes and the
other Financing Agreements executed and/or delivered in connection herewith or
therewith, when issued and delivered pursuant hereto for value received shall
constitute, valid and legally binding obligations of Borrowers, enforceable in
accordance with their respective terms, except as enforcement may be limited by
principles of equity, bankruptcy, insolvency, or other laws affecting the
enforcement of creditors' rights generally.

     (d) LITIGATION.  Except as set forth on Schedule 5.1(d) attached hereto,
                                             ---------------
there are no actions, suits or proceedings pending against Borrowers before any
court or administrative agency, nor are there any actions, suits or proceedings
threatened, which, individually or in the aggregate, would materially and
adversely affect the financial condition, assets or operations of Borrowers, nor
are there any such actions, suits or proceedings which question the validity of
this Agreement, the Notes, any of the other Financing Agreements or any action
to be taken in connection with the transactions contemplated hereby or thereby.

     (e) NO CONFLICTING LAW OR AGREEMENTS. The execution, delivery and
performance by Borrowers of this Agreement, the Notes and each other Financing
Agreement, as the case may be, does not (i) violate any provision of its
Certificate of Incorporation or By-laws or any order, decree or judgment, or any
material provision of any statute, rule or regulation to which the Borrowers may
be subject; (ii) violate or conflict with, result in a breach of or constitute
(with notice or lapse of time, or both) a material default under any
<PAGE>
 
                                      -14-

shareholder agreement, stock preference agreement, mortgage, indenture or other
contract or undertaking to which it is a party, or by which any of its
properties may be bound; and (iii) result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any property or assets
of Borrowers, except for the liens granted hereunder to Lender.

     (f) TAXES.  With respect to all of its taxable periods it has filed all tax
returns which are required to be filed and all federal, state, municipal,
franchise and other taxes shown on such filed returns have been paid or are
being diligently contested by appropriate proceedings and have been reserved
against, as required by generally accepted accounting principles, consistently
applied.

     (g) FINANCIAL STATEMENTS.  It has heretofore delivered to Lender its
audited annual balance sheet as of June 30, 1995, and the related statements of
income, retained earnings and cash flows for the fiscal year or period then
ended. Each of such statements is complete and correct in all material respects
and fairly presents its consolidated financial condition as of the dates and for
the periods referred to therein and has been prepared in accordance with
generally accepted accounting principles. There are no liabilities, direct or
indirect, fixed or contingent, of Borrowers as of the dates of said balance
sheets which are not reflected in such statements or in the Notes thereto.

     (h) ADVERSE DEVELOPMENTS.  Since its unaudited balance sheet as of March
31, 1996, there has been no material adverse change in its financial condition,
business, operations, affairs or prospects or in any of its properties or
assets.

     (i) EXISTENCE OF ASSETS AND TITLE THERETO.  It has good and marketable
title to all of its properties and assets, including the properties and assets
reflected in the financial statements delivered in connection herewith. None of
such properties or assets are subject to any mortgage, pledge, lien, lease,
encumbrance or charge, except those permitted under the terms of this Agreement,
pledges or deposits in connection with or to secure workers' compensation,
unemployment or liability insurance, liens for property taxes not yet due and
payable, and other similar liens arising by operation of law and not in the
aggregate material.

     (j) REGULATIONS G, T, U AND X.  The proceeds of the borrowings hereunder
are not being used and will not be used, directly or indirectly, for the
purposes of purchasing or carrying any margin stock in contravention, or which
would cause any Lender to be in violation, of Regulations G, T, U or X
promulgated by the Board of Governors of the Federal Reserve System.
<PAGE>
 
                                      -15-


     (k) COMPLIANCE.  Except as set forth on Schedule 5.1(k) attached hereto, it
                                             ---------------
is not in default with respect to any order, writ, injunction or decree of any
court or of any federal, state, municipal or other governmental department,
commission, board, bureau, agency, authority or official, nor is it in violation
of any material law, statute, rule or regulation to which it is or any of its
properties are subject and it has not received notice of any such default from
any party and is not in default in the payment or performance of any of its
material obligations to any third parties or in the performance of any material
mortgage, indenture, lease, contract or other agreement to which it is a party
or by which any of its assets or properties may be bound.

     (l) LEASES AND SUBLEASES. It enjoys quiet and undisturbed possession under
all leases and subleases under which it is operating, and all of such leases and
subleases are valid and subsisting and not in default.

     (m) PENSION PLANS.

     (i) No fact, including but not limited to any "reportable event", as that
term is defined in Section 4043 of ERISA, exists in connection with any Plan of
any of the Companies under Sections 414(b), (c), (m), (n) and (o) of the
Internal Revenue Code of 1986, as amended (the "CODE") which might constitute
grounds for termination of any such Plan by the Pension Benefit Guaranty
Corporation (the "PBGC") or for the appointment by the appropriate United States
District Court of a trustee to administer any such Plan. A list of all of the
Companies' respective Plans are attached hereto on Schedule 5.1(m) attached
                                                   --------------
hereto;

     (ii) No "prohibited transaction" within the meaning of Section 406 of ERISA
or Section 4975 of the Code exists or will exist upon the execution and delivery
of this Agreement and the other Financing Agreements, or the performance by the
parties hereto or thereto of their respective duties and obligations hereunder
and thereunder;

     (iii) Each of the Companies agrees to do all acts, including, but not
limited to, making all contributions necessary to maintain compliance with ERISA
or the Code, and agrees not to terminate any such Plan in a manner (or do or
fail to do any act) which could result in the imposition of a lien on any of its
properties pursuant to Section 4068 of ERISA;

     (iv) None of the Companies sponsors or maintains, and has never contributed
to, and has not incurred any withdrawal liability under a "multi-employer plan"
as defined in Section 3 of ERISA and none of the Companies has any written or
verbal commitment of any kind to establish, maintain or contribute to any 
"multi-employer plan" under the Multi-employer Pension Plan Amendment Act of
1980;
<PAGE>
 
                                      -16-

     (v) None of the Companies has any unfunded liability in contravention of
ERISA and the Code;

     (vi) Each and every Plan complies currently, and has complied in the past,
both as to form and operation, with its terms and with provisions of the Code
and ERISA, and all applicable regulations thereunder and all rules issued by the
Internal Revenue Service U.S. Department of Labor and the PBGC and as such, is
and remains a "qualified" plan under the Code;

     (vii) No actions, suits or claims are pending (other than routine claims
for benefits) against any Plan, or the assets of any such Plan;

     (viii) The Companies have performed all obligations required to be
performed by it under any Plan and the Companies are not in default, or in
violation of any Plan, and have no knowledge of any such default or violation by
any other party to any and all Plans;

     (ix) No liability has been incurred by any of the Companies to the PBGC or
to participants or beneficiaries on account of any termination of a Plan subject
to Title IV of ERISA, no notice of intent to terminate a Plan has been filed by
(or on behalf of) any of the Companies pursuant to Section 4041 of ERISA and no
proceeding has been commenced by the PBGC pursuant to Section 4042 of ERISA;

     (x) The reporting and disclosure provisions of the Securities Act of 1933
and Securities Exchange Act of 1934 have been complied with for all such Plans.

     (n) DEFERRED COMPENSATION ARRANGEMENTS. Except as set forth in Schedule
                                                                    -------- 
5.1(n) attached hereto, none of the Companies has entered into employment
-----
contracts or deferred compensation plans, incentive compensation plans,
executive compensation plans, arrangements or commitments (each, individually an
"ARRANGEMENT"). With respect to each such Arrangement:

     (i) Such Arrangement complies currently, and has complied in the past, both
as to form and operation, with its terms and the provisions of the Code and
ERISA and all applicable laws, rules and regulations;

     (ii) The disclosure and reporting provisions of the Securities Act of 1933
and the Securities Exchange Act of 1934 have been satisfied;

     (iii) Such Arrangement is legally valid and binding and is in full force
and effect;

     (iv) The Companies have made all contributions required to 
<PAGE>
 
                                      -17-

be made under such Arrangement and no contributions are currently due and owing
thereunder;

     (v) There are no actions, suits or claims pending (other than routine
claims for benefits) or, to the best of the Companies' knowledge, which could be
reasonably expected to be asserted against such Arrangement; and

     (vi) The Companies have performed all obligations required to be performed
by it under such Arrangement and the Companies are not in default or in
violation of, and the Companies have no knowledge of a such default or violation
by any other party to such Arrangement.

          Notwithstanding anything to the contrary contained herein, the
representations and warranties contained in this Section 5.1(n) are qualified in
their entirety by the disclosure set forth in Schedule 5.1(n) attached hereto.
                                              ---------------                 

     (o) CHIEF EXECUTIVE OFFICE.  Its chief executive office and principal
place of business, and the office where its books and records concerning
Collateral are kept, is as set forth in the first paragraph of this Agreement
and in Schedule 5.1(o) attached hereto.
       ---------------                 

     (p) PLACES OF BUSINESS.  It has no other places of business and locates no
Collateral, specifically including books and records, at any location other than
as set forth in Schedule 5.1(o) attached hereto.  It shall maintain a full and
                ---------------                                               
complete set of its books and records in its offices at the chief executive
office described in the immediately preceding paragraph.

     (q) CONTINGENT LIABILITIES. It is not a party to any suretyship, guaranty
or other similar type agreement, nor has it offered its endorsement to any
individual, concern, corporation or other entity or acted or failed to act in
any manner which would in any way create a contingent liability that does not
appear in the financial statements referred to hereinbefore.

     (r) CONTRACTS. After giving effect to the transactions contemplated upon
the closing of this Agreement, no material contract, governmental or otherwise,
to which it will be a party is subject to renegotiation, nor will it be in
default of any material contract to which it is a party.

     (s) UNIONS AND PENSIONS.  It is not a party to any collective bargaining or
union agreement.

     (t) LICENSES.  It has or, with respect to the conduct of its business in
California, has applied and reasonably expects to be granted, all material
licenses, permits and other permissions required by any government, 
<PAGE>
 
                                      -18-

agency or subdivision thereof, or from any licensing entity to which Borrowers
may be subject, necessary for the conduct of its business, all of which it
represents to be in good standing and in full force and effect.

     (u) COLLATERAL.  After giving effect to the transactions contemplated upon
the closing of this Agreement, it will be the sole owner of the Collateral free
and clear of all liens, encumbrances, security interests and claims except the
liens granted to Lender hereunder and the security interests and liens listed on
Schedule 5.1(u) attached hereto. Borrowers are fully authorized to grant a
--------------                                                             
security interest in each and every item of the Collateral to Lender. All
documents and agreements related to the Collateral shall be true and correct and
in all respects what they purport to be. All signatures and endorsements that
appear thereon shall be genuine and all signatories and endorsers shall have
full capacity to contract. None of the transactions underlying or giving rise to
the Collateral shall violate any applicable state or federal laws or
regulations. All documents relating to the Collateral shall be legally
sufficient under such laws or regulations and shall be legally enforceable in
accordance with their terms. Borrowers agree to defend the Collateral against
the claims of all persons other than Lender. Notwithstanding anything to the
contrary contained herein, the representations and warranties contained in this
Section 5.1(u) are qualified in their entirety by the disclosure set forth in
Schedule 5.1(u) attached hereto.
---------------                 

     (v) TRADENAMES.  It does not have any material tradenames other than as set
forth in Schedule 5.1(v) attached hereto.
         ---------------                 

     (w) FINANCIAL INFORMATION.  All financial information, including, but not
limited to information relating to the Receivables and Inventory, submitted by
it to Lender, whether previously or in the future, is and will be true and
correct in all material respects, and is and will be complete insofar as may be
necessary to render it a true and accurate depiction of the subject matter to
which it relates.

     (x) PARENT, AFFILIATE OR SUBSIDIARY CORPORATIONS.  Borrowers have no parent
corporation and have no affiliates or Subsidiaries other than as set forth in
Schedule 5.1(x) attached hereto.
---------------                 

     (y) ENVIRONMENTAL MATTERS.

     (i) It has obtained all permits, licenses and other authorizations which
are required under all Environmental Laws. It is in compliance with the terms
and conditions of all such permits, licenses and authorizations, and is also in
compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
any applicable Environmental Law or in any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter issued,
<PAGE>
 
                                      -19-

entered, promulgated or approved thereunder.

     (ii) No notice, notification, demand, request for information, citation,
summons or order has been issued, no complaint has been filed, no penalty has
been assessed and no investigation or review is pending or threatened by any
governmental or other entity with respect to any alleged failure by Borrowers to
have any permit, license or authorization required in connection with the
conduct of its business or with respect to any Environmental Laws, including
without limitation, Environmental Laws relating to the generation, treatment,
storage, recycling, transportation, disposal or release of any Hazardous
Materials.

     (iii) No oral or written notification of a release of any Hazardous
Material has been filed by or against Borrowers and no property now or
previously owned, leased or used by it, including without limitation, the
Premises, is listed or proposed for listing on the Comprehensive Environmental
Response, Compensation and Inventory of Sites or National Priorities List under
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, or on any similar state or federal list of sites requiring
investigation or cleanup.

     (iv) There are no liens or encumbrances arising under or pursuant to any
Environmental Laws on any of the property or properties owned, leased or used by
it, including without limitation, any of the properties owned or leased by it,
and no governmental actions have been taken or are in process which could
subject any of such properties to such liens or encumbrances or, as a result of
which Borrowers would be required to place any notice or restriction relating to
the presence of Hazardous Materials at any property owned by it in any deed to
such property.

     (v) Neither it nor, to the best knowledge of Borrowers, any previous owner,
tenant, occupant or user of any property owned, leased or used by Borrowers, has
(i) engaged in or permitted any operations or activities upon or any use or
occupancy of such property, or any portion thereof, for the purpose of or in any
way involving the release, discharge, refining, dumping or disposal (whether
legal or illegal, accidental or intentional) of any Hazardous Materials on,
under, or in or about such property, or (ii) transported or had transported any
Hazardous Materials to such property except to the extent such Hazardous
Materials are raw products commonly used in day-to-day manufacturing operations
of such property and, in such case, in compliance with, all Environmental Laws;
(iii) engaged in or permitted any operations or activities which would allow the
facility to be considered a treatment, storage or disposal facility as that term
is defined in 40 CFR 264 and 265, (iv) engaged in or permitted any operations or
activities which would cause any of Borrowers' properties to become subject to
The Connecticut Transfer Act. Section 22a-134 et 
<PAGE>
 
                                      -20-

sea. C.G.S., or (v) constructed, stored or otherwise located Hazardous Materials
on under, in or about any such property except to the extent commonly used in
day-to-day operations of any such property and, in such case, in compliance with
all Environmental Laws. Further, to the best knowledge of Borrowers, no
Hazardous Materials have migrated from other properties upon, about or beneath
any such property.

     Notwithstanding anything to the contrary contained herein, the
representations and warranties contained in this Section 5.1(y) are, as they
relate to 220 Jefferson Avenue, Menlo Park, California, qualified in their
entirety by the best of Borrowers' knowledge and by the disclosure set forth in
Schedule 5.1(y) attached hereto.
---------------                 

     (z) USE OF PROCEEDS. It will use the proceeds of the Loans solely (i) by
Wright to satisfy in full loans outstanding to Fleet National Bank on the date
hereof, (ii) by Memry to satisfy in full a certain loan outstanding to Raychem
Corporation on the date hereof, (iii) by Memry to satisfy in full loans
outstanding to William Morton and Dominion Capital Partners LLP, and (iv) for
working capital purposes.

     ARTICLE VI.  CONDITIONS OF LENDING

          SECTION 6.1.  CONDITIONS OF THE INITIAL LOAN.

     Subject to the terms hereof, the obligation of Lender to make the first
Revolving Loan and the Term Loan under this Agreement is subject to the
fulfillment of the following conditions precedent at the time of the execution
of this Agreement:

     (a) NOTES.  Lender shall have received a duly executed Revolving Promissory
Note and the Term Promissory Note drawn to its order.

     (b) EVIDENCE OF CORPORATE ACTION. Lender shall have received certified
copies of all corporate action (in form and substance satisfactory to Lender)
taken by Borrowers to authorize the execution, delivery and performance of this
Agreement, the Notes, and the other Financing Agreements to which it is a party,
and the borrowings to be made hereunder and thereunder, together with true
copies of Borrowers' Certificate of Incorporation and By-laws and such other
papers as Lender or its counsel may require.

     (c) OPINION OF COUNSEL. Lender shall have received a favorable written
opinion of counsel for Borrowers, accompanied by such supporting documents as
Lender or its counsel may require.

     (d) FIDELITY AGREEMENTS.  Lender shall have received duly executed Fidelity
Agreements (collectively, the "FIDELITY AGREEMENTS") from James G. Binch and
Wendy Gavaghan (collectively, the "FIDELITY GUARANTORS").  The Fidelity
Agreements shall be in form, scope and substance 
<PAGE>
 
                                      -21-

satisfactory to Lender.


     (e) LIFE INSURANCE ASSIGNMENT.  Lender shall have received a duly executed 
life insurance assignment as collateral (the "LIFE INSURANCE ASSIGNMENT") on the
life of James G. Binch, which shall be in an amount equal to at least $500,000.
The Life Insurance Assignment shall be in form, scope and substance satisfactory
to Lender.


     (f) SUBORDINATION AGREEMENTS.  Lender shall have received a subordination
agreement from each of the Subordinating Creditors in form, scope and substance
satisfactory to Lender (collectively, the "SUBORDINATION AGREEMENTS").


     (g) LESSOR'S AGREEMENTS.  Borrowers shall cause to be delivered to Lender
lessor's agreements with respect to the Premises leased or subleased by
Borrowers (the "LESSOR'S AGREEMENTS") in form, scope and substance satisfactory
to Lender.


     (h) UCC-1 FINANCING STATEMENTS.  Lender shall have received from Borrowers 
duly executed UCC-1 financing statements and such other documents as Lender
deems necessary or proper to perfect, upon filing of such UCC-1 financing
statements or such other documents, the security interest in the Collateral, all
of which shall be in form, scope and substance satisfactory to Lender and its
counsel.


     (i) NOTICES OF ASSIGNMENT AND POST OFFICE BOX CHANGE OF ADDRESS CARDS.  
Lender shall have received notices of assignment and a post office change of
address cards from Borrowers, which shall be in form, scope and substance
satisfactory to Lender and its counsel.


     (j) STOCK PLEDGE AGREEMENT.  Lender shall have received a stock pledge
agreement from Memry, pursuant to which Memry shall have pledged to the Lender
100% of the issued and outstanding shares of stock of Wright, in form, scope and
substance satisfactory to Lender (the "STOCK PLEDGE AGREEMENT");


     (k) MORTGAGE.  Lender shall have received a duly executed first priority
mortgage (the "MORTGAGE") from Wright on the real property of Wright located at
69 Armory Street, Worcester, Massachusetts (the "MASSACHUSETTS PREMISES"), in
form, scope and substance satisfactory to Lender.


     (l) ASSIGNMENT OF LEASES AND RENTS.  Lender shall have received a duly 
executed first priority assignment of leases and rents (the "ASSIGNMENT OF
LEASES AND RENTS") from Wright on the Massachusetts Premises, in form, scope and
substance satisfactory to Lender.
<PAGE>
 
                                      -22-

     (m) INDEMNITY AGREEMENT.  Lender shall have received an Indemnity Agreement
Regarding Hazardous Materials with respect to the Massachusetts Premises, in
form, scope and substance satisfactory to Lender (the "INDEMNITY AGREEMENT").

     (n) NO OFF-SET AGREEMENT.  Lender shall have received a no off-set
agreement from Raychem Corporation, in form, scope and substance satisfactory to
Lender (the "NO OFF-SET AGREEMENT").

     (o) CII AGREEMENT.  Lender shall have received an agreement from
Connecticut Innovations, Inc., in form, scope and substance satisfactory to
Lender (the "CII AGREEMENT").

     (p) PATENT SECURITY AGREEMENT. Lender shall have received a Patent Security
Agreement, in form, scope and substance satisfactory to Lender (the "PATENT
SECURITY AGREEMENT").

     (q) TRADEMARK SECURITY AGREEMENT.  Lender shall have received a Trademark
Security Agreement in form, scope and substance satisfactory to Lender (the
"TRADEMARK SECURITY AGREEMENT").

     (r) FURTHER DOCUMENTS.  Lender shall have received such further documents,
instruments and agreements as Lender may request, including without limitation,
title insurance or an attorneys' certificate of title, landlord's agreements,
warehouse agreements, and evidence that the insurance policies and certificates
evidencing adequate insurance and coverage on Borrowers' assets are currently in
full force and effect, continue to name Lender as loss payee or additional
insured, as the case may be, and that the premiums are current.

          SECTION 6.2.  CONDITIONS OF ADDITIONAL REVOLVING LOANS.

     In addition to the conditions in Section 5.1 above, Lender shall make no
further Revolving Loans (collectively, the "FURTHER LOANS") unless the following
conditions shall exist or have been satisfied by Borrowers at the time any
Further Loan is requested:

     (a) ABSENCE OF TERMINATION OR DEFAULT.  Lender shall not have terminated
the Revolving Loan facility hereunder, nor shall a Defaulting Event exist or
have occurred.

     (b) COMPLIANCE CERTIFICATES.  On the date of each Revolving Loan hereunder
and after giving effect thereto, Memry shall have delivered to Lender, upon
Lender's request, a certificate executed by its chief financial officer which
states, among other things, that: (i) Borrowers have complied, and are then in
compliance, with all the terms, covenants and conditions of this Agreement and
the other Financing Agreements to which they are a party; (ii)
<PAGE>
 
                                      -23-

there exists no Event of Default or Defaulting Event; and (iii) the
representations and warranties contained herein and in the other Financing
Agreements are true and correct with the same effect as though such
representations and warranties had been made at the time of each Further Loan.

     (c) BORROWING BASE. The indebtedness of Borrowers by virtue of the making
of any Revolving Loan shall not exceed the Borrowing Base. Borrowers shall not
request any Revolving Loan if the effect of such Revolving Loan shall be to
cause the balance of all Revolving Loans to exceed the Borrowing Base.

     (d) FURTHER DOCUMENTS.  Lender shall have received such further documents,
instruments and agreements as Lender may reasonably request.

     ARTICLE VII.  COVENANTS

          A.  AFFIRMATIVE COVENANTS.

     Each of the Borrowers covenants and agrees that from the date hereof until
payment and performance in full of all Obligations, and until the termination of
this Agreement, unless Lender otherwise consents in writing, each of the
Borrowers shall:

          SECTION 7.1.  FINANCIAL STATEMENTS.

     Memry shall deliver or caused to be delivered to Lender: (a) within twenty
(20) days after the close of each fiscal month of Borrowers, internally prepared
financial statements of Borrowers including balance sheets as of the close of
such month, and statements of income and retained earnings for such month and
for that portion of the fiscal year-to-date then ended, all of which financial
statements shall be prepared on a basis consistent with that of the preceding
period or containing disclosure of the effect on financial condition or results
of operations, and which shall be certified by the chief financial officer of
Borrowers as being accurate and fairly presenting the financial condition of
Borrowers; (b) its audited opening-day balance sheet on or before September 15,
1996 and, within ninety (90) days after the close of each fiscal year of
Borrowers, audited financial statements including a balance sheet as of the
close of such fiscal year and statements of income, stockholders' capital and
cash flow for the year then ended, both prepared in conformity with generally
accepted accounting principles, applied on a basis consistent with that of the
preceding year or containing disclosure of the effect on financial condition or
results of operations of any change in the application of accounting principles
during the year, and accompanied by a report thereon containing an unqualified
opinion of a recognized certified public accounting firm selected by Borrowers
and reasonably satisfactory to Lender (it being hereby agreed and understood
that as of the date 
<PAGE>
 
                                      -24-

hereof, McGladrey & Pullen is an accounting firm satisfactory to Lender), which
opinion shall state that such financial statements fairly present the financial
condition and results of operations of Borrowers in accordance with generally
accepted accounting principles; (c) at least thirty (30) days prior to the close
of each fiscal year of Borrowers, internally prepared drafts of annual
projections of Borrowers, in form, scope and substance satisfactory to Lender;
(d) within fifteen (15) days of the close of each month, monthly aging of
accounts receivable and accounts payable and inventory status reports in form,
scope and substance satisfactory to Lender; (e) daily loan and collateral
designations in the form supplied by Lender to Borrowers; (f) contemporaneously
with the delivery to shareholders or governmental agencies, copies of all
reports and information delivered to shareholders or filed with governmental
agencies; (g) within sixty (60) days after the date hereof, its unaudited
financial statements for its 1996 fiscal year end in form and scope reasonably
satisfactory to Lender; (h) promptly upon Lender's written request, such other
information about the financial condition and operations of Borrowers or the
Fidelity Guarantors, as Lender may, from time to time, reasonably request; and
(i) promptly upon becoming aware of any Event of Default, or the occurrence or
existence of a Defaulting Event, notice thereof in writing. Notwithstanding
anything to the contrary contained herein, the requirements herein with respect
to interim financial statements shall be subject to normal and customary year-
end audit adjustments and the fact that footnotes sufficient to satisfy the
requirements of the Securities and Exchange Act of 1934, as amended, need not be
as extensive as what may be required by generally accepted accounting
principles.

          SECTION 7.2.  INSURANCE AND ENDORSEMENTS.

     (a) Keep its properties and cause the Premises to be insured against fire
and other hazards (pursuant to so-called "All Risk" coverage) in amounts and
with companies satisfactory to Lender to the same extent and covering such risks
as is customary in the same or a similar business; maintain public liability
coverage, including without limitation, products liability coverage, against
claims for personal injuries or death; and maintain all worker's compensation,
employment or similar insurance as may be required by applicable law; and (b)
all insurance shall contain such terms, be in such form, and be for such periods
reasonably satisfactory to Lender, and be written by carriers duly licensed by
the appropriate governmental authorities of each state where any Collateral is
located.  Without limiting the generality of the foregoing, such insurance must
provide that it may not be canceled without thirty (30) days' prior written
notice to Lender.  Borrowers shall cause Lender to be endorsed as a loss payee
with a long form Lender's Loss Payable Clause, in form and substance acceptable
to Lender on all such insurance.  In the event of failure to provide and
maintain insurance as herein provided, Lender may, at its option, provide such
insurance and charge the amount thereof to the Revolving Loan Account.
Borrowers shall furnish to Lender certificates or other satisfactory evidence of
compliance with the foregoing insurance provisions.  Borrowers hereby
irrevocably appoint 
<PAGE>
 
                                      -25-

Lender as their attorney-in-fact, coupled with an interest, to, except as set
forth in the Mortgage, make proofs of loss and claims for insurance, and to
receive payments of the insurance proceeds and execute and endorse all
documents, checks and drafts in connection with payment of such insurance. Any
insurance proceeds received by Lender shall be applied to the Obligations in
such order and manner as Lender shall determine in its sole discretion.

          SECTION 7.3.  TAX AND OTHER LIENS.

     Comply in all material respects with all statutes and government
regulations and pay all taxes, assessments, governmental charges or levies, or
claims for labor, supplies, rent and other obligations made against it or their
property which, if unpaid, might become a lien or charge against Borrowers or
their properties, except for any of the foregoing being contested in good faith
and against which adequate reserves have been established in accordance with
generally accepted accounting principles.  Lender shall have the right to debit
the Revolving Loan Account to, at its option, pay off, and obtain the release
of, that certain attachment on the premises located at 69 Armory Street,
Worchester, Massachusetts in the event Lender deems such payment necessary to
preserve or protect such premises and/or Lender's mortgage on such premises.

          SECTION 7.4.  PLACE OF BUSINESS; LOCATIONS OF COLLATERAL.

Maintain its chief place of business and chief executive offices at the address
set forth in the introductory sentence hereof and its other places of business
as set forth in Schedule 7.4 hereto unless Borrowers shall have given Lender
                ------------                                                
thirty (30) days' prior written notice of each change in such place of business.
Locate no Collateral at any location other than the Premises; provided, however,
that Borrower may locate inventory (a) which in the aggregate at any one time
does not have a value of more than $50,000 at locations in the United Kingdom,
and (b) which in the aggregate at any one time does not have a value of more
than $50,000 in New Mexico.

          SECTION 7.5.  INSPECTIONS.

     Allow Lender by or through any of its officers, attorneys, and/or
accountants designated by it, for the purpose of ascertaining whether or not
each and every provision hereof and of any related agreement, instrument and
document is being performed, to enter the offices and plants of Borrowers to
examine or inspect any of the properties, books and records or extracts
therefrom, to make copies of such books and records or extracts therefrom and to
make complete environmental studies and/or investigations, and to discuss the
affairs, finances and accounts thereof with Borrowers all at such reasonable
times, upon reasonable notice and as often as Lender or any representative of
Lender may reasonably request.  In addition, upon Lender's request, Borrowers
shall provide Lender with an environmental site assessment or environmental
audit report, or an update of such an assessment or audit, all in scope, form
and content satisfactory of Borrowers.
<PAGE>
 
                                      -26-

          SECTION 7.6.  LITIGATION.

     Promptly advise Lender of the commencement or threat of litigation,
including arbitration proceedings and any proceedings before any governmental
agency (but excluding product liability claims which are either fully covered by
insurance or adequately covered by insurance and which are not likely to have a
material adverse effect on the business, assets or condition (financial or
otherwise) of Borrowers), which is instituted against Borrowers and is
reasonably likely to have a materially adverse effect upon the condition
financial, operating or otherwise, of Borrowers.

          SECTION 7.7.  MAINTENANCE OF EXISTENCE.

     Maintain its corporate existence and comply with all valid and applicable
statutes, rules and regulations, and maintain its properties in good repair,
working order and operating condition. Borrowers shall immediately notify Lender
of any event causing material loss in the value of their assets.

          SECTION 7.8.  INVENTORY.

     Allow Lender to examine and inspect the Inventory at reasonable times and
intervals and upon reasonable notice.  Borrowers shall immediately notify Lender
of any event causing material loss or depreciation in value of Inventory and the
amount of such loss or depreciation.

          SECTION 7.9.  ERISA.

     Immediately notify Lender of any event which causes it not to be in
compliance with ERISA in all material respects.

          SECTION 7.10.  NOTICE OF CERTAIN EVENTS.

     Give prompt written notice to Lender of:

     (a) any material dispute that may arise between Borrowers and any
governmental regulatory body or law enforcement agency;

     (b) any labor controversy resulting or likely to result in a strike or work
stoppage against Borrowers;

     (c) any proposal by any public authority to acquire the assets or business
of Borrowers;

     (d) the location of any Collateral other than at Borrowers' places of
business disclosed in this Agreement (other than Collateral in transit in the
ordinary course of Borrowers' businesses);

     (e) any proposed or actual change of the name, identity or legal form of
organization of Borrowers;

     (f) any circumstance or event by virtue of which or in connection with
which Borrowers may have incurred or may incur any liability, expense or
responsibility under any Environmental Law, including, without limitation: (i)
any Release of any Hazardous Material required to be reported to any federal,
<PAGE>
 
                                      -27-

state or local governmental authority instrumentality or agency under any
applicable Environmental Law; (ii) any and all written communications with
respect to claims or suits under any applicable Environmental Law or any Release
of Hazardous Material required to be reported to any federal, state or local
governmental authority, instrumentality or agency; (iii) any remedial action
taken by Borrowers or any other person in response to (A) any Hazardous Material
on, under or about the properties or assets of Borrowers, the existence of which
may give rise to a claim or suit resulting in a material change of Borrowers'
business operations or financial condition, or (B) any claim or suit resulting
in a material change of Borrowers' business operations or financial condition;
(iv) Borrowers' discovery of any occurrence or condition on any real property
adjoining or in the vicinity of Borrowers' business premises which may cause
such premises to be in violation of any Environmental Law or to be subject to
any restrictions on the ownership, occupation, transferability or use thereof
under any Environmental Law and (v) any request for information from any
federal, state or local governmental authority, instrumentality or agency that
indicates such entity is investigating Borrowers' potential responsibility for a
Release of Hazardous Material;

     (g) any other matter which has resulted or is reasonably likely to result
in a material adverse change in the financial condition or operations of
Borrowers;

     (h) any information received by Borrowers with respect to any Receivable
that may materially affect the value thereof or the rights and remedies of
Lender with respect thereto; and

     (i) any action, suit or claim pending or which is threatened or asserted
against Borrowers.

          SECTION 7.11.  DEFAULTS.

      Upon the occurrence of an Event of Default or of a Defaulting Event, give
prompt written notice of such occurrence to Lender signed by the president or
chief financial officer of Memry describing such occurrence and the action, if
any, being taken to cure the Event of Default or Defaulting Event.

          SECTION 7.12.  DUTIES.

      Borrowers have complied and will continue to comply with any and all
material federal, state and local laws affecting their businesses, including,
but not limited to, payment of all federal and state taxes with respect to sales
to Account Debtors by Borrowers and disclosures in connection therewith.
Borrowers jointly and severally agree to indemnify Lender against and hold
Lender harmless from, all claims, actions and losses, including reasonable
attorney's fees and costs incurred by Lender arising from any contention,
whether well founded or otherwise, that there has been a failure to comply with
such laws.
<PAGE>
 
                                      -28-

          SECTION 7.13.  COLLATERAL DUTIES.

      Do whatever Lender may reasonably request from time to time by way of
obtaining, executing, delivering and filing financing statements, assignments,
landlord's or mortgagee's waivers, warehouse agreements and other notices and
amendments and renewals of any of the foregoing, and Borrowers will take any and
all reasonable steps and observe such formalities as Lender may reasonably
request, in order to create and maintain a valid and enforceable first lien
upon, pledge of, and first priority security interest in, any and all of the
Collateral.  Lender hereby is authorized to file financing statements without
the signature of Borrowers and to execute and file such financing statements on
behalf of Borrowers as specified by the Uniform Commercial Code to perfect or
maintain its security interest in all of the Collateral.  All reasonable
charges, expenses and fees Lender may incur in filing any of the foregoing,
together with reasonable costs and expenses of any lien search required by
Lender, and any taxes relating thereto, shall be charged to the Revolving Loan
Account and added to the Obligations.

          SECTION 7.14.  AUDIT AND APPRAISALS BY LENDER; FEES.

      Permit Lender by or through any of its officers, employees or other
representatives to audit the books and records of Borrowers and to conduct or
cause to be conducted appraisals of Borrowers' assets at such times, upon
reasonable notice, and in such manner and detail as Lender deems reasonable.
Without limiting the generality of the foregoing, Lender shall be allowed to
verify the Receivables and Inventory of Borrowers and to confirm with Account
Debtors the validity and amount of Receivables.  Borrowers shall promptly pay to
Lender audit fees of $500 per man per day and any out-of-pocket expenses
incurred in connection with any audit performed by or for Lender.  In addition,
Borrowers shall promptly pay or reimburse Lender for the costs of any such
appraisals conducted by or for Lender.  Lender is hereby authorized to charge
any such audit and appraisal fees and out-of-pocket expenses to the Revolving
Loan Account.  Notwithstanding the foregoing, so long as Lender has not made
demand for payment of any or all of the Revolving Loans and no Event of Default
has occurred, Borrowers shall not be obligated to reimburse or pay to Lender in
excess of $15,000 per annum for fees and expenses incurred in connection with
any such audit or appraisal.

          SECTION 7.15.  BANK ACCOUNTS.

      Maintain all of its bank accounts, including without limitation, its
operating and depository accounts, at Fleet National Bank; provided, however,
that Memry shall be permitted to have operating and depository accounts in
California so long as the aggregate amount on deposit therein (not including for
payroll) does not exceed $50,000 at any one time (collectively, the "BANK
ACCOUNTS").

          B.  NEGATIVE COVENANTS.

     Each of the Borrowers covenants and agrees that from the date hereof 
<PAGE>
 
                                      -29-

until payment and performance in full of all Obligations and until the
termination of this Agreement, unless Lender otherwise consents in writing,
neither of the Borrowers shall:

          SECTION 7.16.  ENCUMBRANCES.

      Incur or permit to exist any lien, mortgage, charge or other encumbrance
against any of its properties or assets, whether now owned or hereafter
acquired, except: (a) liens required or expressly permitted by this Agreement;
(b) pledges or deposits in connection with or to secure worker's compensation,
unemployment or liability insurance; (c) those listed on Schedule 5.1(u)
                                                         -------------- 
attached hereto; and (d) purchase money liens securing financing for machinery
and equipment purchased in the ordinary course of business as permitted pursuant
to Section 7.17(b) below.

          SECTION 7.17.  LIMITATION ON INDEBTEDNESS.

      Create, incur or guarantee any indebtedness or obligation for borrowed
money (including without limitation, any reimbursement obligations for any
letter of credit issued by any financial institution) or issue or sell any of
its obligations to any lender, except: (a) as set forth on Schedule 7.17
                                                           -------------
attached hereto; and (b) purchase money financing and/or capitalized lease
obligations for machinery and equipment purchased or leased in the ordinary
course of business in the aggregate principal amount of not greater than (i) in
Borrowers' 1997 fiscal year, the sum of $460,000 minus the aggregate amount of
capital expenditures made during such fiscal year, and (ii) in Borrowers' 1998
fiscal year, the sum of $250,000 minus the aggregate amount of capital
expenditures made during such fiscal year plus any unused amount under (i)
above.

          SECTION 7.18.  CONTINGENT LIABILITIES.

      Assume, guarantee, endorse or otherwise become liable upon the obligations
of any person, firm or corporation, or enter into any purchase or option
agreement or other arrangement having substantially the same effect as such a
guarantee, except by the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business.

          SECTION 7.19.  CONSOLIDATION OR MERGER.

      Merge into or consolidate with or into any entity.

          SECTION 7.20.  LOANS, ADVANCES, INVESTMENTS.

      Make or permit to exist any loans or advances to, or purchase any stock,
other securities or evidences of indebtedness of, or make or permit to exist any
investment (including without limitation the acquisition of stock of a
corporation), or acquire any assets or any other interest whatsoever, in any
other person; provided, however, that Borrowers shall be permitted to make
investments in short-term direct obligations of the United States Government so
long as such obligations mature not more than one (1) year after the date of
acquisition thereof and that Lender continues to have a duly perfected first
lien security 
<PAGE>
 
                                      -30-

interest in such obligations in form, scope and substance satisfactory to
Lender; and provided further that each of the Borrowers shall be permitted to
make loans to its officers, directors and shareholders in the ordinary course of
business in the aggregate principal amount of not greater than $20,000 in any
calendar year.

          SECTION 7.21.  ACQUISITION OF STOCK OF BORROWERS; DIVIDENDS.

     Except as may be permitted pursuant to the terms of the CII Agreement,
purchase, acquire, redeem or retire, or make any commitment to purchase,
acquire, redeem or retire, any of the capital stock of Borrowers, whether now or
hereafter outstanding, or declare or pay any dividend, or make any distribution
to any of its stockholders.

          SECTION 7.22.  SALE AND LEASE OF ASSETS.

      Sell or lease any of the assets of the Borrowers, except for sales of
inventory in the ordinary course of business consistent with past practices and
on an arms-length basis.

          SECTION 7.23.  NAME CHANGES.

      Change its name or style from that set forth in this Agreement.

          SECTION 7.24.  PROHIBITED TRANSFERS.

      Transfer, in any manner, either directly or indirectly, any cash,
property, or other asset to any parent or any of its affiliates or Subsidiaries,
other than sales made in the ordinary course of business and for fair
consideration on terms no less favorable than if such sale had been an arms-
length transaction between Borrowers or such Subsidiary and an unaffiliated
entity.

          SECTION 7.25.  NO MANAGEMENT/OWNERSHIP CHANGE.

      Suffer James G. Binch to: (a) cease to be the President of Memry and
performing such duties normally associated with such position, or (b) cease to
be the beneficial owner of the 280,000 shares of stock of, and warrants in,
Memry currently beneficially owned by James G. Binch, or allow Harbour Holdings
L.P. to dispose of more than 500,000 shares of stock of Memry.

          SECTION 7.26.  LEASEBACKS.

      Lease any real estate or other capital asset from any lessor who shall
have acquired such property from Borrowers.

          SECTION 7.27.  LOANS TO OFFICERS, DIRECTORS AND/OR SHAREHOLDERS.

      Make any loan or advance or make any transfers, in any manner, of any
cash, property or other asset to or on behalf of any of its officers, directors
or shareholders; provided, however, that Borrowers may make advances to such
persons for travel expenses incurred in the ordinary course of Borrowers'
business.

          SECTION 7.28.  PAYMENT OF SUBORDINATED DEBT.

      Make payment of any sums to the Subordinating Creditors in violation of
any of the 
<PAGE>
 
                                      -31-

Subordination Agreements.

          SECTION 7.29.  CII AGREEMENT.

      Make payment of any sums to CII in violation of the CII Agreement.

          SECTION 7.30.  CAPITAL EXPENDITURES.

      Make any capital expenditure if the amount of such expenditure, when added
to all other capital expenditures and purchase money financing and capital lease
obligations incurred during such fiscal year, would exceed $460,000 in
Borrowers' 1997 fiscal year and $250,000 (plus any unused amount from the
Borrowers' 1997 fiscal year) in Borrowers' 1998 fiscal year.


     ARTICLE VIII.  COLLATERAL

          SECTION 8.1.  GRANT.

      To secure the prompt payment and performance of each and all of the
Obligations, each of the Borrowers pledges, assigns, transfers and grants to
Lender a continuing first lien security interest in the following property of
Borrowers, whether now owned or hereafter acquired or arising (the
"COLLATERAL"):

     (a) All accounts and accounts receivable related to or arising from the
sale or lease of inventory or rendition of services by Borrowers (the
"ACCOUNTS") and all other accounts, bank accounts, contracts, contract rights,
Notes, documents, chattel paper, instruments, acceptances, drafts or other forms
of obligations and receivables (collectively with the Accounts, the
"RECEIVABLES"), whether or not the same are listed on any schedules assignments
or reports furnished to Lender from time to time, and whether such Receivables
are now existing or are created or arise at any time hereafter, together with
all goods, inventory and merchandise returned by or reclaimed by or repossessed
from customers wherever such goods, inventory and merchandise are located, and
all proceeds thereto including without limitation, proceeds of insurance thereon
and all guaranties, securities, and liens which Borrowers may hold for the
payment of any such Receivables, including without limitation, all rights of
stoppage in transit, replevin and reclamation and all other rights and remedies
of an unpaid vendor or lienor, and any liens held by Borrowers as a mechanic,
contractor, subcontractor, processor, materialman, machinist manufacturer,
artisan, or otherwise;

     (b) All documents, instruments, documents of title, general intangibles,
policies and certificates of insurance, guaranties, securities chattel paper,
deposits, tax returns, proceeds of insurance, proceeds of an eminent domain or
condemnation award, cash, liens or other property, which are now or may
hereinafter be in the possession of Borrowers or as to which Borrowers may now
or hereafter control possession by documents of title or otherwise, 
<PAGE>
 
                                      -32-

including, but not limited to, all property allocable to unshipped orders
relating to Receivables and Inventory;

     (c) All books, records, customer lists, supplier lists, ledgers, evidences
of shipping, invoices, purchase orders, sales orders and all other evidences of
Borrowers' business records, including all cabinets, drawers, etc. that may hold
the same; computer records, lists, software, programs, wherever located, all
whether now existing or hereafter arising or acquired;

     (d) All of Borrowers' inventory, whether now owned or hereafter acquired
(collectively, the "INVENTORY"), including without limitation : (i) all goods
manufactured or acquired for sale or lease, and any piece goods, raw materials,
work in process and finished merchandise, findings or component materials, and
all supplies, goods, incidentals, office supplies, packaging materials, and any
and all items including machinery and equipment used or consumed in the
operation of the business of Borrowers or which contribute to the finished
product or to the, sale, promotion and shipment thereof, in which Borrowers may
now or at any time hereafter have an interest, whether or not such inventory is
listed in this Agreement on any reports furnished to Lender from time to time;
(ii) all inventory whether or not the same is in transit or in the constructive,
actual or exclusive occupancy or possession of Borrowers or is held by Borrowers
or by others for the Accounts, including without limitation, all goods covered
by purchase orders and contracts with suppliers and all goods billed and held by
suppliers; (iii) all inventory which may be located on the premises of Borrowers
or of any carrier, forwarding agents, truckers, warehousemen, vendors, selling
agents or third parties; (iv) all general intangibles relating to or arising out
of inventory; (v) all proceeds and products of the foregoing resulting from the
sale, lease or other disposition of inventory, including cash, accounts
receivable, other non-cash proceeds and trade-ins; and (vi) with respect to
after-acquired inventory, the security interest shall be deemed to be a purchase
money security interest;

     (e) All general intangibles, including without limitation, tax refunds,
proceeds of insurance eminent domain awards, condemnation proceeds, and patents,
copyrights, tradenames, trademarks, applications therefor, and licenses to any
patent, copyright, trademark, or tradename that Borrowers now owns, has the
right to use or may hereafter own or acquire the right to use;

     (f) All equipment, machinery, appliances, and furniture and fixtures, now
existing or hereafter arising, wherever located, and all contracts, contract
rights and chattel paper arising out of any lease of any of the foregoing;

     (g) All other collateral in which Borrowers may hereafter grant to Lender a
security interest; and
<PAGE>
 
                                      -33-

     (h) All renewals, substitutions, replacements, additions, accessions,
proceeds, and products of any and all of the foregoing, including without
limitation, all proceeds of credit, fire and other insurance and also including,
without limitation, rents and profits resulting from the temporary use of the
Collateral.

     ARTICLE IX.  EVENTS OF DEFAULT

          SECTION 9.1.  EVENTS OF DEFAULT.

      Without affecting the demand nature of the Revolving Loan which shall at
all times be due and payable on demand, any and all Obligations, including
without limitation, the Obligations arising pursuant to or in connection with
the Loans, shall, at the option of Lender and notwithstanding any time or credit
allowed by any Notes or agreement, become immediately due and payable if any one
or more of the following events (collectively, ''EVENTS OF DEFAULT" and
individually, an "EVENT OF DEFAULT") shall occur:

     (a) Borrowers' failure to pay principal, interest or any other sum due
hereunder or under the Notes;

     (b) Borrowers' failure to pay or perform when due any other covenant, duty,
indebtedness, liability or obligation arising under this Agreement, the Notes or
any of the other Financing Agreements, or any other Obligation, or such failure
by Fidelity Guarantors (provided, however, that the Borrowers' failure to
perform any of the obligations set forth in Sections 7.3, 7.6, 7.7, 7.9 and 7.12
shall not constitute an Event of Default unless and until such failure continues
for thirty (30) days or more;

     (c) the making by Borrowers or Fidelity Guarantors of any misrepresentation
of a material fact to Lender;

     (d) the filing, making or issuance of any lien, levy, seizure, attachment,
garnishment, injunction, execution, tax lien or judgment upon or against
Borrowers or any of the Collateral, or any other property or assets of Borrowers
which is not discharged or removed within a period of thirty (30) days from the
date of such filing, making or issuance;

     (e) any of the following of, by, or involving Borrowers: insolvency
(failure to pay debts as they mature or where the fair value of assets is not in
excess of liabilities); business failure; appointment of a receiver or
custodian; assignment for the benefit of creditors; calling of a meeting of
creditors; appointment of a committee of creditors, or liquidating banks, or
offering of a composition extension to creditors; or the commencement of any
proceedings under any bankruptcy or insolvency law;

     (f) Borrowers' failure to keep the Collateral insured against loss 
<PAGE>
 
                                      -34-

by fire or otherwise for the full insurable value thereof with companies and for
coverages (including Lender's Long Form Loss Payable Endorsement) acceptable to
Lender and making the loss, if any, payable to Lender;

     (g) the loss, revocation or failure to renew any license and/or permit now
held or hereafter acquired by Borrowers which materially adversely affects the
ability of Borrowers to continue their operations as presently conducted;

     (h) the declaration of a default under any obligation of Borrowers for
borrowed money to any other creditor;

     (i) the occurrence of any event or circumstance with respect to the
Borrowers such that Lender shall reasonably and in good faith believe that the
prospect of payment of all or any part of Obligations or the performance by the
Borrowers under this Agreement, or any other agreement between the Lender and
the Borrowers, is impaired or there shall occur any material adverse change in
the business or financial condition of the Borrowers;

     (j) the receipt by Lender of a Default Notice from Raychem Corporation (as
defined in the Lessor's Agreement from Raychem Corporation); or

     (k) the receipt by Lender of a Put Notice from Connecticut Innovations,
Inc. (as defined in the CII Agreement).



     Upon the occurrence of any Event of Default, at the option of Lender: (x)
any and all Obligations, including without limitation, the Obligations arising
from or in connection with the Loans, shall become immediately due and payable,
and (y) Borrowers' eligibility to request any Further Revolving Loans shall
automatically and immediately terminate, without presentment, demand, protest,
notice of protest or other notice or requirements of any kind, all of which
Borrowers expressly waive.  Notwithstanding the foregoing sentence, if any Event
of Default under clause (e) occurs, the acceleration of the Obligations and
termination of Borrowers' eligibility to request Further Revolving Loans shall
be automatic.

     At any time after an Event of Default, Lender may proceed to enforce the
rights of Lender whether by suit in equity or by action at law, whether for
specific performance of any covenant or agreement contained in this Agreement,
the Notes or the other Financing Agreements, or in aid of the exercise of any
power granted in either this Agreement or the Notes or any other Financing
Agreement, or it may proceed to obtain judgment or any other relief whatsoever
appropriate to the enforcement of such rights, or proceed to enforce any legal
or 
<PAGE>
 
                                      -35-

equitable right which Lender may have by reason of the occurrence of any
Event of Default hereunder.

     ARTICLE X.  COLLECTION OF RECEIVABLES

          SECTION 10.1.  DEPOSITS.

      Until Lender exercises its rights to collect the Receivables as provided
for in this Agreement, Borrowers shall continue direct collection of all
Receivables. All collections and other proceeds of Receivables which Borrowers
receive shall be received in trust for Lender and Borrowers shall: (i) keep all
such collections separate and apart from all of its other funds and property
(ii) identify such collections and proceeds as the property of Lender and (ii)
immediately deposit such collections in the identical form received in accounts
of Lender as designated by Lender from time to time.

          SECTION 10.2.  SCHEDULE.

      All collections of Receivables shall be set forth on a schedule in form
and substance satisfactory to Lender.  Collections of Receivables shall be
credited to the Obligations of Borrowers on the day of their actual receipt by
Lender; provided, however, that all credits shall be conditional credits subject
to collection and that returned items at Lender's option, may be charged to
Borrowers; and further provided that for purposes of the computation of
interest, items shall not be deemed to be collected until three (3) days after
their actual receipt by Lender.

     ARTICLE XI.  RETURNED MERCHANDISE

          SECTION 11.1.  PROCEDURES.

      Until Lender exercises its rights to collect the Receivables as provided
for in this Agreement, Borrowers may continue their present policies for
returned merchandise and adjustments, but shall promptly notify Lender of any
credits, adjustments or disputes arising concerning the goods or services
represented by Receivables.  In any event, Borrowers will immediately pay Lender
from their own funds (and not from the proceeds of Receivables), for application
to the Revolving Loans, an amount equal to any credit or adjustment made to any
Eligible Accounts; provided, however, that so long as Borrowers are not in
default hereunder, such payment need not be made if Borrowers shall have, after
making such credit or adjustment, sufficient Receivables to maintain the
aggregate outstanding balance of the Revolving Loans under the Borrowing Base.

     ARTICLE XII.  RIGHTS AND REMEDIES OF LENDER

          SECTION 12.1.  REMEDIES OF LENDER.

      Upon Lender's demand for payment of the Revolving Loan or upon the
occurrence of any Event of Default, Lender shall have in any jurisdiction where
enforcement of this Agreement, the Notes or any other Financing Agreement is
sought, in addition to all other rights and remedies which Lender may have under
law and equity, the following rights and remedies, all of which may be exercised
with or without further 
<PAGE>
 
                                      -36-

notice to Borrowers and without a prior judicial or administrative hearing,
which notice and hearing are expressly waived: to occupy any of Borrowers'
premises for up to six (6) months rent free for the purposes of liquidating
Collateral, including, without limitation, conducting an auction thereon; to
enforce or foreclose the liens and security interests created under this
Agreement or under any other agreement relating to Collateral by any available
judicial procedure or without judicial process; to enter any premises where any
Collateral may be located for the purpose of taking possession or removing the
same; to sell, assign, lease, or otherwise dispose of Collateral or any part
thereof, either at public or private sale, in lots or in bulk, for cash, on
credit or otherwise, with or without representations or warranties, and upon
such terms as shall be acceptable to Lender, all at Lender's sole option and as
Lender in its sole discretion may deem advisable; to bid or become purchaser at
any such sale if public; and, at the option of Lender to apply or be credited
with the amount of all or any part of the Obligations owing to Lender against
the purchase price bid by Lender at any such sale.

          SECTION 12.2.  SPECIFIC POWERS.

      Lender may at any time, before (with respect to clauses (v), (vii) and (x)
of this Section 12.2) or after the occurrence of a demand for payment of the
Revolving Loan or an Event of Default and during the continuance of an Event of
Default, at Lender's sole discretion: (i) give notice of assignment to any
Account Debtor (it being agreed and understood that Lender may at any time,
before or after demand for payment of the Revolving Loan or the occurrence of an
Event of Default, verify receivables directly with Account Debtors); (ii)
collect Receivables directly and charge, or cause to be charged, the collection
costs and expenses to the Revolving Loan Account; (iii) collect receivables
submitted by Borrowers to Lender for collection and charge, or cause to be
charged, the collection costs and expenses to the Revolving Loan Account; (iv)
settle or adjust disputes and claims directly with Account Debtors for amounts
and upon terms which Lender considers advisable, and credit, or cause to be
credited, the Revolving Loan Account with the net amounts received in payment of
Receivables; (v) exercise all other rights granted in this Agreement and the
other Financing Agreements; (vi) receive, open and dispose of all mail addressed
to Borrowers and notify the Post Office authorities to change the address for
delivery of Borrowers' mail to an address designated by Lender; (vii) endorse
the name of Borrowers on any checks or other evidence of payment that may come
into possession of Lender and on any invoice, freight or express bill, bill of
lading or other document; (viii) in the name of Borrowers or otherwise, demand,
sue for, collect and give acquittance for any and all monies due or to become
due on Receivables; (ix) compromise, prosecute or defend any action, claim or
proceeding concerning Receivables; and (x) do any and all things necessary and
proper to carry out the purposes contemplated in this Agreement, the other
Financing Agreements and any other agreement between the parties. Neither Lender
nor any person acting as its representative hereunder shall be liable for any
acts or omissions or for any 
<PAGE>
 
                                      -37-

error of judgment or mistake of fact or law, except for gross negligence or
willful misconduct. Borrowers agree that the powers granted hereunder, being
coupled with an interest, shall be irrevocable so long as any Obligation remains
unsatisfied. Notwithstanding the foregoing, it is understood that Lender is
under no duty to take any of the foregoing actions and that after having made
demand upon the Account Debtors for payment, Lender shall have no further duty
as to the collection or protection of Receivables or any income therefrom and no
further duty to preserve any rights pertaining thereto, other than the safe
custody thereof in the event Lender takes possession thereof.

          SECTION 12.3.  DUTIES AFTER DEMAND OR DEFAULT.

      Borrowers will, at Lender's request, assemble all Collateral and make it
available to Lender at places which Lender may reasonably select, whether at the
premises of Borrowers or elsewhere, and will make available to Lender all
premises and facilities of Borrowers for the purpose of Lender taking possession
of Collateral or of removing or putting the Collateral in salable form.  In the
event that Lender elects to exercise its right to take possession and control of
any Collateral, and any goods called for in any sales order, contract, invoice
or other instrument or agreement evidencing or purporting to give rise to any
Receivable shall not have been delivered or shall be claimed to be defective by
any customer, Lender shall have the right in its sole discretion to use and
deliver to such customer any goods of Borrowers to fulfill such order, contract
or the like so as to make good any such Receivable.  If any Collateral shall
require repairing, maintenance, preparation, or the like, or is in process or
other unfinished state, Lender shall have the right, but shall not be obligated,
to effectuate such repair, maintenance, preparation, processing or completion of
manufacturing for the purpose of putting the same in such salable form as Lender
shall deem appropriate, provided that Lender shall nonetheless have the right to
sell or dispose of such Collateral without such processing.  The net cash
proceeds resulting from the collection, liquidation, sale, lease or other
disposition of Collateral shall be applied first to the expenses (including all
attorneys' and professionals' fees) of retaking, holding, storing, processing
and preparing for sale, selling, collecting, liquidating and the like such
collateral, and then to the satisfaction of all Obligations, (application as to
any particular Obligations or against principal or interest to be at Lender's
sole discretion), and then, upon full and final payment of the Obligations, and
unless otherwise prohibited by court order or law, to Borrowers, it being agreed
that if any such payment made to Lender is recovered from or repaid by Lender in
whole or in part in any bankruptcy, insolvency or similar proceeding instituted
by or against Borrowers, this Agreement automatically shall be reinstated
without any further action by Borrowers and Lender.  Borrowers shall be liable
to Lender and shall pay to Lender on demand any deficiency which may remain
after such sale, disposition, collection or liquidation of Collateral.

          SECTION 12.4.  CUMULATIVE REMEDIES.

      The enumeration of 
<PAGE>
 
                                      -38-

Lender's rights and remedies set forth in this Article XII is not intended to be
exhaustive and the exercise by Lender of any right or remedy hereunder shall not
preclude the exercise of any other rights or remedies, all of which shall be
cumulative and shall be in addition to any other right or remedy given hereunder
or under any other agreement between the parties or which may now or hereafter
exist in law or at equity or by suit or otherwise. No delay or failure to take
action on the part of Lender in exercising any right, power or privilege shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or privilege preclude other or further exercise thereof or the
exercise of any other right, power or privilege or shall be construed to be a
waiver of any Event of Default. No course of dealing between Borrowers and
Lender or its employees shall be effective to change, modify or discharge any
provision of this Agreement or to constitute a waiver of any Event of Default.

     ARTICLE XIII.  TERM

          SECTION 13.1.  TERM AND TERMINATION.

     (a) REVOLVING LOAN.  Unless sooner terminated by Lender as a result of the
occurrence of a demand, an Event of Default, or a Defaulting Event, Borrowers'
eligibility to request Revolving Loans shall commence on the date hereof and
shall continue for a period through and including July 31, 1998 (the "TERM").
Borrowers' eligibility to request Revolving Loans may be extended after the Term
only with the express written consent of both Borrowers and Lender.  At the end
of the Term, Borrowers shall pay the entire balance of the Revolving Loans, the
Term Loan and all other outstanding Obligations.  Further, upon termination of
the Revolving Loan facility all of the rights, interests and remedies of Lender
and Obligations of Borrowers shall survive and Borrowers shall have no right to
receive, and Lender shall have no obligation to make, any further Revolving
Loans.  Upon full, final and indefeasible payment of the Obligations to Lender,
all rights and remedies of Borrowers and Lender hereunder shall cease, so long
as any payment so made to Lender and applied to the Obligations is not
thereafter recovered from or repaid by Lender in whole or in part in any
bankruptcy, insolvency or similar proceeding instituted by or against Borrowers,
whereupon this Agreement shall be automatically reinstated without any further
action by Borrowers and Lender and shall continue to be fully applicable to such
Obligations to the same extent as though the payment so recovered or repaid had
never been originally made on such Obligations.

     (b) TERMINATION FEE AND MINIMUM INTEREST. In the event that (a) this
Agreement is terminated by Borrowers as of any date other than the end of the
Term, or (b) this Agreement is terminated as a result of the occurrence of an
Event of Default or a Defaulting Event (other than Event of Default arising
solely under 9.1(i) above), Borrowers shall pay to Lender on the effective date
of such termination, in addition to the Minimum Interest Amount
<PAGE>
 
                                      -39-

and any other payments Borrowers are required to make hereunder, a termination
charge equal to one percent (1%) of the sum of the maximum principal amount of
the Revolving Loan ($1,500,000) plus the then outstanding principal amount of
                                ----
the Term Loan (the "TERMINATION FEE"). In the event that (x) Borrowers breach
this Agreement by terminating this Agreement prior to the expiration of the
Term, or (y) Borrowers give to Lender less than sixty (60) days notice that
Borrowers intend to decline to extend the term of this Agreement at the end of
the Term, or (z) this Agreement is terminated as a result of: (i) a demand by
Lender for payment of the Loans; or (ii) the occurrence of an Event of Default
or a Defaulting Event, Borrowers shall pay to Lender the Minimum Interest Amount
on the effective date of such termination, in addition to the Termination Fee
and any other payments Borrowers are required to make hereunder. All other
amounts due from Borrowers to Lender prior to or in connection with any
termination of this Agreement which have not been previously paid, shall be paid
by Borrowers on or before the effective date of the termination. As used herein,
the "Minimum Interest Amount" means interest upon the Minimum Balance at the
interest rate in effect on the date that express written notice of such
termination is given to Lender (or, if no such notice is given, the rate in
effect on the effective date of termination), for the period commencing on the
date of such written notice of termination (or, if no such notice is given,
commencing on the effective date of termination) and ending at the end of the
Term (or at the end of a period of sixty (60) days thereafter, if such
termination notice is given by Borrowers during or at the end of the Term on
less than sixty (60) days notice or if no termination notice is given).

     ARTICLE XIV.  MISCELLANEOUS

          SECTION 14.1.  INDEMNIFICATION.

     (a) In consideration of Lender's execution and delivery of this Agreement
and Lender's making of the Loans hereunder and in addition to all other
obligations of Borrowers under this Agreement, each of the Borrowers hereby
jointly and severally agrees to defend, protect, indemnify and hold harmless
Lender, its successors, assigns, officers, directors, employees and agents
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (individually, each an "INDEMNITEE"
and collectively, the "INDEMNITEES") from and against any and all actions,
causes of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages and expenses in connection therewith (irrespective of whether any such
Indemnitees is a party to any action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements as and when
incurred (collectively, the "INDEMNIFIABLE LIABILITIES") incurred by the
Indemnitees or any of them as a result of, or arising out of, or relating to (i)
the execution, delivery, performance or enforcement of this Agreement and the
other
<PAGE>
 
                                      -40-

Financing Agreements and any instrument, document or agreement executed
pursuant hereto to any of the Indemnitees; (ii) Lender's status as lender to, or
creditor of, Borrowers; or (iii) the operation of Borrowers' businesses from and
after the date hereof, including, without limitation, those arising under any
Environmental Law.  To the extent that the foregoing undertaking by Borrowers
may be unenforceable for any reason, Borrowers shall make the maximum
contribution to the payment and satisfaction of each of the Indemnifiable
Liabilities which is permissible under applicable-law.

     (b) Each of the Borrowers hereby jointly and severally covenants and agrees
at all times to indemnify, hold harmless and defend the Indemnitees, whether as
secured party in possession or as successor in interest to Borrowers as owner of
any personal property assets located on the real property of Borrowers by virtue
of any action taken by Lender pursuant to the Financing Agreements, the Uniform
Commercial Code (as in effect in any applicable jurisdiction) or otherwise, from
and against any and all liabilities, losses, damages, costs, expenses,
penalties, fines, causes of actions, suits, claims, demands or judgments,
including, without limitation, attorneys' fees and expenses, suffered or
incurred in connection with: (i) the Environmental Laws, including, without
limitation, liens or claims of any federal, state or municipal government or
quasi-governmental agency or any third person, whether arising under any
Environmental Law or any other federal, state or municipal law or regulation;
(ii) any spill or contamination affecting the Premises or any other property
owned, leased, controlled or used by Borrowers, including, without imitation,
any Hazardous Substance or other waste-like or toxic substances located on,
under, emanating from or relating to the Premises or such property from and on
and after the date hereof or any portion of any thereof or any property
contiguous to the Premises or such property from and after the date hereof, and
including, without limitation, any loss of value of the Premises or such
property as a result of any such spill or contamination; and (iii) the direct or
indirect installation, use, generation, manufacture, production, storage,
release, threatened release, discharge, disposal or presence of any Hazardous
Substance on under or about the Premises or any other property owned, leased,
controlled or used by Borrowers or any portion of any thereof, from and
including all consequential damages, the costs of any required or necessary
repair, cleanup or detoxification, and the costs of the preparation and
implementation of any closure, remedial or other required plans; provided,
however, that Borrowers shall have no obligation to indemnify the Indemnitees
under this Subsection 14.1(b) for claims or losses resulting solely from the
Indemnitees' Parties own negligent action while on the Premises or property of
Borrowers. Further, is expressly agreed and understood that the mere fact that
an Indemnitee has been declared an "owner" or "operator" (as such term is
defined in any Environmental Law) resulting from such Indemnitee having taking
possession of any of the Collateral (without any negligence on the part of such
Indemnitee) shall not exonerate Borrowers from any claim by such
<PAGE>
 
                                      -41-

Indemnitee or any other Indemnitee seeking indemnification.

          SECTION 14.2.  PAYMENT SET-ASIDE.

      To the extent that Borrowers make a payment or payments to Lender (whether
hereunder, under the Notes, or under the other Financing Agreements) or Lender
enforces its security interests or rights or exercises its right of setoff; and
such payment or payments or the proceeds of such enforcement or setoff or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside, recovered from, disgorged by or are required to be
refunded, repaid or otherwise restored to Borrowers, a trustee, receiver or any
other person under any law (including, without limitation, any bankruptcy law,
state or federal law, common law or equitable cause of action) in connection
with any bankruptcy or similar proceeding involving Borrowers, then to the
extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such enforcement or setoff had not
occurred.

          SECTION 14.3.  SET-OFF.

      Each of the Borrowers hereby grants to Lender a lien and right of setoff
for all its liabilities to Lender upon and against all its deposits, credits,
collateral and property now or hereafter in the possession or control of Lender
or in transit to Lender.  Lender may, upon the occurrence of any Event of
Default or Defaulting Event or both, apply or exercise the right of set off
against any or all of the foregoing or any part of any thereof against any
liability of Borrowers to Lender, regardless whether such liability is matured
or unmatured.

          SECTION 14.4.  COVENANTS TO SURVIVE; BINDING AGREEMENT.

      All covenants, agreements, warranties and representations made herein, in
the Notes, in the other Financing Agreements, and in all certificates or other
documents of Borrowers shall survive the advances of money made by Lender to
Borrowers hereunder and the delivery of the Notes and the other Financing
Agreements, and all such covenants, agreements, warranties and representations
shall be binding upon and inure to the benefit of Lender and its successors and
assigns, whether or not so expressed.

          SECTION 14.5.  CROSS-COLLATERALIZATION.

      All Collateral which Lender may at any time acquire from Borrowers or from
any other source in connection with Obligations arising under this Agreement and
the other Financing Agreements shall constitute collateral for each and every
Obligation, without apportionment or designation as to particular Obligations
and all Obligations, however and whenever incurred, shall be secured by all
Collateral however and whenever acquired, and Lender shall have the right, in
its sole discretion, to determine the order in which Lender's rights in or
remedies against any Collateral are to be exercised and which type of Collateral
or which portions of Collateral are to be proceeded against and the order of
application of 
<PAGE>
 
                                      -42-

proceeds of Collateral as against particular Obligations.

          SECTION 14.6.  CROSS-DEFAULT.

      Borrowers acknowledge and agree that an Event of Default and/or Defaulting
Event under any one of the Financing Agreements shall constitute an Event of
Default or Defaulting Event under each of the other Financing Agreements.

          SECTION 14.7.  AMENDMENTS AND WAIVERS.

      Neither this Agreement, the Notes, the other Financing Agreements, nor any
term, covenant or condition hereof or thereof may be changed, waived,
discharged, modified or terminated except by a writing executed by the parties
hereto or thereto.  No failure on the part of Lender to exercise, and no delay
in exercising, any right, remedy or power hereunder or under the Notes or the
other Financing Agreements shall preclude any other or future exercise thereof,
or the exercise of any other right remedy or power.

          SECTION 14.8.  NOTICES.

      All notices, requests, consents, demands and other communications
hereunder shall be in writing and shall be mailed by first class mail to the
respective parties to this Agreement to the address set forth in the
introductory sentence hereof.

          SECTION 14.9.  TRANSFER OF LENDER'S INTEREST.

      Borrowers hereby agree that Lender, in its sole discretion, may freely
sell, assign or otherwise transfer participations, portions, co-lender interests
or other interests in all or any portion of the indebtedness, liabilities or
obligations arising in connection with or in any way related to the financing
transactions of which this Agreement is a part provided that such transferee is
a recognized financial institution.  In the event of any such transfer, the
transferee may, in Lender's sole discretion, have and enforce all the rights,
remedies and privileges of Lender.  Borrowers consent to the release by Lender
to any potential transferee of any and all information (including, without
limitation, financial information) pertaining to Borrowers as Lender, in its
sole discretion, may deem appropriate.  If such transferee so participates with
Lender in making loans or advances hereunder or under any other agreement
between such Lender and Borrowers, Borrowers hereby grant to such transferee and
such transferee shall have and is hereby given a continuing lien and security
interest in any money, securities or other property of Borrowers in the custody
or possession of such transferee, including the right of setoff under
circumstances consistent with this Agreement, to the extent of such transferee's
participation in the Obligations of Borrowers to Lender.

          SECTION 14.10.  WAIVERS.

     (a) EACH OF THE BORROWERS ACKNOWLEDGES THAT THE LOANS EVIDENCED HEREBY ARE
COMMERCIAL TRANSACTIONS AND WAIVES ITS RIGHT TO NOTICE AND HEARING 
<PAGE>
 
                                      -43-

UNDER CHAPTER 903A OF THE CONNECTICUT GENERAL STATUTES, OR AS OTHERWISE ALLOWED
BY ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH LENDER
MAY DESIRE TO USE, AND FURTHER WAIVES ITS RIGHTS TO REQUEST THAT LENDER POST A
BOND, WITH OR WITHOUT SURETY, TO PROTECT BORROWERS AGAINST DAMAGES THAT MAY BE
CAUSED BY ANY PREJUDGMENT REMEDY SOUGHT OR OBTAINED BY LENDER. EACH OF THE
BORROWERS FURTHER WAIVES DILIGENCE, DEMAND, PRESENTMENT FOR PAYMENT, NOTICE OF
NONPAYMENT, PROTEST AND NOTICE OF ANY RENEWALS OR EXTENSIONS.

     (b) EACH OF THE BORROWERS HEREBY WAIVES TRIAL BY JURY IN ANY COURT IN ANY
SUIT, ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN ANY
WAY RELATED TO THE FINANCING TRANSACTIONS OF WHICH THIS AGREEMENT IS A PART
AND/OR THE ENFORCEMENT OF ANY OF LENDER'S RIGHTS, INCLUDING, WITHOUT LIMITATION,
TORT CLAIMS. EACH OF THE BORROWERS FURTHER ACKNOWLEDGES THAT LENDER HAS NOT
REPRESENTED TO BORROWERS THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.

     (c) EACH OF THE BORROWERS ACKNOWLEDGES THAT IT MAKES THE FOREGOING WAIVERS
IN CLAUSE (A) AND CLAUSE (B) ABOVE, KNOWINGLY, VOLUNTARILY, WITHOUT DURESS AND
ONLY AFTER CONSIDERATION OF THE RAMIFICATIONS OF SUCH WAIVERS WITH ITS
ATTORNEYS.

          SECTION 14.11.  SECTION HEADINGS; SEVERABILITY; ENTIRE AGREEMENT.

          Section and subsection headings have been inserted herein for
convenience only and shall not be construed as part of this Agreement.  Every
provision of this Agreement, the Notes and the other Financing Agreements is
intended to be severable; if any term or provision of this Agreement, the Notes,
the other Financing Agreements, or any other document delivered in connection
herewith shall be invalid, illegal or unenforceable for any reason whatsoever,
the validity, legality and enforceability of the remaining provisions hereof or
thereof shall not in any way be affected or impaired thereby.  All Exhibits and
Schedules to this Agreement shall be annexed hereto and shall be deemed to be
part of this Agreement.  This Agreement, the other Financing Agreements, and the
Exhibits and Schedules attached hereto and thereto embody the entire agreement
and understanding between Borrowers and Lender and supersede all prior
agreements and understandings relating to the subject matter hereof unless
otherwise specifically reaffirmed or restated herein.
<PAGE>
 
                                      -44-

          SECTION 14.12.  GOVERNING LAW, NOTICE AND SERVICE OF PROCESS,
     PLEADINGS AND OTHER PAPERS.

      This Agreement and the other Financing Agreements, and all transactions,
assignments and transfers hereunder and thereunder, and all the rights of the
parties, shall be governed as to validity, construction, enforcement and in all
other respects by the laws of the State of Connecticut (but not its conflicts of
law provisions).  Borrowers hereby designate and appoint, without power of
revocation, the Secretary of the State of Connecticut as Borrowers' agent upon
whom may be served all process, pleadings, notices or other papers which may be
served upon it as a result of any of its Obligations under this Agreement or
other Financing Agreements.  Borrowers agree that the Superior Court for the
Judicial District of Hartford/New Britain or the United States District Court
for the District of Connecticut shall have jurisdiction to hear and determine
any claims or disputes pertaining to the financing transactions of which this
Agreement is a part and/or to any matter arising or in any way related to this
Agreement or any other agreement between Lender and Borrowers, and Borrowers
expressly submit and consent in advance to such jurisdiction in any action or
proceeding.

          SECTION 14.13.  JOINT AND SEVERAL OBLIGATION.

      Each of the Borrowers acknowledges that (a) the Obligations are the joint
and several obligation of each of the Borrowers and all references to Borrowers
are deemed to refer to each of them individually and both of them collectively,
(b) Wright is a wholly-owned subsidiary of Memry and each of them derives a
direct and material financial benefit from the Loans extended to the other, and
(c) for reasons of simplicity and administrative ease, the Borrowers desire that
the Loans be extended to them as co-borrowers. The security interests, liens and
other rights and interests in and relative to any of the real or personal
property of the Borrowers now or hereafter granted to Lender by the Borrowers or
in any instrument or agreement, shall serve as security for any and all of the
Obligations, including but not limited to, the obligations arising under the
Loans and, for the repayment thereof, Lender may resort to any security held by
it in such order and manner as it may elect.

          SECTION 14.14.  MISCELLANEOUS PROVISIONS REGARDING MEMRY'S DOCUMENTS.

          (a) Lender acknowledges that, pursuant to Section 7(b) of the Amended
and Restated Asset Purchase Agreement, dated as of May 10, 1996, between Memry
and Raychem Corporation, a Delaware corporation ("RAYCHEM"), as amended (the
"RAYCHEM AGREEMENT"), Memry is required (i) to keep books and records relating
to products which Memry manufactures and which Raychem manufactured prior to the
Closing (as defined in the Raychem Agreement) for a period of seven (7) years,
and (ii) to maintain all documents purchased from Raychem under the Raychem
Agreement relating in any way to the matters subject to the lawsuit entitled
Intrinsic v. Raychem Corporation
--------------------------------                       
<PAGE>
 
                                      -45-

during the pendency of such litigation (including all appeals thereof). In the
event that Lender forecloses upon any such books, records and/or documents at a
time when the aforesaid requirements are still in force, Lender agrees to take
possession of such books, records and/or documents, and/or to sell or otherwise
convey such books, records and/or documents, or cause such books, records and/or
documents to be sold or otherwise conveyed, subject to the aforesaid
restrictions.
<PAGE>
 
                                      -46-


        (b) Lender acknowledges that, pursuant to the definition of the term
"Documents" contained in Section 1 of the Raychem Agreement, Memry may not have
title to certain documents in Memry's possession due to the inability of Raychem
to transfer such documents to Memry without the prior written consent of various
third parties.  Lender agrees and acknowledges that its lien upon Memry's assets
hereunder only covers documents to the extent that Memry in fact has any right,
title and/or interest in and to the same, and that Lender will have no more
interest in any such documents upon an exercise of any of its foreclosure or
similar rights hereunder than Memry currently has to such documents.  Borrowers
represent and warrant to Lender that the aforesaid documents (i) do not relate
to the Borrowers' accounts receivable, inventory and/or machinery and equipment,
and (ii) are not material to the Borrowers' respective assets, businesses and/or
prospects.

          SECTION 14.15.  WAIVER.

      Without limiting the generality of the waivers contained in this Agreement
or in any other Financing Agreement, Borrowers irrevocably waive any right to
claim that Lender is not dealing fairly with them, or for any other reason has
any liability to them, regardless of the status of the business, financial
condition, or prospects of Borrowers, on account of Lender taking action to
repossess or collect upon the Collateral or otherwise to collect the Obligations
as a result of receiving a Put Notice from Connecticut Innovations, Inc.

     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the date first above written.




Witnesses:                    MEMRY CORPORATION


/s/                           By: /s/ Wendy A. Gavaghan
---------------------------      -------------------------------

                                 Its  V.P. Finance
/s/
---------------------------

Witnessed:                    WRIGHT MACHINE CORPORATION


/s/                           By: /s/ Wendy A. Gavaghan
---------------------------      -------------------------------

                                 Its  Secretary
/s/
---------------------------

 
<PAGE>
 
                                      -47-

Witnessed:                    AFFILIATED BUSINESS CREDIT
                              CORPORATION


/s/                           By: /s/ Gary W. Burdick
---------------------------      -------------------------------

                                 Its  President
/s/
---------------------------

 

STATE OF CONNECTICUT     )

                         )  ss.  Hartford

COUNTY OF HARTFORD       )

     Before me, the undersigned, this 9th day of August, 1996, personally
appeared Wendy Gavaghan, known to me to be the V.P.-Finance of MEMRY
CORPORATION and that he as such officer, signer and sealer of the foregoing
instrument, acknowledged the execution of the same to be his free act and deed
individually and as such officer, and the free act and deed of said corporation.

     In Witness Whereof; I hereunto set my hand.

                              /s/ David I. Albin
                              -----------------------------------------
                              Commissioner of the Superior Court
<PAGE>
 
                                      -48-


STATE OF CONNECTICUT     )

                         )    ss.  Hartford

COUNTY OF HARTFORD       )

     Before me, the undersigned, this 9th day of August, 1996, personally
appeared Wendy A. Gavaghan, known to me to be the Secretary of WRIGHT
MACHINE CORPORATION and that he as such officer, signer and sealer of the
foregoing instrument, acknowledged the execution of the same to be his free act
and deed individually and as such officer, and the free act and deed of said
corporation.

     In Witness Whereof; I hereunto set my hand.

                              /s/ David I. Albin
                              -----------------------------------------
                              Commissioner of the Superior Court

STATE OF CONNECTICUT     )

                         )    ss.  Hartford

COUNTY OF HARTFORD       )

     Before me, the undersigned, this 9th day of August, 1996 personally
appeared Gary Burdick, known to me to be the President of Affiliated Business
Credit Corporation, and that he as such officer, signer and sealer of the
foregoing instrument, acknowledged the execution of the same to be his free act
and deed individually and as such officer, and the free act and deed of said
corporation.

     In Witness Whereof; I hereunto set my hand.
 
                              /s/ David I. Albin
                              -----------------------------------------
                              Commissioner of the Superior Court
<PAGE>
 



                 Exhibits and Schedules Intentionally Omitted