UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[x] Annual report pursuant to section 13 or 15(d) of The Securities Exchange Act
of 1934 ("Exchange Act") [Fee Required]
For the fiscal year ended June 30, 1998
[ ] Transition report pursuant to section 13 or 15(d) of The
Securities Exchange Act of 1934
For the transition period from _________ to __________
Commission file number 33-42408-NY
WESTBURY METALS GROUP, INC.
(Formerly Rosecap, Inc.)
(Name of small business issuer in its charter)
New York 11-3023099
(State or other jurisdiction (I.R.S. Employer of
incorporation or organization) Identification No.)
750 Shames Drive, Westbury, New York 11590
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (516) 997-8333
Securities Registered under Section 12(b) of the Exchange Act:
None
Securities Registered under Section 12(g) of the Exchange Act:
Title of Each Class: Common Stock, Par Value $.001
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes x . No .
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of issuer's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. []
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The issuer's net revenues for its most recent fiscal were $2,031,033.
The aggregate market value of the issuer's voting stock held as of September 30,
1998 by non-affiliates of the issuer, based upon the average of the closing bid
and asked prices on that date was approximately $540,000.
As at September 30, 1998, 3,197,312 shares of the issuer's Common Stock, $.001
par value, were outstanding.
Transitional Small Business Disclosure Format (Check one):
Yes . No X .
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This Form 10-KSB contains forward-looking statements. Additional written and
oral forward-looking statements may be made by the Company from time to time in
Securities and Exchange Commission ("SEC") filings and otherwise. The Company
cautions readers that results predicted by forward-looking Statements,
including, without limitation, those relating to the Company's future business
prospects, revenues, working capital, liquidity, capital needs and income are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those indicated in the forward-looking statements due to
risks and factors identified in this Form 10-KSB and as may be identified from
time to time in the Company's future filings with the SEC.
Item 1. Business
General
On June 18 1998, the Company name was changed from Rosecap, Inc. to Westbury
Metals Group, Inc.(the "Company"). On March 31, 1998 Rosecap, Inc. entered into
a merger between Westbury Acquisition Corp. ("WAC", a wholly owned subsidiary of
the Company, and Westbury Alloys, Inc., ("estbury" a Delaware Corporation, the
surviving entity. The merger is a reverse merger whereby the principals of
Westbury became the principals and the largest shareholders of the Company. The
Company commenced operating the business of Westbury after the consummation of
the merger. Prior to the merger, the Company, which was incorporated in 1990,
had not conducted any operations and reported as a development stage enterprise.
Products and Services
On March 30, 1998, West Tech, Inc. was formed as a subsidiary of the
Company for the manufacture and sale of silver in various forms and shapes,
plating salts as well as tin and tin-lead anodes used in manufacturing. In the
near future the Company anticipates a broader product line to include precious
metal casting grains, alloys, and mill products. In May,1998 the Company
acquired the registered trade name "Onic" for use in the manufacture and sale of
its high quality tin products.
From its facilities in Westbury, New York the Company provides a broad range of
processing, refining and financial services in connection with the reclamation
of precious and specialty metals from primary and secondary sources. The Company
reclaims principally gold, silver, platinum and palladium from scrap and
residues from the electronics, jewelry, petroleum, dental, chemical, automotive,
mining
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and aerospace industries. After controlled weighing, sampling, and assaying to
determine values and to settle with the customer, the Company either purchases
the precious metal or returns metal to the customer. Through its wholly
98% owned Peruvian subsidiary Alloy Trading S.A., the Company imports metals
for its own use as well as for direct sales to third parties.
The Company has not encountered significant difficulties in purchasing scrap or
raw materials for its refining process. Management is constantly searching for
improved sources of materials and believes that if any one source of raw
materials becomes unavailable, alternative sources of supply can be found at
comparable prices, but there can be no assurance thereof.
On July 1, 1998 Westbury International, Inc., was formed to provide trading and
risk management services. Activities include metals leasing, inventory
financing, cash and forward purchases and sales for internal metals management
requirements and as a profit center dealing with third parties.
Research and Development
The Company is engaged in various research and development activities at its
Westbury, New York facility. The Company is researching and developing refining
and processing techniques that produce less environmental waste. The Company
researches and develops different preparations of precious and specialty metals
constantly upgrading equipment and processing capabilities. No assurance can be
given that the Company's research efforts will be successful.
Consultants
Under a five-year (5) consulting agreement dated July 22, 1996, Lawrence Raskin,
former president of the Company's predecessor, has agreed to serve as an advisor
in connection with the conduct of the business for an annual fee of $10,000. Mr.
Raskin has extensive knowledge of the precious and specialty metals industry and
knowledge of Westbury in particular.
From time to time the Company retains consultants to assist in specific
requirements of product development and plant operations as well as the
administrative areas of computer systems and business plan development.
Competition
The precious metals refining industry is highly competitive. Many of
the companies with which the Company currently competes or may
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compete in the future have greater financial, technical, marketing, sales and
customer support resources, as well as greater name recognition and better
access to customers. The precious metals refining industry is highly
competitive.
Environmental Matters
The Company's environmental concerns are central to its business. The refining
activities are subject to extensive and rigorous government regulations designed
to protect the environment from wastes, emissions and from hazardous substances,
particularly with respect to the emissions of air pollutants, the discharge of
cooling water, and the disposal and storage of hazardous substances.
The Company is in compliance with present federal, state and local air and water
pollution controls, and intends to remain so. However, evolving federal, state
and local air and water pollution control legislation and regulations will
continue to affect the Company's operations and long-range planning. During the
fiscal year the Company did not need to make any capital expenditures to comply
with environmental laws and regulations.
The Company cannot predict the direction of future laws or regulations designed
to protect the environment and control the discharge and disposal of hazardous
waste materials or their impact on the Company's operations. Consequently, the
Company is unable to predict with any certainty its total future expenditures
for installation of pollution control facilities or for legal and administrative
expenditures. New and expanding laws, regulations, administrative policies and
control levels, new pollution control technology and cost-benefit analysis based
on future market conditions are all factors which will affect future
expenditures.
Employees
As of September 30, 1998 the Company had 24 employees, seven (7) of whom were in
administration, six (6) of whom were in marketing and sales and eleven (11) of
whom were in operations. All employees are full-time. The Company's employees
are not unionized and the Company believes that its relations with its employees
are satisfactory.
Sales and Marketing
The Company maintains a highly experienced sales force for its customers who
require processing and refining services in connection
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with the reclamation of precious and specialty metals from secondary sources. An
expanding network of suppliers has been established to procure catalyst
materials from the automotive industry from which platinum and palladium are
recovered. The Company has entered into an exclusive agreement with Stillwater
Mining Corp. the largest miners of platinum group metals in the Northern
Hemisphere for the processing of these catalytic materials.
Item 2. Properties
The Company has a lease on its premises at 750 Shames Dr., Westbury, New York,
which expires July 31, 2003. The facility is approximately 10,200 square feet
and serves as the Corporate Headquarters. As part of this lease agreement the
Company has an option to renew the lease at a mutually agreeable rental at least
30 days prior to expiration. The Company also has the option to buy the premises
at the end of the lease term. The Company has no current intention to exercise
this option
The Company has purchased an approximately 13,000 square foot adjoining building
at 900 Shames Dr., Westbury, New York, which currently houses its catalyst
activities. The Company paid $510,000 for the property, including a mortgage in
the amount of $325,000.
Small administrative offices are also maintained in Lima, Peru and Pawtucket,
Rhode Island.
Item 3. Legal Proceedings
There are no pending legal proceedings to which the Company or any of its
subsidiaries is a party, other than ordinary, routine litigation incidental to
the business, none of which individually or in the aggregate is material to the
financial condition or to the business of the Company.
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Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of shareholders of the Corporation held on June 18,1998,
the following persons were elected directors of the corporation with the votes
set opposite their names:
Mandel Sherman 2,065,979 5,000
Michael A. O'Hanlon 2,065,979 5,000
Michael Riess 2,065,979 5,000
Shareholders also approved a name change for the Company from
Rosecap, Inc. to Westbury Metals Group, Inc. by a vote of 2,065,979
in favor and 5,000 against, and ratified and approved a Qualified
Stock Option Plan for the Company by a vote of 1,999,261 in favor and
68,660 against.
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PART II
Item 5. Market for Company's Common Equity and Related Stockholder
Matters
The following table sets forth the high and low closing bid prices for
the periods indicated as reported by the National Association of Securities
Dealers Automated Quotation System (NASDAQ) between dealers and do not include
retail mark-ups, mark-downs, or commissions and do not necessarily represent
actual transactions. The Company commenced trading on the Bulletin Board in
September, 1998 under the symbol WMET.
Low High
Calendar Year 1997:
First Quarter Not Traded Not Traded
Second Quarter Not Traded Not Traded
Third Quarter Not Traded Not Traded
Fourth Quarter Not Traded Not Traded
Calendar Year 1998:
First Quarter Not Traded Not Traded
Second Quarter Not Traded Not Traded
- ----------
At September 30, 1998, the Company had 132 holders of record of its
Common Stock.
The Company has paid no cash dividends on its Common Stock to date and it
does not anticipate declaring or paying any cash dividends in the foreseeable
future.
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Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations
General
The Company has positioned itself through its subsidiaries to engage in four
significant areas of the precious metals business.
Westbury International, Inc.
Trading and risk management services, including metals leasing, financing
arrangements, cash and forward purchases and sales for internal metals
management requirements. This newly formed entity will be responsible for
the ongoing management and operations of the Peruvian subsidiary.
It is expected that long-term contracts for metals will be entered into
for both the procurement and sales of precious metals on both a domestic
and international basis.
West Tech, Inc.
Manufacture and sale of precious and base metal products for use by
industry.
Westbury Alloys, Inc.
Refining services to accumulators and manufacturers of precious metals.
Catalyst procurement and collection for the purpose of processing and
recovery of platinum group metals.
Year 2000
Management believes that there is no impact to the Company as it relates to the
Year 2000.
Liquidity, Capital Resources and Other Financial Data
During the fiscal year ended June 30, 1998, the Company issued 1,167,312 shares
of common stock and received proceeds, net of offering costs, of $3,234,039.
The Company has been relying on a gold consignment program and internally
generated funds to finance its metal purchase, inventories and accounts
receivable. Inventories are stated at market value. Consistent with other
companies that refine and produce precious metal fabricated products, customers
and suppliers on a consignment basis furnish some of the Company's gold and
silver requirements. Title to the consigned gold and silver remains with the
Consignor. The value of consigned gold and silver held by the Company is not
included in the Company's inventory and there is no related liability recorded.
At June 30, 1998, the company held 7,915 troy ounces of gold at a value of
$2,345,300 of Gold and Silver under a consignment agreement with Republic
National Bank for which the Company is
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charged a consignment fee based on the current rates. There can be no assurances
that fluctuations in the precious metals markets and credit would not result in
an interruption of the Company's gold supply or the credit arrangements
necessary to allow the Company to support its accounts receivable and continue
the use of consigned gold.
In general all of the Company's operating entities are capital intensive.
The cash requirements are primarily used to facilitate the acquisition and
maintenance of metal inventories and receivables. In order to maintain and
maximize the current sales growth of West Tech, Inc., a borrowing facility of
$2,000,000 for the financing of accounts receivable has been approved by a
commercial lender and will be available by October 1998. A Director of the
Company is an Officer of the commercial lender.
The Company will have an additional requirement for funds in order to
maximize its potential as it relates to the various segments of activity. Based
upon anticipated future financing requirements of the Company, management
expects that the Company may, from time to time, engage in additional financings
of a character and in amounts to be determined.
Prior to the Merger, the Company (a development stage enterprise) had
earned a commission of $45,000 that was unrelated to operations. This
non-recurring revenue has been reflected with other income.
The significant factors relating to the pro forma loss incurred for the
fiscal year ended June 30, 1998 were amortization and depreciation of $246,739.
In fiscal 1999 the portion of amortization attributable to intangibles is
expected to be reduced from approximately $150,000 to approximately $30,000 due
mainly to the write-off of acquired customer lists in 1998.
Additional staffing for executive, administrative and sales functions as well as
significant start up costs for West Tech, Inc. and the catalyst operation
accounted for the balance of the current year's loss as reflected in Note 16 in
the Notes to the Consolidated Financial Statements. Management does not
anticipate any significant increase in staff other than that required by
Westbury International, Inc.
Management believes that operations will improve for the year ended
June 30, 1999, as a result of changing from a less efficient start-up
environment in its West Tech Metal Fabricating operation, and its reprocessing
of catalytic converters, to more efficient operations and increased volume in
all its operations. Management believes that as the volume increases it will be
able to control its overall overhead. Additional contributions to profitability
are expected to be generated by the newly formed trading and risk management
services operations. However, there can be no assurance that management will be
successful in its efforts.
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Item 7. Financial Statements.
F-1 through F-13
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Item 8. Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure.
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act.
Directors and Executive Officers
Name Age Position
Mandel Sherman 59 President, Chief Executive
Officer and Director
Michael A. O'Hanlon 51 Director
Michael Riess 57 Director
David W. Sass 62 Secretary
David Nadler 51 Treasurer
Mandel Sherman, President, Chief Executive Officer and Director
Mandel Sherman, 59, has been the President, Chief Executive Officer and
Director of Westbury since July 1996. From 1993 to 1995, Mr. Sherman acted as an
independent consultant to various investment firms. From 1983 to 1993, Mr.
Sherman participated in numerous real estate ventures as both an investor and
manager of developments with an approximate total value in excess of $30
million. From 1975 to 1983, Mr. Sherman served as the Chief Executive Officer
and President of Refinement International Company ("Refinement", a company he
founded in 1975. Refinement, a full service metals processing company with
financial capabilities and capital resources in precious metals and specialty
metals markets, exceeded sales of $350 million and was publicly traded on the
American Stock Exchange. From 1962 to 1975, Mr. Sherman served as the President
of Eastern Foundry Supplies ("EFS"), a company he founded in 1962. EFS
concentrated in the recovery of precious metals from the electronic and jewelry
industries. In 1967, Mr. Sherman was responsible for the sale of EFS to
Whittaker Corp., a California-based Company listed on the NYSE, where Mr.
Sherman remained as President with sales of approximately $10 million. Mr.
Sherman received his BSBA in Business Administration from Boston University in
1959.
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Michael A. O'Hanlon, Director
Michael A. O'Hanlon, 51, has been the president and chief executive
officer of DVI, Inc., since November, 1995 and served as executive vice
president of DVI since joining DVI in March, 1993. DVI is an independent
specialty finance company that conducts a medical equipment finance business and
related medical receivables finance business. Mr. O'Hanlon became a director of
DVI in November, 1993. Prior to joining DVI, Mr. O'Hanlon served as president
and chief executive officer of Concord Leasing, Inc., and its subsidiary, U.S.
Concord, Inc. for nine years. Concord Leasing provides medical, aircraft,
shipping and industrial equipment financing. Previously, Mr. O'Hanlon was a
senior executive with Pitney Bowes Credit Corporation. Mr. O'Hanlon received his
Master of Science degree from the University of Connecticut and his Bachelor of
Business Administration from the Philadelphia College of Textiles and Science.
Michael Riess, Director
Michael Riess, 57, has, since 1978, been the president of Materials
Management Corporation ("MMC"), a consulting firm specializing in precious and
nonferrous metals. He has headed the North American trading operations of the
Gulf Oil Corporation, Brascam, Ltd. and W.C. Heraeus, GmbH. He also managed
Heraeus' U.S. precious metals refining and has been involved in trading and
marketing a broad range of materials, including metals, scrap, and concentrates.
A graduate of Middlebury College with advanced degrees from Columbia
University's Graduate School of Business and its School of International
Affairs, Mr. Riess was Professor of Finance at Columbia University for eight
years. He has been a member of several commodity exchanges and is a Director of
the International Precious Metals Institute and the Center for the Study of
Futures Markets.
David W. Sass, Secretary
David W. Sass, 62, has, for the past 37 years, been a practicing attorney
in New York City and is currently a senior partner in the law firm of McLaughlin
& Stern, LLP, counsel to the Company. Mr. Sass is a director of Pallet
Management Systems, Inc. a company engaged in the manufacture and repair of
wooden pallets and other packaging services; a director of The Harmat
Organization, Inc., a real estate development company; a director of Genisys
Reservation Systems, Inc., a company engaged in the development of a
computerized limousine reservation system and a member and Vice Chairman of the
Board of Trustees of Ithaca College.
David Nadler, Chief Financial Officer
David Nadler, 51, joined the Company as the chief financial
officer and controller in March, 1998. From 1993 to when he joined
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the Company, Mr. Nadler was a director, executive vice president, CFO and
controller, with responsibility for the management of all financial and
accounting functions at Merchants Overseas, E&C Imports, a Rhode Island
distributor of jewelry products. From 1988 to 1993, he was a partner of the
public accounting firm of Leventhal, Zupnick, Berg & Co. Prior to this, Mr.
Nadler was vice president of British American Petroleum, a publicly-traded
syndicator of oil and gas drilling programs. From 1974 to 1986, he was principal
of David Nadler & Company, CPA, P.C., which provided accounting, tax and
financial consulting services. Mr. Nadler is a graduate of Pace University and a
member of the AICPA and of the New York State Society of Certified Public
Accountants.
All of Westbury's executive officers devote their full business time to
the affairs of the Company.
All directors shall serve for a term of one year or until their
respective successors have been duly elected and qualified. It is anticipated
that outside directors will receive $500 for each meeting attended in person and
$250 for each meeting attended telephonically as well as reimbursement for
out-of-pocket expenses. In addition, each outside director will receive an
option to purchase 15,000 shares of Common Stock at an exercise price of $3.00
per share. These options will vest each year over a period of three years. As of
September 30, 1998, no options have been granted to directors.
Item 10. Executive Compensation
Employment Agreement
On January 1, 1998, Westbury entered into a three-year employment agreement with
Mr. Sherman, a stockholder, director and chief executiveofficer of the Company.
Under the agreement, Mr. Sherman's compensation is $175,000 annually. In
addition, Mr. Sherman will receive 10% of the pretax profits of the Company in
each year in excess of $500,000 to a maximum bonus of $175,000. This employment
agreement has been assumed by the Company upon the completion of the Merger. In
addition, the Company has taken out a $1,000,000 keyman life insurance policy
for Mr. Sherman.
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Consulting Agreements
On July 22, 1996, Westbury entered into a five-year consulting agreement
with Lawrence Raskin, former president of the Company's predecessor, Westbury
Alloys, Inc. The agreement provides for an annual salary of $10,000 for his
consulting services. The Consulting Agreement also contains certain
confidentiality and non-competition provisions which are operative during the
term of the agreement and for given periods of time after termination thereof.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Summary Compensation Table
Name and Principal Long-Term Compensation
Position Annual Compensation Awards Payouts
Other
Annual Restricted All Other
Compen- Stock Options/ LTIP Compen-
Year Salary Bonus sation Award(s) SARs Payouts sation
Mandel Sherman 1998 $166,154 - - - - - $6,888
President
1997 $ -0- - - - - -
$
1996 $ -0- - - - - - -
</TABLE>
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Item 11. Security Ownership of Certain Beneficial Owners and
Management.
The following table sets forth as of September 30, 1998, the number of
shares of Common Stock of the Company and the percentage of that class owned
beneficially, within the meaning of Rule 13d-3 promulgated under the Exchange
Act, and the percentage of the Company's voting power owned by (i) all
shareholders known by the Company to beneficially own more than five percent of
the Company's Common Stock; (ii) each director of the Company; and (iii) all
directors and officers as a group. All shares set forth in the following table
are entitled to one vote per share and the named beneficial owners have sole
voting and investment power. Each percentage set forth in the following table
assumes the exercise of all stock options exercisable by the named individual or
group as of September 30, 1998 or within 60 days thereafter.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Number of Shares
Name and Address Beneficially Percentage
Owned(1)
Dartmouth Capital
Partners(2)
210 Dartmouth Street 832,500 26.0%
Pawtucket, RI 02860
Mandel Sherman(3)
Westbury Alloys, Inc.
750 Shames Drive
Westbury, NY 11590 450,166 14.1%
Michael A. O'Hanlon
DVI, Inc.
500 Hyde Park
Doylestown, PA 18901 100,000 3.1%
Michael Riess -0- -0-
818 Lake Avenue
Greenwich, CT 06831
Directors and Officers as 550,166 17.2%
a Group (3)
</TABLE>
(1) All share amounts reflect beneficial ownership determined pursuant to Rule
13d-3 under the Exchange Act, and include voting and investment power with
respect to shares of Common Stock of the Company.
(2) The members of this limited liability company are immediate family members
of Mr. Mandel Sherman, President and Chief Executive Officer of Westbury. Mr.
Sherman disclaims beneficial ownership of such shares.
(3) Does not include 832,500 shares owned by Dartmouth Capital Partners, a
company owned and controlled by Mr. Sherman's children.
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Item 12. Certain Relationships and Related Transactions
On July 3, 1996, Westbury's predecessor, Westbury Alloys, LLC
executed an asset purchase agreement (the "Asset Purchase Agreement") where
Westbury Alloys, LLC purchased the assets of a unrelated New York corporation,
Westbury Alloys, Inc. ("Westbury New York") for a purchase price of $650,000,
payable as follows: $550,000 in cash at or prior to closing and with a balance
due in equal amounts of $50,000 on January 31, 1997 and July 31, 1997. To fund
this purchase Westbury Alloys, LLC borrowed from Graco Holdings, Inc. ("Graco"),
the sum of $550,000. This loan has been repaid from the proceeds of certain
bridge financing in the amount of $700,000 (described below). On July 16, 1996,
the obligation due to Graco was assigned by Graco to another affiliate of a
former stockholder. In July 1996, Graco guaranteed Westbury Alloys, LLC's line
of credit ("Line of Credit") and deposited a letter of credit in the amount of
$2,600,000 as security for its guaranty.
On July 22, 1996, Lawrence Raskin, former president of Westbury New York
executed a five (5) year consulting agreement with Westbury to serve as a
consultant to Westbury in connection with transitional issues and continuing
conduct of Westbury's business. Mr. Raskin will receive a fee of $10,000 per
annum for his consulting services. Westbury signed a five year lease on its
10,200 square foot facilities at 750 Shames Drive, Westbury, New York, with Mr.
Raskin. The term of the lease expires on July 31, 2003. Throughout the term of
the lease, Westbury has the option to renew the lease at a mutually agreeable
rental at least 30 days prior to expiration. In addition, Westbury has an option
to purchase the existing facility space at the appraised fair market value,
although not for less than $1.2 million for the first three years. Westbury has
no current intention to exercise this option.
From time to time, Westbury borrowed funds from several affiliated
investment limited partnerships. These loans were repaid in July and August,
1997. Mandel Sherman, the president, director and a principal shareholder of the
Company is the general partner and manager of such affiliated entities.
In October, 1997, Westbury Alloys, LLC merged into Westbury Alloys, Inc.,
a Delaware corporation. The membership interests in Westbury Alloys, LLC were
converted into 1,850,000 shares of common stock of Westbury Alloys, Inc. in
proportion to the interest held by each member.
On January 1, 1998, Westbury entered into a three-year employment
agreement with Mandel Sherman. Under the agreement, Mr. Sherman's compensation
is $175,000 annually. In addition, Mr. Sherman will receive 10% of the pretax
profits of the Company in each year in excess of $500,000 to a maximum bonus of
$175,000 per year. This agreement has been assumed by the Company. In addition,
the Company
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has taken out a $1,000,000 keyman life insurance policy for Mr.
Sherman.
The Agreement terminates upon the death or disability of Mr. Sherman and
permits the Company to terminate the agreement, without further payment
obligation to Mr. Sherman, upon the commission of certain acts, and to terminate
the Agreement for any other reason, provided that the Company pays to him a
severance payment equal to the aggregate base salary otherwise owed to him over
the remaining term of the Agreement. Pursuant to the terms of the Agreement, in
the event that Mr. Sherman is not nominated or re-elected to serve as a member
of the Board of Directors, either he or the Company may terminate his employment
with the Company and in such event, he shall be entitled to continue to receive
his base salary as set forth in the Agreement for the remainder of the term.
The Agreement also contains certain confidentiality and non-compete
provisions which are operative during the term of the Agreement. The
confidentiality provisions remain in effect after termination of employment.
In July, 1996, the original members of Westbury Alloys, LLC, subscribed
for membership interests of $100,000, in the aggregate, in Westbury Alloys, LLC.
Such interests were converted into Westbury Common Stock at the time of the
merger between Westbury Alloys, LLC and Westbury.
On March 31, 1998, the Company completed a reverse merger of its wholly
owned subsidiary, Westbury Acquisition Corp. a New York corporation ("WAC") with
Westbury Alloys, Inc., a Delaware corporation ("Westbury") pursuant to which
Westbury has become a wholly owned subsidiary of the Company. Westbury provides
a broad range of processing and refining services in connection with the
reclamation of precious and specialty metals from scrap materials. Pursuant to
the merger, the principals of Westbury have become the principals of the Company
and have become the largest shareholders of the Company.
In order to maintain and maximize the current sales growth of West Tech,
Inc., a borrowing facility of $2,000,000 for the financing of accounts
receivable has been approved by a commercial lender and will be available by
October 1998. A Director of the Company is an Officer of the commercial lender.
The Company paid to the firm of McLaughlin & Stern, LLP during the year
ended June 30, 1998, the sum of $67,641 for various legal services. David W.
Sass, the Secretary of the Company, is a member of said firm.
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PART IV
Item 13. Exhibits and Reports on Form 8-K.
Schedules and Reports on Form 8-K
(A)(1) The following financial statements are included in Part II, Item
7:
Independent Auditors' Reports
Consolidated Balance Sheets as at June 30, 1998 and 1997.
Consolidated Statements of Operations for the Years Ended June 30,
1998 and 1997
Consolidated Statements of Stockholders' Equity for the Years Ended June 30,
1998 and 1997.
Consolidated Statements of Cash Flows for the Years Ended June
30,1998 and 1997
Notes to Consolidated Financial Statements
Schedules are omitted for the reason that they are not required, are not
applicable, or the required information is included in the financial statements
or notes thereto.
(B) Reports on Form 8-K - Not applicable.
(C) Exhibits. The following exhibits are filed as part of the Company's
report. Where such filing is made by incorporation by reference (I/B/R)
to a previously filed statement or report, such statement or report is
identified in parenthesis.
Official Exhibit
Number Description
[3](a)* Certificate of Incorporation, as amended.
[3](b)* By-Laws.
4* Form of Common Stock Certificate
10* Form of Employment Agreement with Mandel Sherman.
[27]* Financial Data Schedule
* Filed herewith.
17
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Board of Directors and Stockholders
Westbury Metals Group, Inc.
We have audited the accompanying consolidated balance sheet of Westbury Metals
Group, Inc. (formerly known as Rosecap, Inc.) and subsidiaries as of June 30,
1998, and the related consolidated statements of operations, stockholders'
equity and cash flows for the year then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit. We did not audit the financial statements of
Alloy Trading S.A., a 98% owned subsidiary, which statements reflect total
assets of $508,432 as of June 30, 1998; there were no revenues as they have been
eliminated in consolidation. Those statements were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it relates to
the amounts included for Alloy Trading S.A., is based solely on the report of
the other auditors. We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit and the
report of other auditors provide a reasonable basis for our opinion. In our
opinion, based on our audit and the report of other auditors, the consolidated
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Westbury Metals Group, Inc. and
subsidiaries as of June 30, 1998, and the results of their operations and their
cash flows for the year then ended in conformity with generally accepted
accounting principles.
CITRIN COOPERMAN & COMPANY, LLP
New York, New York
September 18, 1998
F-1
<PAGE>
SCOTT & GUILFOYLE
5 DAKOTA DRIVE - SUITE 206
LAKE SUCCESS, NEW YORK 11042
PAUL J. Scott, C.P.A. (516) 775-0600
RICHARD T. Guilfoyle, C.P.A. FAX (518) 328-4638
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Rosecap, Inc.
We have audited the accompanying balance sheets of Rosecap, Inc.
(a development stage company) as of June 30, 1997 and 1996, and
the related statements of operations, stockholders' equity and
cash flows for the years ended June 30, 1997, 1996 and 1995 and
for the period August 24, 1990 (inception) to June 30, 1997.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining on a test basis evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Rosecap, Inc. (a development stage company) as of June 30,
1997 and 1996 and the results of its operations and its cash
flows for the years ended June 30, 1997, 1996, 1995 and for the
period August 24, 1990 (inception) to June 30, 1997 in conformity
with generally accepted accounting principles.
Lake Success, New York
August 6, 1997
F-1A
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
WESTBURY METALS GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND 1997
1998 1997
--------------- -------------
ASSETS
CURRENT ASSETS:
Cash $ 877,520 $ 7,502
Accounts receivable 788,749
Inventory 835,565
Prepaid expenses and other current assets 348,795
--------------- -------------
Total Current Assets 2,850,629 7,502
--------------- -------------
PROPERY PLANT AND EQUIPMENT:
Property and equipment 599,843
Accumulated depreciation and amortization (162,695)
--------------- -------------
Net Property Plant and Equipment 437,148
--------------- -------------
OTHER ASSETS:
Goodwill - net of accumulated amortization of $75,612 647,216
Deposits 113,177
--------------- -------------
Total Other Assets 760,393
--------------- -------------
TOTAL ASSETS $4,048,170 $ 7,502
=============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Due to customers $ 455,553 $
Accounts payable and accrued expenses 528,246 1,938
--------------- -------------
Total Current Liabilities 983,799 1,938
--------------- -------------
STOCKHOLDERS' EQUITY:
Common stock $.001 par value; Authorized
50,000,000 shares; issued and
outstanding 3,197,312 shares and 87,500 shares
at June 30, 1998 and 1997, respectively 3,197 88
Capital in excess of par value 3,173,171 42,241
Accumulated deficit (111,997) (36,765)
--------------- -------------
Total Stockholders' Equity 3,064,371 5,564
--------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,048,170 $ 7,502
=============== =============
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
WESTBURY METALS GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
1998 1997
--------------- --------------
Revenues:
Sales $1,425,315 $
Refining fees 552,451
Other income 53,267
--------------- --------------
Total revenues 2,031,033
--------------- --------------
Cost and expenses:
Cost of sales 1,335,607
Cost of refining 263,997
Selling, general and administrative 430,862 7,383
Depreciation and amortization 37,495
Interest 38,304
--------------- --------------
Total costs and expenses 2,106,265 7,383
--------------- --------------
Net loss $ (75,232) $ (7,383)
======================================
Net loss per share - basic $ (.08)
Net loss per share - diluted $ (.08)
Average shares outstanding - basic 919,495 66,062
Average shares outstanding - diluted 919,495 66,062
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
WESTBURY METALS GROUP, INC. AND SUBSIDIARIES
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
Common Stock Capital in Total
excess of Accumulated Stockholders'
Shares Amount par value Deficit Equity
Balance, June 30, 1996 62,500 $ 63 $ 37,266 $ (29,382) $ 7,947
Issuance of common
shares, May 10, 1997 25,000 25 4,975 5,000
Net loss for the year
ended June 30, 1997 (7,383) (7,383)
-------------- -------------- -------------- --------------- -----------------
Balance, June 30, 1997 87,500 88 42,241 (36,765) 5,564
Common Stock Dividend
March 31, 1998 92,500 92 (92)
Common stock issued
upon merger with
Westbury Alloys, Inc.
March 31, 1998 1,850,000 1,850 98,150 100,000
Common stock issued
in private placement
March 31, 1998 814,503 815 2,015,224 2,016,039
Common stock issued
upon conversion of
bridgeholder loans
March 31, 1998 233,333 233 699,767 700,000
Common stock issued
in private placement
May 8, 1998 119,476 119 317,881 318,000
Net loss for the year
ended June 30, 1998 (75,232) (75,232)
-------------- -------------- -------------- --------------- -----------------
3,197,312 $ 3,197 $3,173,171 $ (111,997) $ 3,064,371
============== ============== ============== =============== =================
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
WESTBURY METALS GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
1998 1997
----------------- ------------------
Operating activities:
Net loss $ (75,232) $ (7,383)
Adjustments to reconcile net loss to net cash
used in operating activities net
of assets and liabilities acquired in merger:
Depreciation and amortization 37,495
Changes in assets and liabilities:
Accounts receivable (661,582)
Inventories (794,707)
Prepaid expenses and other current assets 404,178
Deposits (75,969)
Due to customers (189,619)
Accounts payable and other current liabilities (120,441) (798)
----------------- ------------------
Net cash used in operating activities (1,475,877) (8,181)
Investing activities:
Property, plant and equipment (98,512)
Financing activities:
Issuance of common stock 2,334,039 5,000
----------------- ------------------
Net increase (decrease) in cash 759,650 (3,181)
Cash from merged subsidiary 110,368
Beginning Cash Balance 7,502 10,683
----------------- ------------------
Ending Cash Balance $ 877,520 $ 7,502
================= ==================
Supplemental cash flow information:
Cash paid for interest $ 22,518
See accompanying notes to consolidated financial statements.
F-5
</TABLE>
<PAGE>
WESTBURY METALS GROUP, INC., AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998 AND 1997
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
On June 18, 1998, the Company name was changed from Rosecap, Inc. to Westbury
Metals Group, Inc. ("WMG"). On March 31, 1998 the Company entered into a merger
between Westbury Acquisition Corp. ("WAC"), a wholly owned subsidiary of the
Company, and Westbury Alloys, Inc., ("Westbury") a Delaware Corporation, the
surviving entity. The merger is a reverse merger whereby the principals of
Westbury became the principals and the largest shareholders of the Company. The
Company commenced operating the business of Westbury after the consummation of
the merger. Prior to the merger, the Company, which was incorporated in 1990,
had not conducted any operations and reported as a development stage enterprise.
Westbury reclaims principally gold, silver, platinum and palladium from scrap
and residues from the electronics, jewelry, petroleum, dental, chemical,
automotive, mining and aerospace industries. After controlled weighing,
sampling, and assaying to determine values and to settle with the customer,
Westbury either purchases the precious metal or returns metal to the customer.
Through its Peruvian subsidiary Alloy Trading S.A. ("Alloy"), Westbury imports
metals for its own use as well as for direct sales to third parties.
Alloy, a 98% owned subsidiary of Westbury, was incorporated in Peru in 1996. The
remaining 2% of the capital stock of Alloy is owned by the two local managers of
Alloy. The long range purpose of Alloy is to develop trading opportunities
between Peruvian companies and their counterparts worldwide and to explore
opportunities in metal related activities including gold and silver bullion,
transactions with the mining industry, jewelry manufacturers, and other similar
activities.
On March 30,1998 West Tech, Inc. ("West Tech") was formed as a subsidiary of
Westbury (with ownership being subsequently transferred to WMG) for the
manufacture and sale of silver in various forms and shapes, plating salts as
well as tin and tin-lead anodes used in manufacturing. In the near future the
Company anticipates a broader product line to include precious metal casting
grains, alloys, and mill products. In May of 1998 the Company acquired the
registered trade name Onic for use in the manufacture and sale of its high
quality tin products.
Westbury Realty Management Corp. (WRMC) was formed in June of 1998 for the
purpose of acquiring the property that is presently being rented by Westbury for
its processing of catalyst materials. This acquisition should be completed by
September 30, 1998. There was no financial activity during the reporting period.
Gold and silver comprise the major portion of the value of Westbury's precious
metal inventory, which may be held under certain consignment agreements (see
Note 4). The prices of gold and silver are subject to fluctuations and are
expected to continue to be affected by world market conditions. At June 30, 1998
all inventory owned by Westbury was fully hedged to protect against market
fluctuations. Market gains or losses as well as all trading activities are
included in "Cost of sales". It is the Company's policy that all metal
transactions are fully hedged and should result in no gains or losses due to
market fluctuations. Hedging consists of the sale or purchase of forward
contracts for the physical delivery of metals. When the Company purchases
precious metal it sells a forward contract to protect against fluctuating market
prices, conversely when the company sells precious metals it buys a contract to
close the transaction. Futures contracts are measured at market value with
unrealized gains and losses reflected in operations during the period. Westbury
maintains inventories of precious metals in various states of processing.
Westbury also maintains inventories at independent outside refineries. Such
inventories are carried on its books at current market value.
F-6
<PAGE>
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the operations of WMG for the
period from July 1, 1997 through June 30, 1998 and the operations of Westbury,
Alloy and West Tech, from April 1, 1998 through June 30, 1998. All significant
intercompany balances and transactions have been eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements requires the Company's management to
estimate the current effects of transactions and events whose ultimate outcomes
may not be determinable until future years. Consequently, actual results could
differ from those estimates.
TRANSLATION OF FOREIGN CURRENCIES
Translation adjustments result from the process of translating Alloy's financial
statements from their local currency to U.S. dollars. Assets and liabilities
in foreign currencies are translated into U.S. dollars at the rate in effect on
the balance sheet date. Revenues and expenses are translated at the average
rate for the period. Translation adjustments were not significant. Where
amounts denominated in a foreign currency are converted to U.S. dollars by
remittance or repayment, the realized exchange differences are not material
and are included in determining net loss for the period.
INVENTORY AND DUE TO CUSTOMERS
The Company's customers have the option of receiving cash in lieu of the refined
precious metals. Since the Company bears the risk of loss, it is the policy
of the Company to record all precious metals received for refining as inventory
and an offsetting liability due to customers.
Inventories which consist of precious metals, are stated at their market value.
Quantities are determined based upon physical count.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost and depreciated using
straight-line methods over the estimated useful lives of the assets ranging from
5 years to 39 years.
AMORTIZATION OF INTANGIBLE ASSETS
Intangible assets consist of goodwill, which is the excess of the purchase
price over the fair value of assets acquired in business combinations accounted
for as purchases. Goodwill is amortized on a straight-line basis over the
period benefited, 24 years. The goodwill relates to the Westbury Alloys, Inc.
and Subsidiaries acquisition. Goodwill is reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not
be recoverable. Impairment would be recognized in operating results if a
permanent diminution in value were to occur.
INCOME TAXES
The Company accounts for income taxes under the provisions of Statement 109,
Accounting for Taxes issued by the Financial Accounting Standards Board.
Under such statement, the tax benefits of tax operating loss carryforwards are
recorded to the extent available less a valuation allowance if it is more
likely than not that some portion of the deferred tax asset will not be
realized.
NET INCOME (LOSS) PER COMMON SHARE
Basic net income (loss) per common share is calculated using the weighted
average number of common shares outstanding during the period. Diluted income
(loss) per share is calculated by including all dilutive potential common
shares such as stock options and warrants. Potential common shares are not
included for all periods presented because they would be anti-dilutive.
F-7
<PAGE>
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
IMPAIRMENT OF LONG-LIVED ASSETS
Effective July 1, 1996, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of". This
statement requires that long-lived assets and certain identifiable intangibles
to be held and used by an entity be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of assets may not be
recoverable. There was no significant impact on the Company's results of
operations or financial position.
STOCK BASED COMPENSATION
The Company accounts for stock-based compensation using the intrinsic value
method in accordance with APB No. 25, "Accounting for Stock Issued to
Employees". Effective July 1, 1996, the Company adopted the disclosure
requirements of SFAS No. 123, "Accounting for Stock-Based Compensation", which
require the disclosure of pro forma net income and earnings per share as if the
Company adopted the fair value-based method in measuring compensation expense
as of the beginning of fiscal 1996 (See Note 13).
NEW REPORTING PRONOUNCEMENT
The Company will implement the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 130, Reporting Comprehensive Income, SFAS No. 131,
Disclosures About Segments of an Enterprise and Related Information, and SFAS
No. 132, Employers' Disclosures about Pensions and Other Post-retirement
Benefits which require the Company to report and display certain information
related to comprehensive income, operating segments, and employee benefits
plans, respectively, as required in 1998. Adoption of these statements will not
impact the Company's financial position or results of operations.
FAIR VALUE FINANCIAL INSTRUMENTS
The Company considers the fair value of all financial instruments to be not
materially different from their carrying value at year end.
NOTE 2 - CONCENTRATION OF CREDIT RISK
The Company maintains its cash in bank accounts which, at times, may exceed
federally insured limits. The Company has not experienced any losses in such
accounts. The Company believes it is not exposed to any significant credit risk.
NOTE 3 - ADVANCES TO CUSTOMERS
Advances to customers arise as a result of the Company advancing finished metal
or cash to the customer prior to the subsequent settled amount. At the request
of the customer, the Company may advance up to 90% of the expected settlement
value of the metal to the customer. The Company occasionally advances or
consigns metal to its customers. These advances are charged against future
transactions with the customer.
NOTE 4 - INVENTORIES
Inventories are stated at current market value. Consistent with other
companies that refine and produce precious metal fabricated products, some of
the Company's gold and silver requirements are furnished by customers and
suppliers on a consignment basis. Title to the consigned gold and silver
remains with the Consignor. The value of consigned gold and silver held by
the Company is not included in the Company's Balance Sheet. At June 30, 1998
the Company held $2,345,300 under a consignment agreement with Republic
National Bank. The Company's gold and silver requirements are provided from a
combination of owned inventories, precious metals which have been purchased and
sold for future delivery, and gold and silver received from suppliers and
customers on a consignment basis.
F-8
<PAGE>
NOTE 5 - PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets at June 30, 1998 substantially
consist of a value added tax credit from the Peruvian government of $245,847
and of payments in advance of Peruvian income tax of $56,886. Alloy may
request the reimbursement of the value added tax credit to the local tax
administration and is entitled to also receive reimbursement of the payments
in advance of income taxes.
NOTE 6 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at June 30, 1998 consists of the following:
Machinery and equipment $487,777
Furniture and fixtures 54,135
Leasehold improvements 31,646
Vehicles 26,285
----------------
599,843
Less accumulated depreciation and amortization 162,695
----------------
Property, plant and equipment - net $437,148
================
NOTE 7 - GOODWILL
Goodwill arose from the capitalization of the equity accounts of the
subsidiaries at the time of the merger and from goodwill on the books of the
subsidiary, as follows:
Westbury Alloys, Inc. (capitalization of equity accounts at merger) $422,828
Westbury Alloys, Inc. (prior acquisition) 300,000
-------
722,828
Accumulated amortization 75,612
-------
$647,216
=======
Management has determined that goodwill would be amortized over twenty-four
years.
NOTE 8 - LOANS PAYABLE
The Company has entered into an agreement with Republic National Bank to
provide the Company with the gold used in production through consignment
arrangements. At June 30, 1997 the Company included in its inventory 7,915
troy ounces of fine gold on consignment having a market value of $2,345,300
(see Note 4). The maximum amount of consigned gold available is limited to
the amount guaranteed by letters of credit provided by a third party consignee,
presently $2,600,000.
The Company has incurred consignment fees in the amount of $22,518 on the above
loans for the year ended June 30, 1998.
F-9
<PAGE>
NOTE 9 - INCOME TAXES
The Company's net deferred tax asset as of June 30, 1998 is estimated as
follows:
Deferred tax assets:
Net operating loss carryforward $196,000
Deferred tax liability:
Amortization of goodwill 3,000
--------------------
Net deferred tax asset 193,000
Valuation allowance 193,000
--------------------
Net deferred taxes $ 0
--------------------
A valuation allowance for 1998 has been applied to offset the deferred tax asset
in recognition of the uncertainty that such tax benefits will be realized.
At June 30, 1998, the Company has available net operating loss carryforwards
for federal and state income tax purposes of approximately $490,000, which are
available to offset future taxable income, if any. These carryforwards expire
beginning in 2012.
NOTE 10 -STOCKHOLDERS' EQUITY
The Company issued 1,850,000 shares of its common stock in exchange for all
of the outstanding shares of Westbury Alloys, Inc. This merger was accounted
for as a purchase. The value attributed to the shares was $100,000, which was
the value of all of the outstanding shares on the books of Westbury Alloys, Inc.
The Company entered into an agreement whereby it issued shares of its common
stock through a private placement memorandum. The proceeds of the offering,
net of expenses, was $2,334,039, from the issuance of 1,167,312 shares of
common stock. Included in the issued shares are 233,333 shares issued to
certain investors who had provided bridge financing of $700,000 to Westbury
and converted their loans to equity at the same offering price of $3.00 per
share. These noteholders also received warrants to purchase 700,000 shares of
common stock of the Company at $2.25 per share. The warrants expire on
March 31, 2000.
NOTE 11 - STOCK OPTION PLAN
Under the Company's stock option plan (Westbury Alloys' Inc.'s 1997 Omnibus
Stock Incentive plan (as amended) (the "Plan") which has been ratified by the
shareholders' of Westbury Metals Group Inc., options to purchase a maximum of
750,000 shares of common stock (subject to adjustment in the event of stock
splits, stock dividends, recapitalization and other capital adjustments) may be
granted to employees and outside directors of the Company. The options to be
granted under the plan are designated as incentive stock options or
non-incentive stock options by the board of directors which also has the
discretion as to the person to be granted the options, the number of shares
subject to the options and the terms of the option agreements. The plan is
administered by the board of directors. All present and future employees shall
be eligible to receive incentive awards under the plan, and all present and
future non-employee directors shall be eligible to receive non-statutory options
under the plan. The options are intended to receive incentive stock option tax
treatment under Section 422 of the Internal Revenue Code of 1986, as amended.
F-10
<PAGE>
WESTBURY METALS GROUP, INC., AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998 AND 1997
NOTE 11 - STOCK OPTION PLAN (CONTINUED)
The exercise price of shares of common stock covered by an incentive stock
option shall not be less than 100% of the fair market value of such shares on
the date of grant, provided that if an incentive stock option is granted to an
employee who, at the time of the grant, is a 10% shareholder, then the exercise
price of the shares covered by the incentive stock option shall not be less than
110% of the fair market value of such shares on the date of grant. The exercise
price of shares covered by a non-statutory stock option shall not be less than
85% of the fair market value of such shares on the date of grant.
Options outstanding at June 30, 1998 are exercisable at prices ranging from $.50
to $3.00 per share, the fair market value on the date of grant, and expire at
various dates to June 17, 2008. Options to purchase 180,000 shares were granted
October 28, 1997, while the plan was part of Westbury Alloys, Inc. Options to
purchase 100,000 shares were granted June 18, 1998 and are exercisable through
June 17, 2008. The options granted October 28, 1997 are exercisable at a rate of
45,000 shares annually for four years beginning October 28, 1997. Of the options
granted June 18, 1998, 50,000 are exercisable immediately and 25,000 are
exercisable annually beginning June 18, 1999 and June 18, 2000. No other options
have been granted, exercised or terminated.
NOTE 12 - COMMITMENTS
EMPLOYMENT AGREEMENT
The Company's chief executive officer has an employment agreement expiring
December 31, 2000. Under the agreement he receives $175,000 annually plus 10%
of the annual pretax profits of the Company in excess of $500,000 to a maximum
bonus of $175,000 per year.
LEASE COMMITMENT
Effective July 22, 1996 the Company entered into a seven-year lease, expiring
July 31, 2003, for the premises known as 750 Shames Drive, Westbury, New York,
which approximates 10,200 square feet. The annual rental in the initial year
of the lease is $7.50 per square foot, plus escalations for real estate taxes.
Provided the Company is not in default under the lease, the Company has the
option to purchase the premises, along with premises known as 700 Shames Drive
(7,800 square feet). If the Company exercises the option to buy within the
first three years of the lease, the combined purchase price of both premises
shall be $1,200,000. After the first three years of the lease, the purchase
terms of the property shall be determined as specified in the lease, which
calls for among other provisions, the purchase price to be fair market value.
Future minimum lease payments are as follows:
For the year ending June 30,
1999 $82,416
2000 84,762
2001 85,884
2002 89,556
2003 92,004
---------
$434,622
==========
Rent expense for the year ended June 30, 1998 was $22,838.
CONSULTING SERVICES
Effective July 22, 1996, the Company entered into a five year consulting
agreement with Lawrence Raskin. Under the agreement, the Company will pay
Lawrence Raskin $10,000 annually for a total fee of $50,000 plus certain
expenses.
F-11
<PAGE>
WESTBURY METALS GROUP, INC., AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998 AND 1997
NOTE 12 - COMMITMENTS (CONTINUED)
LETTERS OF CREDIT
An affiliate of the Company has entered into letter of credit arrangements
with an unrelated third party to provide letters of credit in the amount of
$2,600,000 to guarantee the debt to Republic National Bank. During the
current fiscal year the Company paid fees of $21,807 for these letters of
credits.
NOTE 13 - STOCK BASED COMPENSATION
The per share average fair value of stock options granted during the year
ended June 30, 1998 were $2.59 and $.66 on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions:
Expected dividend yield 0%
Risk free interest rate 5%
Expected stock volatility 0%
Expected option life 4 YEARS AND 5 YEARS
The Company applies APB opinion No 25 in accounting for its plans and,
accordingly, no compensation cost has been recognized in the financial
statements for its stock options which have an exercise price equal to the fair
value of the stock on the date of the grant. Had the Company determined
compensation cost based on the fair value at the grant date of this stock
options under SFAS No. 123, the Company's net loss would have been increased to
the pro forma amounts indicated below for the year ended June 30, 1998:
Net loss:
As reported $(75,232)
Pro forma $(153,485)
Net loss per share:
As reported $(.08)
Pro forma $(.17)
Pro forma net loss reflects only options granted during the year ended June 30,
1998. The full impact of calculating compensation cost for stock options under
SFAS No. 123 is not reflected in the pro forma net loss amounts presented above
because compensation cost is reflected over the options' vesting period of 4
years.
NOTE 14 - SUBSEQUENT EVENTS
On July 1, 1998 Westbury International, Inc., was formed to provide trading and
risk management services. Activities include metals leasing, financing
arrangements, cash and forward purchases and sales for internal metals
management requirements and as a profit center dealing with third parties.
The Company has entered into an agreement to purchase an adjacent building at
900 Shames Drive, Westbury, New York for a total of $510,000. There is a
mortgage commitment from Roosevelt Savings Bank in the amount of $325,000. The
title to this property will be in Westbury Realty Management Inc., a newly
formed corporation with no activity in the current year. The closing is
anticipated to take place on September 29, 1998.
NOTE 15 - RELATED PARTY TRANSACTIONS
An Officer of the Company is affiliated with a legal firm which provided
services to the Company in 1998. Fees earned by such affiliate were $67,641.
F-12
<PAGE>
WESTBURY METALS GROUP, INC., AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998 AND 1997
NOTE 16 - PRO FORMA RESULTS OF OPERATIONS - UNAUDITED
The pro forma results include the operations of the Company, Westbury Alloys,
Inc. and Alloy Trading S.A. for the twelve month periods ended June 30, 1998 and
1997, respectively, and the operations of West Tech, Inc. for the period from
March 30, 1998 (inception) through June 30, 1998.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1998 1997
----
Revenues:
Sales $1,425,315 $
Refining fees 1,874,829 1,540,479
Other income 67,688
----------------------- --------------------
Total revenues 3,367,832 1,540,479
Cost and expenses:
Cost of sales 1,335,607
Cost of refining 807,221 703,853
Selling, general and administrative 1,240,274 742,953
Depreciation and amortization 246,739 138,144
Interest 132,090 56,654
----------------------- --------------------
Total costs and expenses 3,761,931 1,641,604
----------------------- --------------------
Loss before provision for income taxes (394,099) (101,125)
Provision for income taxes 9,018
----------------------- --------------------
Net loss $(394,099) $(110,143)
======================= ====================
Net loss per share - basic $(.16) $(.06)
Net loss per share - diluted $(.16) $(.06)
Average shares outstanding - basic 2,408,947 1,916,062
Average shares outstanding - diluted 2,408,947 1,916,062
F-13
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act,
Westbury Metals Group, Inc. has caused this report to be signed on its behalf by
the undersigned, hereunto duly authorized.
Dated: October 8, 1998
WESTBURY METALS GROUP, INC.
By: _______________________
Mandel Sherman,President
Pursuant to the requirements of the Exchange Act, this report has been
signed by the following persons on behalf of the Registrant and in the
capacities and on the date indicated:
Name Titles Date
_______________ President, Chief Executive October 8, 1998
Mandel Sherman Officer and Director
___________________ Director October 8, 1998
Michael A. O'Hanlon
___________________ Director October 8, 1998
Michael Riess
___________________ Chief Financial Officer October 8, 1998
David Nadler
CERTIFICATE OF INCORPORATION
OF
ROSECAP, INC.
Under Section 402 of the Business Corporation
Law of the State of New York
The undersigned, for the purpose of forming a corporation under Section 402 of
the Business Corporation Law of the State of New York, does hereby certify as
follows:
ARTICLE I
NAME
The name of the Corporation is: Rosecap, Inc.
ARTICLE II
Purposes
The purpose of the Corporation is to engage in any lawful act or activity for
which corporations may be organized under the Business Corporation Law of the
State of New York. This Corporation is not formed for the purpose of engaging in
any act or activity requiring the consent or approval of any state official,
department, board, agency or other body without such approval or consent first
being obtained.
ARTICLE III
Office of Corporation
The office of the Corporation is in the State of New York shall be located in
the County of Suffolk County.
<PAGE>
ARTICLE IV
Capital Stock
The aggregate number of shares which the Corporation shall have authority to
issue is 50,000,000 which shall have a par value of $.00l per share. All shares
shall be designated as Common Stock. Shareholders shall not have pre-emptive
rights or be entitled to cumulative voting in connection with the shares of the
Corporation's Common Stock.
ARTICLE V
Designation of Agent
The Secretary of State of the State of New York is designated as the agent of
the Corporation upon whom process against the Corporation may be served. The
address to which the Secretary of State shall mail a copy of any process against
the Corporation served upon him is A. 0. Headman, Jr., Attorney at Law, 257 East
200 South, Suite 850, Salt Lake City, UT 84111.
ARTICLE VI
Certain Contracts
No contract or transaction between the Corporation and one or more of its
directors or officers or between the Corporation and any other corporation,
partnership, association, or other organization in which one or more of its
directors or officers are directors or officers or have a financial interest,
shall be void or voidable solely for this reason, or solely because the director
or officer is present at or participates in the meeting of the board of
committee thereof which authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose, if:
1. The material facts as to his interest and as to the contract or transaction
are disclosed or are known to the Board of Directors or the Committee, and the
Board or committee, in good faith, authorizes the contract or transaction by a
vote sufficient for such purpose without counting the vote of the interested
director or directors; or
2. The material facts as to his interest and as to the contract or transaction
are disclosed or are known to the shareholders entitled to vote thereon, and the
contract or
<PAGE>
transaction is specifically approved in good faith by vote of the
shareholders; or
3. The contract or transaction is fair as to the Corporation as of the time it
is authorized, approved, or ratified, by the Board of Directors, a committee
thereof, or the shareholders.
Interested directors may be counted in determining the presence of a quorum at a
meeting of the Board of Directors or of a committee which authorizes the
contract or transaction.
ARTICLE VII
Bylaws
The Board of Directors or the Shareholders shall have the power to make, adopt,
amend, or repeal the Bylaws of the Corporation.
ARTICLE VIII
Indemnification
Section 1. The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of -the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys' fee),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nob contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
2. The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened pending or completed action or
suit by or in the right of the
<PAGE>
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation and except- that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation unless and only to
the extent that the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the court shall deem proper.
3. To the extent that any person referred to in paragraphs 1 and 2 of this
Article VIII has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to therein or in defense of any claim, issue
or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
4. Any indemnification under paragraphs 1 and 2 of this Article VIII (unless
ordered by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in paragraphs 1 and 2 of this Article
VIII. Such determination shall be made (a) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (b) if such quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (c) by the shareholders.
5. Expenses incurred in defending a civil or criminal action, suit or proceeding
may be paid by the Corporation in advance of the final disposition of such
action, suit or proceeding as authorized by the Board of Directors in the
specific case upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount unless it shall ultimately be
determined that he- is entitled to be indemnified by the Corporation as provided
in this Article VIII.
6. The indemnification provided by this Article VIII shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any statute, bylaw, agreement, vote of shareholders or
disinterested directors or
<PAGE>
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
7. The Corporation shall have power to purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Article VIII.
8. For the purposes of this section, references to "the corporation" include all
constituent corporations absorbed in a consolidation or merger as well as the
resulting or surviving corporation so that any person who is or was a director,
officer, employee or agent of such a constituent corporation or is or was
serving at the request of such constituent corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise shall stand in the same position under the provisions of this
section with respect to the resulting or surviving corporation as he would if he
had served the resulting or surviving corporation in the same capacity.
ARTICLE IX
Amendment
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon shareholders
herein are granted subject to this reservation.
The undersigned, for the purpose of forming a corporation under the laws of the
State of New York, does make, file, and record this Certificate, and does affirm
that the facts stated herein are true under penalty of perjury; and has executed
this Certificate of Incorporation this 1st day of August, 1990.
_________________________ 236 Birchwood Road
Charles Rose Medford, NY 11763
<PAGE>
11
CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION
OF
ROSECAP, INC.
(Pursuant to Section 805 of the Business Corporation Law)
-------------------------
It is hereby certified that:
FIRST: The name of the corporation is Rosecap, Inc.
SECOND: The certificate of incorporation of the corporation was filed by the
Department of State on August 24, 1990.
THIRD: The amendment of the certificate of incorporation effected by this
certificate of amendment is as follows:
To change the name of the corporation.
FOURTH: To accomplish the foregoing amendment Article First of the certificate
of incorporation of the corporation, relating to the name of the corporation is
hereby amended to read as follows:
The name of the corporation is Westbury Metals Group, Inc.
FIFTH: The foregoing amendment of the certificate of incorporation of
the corporation was authorized by the vote at a meeting of the Board of
Directors of the corporation, followed by the vote of the holders of a least "a
majority" of all of the outstanding shares of the corporation entitled to vote
on the said amendment of the certificate of incorporation.
IN WITNESS WHEREOF, we have subscribed this document on the date set
forth below and do hereby affirm, under the penalties of perjury, that the
statements contained therein have been examined by us and are true and correct.
Executed on this 18th day of June, 1998
----------------------------------------
Mandel Sherman, President
---------------------------------------
David W. Sass, Secretary
BY-LAWS
OF
ROSECAP, INC.
ARTICLE 1 - Shareholders
1.1 Place of Meetings. All meetings of shareholders shall be held at such place
within or without the State of New York as may be designated from time to time
by the board of directors or the president or, if not so designated, at the
registered office of the corporation.
1.2 Annual Meetings. The annual meeting of shareholders for the election of
directors and for the transaction of such other business on such date and time
as shall be designated from time to time by the Board of Directors and stated in
the notice of the meeting. If no annual meeting is held in accordance with the
foregoing provisions, the board of directors may call a special meeting may be
held in lieu of the annual meeting, and any action taken at that special meeting
shall have the same effect as if it had been taken at the annual meeting, and in
such case all references in these Bylaws to the annual meeting of the
shareholders shall be deemed to refer to such special meeting.
1.3 Special Meetings. Special meetings of shareholders may be called at any time
by the chairman of the board of directors, by the board of directors. A Special
Meeting of Shareholders shall be called by the Chairman of the Board of
Directors at the request in writing of the holders of not less than one--fourth
(1/4) of all the shares entitled to vote at the meeting. Such request of
shareholders for a Special Meeting shall state the purpose or purposes of the
proposed meeting. Business transacted at any special meeting of shareholders
shall be limited- to matters relating to the purpose or purposes stated in the
notice of meeting.
1.4 Notice of Meetings. Except as otherwise provided by law, written notice of
each meeting of shareholders, whether annual or special, shall be given not less
than 10 nor more than 50 days before the date of the meeting to each shareholder
entitled to vote at such meeting. The notices of all meetings shall state the
place, date and hour of the meeting. The notice of a special meeting shall
state, in addition, the purpose or purposes for which the meeting is called.
<PAGE>
1.5 Voting List. The officer who has charge of the stock ledger of the
Corporation shall prepare, at least 10 days before every meeting of
shareholders, a complete list of the shareholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
shareholder and the number of shares registered in the name of each shareholder.
1.6 Quorum. Except as otherwise provided by law, the Certificate of
Incorporation or these Bylaws, the holders of one-- third (1/3) of the shares of
the capital stock of the Corporation issued and outstanding are entitled to vote
at the meeting, present in person or represented by proxy, shall constitute a
quorum for the transaction of business.
1.7 Adjournments. Any meeting of shareholders may be adjourned to any other time
and to any other place at which a meeting of shareholders may be held under
these Bylaws by the shareholders present or represented at the meeting and
entitled to vote, although less than a quorum, or, if no shareholder is present,
by any officer entitled to preside at or to act as secretary of such meeting. If
the adjournment is for more than 30 days, or if after the adjournment, a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each shareholder of record entitled to vote at the
meeting. At the adjourned meeting, the Corporation may transact any business
which might have been transacted at the original meeting.
1.8 Voting and Proxies. Each shareholder shall have one vote for each share of
stock entitled to vote held of record by such shareholder and a proportionate
vote for each fractional share so held, unless otherwise provided in the
Certificate of Incorporation. Each shareholder of record entitled to vote at a
meeting of shareholders, or to express consent or dissent to corporate action in
writing without a meeting, may vote or express such consent or dissent in person
or may authorize another person or persons to vote or act for him or her by
written proxy executed by the shareholder or his or her authorized agent
and-delivered to the secretary of the Corporation. A duly executed proxy shall
be irrevocable if it states that it is irrevocable and if it is held by any
person or the nominee of any person who is enumerated in Section 609(f) of the
Business Corporation Law of the State of New York. No proxy shall be voted or
acted upon after three years from the date of its execution, unless the proxy
expressly provides for a longer period.
1.9 Action at Meeting. When a quorum is present at any meeting, the holders of a
majority of the stock present or represented and voting on a matter (or if there
are two or more classes of stock entitled to vote as separate classes, then in
the case of each such class, the holders of a majority of the stock of that
class present or represented and voting on a matter) shall
<PAGE>
decide any matter to be voted upon by the shareholders at such meeting, except
when a different vote is required by express provision of law, the Certificate
of Incorporation or these Bylaws. Any election by shareholders shall be
determined by a plurality of the votes cast by the shareholders entitled to vote
at the election.
1.10 Action Without Meeting. Any action required or permitted to be taken at any
annual or special meeting of shareholders of the Corporation may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, is signed by all of the holders of
outstanding stock.
ARTICLE 2 - Directors
2.1 General Powers. The business and affairs of the Corporation shall be managed
by or under the direction of a board of directors, who may exercise all of the
powers of the Corporation except as otherwise provided by law, the Certificate
of Incorporation or these Bylaws. In the event of a vacancy on the board of
directors, the remaining directors, except as otherwise provided by law, may
exercise the powers of the full board of directors until the vacancy is filled.
2.2 Number; Election and qualification. The number of directors which shall
constitute the whole board of directors shall be determined by resolution of the
shareholders or the board of directors, but in no event shall be less than
three. The number of directors may be decreased at any time and from time to
time either by the shareholders or by a majority of the directors then in
office, bul only to eliminate vacancies existing by reason of the death,
resignation, removal or expiration of the term of one or more directors. The
directors shall be elected at the annual meeting of shareholders by such
shareholders as have the right to vote in such election. Directors need not be
shareholders of the corporation.
2.3. Enlargement of the Board. The number of directors may be increased at any
time and from time to time by the shareholders or by a majority of the directors
then in office.
2.4 Tenure. Each director shall hold office until the next annual meeting and
until such time as his or her successor is elected and qualified, or until his
or her earlier death, resignation or removal.
<PAGE>
2.5 Vacancies. Unless and until filled by the shareholders, any vacancy in the
board of directors, however occurring, including a vacancy resulting from an
increase in the number of directors, may be filled by vote of a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. A director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office, and a director chosen to fill a
position resulting from an increase in the number of directors shall hold office
until the next annual meeting of shareholders and until his successor is elected
and qualified, or until his earlier death, resignation or removal.
2.6 Resignation. Any director may resign by delivering his or her written
resignation to the Corporation at its principal office or to the secretary. Such
resignation shall be effective upon receipt unless it is specified to be
effective at some other time or upon the happening of some other event.
2.7 Regular Meetings. Regular meetings of the board of directors may be held
without notice at such time and place, either within or without the State of New
York, as shall be determined from time to time by the board of directors,
provided that any director who is absent when such a determination is made shall
be given notice of the determination. A regular meeting of the board of
directors may be held without notice immediately after and at the same place as
the annual meeting of shareholders.
2.8 Special Meetings. Special meetings of the board of directors may be held at
any time and place, within or without the State of New York, designated in a
call by the chairman of the Board, president or two or more directors, or by one
director in the event that there is only a single director in office.
2.9 Notice of Special Meetings. Notice of any special meeting of directors shall
be given to each director by the secretary or one of the directors calling the
meeting. Notice shall be duly given to each director (i) by giving notice to
such director in person or by telephone at least 48 hours in advance of the
meeting, (ii) by sending a telegram or telex, or delivering written notice by
hand to his last known business or home address at least 48 hours in advance of
the meeting, or (iii) by mailing written notice to his last known business or
home address at least 72 hours in advance of the meeting. A notice or waiver of
notice of a meeting of the board of directors need not specify the purpose of
the meeting.
2.10 Meetings by Telephone Conference Calls. Directors or any members of any
committee designated by the directors may participate in a meeting of the board
of directors or such committee by means of conference telephone or similar
communi cations equipment by means of which all persons participating in
<PAGE>
the meeting can hear each other, and participation by such means shall
constitute presence in person at such meeting.
2.11 Quorum. A majority of the whole board of directors shall constitute a
quorum at all meetings of the board of directors. In the event one or more of
the directors shall be disqualified to vote at any meting, then the required
quorum shall be reduced by one for each such director so disqualified; provided,
however, that in no case shall less than one--third (l,'3) of the whole board of
directors constitute a quorum. In the absence of a quorum at any such meeting, a
majority of the directors present may adjourn the meeting from time to time
without further notice other than announcement at the meeting, until a quorum
shall be present.
2.12 Action at Meeting. At any meeting of the board of directors at which a
quorum is present, the vote of a majority of those present shall be sufficient
to take any action, unless a different vote is specified by law, the Certificate
of Incorporation or these Bylaws.
2.13 Action by Consent. Any action required or permitted to be taken at any
meeting of the board of directors or of any committee of the board of directors
may be taken without a meeting, if all members of the board of directors or
committee, as the case may be, consent to the action in writing, and the written
consents are filed with the minutes of proceedings of the board of directors or
committee.
2.14 Removal. Any one or more or all of the directors may be removed, with or
without cause, by the holders of a majority of the shares 'then entitled to vote
at an election of directors, except that (i) the directors elected by the
holders of a particular class or series of stock may be removed without cause
only by vote of the holders of a majority of the outstanding shares of such
class or series and (ii) in the case of a corporation having cumulative voting,
if less than the entire board is to be removed, no director may be removed
without cause if the votes cast against his removal would be sufficient to elect
him if then cumulatively voted at an election of the entire board of directors.
2.15 Committees. The board of directors may, by resolution passed by a majority
of the whole board of directors, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member of any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or members of the committee present at any meeting and not disqualified
from voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member. Any such committee, to the
extent provided in
<PAGE>
the resolution of the board of directors and subject to the provisions of the
Business Corporation Law of the State of New York, shall have and may exercise
all the powers and authority of the board of directors in the management of the
business and affairs of the Corporation and may authorize the seal of the
Corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the shareholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
shareholders a dissolution of the Corporation or a revocation of a dissolution,
or amending the Bylaws of the Corporation; and, unless the resolution, Bylaws or
Certificate of Incorporation expressly so provides, no such committee shall have
the power or authority to declare a dividend, to authorize the issuance of stock
or to adopt a certificate of ownership and merger. Each such committee shall
keep minutes and make such reports as the board of directors may from time to
time request. Except as the board of directors may otherwise determine, any
committee may make rules for the conduct of its business, but unless otherwise
provided by the directors or in such rules, its business shall be conducted as
nearly as possible in the same manner as is provided in these Bylaws for the
board of directors.
2.16 Compensation of Directors. Directors may be paid such compensation for
their services and such reimbursement for expenses of attendance at meetings as
the board of directors may from time to time determine. No such payment shall
preclude any director from serving the Corporation or any of its parent or
subsidiary corporations in any other capacity and receiving compensation for
such service.
ARTICLE 3 - Officers
3.1 General. The officers of the Corporation shall consist of a chairman of the
board, a president, a secretary, a treasurer and such other officers with such
other titles as the board of directors may determine, including a vice chairman
of the board, and one or more vice presidents, assistant treasurers, and
assistant secretaries. The board of directors may appoint such other officers
with such other powers and duties as it may deem appropriate.
3.2 Election. The chairman of the board, president, treasurer and secretary
shall be elected annually by the board of directors at its first meeting
following the annual meeting of shareholders. Other officers may be appointed by
the board of directors at such meeting or at any other meeting.
3.3 Qualification. No officer need by a shareholder. Any two or more offices may
be held by the same person.
<PAGE>
3.4 Tenure. Except as otherwise provided by law, by the Certificate of
Incorporation or by these Bylaws, each officer shall hold office until his
successor is elected and qualified, unless a different term is specified in the
vote choosing or appointing him, or until his earlier death, resignation or
removal.
3.5 Resignation and Removal. Any officer may resign by delivering his written
resignation to the Corporation at its principal office or to the president or
secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
Any officer may be removed at any time, with or without cause, by vote of a
majority of the entire number of directors then in office.
Except as the board of directors may otherwise determine, no officer who resigns
or is removed shall have any right to any compensation as an officer for any
period following his resignation or removal, or any right to damages on account
of such removal, whether his compensation be by the month or by the year or
otherwise, unless such compensation is expressly provided in a duly authorized
written agreement with the corporation.
3.6 Vacancies. The board of directors may fill any vacancy occurring in any
office for any reason and may, in its discretion, leave unfilled for such period
as it may determine any offices other than those of president, treasurer and
secretary. Each such successor shall hold office for the unexpired term of his
predecessor and until his successor is elected and qualified, or until his
earlier death, resignation or removal.
3.7 -Chairman of the Board and Vice Chairman of the Board. The chairman of the
board of directors shall be the chief executive officer of the Corporation.
Subject to the direction of the board of directors, the chairman of the board of
directors shall have general charge and supervision of the business of the
Corporation, and shall have full authority to take all lawful actions necessary
to implement corporate and business policy established by the board of
directors. In addition, the chairman of the board of directors shall perform
such duties and possess such other powers as are assigned to him by the board of
directors. Unless otherwise provided by the board of directors, the chairman of
the board of directors shall preside at all meetings of the shareholders and the
board of directors. The board of directors may appoint a vice chairman of the
board of directors who may, in the absence or disability of the chairman,
perform the duties and exercise and powers of the chairman and perform such
other duties and possess such other powers as from time to time are authorized
by the board of directors.
<PAGE>
3.8 President. The president shall be the chief operating officer of the
Corporation and shall have charge and supervision of the day to day business
operations of the Corporation, subject to the authority of the chairman of the
board of directors and of the board of directors. Unless the board of directors
or chairman of the board of directors shall otherwise direct, all executive
officers of the Corporation shall report, directly or through their immediate
superior officers, to the president. The president shall perform such other
duties and shall have such other powers as the board of directors may from time
to time prescribe.
3.9 Vice Presidents. The vice president shall perform such duties and shall have
such powers as the board of directors, chairman of the board of directors or the
president may from time to time prescribe. The vice president shall discharge
the duties of the president when the president, for any reason, cannot discharge
the duties of his office. He shall have such other powers and perform such other
duties as shall be prescribed by the directors.
Any assistant vice presidents shall perform such duties and possess such powers
as the board of directors, the chairman of the board of directors, the president
or the vice president may from time to time prescribe.
3.10 Secretary and Assistant Secretaries. The secretary shall perform such
duties and shall have such powers as the board of directors, chairman of the
board of directors or the president may from time to time prescribe. In
addition, the secretary shall perform such duties and have such powers as are
incident to the office of the secretary, including without limitation, the duty
and power to give notices of all meetings of shareholders and special meetings
of the board of directors, to attend all meetings of shareholders and the board
of directors and keep a record of the proceedings, to maintain a stock ledger
and prepare lists of shareholders and their addresses as required, to be
custodian of corporate records and the corporate seal, if any, and to affix and
attest to the same on documents.
Any assistant secretary shall perform such duties and possess such powers as the
board of directors, the chairman of the board of directors, the president or the
secretary may from time to time prescribe. In the event of the absence,
inability or refusal to act of the secretary, the assistant secretary (or if
there be more than one, the assistant secretaries in the order determined by the
board of directors) shall perform the duties and exercise the powers of the
secretary.
In the absence of the secretary or any assistant secretary at any meeting of
shareholders or directors, the person presiding at the meeting shall designate a
temporary secretary to keep a record of the meeting.
<PAGE>
3.11 Treasurer and Assistant Treasurers. The treasurer shall perform such duties
and shall have such powers as from time to time be assigned to him by the board
of directors, the chairman of the board of directors or the president. In
addition, the treasurer shall perform such duties and have such powers as are
incident to the office of treasurer, including without limitation the duty and
power to keep and be responsible for all funds and securities of the
Corporation, to deposit funds of the Corporation in depositories selected in
accordance with these Bylaws, to disburse such funds as ordered by the board of
directors, the chairman of the board of directors, the president or any vice
president of the Corporation so authorized to act by specific authorization of
the board of directors or chairman of the Directors, to make proper accounts of
such funds, and to render, as required by the board of directors, chairman of
the board of directors or president, statements of all such transactions and of
the financial condition of the Corporation.
The assistant treasurers shall perform such duties and possess such powers as
the board of directors, the chairman of the board of directors, the president or
the treasurer may from time to time prescribe. In the event of the absence,
inability or refusal to act of the treasurer, the assistant treasurer (or if
there shall be more than one, the assistant treasurers in the order determined
by the board of directors) shall perform the duties and exercise the powers of
the treasurer.
3.12 Salaries. Officers of the Corporation shall be entitled to such salaries,
compensation or reimbursement as shall be fixed or allowed from time to time by
the board of directors.
ARTICLE 4 - Capital Stock
4.1 Issuance of Stock. Unless otherwise voted by the shareholders and subject to
the provisions of the Certificate of Incorporation, the whole or any part of any
unissued balance of the authorized capital stock of the Corporation or the whole
or any part of any unissued balance of the authorized capital stock of the
Corporation held in its treasury may be issued, sold, transferred or otherwise
disposed of by vote of the board of directors in such manner, for such
consideration and on such terms as the board of directors may determine.
4.2 Certificates of Stock. Every holder of stock of the Corporation shall be
entitled to have a certificate, in such form as may be prescribed by law and by
the board of directors, certifying the number and class of shares owned by him
in the Corporation. Each such certificate shall be signed by, or in the name of
the Corporation by the chairman or vice chairman, if any,
<PAGE>
of the board of directors, or the president or a vice president, and the
treasurer or an assistant treasurer, or the secretary or an assistant secretary
of the Corporation. Any or all of the signatures on the certificate may be a
facsimile.
Each certificate for shares of stock which are subject to any restriction on
transfer pursuant to the Certificate of Incorporation, the Bylaws, applicable
securities laws or any agreement among any number of shareholders or among such
holders and the Corporation shall have conspicuously noted on the face or back
of the certificate either the full text of the restriction or a statement of the
existence of such restriction.
4.3 Transfers. Except as otherwise established by rules and regulations adopted
by the board of directors, and subject to applicable laws, shares of stock may
be transferred on the books of the Corporation by the surrender to the
Corporation or its transfer agent of the certificate representing such shares
properly endorsed or accompanied by a written assignment or power of attorney
properly executed, and with such proof of authority or the authenticity of
signature as the Corporation or its transfer agent may reasonable require.
Except as may be otherwise required by law, by the Certificate of Incorporation
or by these Bylaws, the Corporation shall be entitled to treat the record holder
of stock as shown on its books as the owner of such stock for all purposes,
including the payment of dividends and the right to vote with respect to such
stock, regardless of any transfer, pledge or other disposition of such stock
until the shares have been transferred on the books of the Corporation in
accordance with the requirements of these Bylaws.
4.4 Lost, Stolen or Destroyed Certificates. The Corporation may issue a new
certificate of stock in place of any previously issued certificate alleged to
have been lost, stolen or destroyed, upon such terms and conditions as the board
of directors may prescribe, including the presentation of reasonable evidence of
such loss, theft or destruction and the giving such indemnity as the board of
directors may require for the protection of the Corporation or any transfer
agent or registrar.
4.5 Record Date. The board of directors may fix in advance a date as a record
date for the determination of the shareholders entitled to notice of or to vote
at any meeting of shareholders or to express consent (or dissent) to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action. Such record date shall not be more than 60 days prior to any other
action to which such record date relates.
If no record date is fixed, the record date for determining
11
<PAGE>
shareholders entitled to notice of or to vote at a meeting of shareholders shall
be at the close of business on the day before the day on which notice is given,
or, if notice is waived, at the close of business on the day before the day on
which the meeting is held. The record date for determining shareholders entitled
to express consent to corporate action in writing without a meeting, when no
prior action by the Board of Directors is necessary, shall be the day on which
the first written consent is expressed. The record date for determining
shareholders for any other purpose shall be at the close of business on the date
on which the board of directors adopts the resolution relating to such purpose.
A determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
ARTICLE 5 - Indemnification
The Corporation shall, to the fullest extent permitted by the Business
Corporation Law of the State of New York and the Company's Certificate of
Incorporation, as may be amended and supplemented from time to time, indemnify
any director, officer or trustee which it shall have power to indemnify against
any expenses, liabilities or other matters referred to in or covered by that
Section. The indemnification provided for in this Article (i) shall not be
deemed exclusive of any other rights to which those indemnified may be entitled
under any bylaw, agreement or vote of shareholders or disinterested directors or
otherwise, both as to action in their official capacities and as to action in
another capacity while holding such office, (ii) shall continue as to a person
who has ceased to be a director, officer or trustee, and (iii) shall inure to
the benefit of the heirs, executors and administrators of such a person. The
Corporation's obligation to provide indemnification under this Article shall be
offset to the extent of any other source of indemnification or any otherwise
applicable insurance coverage under a policy maintained by the Corporation or
any other person.
ARTICLE 6 - General Provisions
6.1 Fiscal Year. The fiscal year of the Corporation shall be
determined by the board of directors.
6.2 Corporate Seal. The corporate seal, if any, shall be in such
form as shall be approved by the board of directors.
11
<PAGE>
6.3 Written Notice of Meetings. Whenever written notice is required to be given
to any person pursuant to law, the Certificate of Incorporation or these Bylaws,
it may be given to such person, either personally or by sending a copy thereof
by first class mail, or by telegram, charges prepaid, to his address appearing
on the books of the Corporation, or to his business or other address supplied by
him to the Corporation for the purpose of notice. If the notice is sent by first
class mail or by telegraph, it shall be deemed to have been given to the person
entitled thereto when deposited in the United States mail or with a telegraph
office for transmission to such person. Such notice shall specify the place, day
and hour of the meeting and, in case of a special meeting of the shareholders,
the general nature of the business to be transacted.
6.4 Waiver of Notice. Whenever any notice whatsoever is required to be given by
law, by the Certificate of Incorporation or by these Bylaws, a waiver of such
notice either in writing signed by the person entitled to such notice or such
person's duly authorized attorney, or by telegraph, cable or any other available
method, whether before, at or after the time stated in such waiver, or the
appearance of such person or persons at such meeting in person or by proxy,
shall be deemed equivalent to such notice.
6.5 Voting of Securities. Except as the directors may otherwise designate, the
president or treasurer may waive notice of, and act as, or appoint any person or
persons to act as, proxy or attorney-in-fact for this Corporation (with or
without power of substitution) at any meeting of shareholders of any other
Corporation or organization, the securities of which may be held by this
Corporation.
6.6 Evidence of Authority. A certificate by the secretary, or an assistant
secretary, or a temporary secretary, as to any action taken by the shareholders,
directors, a committee or any officer of representative of the Corporation shall
as to all persons who rely on the certificate in good faith be conclusive
evidence of such action.
6.7 Certificate of Incorporation. All references in these Bylaws to the
Certificate of Incorporation shall be deemed to refer to the certificate of
Incorporation of the Corporation, as amended and in effect from time to time.
6.8 Transactions with Interested Parties. No contract or transaction between the
Corporation and one or more of the directors or officers, or between the
Corporation and any other corporation, partnership, association or other
organization in which one or more of the directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the board of
11
<PAGE>
directors or a committee of the board of directors which authorizes the contract
or transaction or solely because his or their votes are counted for such
purpose, if:
(1) The material facts as to his relationship or interest as to the contract or
transaction are disclosed or are known to the board of directors or the
committee, and the board of directors or committee in good faith authorized the
contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum;
(2) The material facts as to his relationship or interest and as to the contract
or transaction are disclosed or are known to the shareholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the shareholders; or
(3) The contract or transaction is fair as to the Corporation as of the time it
is authorized, approved or ratified by the board of directors, a committee of
the board of directors, or the shareholders,
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the board of directors or of a committee which authorizes
the contract or transaction.
6.9 Severability. Any determination that any provision of these Bylaws is for
any reason inapplicable, illegal or ineffective shall not affect or invalidate
any other provision of these Bylaws.
6.10 Pronouns. All pronouns used in these Bylaws shall be deemed to refer to the
masculine, feminine or neuter, singular or plural, as the identity of the person
or persons may require.
ARTICLE 7 - Amendments
7.1 By the Board of Directors. These Bylaws may be altered, amended or repealed
or new Bylaws may be adopted by the affirmative vote of a majority of the
directors present at any regular or special meeting of the board of directors at
which a quorum is present.
11
<PAGE>
7.2 By the Shareholders. These Bylaws may be altered, amended or repealed or new
Bylaws may be adopted by the affirmative vote of the holders of a majority of
the shares of the capital stock of the Corporation issued and outstanding and
entitled to vote at any regular meeting of shareholders, or at any special
meeting of shareholders, provided notice of such alternation, amendment, repeal
or adoption of new Bylaws shall have been stated in the notice of such special
meeting.
ADOPTED THIS 25th day of August, 1990.
Charles Rose
President
ATTEST:
Ida Rose
Secretary
COMMON STOCK COMMON STOCK
PAR VALUE $.001
SHARES
SEE REVERSE FOR CERTAIN
DEFINITIONS AND LIMITATIONS CUSIP
WESTBURY METALS GROUP, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF NEW YORK
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, OF
WESTBURY METALS GROUP, INC.
(hereinafter called the Corporation) transferable on the books of
the Corporation or by the holder hereof, in person or b duly
authorized Attorney, upon surrender of this Certificate properly
endorsed. This Certificate is not valid until countersigned and
registered by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
Countersigned and Registered:
Corporate Stock Transfer
Transfer Agent and Registrar
AUTHORIZED SIGNATURE
SECRETARY PRESIDENT
The following abbreviations, when used in the inscription on the
face of this certificate, shall be constured as though they were
written out in full according to applicable laws or regulations:
TEN COM - as tentnants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as
tenants in common
<PAGE>
UNIF GIFT MIN ACT - Custodian
(Cust) (Minor)
Under Uniform Gifts to Minor Act
(State)
Addtional abbreviations may also be used though not in the above
list.
For Value received hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(NAME AND ADDRESS OF TRANSFEREE SHOULD BE PRINTED OR TYPEWRITTEN)
Shares
of the Common Stock represented by the within Certificate and do
hereby irrevocably constitute and appoint
Attorney
to transfer the said stock on the books of the within-named
Corporation with full power of substitution in the premises.
Dated
SIGNATURE
Signature(s) Guaranteed
By
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION (Banks, Stockbrokers, Savings and Loan Associations
and Credit Unions WITH MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE PROGRAM) PURSUANT TO S.E.C. RULE 17Ad-1 5.
NOTICE: The signature of this assignment must correspond with
name(s) as written upon the face of the certificate in every
particular without alteration or enlargement or any change
whatever.
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), dated as of the 1st
day of January, 1998, by and between Westbury Alloys, Inc. (the "Company") with
offices at 750 Shames Drive, Westbury, New York 11590 and Mandel Sherman
("Sherman") residing at 690 Elm Grove Avenue, Providence, Rhode Island 02906.
WHEREAS, Sherman and the Company have agreed that Sherman
shall render services to the Company in the capacity of President and Chief
Executive Officer pursuant to the terms of this Agreement.
NOW THEREFORE, in consideration of the premises and of the
mutual agreements herein set forth, the parties hereto have agreed and do hereby
mutually agree as follows:
1. Employment Term: The term of this Agreement shall commence
on the date hereof and shall expire three years thereafter (the "Employment
Period") subject to the provisions of Section 5.
2. Duties of Executive: Sherman shall serve as President and
Chief Executive Officer of the Company and shall be required to perform such
duties as may from time to time be required by the Board of Directors of the
Company.
3. Compensation:
(a) As compensation for his services hereunder, the Company shall pay Sherman,
1
<PAGE>
during the Employment Period, a base salary ("Base Salary") payable as follows:
One Hundred Seventy-five Thousand Dollars ($175,000.00) each year.
(b) Sherman shall also receive a bonus equal to 10% of the
pre-tax earnings of the Company in each fiscal year during the Employment Period
in excess of $500,000, to a maximum in each year equal to the Base Salary,
payable within ten (10) days after the completion of the year end audit for each
such fiscal year.
(c) The Company may withhold from payments of Employee's
salary amounts required to be withheld by the Company from time to time from
such salary under applicable Federal, State, and local laws and regulations then
in effect.
(d) Upon submission of written statements and bills in
accordance with the then regular procedures of the Company, Sherman shall be
entitled to reimbursement for reasonable out-of-pocket expenses necessarily
incurred in the performance of his duties hereunder, including, but not limited
to, reimbursement for travel and car expenses.
4. Employee Benefits:
(a) Sherman shall be included to the extent eligible
thereunder (at the expense of the Company, if appropriate) in any and all
existing plans (and any plans which may be adopted in the future) providing
benefits for the Company's employees generally, including, but not limited to,
group life and disability insurance, hospitalization, medical, vacation,
retirement, stock option plans and any and all similar or comparable benefits.
(b) Due to the fact that the Company's success is dependent
upon the activities of Sherman, the Company will provide keyman insurance on the
life of Mr. Sherman in the amount
2
<PAGE>
of $1,000,000.00 and Sherman will cooperate in obtaining and maintaining such
policy.
5. Termination:
(a) The Company may terminate Sherman's employment hereunder at any time by
written notice but only after a decision by the Board of Directors of the
Company which is communicated to Sherman in writing thirty (30) days prior to
the effective date of termination; provided however, that the Company pays to
Sherman a severance payment equal to the aggregate Base Salary otherwise owed to
him over the remaining term of the Employment Period.
(b) Notwithstanding the provisions of Section 5(a) above, the
Company shall not be required to pay the amount owed under such Section if
Sherman is terminated "for cause." For purposes of this Agreement "For Cause"
shall mean:
(i) Deliberate misappropriating any funds or properties of the Company;
(ii) Gross mismanagement of the Company;
(c) In the event Sherman is not nominated or re-elected to
serve as a member of the Board of Directors during the Employment Period, either
party may terminate this Agreement and Sherman shall be entitled to continue to
receive his Base Salary as set forth in Section 3 above for the remainder of the
Employment Period.
(d) If, during the term of this Agreement, Sherman personally
guarantees any indebtedness of the Company to banks or others, this Agreement
cannot be terminated by the Company until such time as Sherman is relieved of
all obligations as such guarantor.
(e) In the event that Sherman dies or becomes disabled so as
not to be able to perform his duties as set forth herein for a period exceeding
twelve (12) months, this Agreement
3
<PAGE>
shall terminate and no further compensation shall be payable to Sherman, except
as may otherwise be provided under any insurance policy, employee benefit plan,
or similar instrument; provided however, that during any such period of
disability, Sherman shall be entitled to his base salary as provided under
Section 3 for a period not to exceed twelve (12) months.
6. Covenant Not to Compete:
(a) Sherman agrees that, commencing the date hereof and
continuing until the due date of his final payment of salary due hereunder, he
will not, except on behalf of the Company or with the written consent of the
Company (i) engage in any business activity in Nassau county, directly or
indirectly, on his own behalf or as a partner, stockholder (except by ownership
of less than ten percent (10%) of the outstanding stock of a publicly-held
corporation), director, trustee, principal, agent, employee, consultant or
otherwise of any person, firm or corporation which then is competitive with an
activity in which the Company or any parent or subsidiary of the Company is then
engaged at the time; (ii) allow the use of his name by or in connection with any
business activity in Nassau county which then is principally competitive with
any activity in which the Company or any of its parents or subsidiaries is then
engaged; or (iii) offer employment to or employ, for himself or on behalf of any
then competitor of the Company or any of its parents or subsidiaries, any
persons in Nassau county who at any time within the prior 6 months shall have
been employed by the Company or any parent or subsidiary of the Company.
(b) In the event Sherman is terminated without cause, the term
during which Sherman shall not be permitted to engage in the activities
described in Section 6(a) above shall commence on the date thereof and continue
until the date of final payment of Base Salary due
4
<PAGE>
hereunder.
7. Default - Remedies: In the event of proof of breach by
Sherman, the Company shall be entitled to pursue any remedy at law or equity,
and shall specifically have the right to terminate any further payments of any
kind or nature to be made under this Agreement.
8. Confidential Information: Except as otherwise required by
law, Sherman shall not disclose or use at any time, except as part of his
employment by the Company, either during or subsequent to such employment, any
secret or confidential information or knowledge obtained by Sherman while
employed by the Company. Without limiting the generality of the foregoing,
Sherman shall not disclose or use any information pertaining to the business of
the Company or any parent or subsidiary of the Company, including, but not
limited to, profit figures, names of or relationships with customers or
advertisers, or the terms of any contracts to which it or they may be a party.
The obligation imposed by this Section 8 shall survive the expiration or other
termination of this Agreement.
9. Surrender of Documents: Sherman shall, at the request of
the Company, promptly surrender to the Company or its nominee, upon any
termination of his employment hereunder, or at any time prior thereto, any
document, memorandum, record, letter, specification or other paper in his
possession or under his control relating to the operations, business, customers,
or affairs of the Company or its affiliates.
10. Waiver of Breach: The waiver be either the Company or
Sherman of any provision of this Agreement shall not operate or be construed as
a waiver of any subsequent
5
<PAGE>
breach by either the Company or Sherman.
11. Severability: The invalidity or unenforceability of any
provision of this Agreement, whether in whole or in part, shall not in any way
affect the validity or enforceability of any other part of such provision or of
any provision herein contained, and any invalid or unenforceable provision or
part thereof shall be deemed severable to the extent of any such invalidity or
unenforceability. If such invalidity or unenforceability is due to the
unreasonableness of the time or geographical area covered by the covenants or
restrictions of such provision, such covenants and restrictions shall
nevertheless be effective for such period of time and for such area as may be
determined to be reasonable by a court of competent jurisdiction.
12. Assignment; Binding Effect: The obligations of Sherman
hereunder may not be assigned or delegated without the prior written consent of
the Company. The rights and obligations of the parties shall inure to the
benefit of, and be binding upon, their respective heirs, personal
representatives, successors and assigns.
13. Notices:
(a) All notices, requests, demands, and other communications
hereunder must be in writing and shall be deemed to have been given if delivered
by hand or mailed within the continental United States by first class, certified
mail, return receipt requested, postage and
6
<PAGE>
registry fees prepaid, or sent by telecopier (with receipt confirmation), to the
applicable party and addressed as follows:
(i) if to the Company:
Westbury Alloys, Inc.
750 Shames Drive
Westbury, New York 11590
(ii) if to Sherman:
690 Elm Grove Avenue
Providence, Rhode Island 02906
(b) Any notice or other communication given by certified mail
shall be deemed given at the time of certification thereof, except for a notice
changing a party's address which shall be deemed given at the time of receipt
thereof. Any notice or other communication sent by telecopier transmission shall
be deemed given at the time of written confirmation of receipt.
13. Entire Agreement of the Parties: This Agreement expresses
the entire agreement of the parties, and all promises, representations,
understandings, arrangements and prior agreements are merged herein and
superseded hereby. No person, other than pursuant to a resolution of the Board,
shall have any authority on behalf of the Company to agree to modify or change
this Agreement or anything in reference thereto, and any such modification or
change must be in writing and signed by both parties hereto.
14. Laws Governing: This Agreement has been entered into in
the State of New York and shall be construed, interpreted and governed in
accordance with the laws of the State of New York without regard to the choice
of laws provisions thereof.
7
<PAGE>
15. Counterparts: This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute but one document.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and Sherman has hereunto set his hand
as of the day and year first above written.
Westbury Alloys, Inc.
By:
Name:
Title:
Accepted and Agreed
By:
Mandel Sherman
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED INT HE COMPANY'S FORM 10-KSB AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-1-1997
<PERIOD-END> JUN-30-1998
<CASH> 877,520
<SECURITIES> 0
<RECEIVABLES> 788,749
<ALLOWANCES> 0
<INVENTORY> 835,565
<CURRENT-ASSETS> 2,850,629
<PP&E> 599,843
<DEPRECIATION> 162,695
<TOTAL-ASSETS> 4,048,170
<CURRENT-LIABILITIES> 983,799
<BONDS> 0
0
0
<COMMON> 3,197
<OTHER-SE> 3,061,174
<TOTAL-LIABILITY-AND-EQUITY> 4,048,170
<SALES> 1,425,315
<TOTAL-REVENUES> 2,031,033
<CGS> 1,335,607
<TOTAL-COSTS> 1,335,607
<OTHER-EXPENSES> 732,354
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,304
<INCOME-PRETAX> 75,232
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 75,232
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
