SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934.
Date of Report (Date of earliest event reported) February 10, 2000.
WESTBURY METALS GROUP, INC.
(Exact name of registrant as specified in its charter)
New York
(State or Other Jurisdiction of Incorporation)
33-42408-NY 11-3023099
(Commission File Number) (I.R.S. Employer Identification No.)
750 Shames Drive, Westbury, New York 11590
(Address of principal executive offices)(Zip Code)
(516) 997-8333
(Registrant's telephone number, including area code)
<PAGE>
ITEM 5. Other Events
On February 10, 2000 the Company completed a private placement of
securities through KSH Investment Group, Inc. ("KSH"). The Company offered units
with each unit consisting of one share of common stock and one-half warrant for
a purchase price of $3.00 per unit. The warrants are exercisable at $4.00 per
share during a three year period from the closing of the offering. Pursuant to
the offering the Company raised $5,626,484 and issued 1,875,494 shares of common
stock and 937,747 warrants. KSH as the placement agent received cash commissions
of 3 3/4% of the dollars raised plus a 3/4% non- accountable expense allowance.
In addition, KSH received 332,071 warrants.
The net proceeds of the offering after all expenses was $5,137,699 and
are to be used to finance acquisitions, facilitate bank financing and for
general corporate purposes. The offering was made pursuant to Rule 506 of
Regulation D to accredited investors only.
ITEM 7. Financial Statements and Exhibits.
(c) Exhibits
(1) Confidential Private Placement Memorandum.
(2) Form of Warrant
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WESTBURY METALS GROUP, INC.
(Registrant)
By:
Mandel Sherman, President
DATED: March 3, 2000
Offeree Name:_______________________ Copy No.:____
CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM
1,833,333 UNITS
CONSISTING OF
1,833,333 SHARES OF COMMON STOCK
AND 916,666 THREE YEAR SHARE PURCHASE WARRANTS
WESTBURY METALS GROUP, INC.
(a New York Corporation)
Offering Price: $3.00 per Unit
Best Efforts Offering
666,667 Units - Minimum Offering
1,833,333 Units - Maximum Offering
-----------------------------------------------------
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAW
OF ANY STATE, NOR HAVE THEY BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE AND NO SUCH
COMMISSION HAS PASSED UPON THE ADEQUACY OR
ACCURACY OF THIS MEMORANDUM. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
---------------------------------------------------------------
This Confidential Private Placement Memorandum contains forward-looking
statements that relate to the future markets, business and operations of the
Company. These statements are based on management's current expectations and
assumptions and may be affected by subsequent developments, regulatory actions
and business conditions, including those discussed under "Risk Factors," that
are not within the Company's control. Accordingly, there can be no assurance
that the Company's future markets, business and operations will not differ
materially from those described herein.
-------------------------------------------------------
The Units offered hereby are speculative and involve a high
degree of risk.
---------------------------------------------------------
KSH Investment Group, Inc.
245 Great Neck Road
Great Neck, NY 11021
November 22, 1999
<PAGE>
Prospective investors and/or their representatives should review the following
legends and be aware of their contents.
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE
OF RISK. ONLY THOSE PERSONS WHO CAN BEAR THE RISK OF LOSS OF THEIR ENTIRE
INVESTMENT SHOULD INVEST. SEE "RISK FACTORS." INVESTORS WILL BE REQUIRED TO
REPRESENT THAT THEY ARE FAMILIAR WITH AND UNDERSTAND THE TERMS OF THIS OFFERING,
AND THAT THEY OR THEIR PURCHASER REPRESENTATIVES HAVE THE KNOWLEDGE AND
EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS NECESSARY TO EVALUATE THE MERITS
AND RISKS OF THIS INVESTMENT. INVESTORS SHOULD BE AWARE THAT THEY WILL BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME.
----------------------------------------
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR THE SECURITIES LAWS
OF ANY STATE. THIS OFFERING IS BEING MADE PURSUANT TO A PRIVATE PLACEMENT, IN
RELIANCE UPON THE EXEMPTIONS FROM THE REGISTRATION PROVISIONS OF THE SECURITIES
ACT AND THE REGULATIONS THEREUNDER AFFORDED BY SECTION 4(2) OF THE SECURITIES
ACT AND RULE 506 OF REGULATION D THEREUNDER, TO A LIMITED NUMBER OF ACCREDITED
INVESTORS WITHIN THE MEANING OF REGULATION D. THE SECURITIES OFFERED HEREBY MAY
NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE LAWS,
SUPPORTED BY AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY AND
ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
----------------------------------------
THIS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE
SECURITIES DESCRIBED HEREIN IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SALE.
----------------------------------------
THE UNITS ARE OFFERED SUBJECT TO RECEIPT AND ACCEPTANCE OF AN INVESTOR
QUESTIONNAIRE AND SUBSCRIPTION AGREEMENT, TO WITHDRAWAL, CANCELLATION OR
MODIFICATION OF THE OFFERING WITHOUT PRIOR NOTICE TO INVESTORS, AND TO CERTAIN
OTHER CONDITIONS SPECIFIED HEREIN. THE COMPANY RESERVES THE RIGHT TO ACCEPT OR
REJECT ANY SUBSCRIPTION, IN WHOLE OR IN PART, FOR ANY REASON WHATSOEVER, OR TO
ALLOT TO ANY PROSPECTIVE INVESTOR LESS THAN THE NUMBER OF UNITS SUBSCRIBED FOR
BY SUCH PROSPECTIVE INVESTOR. SUBSCRIPTIONS NOT ACCOMPANIED BY A COMPLETED AND
EXECUTED INVESTOR QUESTIONNAIRE AND SUBSCRIPTION AGREEMENT WILL BE REJECTED AND
RETURNED.
----------------------------------------
THE PLACEMENT AGENT IS ENTITLED TO RECEIVE A CASH COMMISSION AND A
NON-ACCOUNTABLE EXPENSE ALLOWANCE EQUAL TO 3 3/4% AND 3/4%, RESPECTIVELY, OF THE
AGGREGATE PURCHASE PRICE OF THE UNITS SOLD TO "FRIENDS" OF THE COMPANY, AND 7
1/2% AND 1 1/2%, RESPECTIVELY, OF THE AGGREGATE PURCHASE PRICE OF ALL OTHER
UNITS. IN ADDITION, THE COMPANY WILL ISSUE TO THE PLACEMENT AGENT WARRANTS TO
PURCHASE COMMON STOCK EQUAL TO 5% OF THE AGGREGATE SHARES SOLD IN THE OFFERING
AND UP TO 250,000 INVESTMENT BANKING WARRANTS, EACH ENTITLING THE PLACEMENT
AGENT TO PURCHASE ONE-HALF SHARE OF THE COMPANY'S COMMON STOCK. THE PLACEMENT
AGENT WILL ALSO BE ENTITLED TO A FEE OF $100,000 IF THE PLACEMENT AGENT IS
UNABLE TO SELL THE MINIMUM OFFERING OF UNITS DUE TO THE FAILURE OF THE COMPANY'S
COMMON STOCK TO TRADE AT A PRICE AT OR ABOVE AN AVERAGE PRICE OF $3.00 PER SHARE
DURING THE PERIOD COMMENCING ON THE DATE HEREOF AND TERMINATING ON JANUARY 28,
2000.
----------------------------------------
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE COMPANY AND THE TERMS OF THIS OFFERING, INCLUDING THE MERITS
AND RISKS INVOLVED. PROSPECTIVE INVESTORS SHOULD NOT CONSTRUE THE CONTENTS OF
THIS PRIVATE PLACEMENT MEMORANDUM (THE "MEMORANDUM") AS LEGAL, TAX OR BUSINESS
ADVICE. THIS MEMORANDUM AND THE OTHER DOCUMENTS DELIVERED HEREWITH, AS WELL AS
THE NATURE OF AN INVESTMENT IN THE SECURITIES OFFERED HEREBY, SHOULD BE REVIEWED
BY EACH PROSPECTIVE INVESTOR AND SUCH INVESTOR'S INVESTMENT, TAX, LEGAL,
ACCOUNTING AND OTHER ADVISORS.
----------------------------------------
NO GENERAL SOLICITATION WILL BE CONDUCTED AND NO OFFERING LITERATURE OR
ADVERTISING IN ANY FORM WILL OR MAY BE EMPLOYED IN THE OFFERING OF THE UNITS,
EXCEPT FOR THIS MEMORANDUM (INCLUDING THE SUBSCRIPTION AGREEMENT AND ALL OTHER
EXHIBITS HERETO, INCLUDING AMENDMENTS AND SUPPLEMENTS) AND THE DOCUMENTS
SUMMARIZED HEREIN OR ENCLOSED HEREWITH. NO PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS MEMORANDUM
(INCLUDING THE EXHIBITS, AMENDMENTS AND SUPPLEMENTS TO THIS MEMORANDUM) OR IN
THE DOCUMENTS SUMMARIZED HEREIN OR ENCLOSED HEREWITH AND, IF GIVEN OR MADE, SUCH
OTHER INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON.
----------------------------------------
<PAGE>
THE INFORMATION CONTAINED IN THIS MEMORANDUM HAS BEEN SUPPLIED BY THE
COMPANY AND HAS BEEN INCLUDED HEREIN IN RELIANCE ON THE COMPANY. THIS MEMORANDUM
CONTAINS SUMMARIES, BELIEVED BY THE COMPANY TO BE ACCURATE, OF CERTAIN
DOCUMENTS, BUT REFERENCE IS HEREBY MADE TO SUCH DOCUMENTS FOR COMPLETE
INFORMATION CONCERNING THE RIGHTS AND OBLIGATIONS OF THE PARTIES THERETO. COPIES
OF SUCH DOCUMENTS ARE AVAILABLE ON A CONFIDENTIAL BASIS AT THE OFFICES OF
WESTBURY METALS GROUP, INC., 750 SHAMES DRIVE, WESTBURY, NEW YORK 11590,
ATTENTION: MICHAEL HUBER. ALL SUCH SUMMARIES ARE QUALIFIED IN THEIR ENTIRETY BY
THIS REFERENCE. NO ASSURANCE CAN BE GIVEN BY THE PLACEMENT AGENT AS TO THE
ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED IN THIS MEMORANDUM OR ANY
OTHER DOCUMENT REFERRED TO HEREIN OR ENCLOSED HEREWITH. THE DELIVERY OF THIS
MEMORANDUM DOES NOT IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AT
ANY TIME SUBSEQUENT TO ITS DATE.
----------------------------------------
THIS MEMORANDUM HAS BEEN PREPARED SOLELY FOR THE BENEFIT OF PROSPECTIVE
INVESTORS INTERESTED IN THE PROPOSED PRIVATE PLACEMENT OF THE UNITS AND
CONSTITUTES AN OFFER ONLY TO THE PERSON WHOSE NAME APPEARS IN THE APPROPRIATE
SPACE PROVIDED ON THE COVER OF THIS MEMORANDUM. BY ACCEPTING DELIVERY OF THIS
MEMORANDUM, THE RECIPIENT HEREOF AGREES TO KEEP THE CONTENTS HEREOF, AND ANY
INFORMATION OBTAINED BY SUCH PERSON IN CONNECTION HEREWITH, IN STRICTEST
CONFIDENCE. DISTRIBUTION OF THE MEMORANDUM TO ANY PERSON OTHER THAN SUCH
PROSPECTIVE INVESTOR AND THOSE PERSONS RETAINED TO ADVISE SUCH PROSPECTIVE
INVESTOR WITH RESPECT THERETO IS UNAUTHORIZED AND ANY REPRODUCTION OF THIS
MEMORANDUM, IN WHOLE OR IN PART, OR THE DIVULGENCE OF ANY OF ITS CONTENTS,
WITHOUT PRIOR WRITTEN CONSENT OF THE COMPANY IS PROHIBITED. EACH PROSPECTIVE
INVESTOR, BY ACCEPTING DELIVERY OF THIS MEMORANDUM, AGREE TO RETURN IT AND ALL
OTHER DOCUMENTS RECEIVED BY SUCH PROSPECTIVE INVESTOR TO THE COMPANY AT ITS
ADDRESS SPECIFIED ABOVE IF THE PROSPECTIVE INVESTOR DOES NOT SUBSCRIBE FOR THE
PURCHASE OF ANY UNITS, THE PROSPECTIVE INVESTOR'S SUBSCRIPTION IS NOT ACCEPTED
OF THIS OFFERING IS TERMINATED.
----------------------------------------
EACH PROSPECTIVE INVESTOR AND HIS PURCHASER REPRESENTATIVE, IF ANY,
SHALL BE GIVEN, UPON REQUEST, THE OPPORTUNITY TO ASK QUESTIONS OF, AND TO
RECEIVE ANSWERS FROM, THE COMPANY OR THE PLACEMENT AGENT CONCERNING THIS
OFFERING AND TO OBTAIN ANY ADDITIONAL INFORMATION NECESSARY TO VERIFY THE
ACCURACY OF THE INFORMATION CONTAINED HEREIN, TO THE EXTENT THAT SUCH
INFORMATION IS AVAILABLE WITHOUT UNREASONABLE EFFORTS OR EXPENSE. PROSPECTIVE
INVESTORS AND PURCHASER REPRESENTATIVES, IF ANY, ARE URGED TO REQUEST ANY
ADDITIONAL INFORMATION THEY MAY CONSIDER NECESSARY TO MAKE AN INFORMED
INVESTMENT DECISION BY CONTACTING MICHAEL HUBER AT WESTBURY METALS GROUP, INC.,
750 SHAMES DRIVE, WESTBURY, NEW YORK 11590 (TELEPHONE NUMBER (800) 645-3442), OR
FRANCIS P. ANDERSON AT KSH INVESTMENT GROUP, INC., 245 GREAT NECK ROAD, GREAT
NECK, NY 11021 (TELEPHONE NUMBER (516) 466-1117).
----------------------------------------
THE INFORMATION PROVIDED IN THIS MEMORANDUM CONTAINS CERTAIN
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT, WHICH REPRESENT THE COMPANY'S EXPECTATIONS OR BELIEFS, INCLUDING, BUT NOT
LIMITED TO, STATEMENTS REGARDING THE COMPANY'S FUTURE BUSINESS PROSPECTS,
REVENUES, WORKING CAPITAL, LIQUIDITY, CAPITAL NEEDS AND INCOME. FOR THIS
PURPOSE, ANY STATEMENTS CONTAINED HEREIN THAT ARE NOT STATEMENTS OF HISTORICAL
FACT MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING THE
FOREGOING, WORDS SUCH AS "MAY," "WILL," "EXPECT," "BELIEVE," "ANTICIPATE,"
"INTEND," "ESTIMATE," OR "CONTINUE" OR THE NEGATIVE OR OTHER VARIATIONS THEREOF
OR COMPARABLE TERMINOLOGY ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS.
THESE STATEMENTS BY THEIR NATURE INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES,
INCLUDING THOSE DESCRIBED ABOVE.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TABLE OF CONTENTS
Page
SUMMARY OF THE OFFERING........................................................................... 1
THE 6
RISK 10
THE 15
PRIVATE PLACEMENT EXEMPTION................................................................. 17
PLAN OF 20
USE OF 21
CAPITALIZATION..............................................................................................22..
SELECTED FINANCIAL 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
MANAGEMENT..................................................................................................31..
CERTAIN 34
PRINCIPAL 36
DESCRIPTION OF CAPITAL STOCK................................................................... 37
LEGAL 38
ADDITIONAL INFORMATION............................................................................. 38
EXHIBITS
EXHIBIT A Form of Investor Questionnaire
EXHIBIT B Form of Subscription Agreement
EXHIBIT C Registration Rights Agreement
EXHIBIT D Form 10K-SB for the period ended June 30, 1999
</TABLE>
<PAGE>
SUMMARY OF THE OFFERING
Offeror: Westbury Metals Group, Inc., a New York corporation ("Westbury" or
the "Company")
Securities Offered: The Company is offering up to 1,833,333 units (the
"Units"), each consisting of one share of the Company's common stock, par
value $0.001 (the "Common Stock"), and a redeemable warrant to purchase
one-half share of the Company's Common Stock at a price per share of $4.00
(each a "Warrant" and collectively, the "Warrants"). The Company is
offering the first 666,667 Units on a "best efforts, all or none" basis and
the remaining 1,166,666 Units on a "best efforts" basis. The Units will be
offered until January 28, 2000 (the "Termination Date"), unless extended as
described herein. If the Company does not receive and accept subscriptions
for the Minimum Offering at or prior to the Termination Date, as the
Company may extend the same, the Offering will not close and all investors'
funds will be returned, without interest or deduction. The Company's Common
Stock is traded on the NASDAQ Bulletin Board under the symbol WMET.
Offering Price: $3.00 per Unit
Minimum Amount to be Offered: $2,000,000 or 666,667 Units (the "Minimum
Offering")
Maximum Amount to be Offered: $5,500,000 or 1,833,333 Units (the "Maximum
Offering")
Minimum Subscription: 10,000 Units (or an investment of $30,000), but fewer
than 10,000 Units may be sold at the discretion of the Company and the
Placement Agent.
<PAGE>
Outstanding Common Stock of the Company
Before the Offering: 3,257,312 shares (1)
After the Minimum Offering: 3,923,979 shares (2)
After the Maximum Offering: 5,090,645 shares (3)
Placement Agent: KSH Investment Group, Inc., is acting as placement agent
for the Offering (the "Placement Agent"). The Placement Agent will receive
a cash commission and a non-accountable expense allowance equal to 3-3/4 %
and3/4%, respectively, of the aggregate purchase price of the Units sold to
"friends" of the Company, and 7-1/2% and 1-1/2%, respectively, of the
aggregate purchase price of all other Units. In addition, the Company will
issue to the Placement Agent warrants to purchase Common Stock equal to 5%
of the aggregate shares (excluding shares underlying the Warrants) sold in
the Offering (the "Placement Agent's Warrants") and up to 250,000
investment banking warrants (the "Investment Banking Warrants"), each
entitling the Placement Agent to purchase one share of the Company's Common
Stock at $4.00 per share. The Placement Agent will also be entitled to a
fee of $100,000 if the Placement Agent is unable to sell the Minimum
Offering of Units due to the failure of the Company's Common Stock to trade
at a price at or above an average price of $3.00 per share during the
period commencing on the date hereof and terminating on January 28, 2000.
Warrants:
Exercise Price: The Warrants will have an exercise price equl to $4.00
per share.
Exericse Period: The Warrants can be exercised at any time for three
years from the date of the closing.
1 Excludes 954,000 shares issuable on exercise of outstanding options.
2 Excludes 954,000 shares issuable on exercise of outstanding options,
333,333 shares issuable upon exercise of the Warrants issued to Unit
purchasers, 193,213 shares issuable upon exercise of the Placement Agent's
Warrants and Investment Banking Warrants to be issued to the Placement
Agent.
3 Excludes 954,000 shares issuable on exercise of outstanding options,
333,333 shares issuable upon exercise of the Warrants issued to Unit
purchasers, 251,546 shares issuable upon exercise of the Placement Agent's
Warrants and Investment Banking Warrants to be issued to the Placement
Agent.
<PAGE>
Company Call: The Company can call at a price of $0.001 per Warrant
any unexercised Warrants and require their exercise as follows if the
Common Stock closes above the price indicated below for any
consecutive 20 business days
Warrants Callable by Company
Trading Price If Unexercised
$5.50 One-third
$6.25 One-third
$7.00 All
Each call must follow the next by a minimum of 30 days. Warrants that
are not exercised when called will be forfeited.
Investor Suitability: An investment in the Units is suitable only for
those persons and entities whose financial means permit them to assume
the risks of a speculative, illiquid, long-term investment.
Subscribers will be required to submit a completed Investor
Questionnaire, in the form of Exhibit A to this Memorandum, so that
the Company can determine whether investor suitability requirements
are satisfied, including whether the subscriber is an accredited
investor.
Sales of the Units will be made only to "accredited investors," as
such term is defined in Rule 501(a) of Regulation D under the
Securities Act.
Restrictions on Resale: The Units offered hereby will not be
registered under the Securities Act. The Common Stock and the Warrants
(collectively, the "Securities") will be "restricted securities," as
defined under the rules and regulations of the Securities Act. The
certificates representing the Securities will contain a legend
restricting the transfer, sale or other disposition of the Securities
unless and until such Securities are registered under the Securities
Act or an opinion of counsel, reasonably satisfactory to the Company,
is received that registration is not required under the Securities
Act.
Registration Rights: The Company will use its reasonable best efforts
to file within 60 days after January 28, 2000 or after any extended
termination date, if later, a shelf registration statement registering
the shares of Common Stock, including shares of Common Stock to be
issued upon exercise of the Warrants. The Company will keep such
registration statement current, subject to the limitations set forth
in the Registration Rights Agreement attached hereto as Exhibit D,
until all Common Stock issued hereunder and all Common Stock issuable
upon exercise of the Warrants issued hereunder has been sold or is
otherwise fully tradable under the Securities Act. If the Company
fails to file the Registration Statement within 60 days following the
final closing, the Company will issue to each investor penalty shares
equal to 10% of the shares (excluding shares underlying the Warrants)
purchased by such investor hereunder.
<PAGE>
Subscription Procedure: The proceeds of the Offering will be placed in
an escrow account with American Stock Transfer & Trust Company, as
Escrow Agent, until subscriptions are received and accepted by the
Company and the Placement Agent for the Minimum Offering, at which
time the initial closing will occur. The Offering will continue until
the maximum number of Units have been sold or until the Company and
the Placement Agent determine to close the Offering, but in any event,
the Offering will close no later than January 28, 2000 (the
"Termination Date"), unless extended by mutual consent of the Company
and the Placement Agent, without notice to investors. If the initial
closing has not occurred on or prior to the Termination Date, as the
same may be extended, subscriptions received will be returned to
subscribers, without interest or deduction.
Investors wishing to subscribe for Units under this Offering must
complete and return to the Placement Agent an Investor Questionnaire,
in the form attached hereto as Exhibit A, together with a Subscription
Agreement, in the form attached hereto as Exhibit B, along with the
full purchase price for the Units being subscribed for. Any
subscription may be accepted or rejected, in whole or in part, by the
Company, but no subscription once made may be withdrawn by a
subscriber except as required by law.
Certificates for the shares and the Warrants will be delivered to
subscribers promptly following the closing of the Offering.
<PAGE>
Use of Proceeds: The Company expects to realize net proceeds from the
Offering of between $1,720,0001 and $5,152,500.2 The Company intends
to use such net proceeds to expand its business operations, to finance
acquisitions and for general corporate purposes.
4 Assuming a Minimum Offering with no Units sold to "friends" of the
Company and expenses of $100,000.
5 Assuming a Maximum Offering with all Units sold to "friends" of the
Company and expenses of $100,000.
<PAGE>
INTRODUCTION AND SUMMARY OF INFORMATION
The following summary is qualified in its entirety by reference to the
more detailed information and the financial statements appearing elsewhere in
this Memorandum. This summary is intended to give a brief description of the
information contained in this Memorandum. Prospective investors are strongly
advised to read the entire Memorandum, including the section entitled "Risk
Factors" beginning on page 10 and all Exhibits attached hereto. An investment in
the Units offered hereby is highly speculative, involves a high degree of risk
and is inappropriate for persons who cannot afford the loss of their entire
investment. Prospective investors should retain their own professional advisors
to review and evaluate the economic, tax and other consequences of investing in
the Units and are not to construe the contents of this Memorandum or any other
information furnished by the Company as legal, tax, financial or other advice.
The Company
Westbury Metals Group, Inc. ("Westbury" or the "Company") is a rapidly
growing provider of integrated fabrication, reclamation, refining, processing,
and financial and risk management services to small and medium sized consumers
of precious metals and intermediate industrial products. The Company's primary
focus is on the manufacture and sale of base and precious metal products to
industrial users. The Company also reclaims precious and specialty metals from
scrap and industrial residue from industrial scrap and provides industrial
commodity management services to industrial users. Management has built the
company through a series of strategic acquisitions of small- to medium-sized
metals companies and through internal growth. The Company's revenues have grown
from approximately $2.0 million for the fiscal year ended June 30, 1997 to
approximately $34.5 million for the fiscal year ended June 30, 1999.
The Company provides a broad range of processing, refining and
financial services in connection with reclamation of precious and specialty
metals from primary and secondary sources. The Company reclaims 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, the Company either purchases the reclaimed metal or returns
it to the customer. Through its 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, through its subsidiaries, operates in three inter-related
areas of the precious metals business:
|X| Industrial Products -- manufactures and sells customized,
value-added precious and base metal products principally to the
North American metal finishing and plating industry.
|X| Metal Processing -- reclaims precious and specialty metals
materials through processing and refining services, including the
reclamation of platinum group metals from used automotive
catalytic converters.
<PAGE>
|X| Industrial Commodities Management -- buys, sells and finances
metal for Westbury and its customers and offers hedging and risk
management services, including spot fixing market pricing and
forward contracts to its customers.
The Company believes that it is one of only a few companies that offer
a full range of precious metal related services to small and medium-sized
customers. Westbury has the ability to service a customer throughout the entire
operating cycle -- from fabrication through recycling back to fabrication, while
at the same time offering a complement of hedging and risk management services.
The Company believes that its ability to address its customers' needs throughout
their precious metal usage cycle distinguishes it from most of its competitors
and positions the Company to expand its sales to its existing customers.
History
The Company's predecessor, Westbury Alloys, has been in operation since
1968. The Company's current management acquired Westbury Alloys in 1996 and
formed the Company in March 1998.
Since its formation, the Company has achieved growth through the
expansion and development of its existing businesses and through strategic
acquisitions. In July 1998, Westbury created Westbury International, Inc., its
Industrial Commodities Management Division, which reinforces the marketing and
operating capability of the Company's other subsidiaries. This division buys,
sells and finances metal for the Company's other divisions and customers,
managing the Company's price risk and assuring timely metal availability, while
seeking to reduce inventory and maximize capital usage. The high cost of
inventory and the significant price fluctuations to which precious metals
companies are susceptible makes critical the Company's ability to effectively
manage its customers price risk and flow of inventory.
In January 1998, the Company entered into a joint venture with
Stillwater Mining Co. ("Stillwater"). Stillwater, the largest platinum mining
operation in North America, selected Westbury as its exclusive supplier of the
processed automobile catalytic converter secondary material used to supplement
Stillwater's production of virgin platinum and palladium. The Company believes
that this joint venture is unusual in that it draws together a major precious
metals producer, such as Stillwater, and an outside service organization, such
as the Company. Since inception of this venture, semi-annual volume has
increased over sixfold and recent capital investments have doubled the
facility's capacity.
In July 1999, the Company acquired substantially all of the assets of
Reliable Corporation, a manufacturer of silver semi-fabricated products. The
successful integration of Reliable Corporation should significantly enhance
Westbury's Industrial Products Group's position in the North American metal
finishing and plating industries. The Company plans to expand this division to
take advantage of the increase in demand for silver in many rapidly growing
industries, including the electronics and telecommunications industries.
<PAGE>
For the year ended June 30, 1999, Westbury had revenue and EBITDA of
$34,470,000 and $315,600, respectively.
Competitive Strengths
Full Service Provider. Westbury is one of few companies in the precious
metals industry that offers a full range of services, including fabrication,
refining and risk management services, to small and mid-size companies. The
Company believes that its ability to offer its customers a sustainable operating
cycle from fabrication through recycling back to fabrication distinguishes it
from most of its competitors and creates cross-marketing opportunities. The
Company believes that by marketing additional services to its existing customers
it can increase its revenues without significantly increasing its overhead
costs.
Well Positioned to Capitalize on Rapidly Growing Industries. Precious
metals in various forms are critical to certain high-growth industries, such as
computers and telecommunications. Growth in such industries has stimulated an
increase in the use of precious metals such as silver, whose usage worldwide
increased 5% in 1997 (the last year for which such data is available). Westbury
is among the leaders in supplying precious metals for use in advanced technology
applications.
Able to Respond Quickly to Customer Needs. Westbury believes that its
financial strength and commodity management skills allow it to respond quickly
to changes in the precious metal needs of the Company and its customers. The
Company believes that its flexibility distinguishes it from most of its
competitors and is critical to success in an industry where the high value of
precious metals is a major deterrent to the maintenance of large inventories.
Business Strategy
Expand on Cross-Selling Opportunities. Because Westbury has built much
of its customer base through acquisitions, many of its current customers
purchase from only one of the Company's divisions. The Company intends to
achieve revenue and margin enhancements through aggressive cross-selling of its
fabrication, refining and risk management services to existing customers.
Westbury's goal is to earn a greater share of each customer's total precious
metals business by serving them throughout a sustainable cycle from fabrication,
through recycling back to business lines.
Pursue Strategic Growth Opportunities through Acquisitions. Management
expects that as the precious metals industry continues to consolidate,
opportunities for strategic acquisitions will continue to arise. Westbury
intends to be proactive in this environment and, on a strategic basis, pursue
acquisitions that management believes will complement its key business strengths
and further expand its capabilities. Westbury will seek to expand its
silver-based Industrial Products Division in the first phase of its acquisition
plan. The Company is currently engaged in acquisition discussions with a number
of established sole proprietorships that lack Westbury's access to capital.
Successful completion and integration of these acquisitions currently under
discussion should result in Westbury's Industrial Products Group becoming a
<PAGE>
leading participant in the North American metal finishing and plating industry.
During phase two of its acquisition strategy, Westbury will target divisions of
larger conglomerates who seek to divest themselves of their precious metal
manufacturing operations. The Company has also identified several larger
privately held companies that fit Westbury's general consolidation profile. As
the Company moves along its acquisition and consolidation campaign, Westbury
will seek out companies that can be vertically integrated to create a more
synergistic and profitable organization. There can be no assurance that any of
these acquisitions will be consummated, or if consummated, that they will be
successfully integrated into the Company.
<PAGE>
RISK FACTORS
You should carefully consider the following factors in addition to the
other information provided elsewhere in this Memorandum in evaluating an
investment in the Units.
Implementation of Business Strategy
Westbury's ability to achieve its objectives is subject to a variety of
factors, many of which are beyond its control, and the Company may not be
successful in implementing its strategy. In addition, the implementation of
Westbury's strategy may not improve its operating results. The Company may
decide to alter or discontinue certain aspects of its business strategy and may
adopt alternative or additional strategies due to competitive factors or factors
not currently foreseen, such as unforeseen costs and expenses or events beyond
its control, such as economic downturn.
One element of Westbury's growth strategy is to pursue acquisitions,
investments and strategic alliances that either expand or complement its
business. The Company may not be able to identify acceptable opportunities or
complete any acquisitions, investments or strategic alliances on favorable terms
or in a timely manner. Acquisitions and, to a lesser extent, investments and
strategic alliances involve a number of risks, including:
o the diversion of management's attention to the assimilation of the
operations and personnel of the new business,
o adverse short-term effects on our operating results, and
o the inability to successfully integrate new businesses with our existing
business, including financial reporting, management and information
technology systems.
In addition, the Company may require additional debt or equity
financings for future acquisitions, investments or strategic alliances which may
not be available on favorable terms, if at all. Westbury may not be able to
successfully integrate or operate profitably any new business it acquires and
the Company cannot assure you that any other investments it makes or strategic
alliances it enters into will be successful.
Impact of Environmental and Other Regulation
As a manufacturer, refiner and reclaimer of precious metals, Westbury
is subject to the requirements of federal, state and local environmental and
occupational health and safety laws and regulations of the U.S. and foreign
countries. Westbury's refining activities are subject to extensive and rigorous
government regulations designed to protect the environment from wastes,
emissions and hazardous substances, particularly with respect to the emissions
of air pollutants, the discharge of treated water, and the disposal and storage
of hazardous substances. The Company and its predecessors have operated
manufacturing facilities since 1968 and have used, generated and disposed of
various substances and wastes which are or may be considered hazardous. For
<PAGE>
example, Westbury disposes of from its Westbury, New York facility treated water
from its refining process. Although the Company believes that its facilities are
in substantial compliance with environmental laws currently applicable to their
storage and disposal activities, additional environmental issues and related
matters may arise relating to past activities that could require significant
expenditure by the Company. In addition, there can be no assurance that the
Company has been or will be at all times in complete compliance with all such
requirements or that it will not incur material costs or liabilities in
connection with such requirements in the future. These requirements are complex,
constantly changing and have tended to become more stringent over time. It is
possible that these requirements may change or liabilities may arise in the
future in a manner that could have a material adverse effect on Westbury's
business.
Absence of Combined Operating History; Risks of Integrating Acquired Companies
The Company was founded in 1998. Each acquired company was operated as
a separate independent entity prior to its acquisition, and there can be no
assurance that Westbury will be able to integrate the operations of these
businesses successfully or to institute the necessary systems and procedures,
including accounting and financial reporting systems, to manage the combined
enterprise on a profitable basis. There can be no assurance that the management
group will be able to manage the combined entity effectively or to implement
successfully the Company's acquisition and internal growth operating strategies.
The historical results of the acquired companies cover periods when the acquired
companies and Westbury were not under common control or management and may not
be indicative of the Company's future financial or operating results. The
inability of the Company to integrate its acquisitions successfully would have a
material adverse effect on the Company's business, financial condition and
results of operations and would make it unlikely that the Company's acquisition
program will be successful.
Absence of Profitability
The Company has incurred net operating losses since its inception. Net
losses for the years ended June 30, 1998 and 1999 were $184,694 and $424,441,
respectively. The Company may continue to incur losses as it expands and there
can be no assurance that the Company will ever become profitable, or if Westbury
achieves profitability, that such profitability will be sustained. The Company's
future profitability will depend on a number of factors, including the
availability of capital and the Company's ability to implement its business
plan. The Company's operating results will also depend on factors beyond its
control, such as the strength of competition and the market for the Company's
products and services.
Possible Impact of Varying Metal Prices
The principal materials used by the Company are silver, gold and
platinum and various specialty metals. The metals industry as a whole is
cyclical, and at times pricing and availability of raw materials in the metals
industry can be volatile due to numerous factors beyond the control of the
Company, including general, domestic and international economic conditions,
labor costs, production levels, competition, import duties and tariffs and
currency exchange rates. This volatility can significantly affect the
availability and cost of raw materials for the Company, and may, therefore,
adversely affect Westbury's net sales, operating margin and net income. Westbury
<PAGE>
maintains substantial inventories of metal to accommodate its needs and the
requirements of its customers. The Company's commitments for metal purchases are
generally at prevailing market prices in effect at the time the Company places
its orders. Although it mitigates its exposure to commodity market price
fluctuations by hedging its precious metal inventories, the Company has no
long-term, fixed-price purchase contracts. During periods of rising raw
materials prices, there can be no assurance the Company will be able to pass any
portion of such increases on to customers. When raw material prices decline,
customer demands for lower prices could result in lower sale prices and, as the
Company uses existing inventory, lower margins. Changing metal prices could
adversely affect the Company's operating margin and net income.
Cyclicality of Demand
Many of Westbury's products are sold to industries that experience
significant fluctuations in demand based on economic conditions, energy prices,
consumer demand and other factors beyond the control of the Company. No
assurance can be given that the Company will be able to increase or maintain its
level of sales in periods of economic stagnation or downturn.
Risks Related to the Company's Acquisition Strategy
Westbury intends to grow significantly through the acquisition of
additional value-added precious metals processors/service centers. The Company
expects to face competition for acquisition candidates, which may limit the
number of acquisition opportunities and may lead to higher acquisition prices.
There can be no assurance that the Company will be able to identify, acquire or
manage profitably additional businesses or to integrate successfully any
acquired businesses into the Company without substantial costs, delays or other
operational or financial difficulties. Further, acquisitions involve a number of
special risks, including failure of the acquired business to achieve expected
results, diversion of management's attention, failure to retain key personnel of
the acquired business and risks associated with unanticipated events or
liabilities, some or all of which could have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
there can be no assurance that acquired businesses will achieve anticipated net
sales and earnings.
Competition
The Company is engaged in a highly-fragmented and competitive industry.
Westbury competes with a large number of other medium-sized value-added precious
metals refiners/reclaimers on a regional and local basis, some of which may have
greater financial resources than the Company. Westbury also competes to a lesser
extent with large precious metals refiners, who typically sell to very large
customers requiring regular shipments of large volumes of precious metals. The
Company may also face competition for acquisition candidates from those large
refiners that have acquired a number of metals service center businesses during
the past decade. Other smaller metals refiners/reclaimers may also seek
acquisitions from time to time. Increased competition with respect to
acquisitions and for increased sales to new and existing customers could have a
material adverse effect on the Company's net sales and profitability.
<PAGE>
Limited Float; Restrictions on Transfer
Although the Company's Common Stock is available for trading on the
NASDAQ Bulletin Board, there is currently no active trading market for the
Common Stock. There is no market for the Units or Warrants, and it is unlikely
that a market will be available in the future.
The Units are being offered in reliance upon an exemption from
registration under the Securities Act and applicable state securities laws.
Therefore, the Units may be transferred or resold only in a transaction
registered under or exempt from the Securities Act and applicable state
securities laws. Westbury has agreed to file a resale registration statement
with the Securities and Exchange Commission ("SEC") and to use all reasonable
efforts to cause such resale registration statement to become effective with
respect to the Common Stock and the Common Stock underlying the Warrants. No
assurance can be given, however, that such resale registration statement will be
accepted by the SEC for filing or that the resale registration statement will
ever be declared effective. If issued, the Units will generally be permitted to
be resold or otherwise transferred by each holder without requirements of
further registration. No assurance can be given as to the liquidity of the
trading market for the Units.
Control by Existing Shareholders
As of June 30, 1999, directors, executive officers and principal
shareholders of the Company, and certain of their affiliates, owned beneficially
approximately 60% of the Company's outstanding Common Stock. After the Offering,
assuming a Maximum Offering and no Units sold to directors, executive officers
and principal shareholders of the Company, and certain other affiliates, such
shareholders will still own beneficially as a group approximately 52% of the
Company's outstanding Common Stock. Accordingly, these shareholders,
individually and as a group, may be able to influence the outcome of shareholder
votes, including votes concerning the election of directors, adopting or
amending provisions in the Company's Articles of Incorporation and By-laws and
approving certain mergers or other similar transactions, such as sales of
substantially all of the Company's assets. Such control by existing shareholders
could have the effect of delaying, deferring or preventing a change in control
of the Company.
Possible Volatility of Stock Price in the Public Market
The securities markets have from time to time experienced significant
price and volume fluctuations that may be unrelated to the operating performance
of particular companies. The market prices of the common stock of many publicly
traded precious metals companies have in the past been, and can in the future be
expected to be, especially volatile. Environmental regulatory developments,
fluctuations in the prices of gold and silver and economic and other external
factors, as well as period-to-period fluctuations in the Company's financial
results, may have a significant impact on the market price of the Common Stock.
Sales of Common Stock in the public market could adversely affect prevailing
market prices.
<PAGE>
Dependence on Future Financing
The Company operates in a capital intensive industry. Even if the
Offering is fully subscribed, management believes that the Company will require
additional financing to continue to make key acquisitions, to maintain
sufficient inventories of precious metals and for working capital. The Company
plans to seek the additional financing it will require through the sale of
additional debt or equity securities, through bank loans or through strategic
partnerships. Over the past few years, some banks that had traditionally offered
metal loans and hedging services have stopped making metal and asset-based loans
and there can be no assurance that bank or other financing necessary to the
Company's business plan will be available or available on terms acceptable to
the Company. If the Company is not able to secure future financing, the Company
may have to reduce overall operations, reduce its precious metal inventories or
forego expansion opportunities.
Dependence on Key Personnel
The Company's success will depend, in large part, upon the talents and
skills of Mandel Sherman and other senior managers. On January 1, 1998, Westbury
Alloys, Inc. entered into a three-year employment agreement with Mandel Sherman.
In addition, the Company has taken out a $1,000,000 keyman life insurance policy
for Mr. Sherman. To the extent that any of its management personnel is unable or
refuses to continue association with the Company, a suitable replacement would
have to be found. There is no assurance that the Company would be able to find
suitable replacements for such personnel, or that suitable person.
Additional Securities Available for Issuance
The Company's Certificate of Incorporation authorizes the issuance of
50,000,000 shares of Common Stock. At this time, 3,197,586 shares of Common
Stock have been issued. Accordingly, investors purchasing shares in this
offering will be dependent upon the judgment of management in connection with
the future issuance and sale of shares of the Company's capital stock, in the
event purchasers can be found for such securities. There can be no assurance
that additional share issuances will not substantially dilute the investment of
the Company's existing investors.
Excess Capacity
There is significant excess capacity in the U.S. precious metals
refining industry. The existence of such excess capacity may constrain prices
that the Company and its competitors can charge for their services, which could
negatively impact profit margins.
<PAGE>
THE OFFERING
Securities Being Offered. The Units are being offered only to accredited
investors as that term is defined in Section 2(15) of the Securities Act and
Rule 501 of Regulation D.
The Company is offering for sale pursuant to this Memorandum up to
1,833,333 Units, each consisting of one share of the Company's Common Stock, par
value $0.001 per share and a redeemable Warrant to purchase one-half share of
the Company's Common Stock. This Offering is a "minimum-maximum" offering and
will be made on a "best efforts, all or none" basis with respect to the Minimum
Offering, and a "best efforts" basis with respect to the Maximum Offering.
Terms of the Offering. All costs and expenses of the Offering shall be paid by
the Company. Investors desiring to subscribe for Units should make their checks
payable to the order of "American Stock Transfer & Trust Company- Westbury
Metals Group, Inc. Escrow Account." The proceeds of this Offering will be placed
in an escrow account with American Stock Transfer & Trust Company, as Escrow
Agent, until the Company and the Placement Agent receive and accept
subscriptions for the Minimum Offering, at which time the initial closing will
occur. The Offering will continue until all of the Units have been sold or until
the Company and the Placement Agent determine to close the Offering, but in any
event the Offering will close no later than the Termination Date, unless
extended by mutual consent of the Company and the Placement Agent, without
notice to investors. The Company may reject any subscription, in whole or in
party, at any time for any reason.
If terminated at any time prior to all of the Units being subscribed
for and purchased, the Company will stop accepting subscriptions pursuant to
this Offering. If subscriptions of at least $2,000,000 are not received and
accepted by the Company before the Termination Date, or if the Offering is
terminated at any time prior to the minimum 666,667 Units being subscribed for
and purchased, then the Offering will be terminated and all funds on deposit
will be promptly returned to investors without interest and without deduction.
Restricted Securities. The Units offered hereby will not be registered under the
Securities Act. The certificates representing the Securities to be issued by the
Company in this Offering will be "restricted securities" as defined under the
rules and regulations of the Securities Act and subject to limitations on their
transfer pursuant to federal and state securities laws. The Securities will be
imprinted with a legend in substantially the following form, unless and until
such Securities are registered under the Securities Act or an opinion of
counsel, reasonably satisfactory to the Company is received that registration is
not required under the Securities Act:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE
DISPOSED OF WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH
ACT AND APPLICABLE STATE SECURITIES LAWS, SUPPORTED BY AN OPINION OF
COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT
SUCH REGISTRATION IS NOT REQUIRED."
<PAGE>
Certain states require a particular form of legend on securities sold
within those respective states or to residents thereof. If any Units are
subscribed for and purchased by residents of any such state, such legends will
likewise be affixed to the certificates evidencing the shares underlying such
Units. Although no extended discussion of these restriction is contained in this
Memorandum, each prospective investor should be aware that these requirements
exist and should consult his, her or its own legal counsel regarding the manner
in which such restrictions would apply to his, her or its own situation.
<PAGE>
PRIVATE PLACEMENT EXEMPTION
Qualified Subscribers. The Company has adopted as a general investor suitability
standard the requirement that each investor of Units represents in writing that:
(i) the investor understands and acknowledges that the Securities underlying the
Units cannot be sold or transferred without compliance with registration or
qualification provisions of applicable federal and state securities laws or an
opinion of counsel that an exemption from such registration or qualifications
requirements is available; (ii) the investor can bear the economic risk of
losing his entire investment; (iii) the investor's overall commitment to
investments that are not readily marketable is not disproportionate to the
investor's net worth, and the investor's investment in the Units will not cause
such overall commitment to become excessive; (iv) the investor has adequate
means of providing for current needs and personal contingencies; (v) the
investor has evaluated all the risks of investment in the Company; and (vi) the
investor has substantial experience in making investment decisions of this type.
An investment in the Company, such as is described in this Memorandum,
is suitable only for persons or entities of adequate financial means that have
no need for immediate or short-term liquidity from this investment and who can
afford to bear the risks inherent in an investment of the nature discussed in
the Memorandum. Accordingly, no subscriber will be accepted as an investor to
the Company pursuant to this Offering until the subscriber has demonstrated to
the satisfaction of the Company and its legal counsel that the subscriber is an
"accredited investor" as that term is defined under Rule 501 of Regulation D.
Regulation D provides, in part, that an "accredited investor" shall generally
mean any person or entity that, at the time of purchase of the Units is:
(a) a bank or savings and loan association or other institution; a
broker or dealer; an insurance company; and investment company
registered under the Investment Company Act of 1940 or a business
development company; a Small Business Investment Company licensed by
the United States Small Business Administration; a plan established
and maintained by a state, its political subdivision or any agency or
instrumentality of a state or its political subdivision for the
benefit of its employees, if such plan has total assets in excess of
$5,000,000; an employee benefit plan within the meaning of the
Employee Retirement Income Securities Act of 1974, as amended, if the
investment decision is made by a plan fiduciary that is either a bank,
savings and loan association, insurance company or registered
investment advisor, or if the employee benefit plan has total assets
in excess of $5,000,000 or, if a self-directed plan, with investment
decisions made solely by persons who are accredited investors;
(b) a private business development company;
(c) an organization described in Section 501(c)(3) of the Internal
Revenue Service Code, a corporation, or a Massachusetts or
similar business trust or partnership, not formed for the
specific purpose of acquiring the Units offered, with total
assets in excess of $5,000,000;
<PAGE>
(d) a director, executive officer or general partner of the issuer
of the Units being offered or sold, or any director, executive
officer or general partner of a general partner of that
issuer;
(e) a natural person whose individual net worth, or joint net worth
with that person's spouse, at the time of his or her purchase exceeds
$1,000,000;
(f) a natural person who had an individual income in excess of
$200,000 in each of the two most recent years, or joint income
with that person's spouse in excess of $300,000 in each of
those years, and who has a reasonable expectation of reaching
the same income level in the current year;
(g) any trust, with total assets in excess of $5,000,000 not
formed for the specific purpose of acquiring the Units
offered, whose purchase is directed by a sophisticated person;
and
(h) an entity in which all of the equity owners are accredited
investors.
For a precise legal description of the term "accredited investor,"
prospective investors should refer to Rule 501 of Regulation D.
Investor Representations. The validity of the exemption under which this
Offering is being made and, therefore, the credibility of the Units offered
pursuant thereto are directly dependent upon subscribers meeting the
qualifications described above. To establish their qualification, subscribers
must complete a copy of the Accredited Investor Questionnaire and the
Subscription Agreement, attached hereto as Exhibits B and C, respectively, and
must provide the Company with all necessary financial and other information that
the Company or its legal counsel deems necessary for that purpose. Apart from
that, the Company deems relevant in certain instances information regarding
subscribers' experience in financial and business matters. The information may
bear not only upon the suitability of the subscriber but also can relate to the
subscriber's true investment intent.
The Company will accept and rely upon the representations and
warranties of the individual subscriber, as set forth in the Accredited Investor
Questionnaire and the Subscription Agreement, without attempting to
independently verify or confirm the statements contained therein; provided,
however, that the Company reserves the right to rescind any subscription for
Units if the Company at any time is advised or becomes aware of any untrue
statement or misrepresentation made by an investor to the Company therein.
Additional Investor Representations. Because the Units being offered hereby will
not be registered with the SEC under the Securities Act in reliance upon Section
4(2) thereof and Rule 506 of Regulation D promulgated under the Securities Act,
and applicable state laws, rules and regulations, prospective investors will be
required to make certain representations to the Company. Each prospective
investor will be required to represent that: (a) the Units are being purchased
for that subscriber's own account for investment and not for the interest of any
other person or entity not allowed by law; (b) that the Units are not being
<PAGE>
purchased for the purpose of resale to other; and (c) the subscriber understands
that his, her or its right to transfer the Units is restricted by the applicable
securities laws, rules and regulations, including a restriction against
transfer, unless the transfer is in compliance with the requirements of Rule 144
promulgated under the Securities Act or otherwise not in violation of the
Securities Act or applicable state securities laws, rules or regulations.
Sales of the Units will only be made to persons or entities meeting
these requirements. Consequently, if the Company is not correct in its
assumptions as to the circumstances of a particular prospective investor, then
the delivery of this Memorandum to such prospective investor shall not be deemed
to be an offer, and this Memorandum must be returned to the Company immediately
with no copy thereof being retained.
Caveat Regarding Investment Standards. These suitability standards have been
adopted by the Company as a means of assisting prospective investors in
determining the advisability of an investment in the Units and for the further
purpose of enabling the Company to make its determination with respect to a
prospective investor's suitability and investment intentions. These suitability
standards are minimum requirements and represent only a few of many factors to
be considered in making an investment decision. Consequently, satisfaction of
these suitability standards should not be construed as an indication that a
prospective investor should purchase any of the Units offered hereby. An
investment in the Units is suitable only for those persons and entities whose
financial means will permit them to assume the risks of a speculative, illiquid,
long-term investment.
<PAGE>
PLAN OF DISTRIBUTION
Placement Agent. The Company has retained KSH Investment Group, Inc. to act as
the Placement Agent for the Offering. The Company has agreed to pay the
Placement Agent a cash commission and a non-accountable expense allowance equal
to 3 3/4% and 3/4%, respectively, of the aggregate purchase price of the Units
sold to "friends" of the Company, and 7 1/2 % and 1 1/2%, respectively, of the
aggregate purchase price of all other Units sold. The Company will pay all
expenses in connection with the preparation of this Memorandum and the
qualification of the Units offered hereby for sale under the laws of such states
as the Placement Agent may reasonably designate, including professional fees of
counsel (which professional fees, excluding disbursements, are anticipated to be
no more than $35,000). The Company will also issue to the Placement Agent
warrants to purchases Common Stock equal to 5% of the aggregate shares
(excluding shares underlying the Warrants) sold in the Offering. In addition,
depending upon the aggregate size (including sales to "friends" of the Company)
of the Offering, the Company will issue to the Placement Agent Investment
Banking Warrants in the quantities set forth below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Aggregate Principal Amount of Units Sold Shares Into Which Investment Banking Warrants Convert
$0-$2,000,000 0
$2,000,001-$2,500,000 100,000
$2,250,001-$3,000,000 150,000
$3,000,001-$3,500,000 200,000
$3,500,001-$5,000,000 250,000
</TABLE>
The Placement Agent will also be entitled to a fee of $100,000 if the Placement
Agent is unable to sell the Minimum Offering of Units due to the failure of the
Company's Common Stock to trade at a price at or above an average price of $3.00
per share during the period commencing on the date hereof and terminating on
January 28, 2000.
The Placement Agent is a registered broker-dealer and a member of the
National Association of Securities Dealers, Inc. (the "NASD"). In connection
with the Offering, the Placement Agent may use the services of other licensed
broker-dealers who are NASD members. The Placement Agent will pay commissions to
any broker-dealer selling shares from its commission.
Subscription Procedure. The minimum purchase that can be made by any subscriber
is 10,000 Units, or an investment of $30,000 but fewer than 10,000 Units may be
sold at the discretion of the Company and the Placement Agent. Any prospective
investor who decides to purchases Units should deliver to the Placement Agent
the following items:
1. A fully completed and executed copy of the Accredited Investor
Questionnaire attached hereto as Exhibit A.
<PAGE>
2. Cash, check or certified funds payable to "American Stock Transfer
& Trust Company - Westbury Metals Group, Inc. Escrow Account," in an
amount equal to the total subscription price;
3. A completed and executed Internal Revenue Service Form W-9; and
4. An executed copy of the Subscription Agreement attached hereto as
Exhibit B.
The purchase price per Unit is exclusive of any costs incurred by an
offeree for legal, tax accounting or financial advice, including fees paid to
his, her or its purchaser representative, if any. All of the items listed above
must be delivered to the Placement Agent at:
KSH Investment Group, Inc.
245 Great Neck Road
Great Neck, NY 11021
The Accredited Investor Questionnaire and the Subscription Agreement
will be irrevocable by the prospective investor and, unless the subscription is
rejected or the Offering is withdrawn, the subscriber will become an investor in
this Offering. Subscriptions may be rejected by the Company for failure to
conform to the requirements of the Offering, insufficient documentation,
oversubscription of the Offering or any such other reason, whatsoever, as the
Company, in its sole discretion, may determine.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Units being
offered could be as little as $1,720,000, assuming a Minimum Offering of 666,667
Units sold with no Units sold to "friends" of the Company and expenses of
$100,000. The net proceeds to the Company from the sale of the Units being
offered could be as great as $5,152,500, assuming a Maximum Offering of
1,833,333 Units sold entirely to "friends" of the Company and expenses of
$100,000.
The principal purposes of this Offering are to increase the Company's
working capital, work toward creating a public market for the Common Stock, to
finance acquisitions and to facilitate access to bank and other financing
arrangements.
<PAGE>
CAPITALIZATION
The following table sets forth (i) the actual cash and capitalization
of the Company as of June 30, 1999 and (ii) the cash and capitalization of the
Company as adjusted to give effect to the sale of the Units offered hereby and
the credit facilities provided by BankBoston, N.A. and Alliance Capital
Investments Corp. This table should be read in conjunction with the Company's
Consolidated Financial Statements and the related Notes thereto contained in
Form 10K-SB attached hereto as Exhibit D.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
June 30, 1999
-------------------------------------------
Actual As Adjusted (1)
-------------------- ----------------------
(In thousands of dollars)
Cash and cash equivalents.............................................. $1,242 $8,242
==================== =====================
Total debt (including current maturities).............................. 1,511 1,511
Old Credit Facility.............................................. 1,553 ---
New Credit Facility............................................... --- 6,800
Alliance Capital Corp. Facility................................... 2,000
-------------------- ---------------------
Total debt.................................................... 3,064 10,311
Stockholders' equity:
Common Stock: $0.001 par value, 50,000,000 shares authorized;
Capital in excess of par value.................................... 3,284 8,284
Accumulated deficit............................................... (772) (772)
Warrants(3) --- ---
-------------------- ---------------------
Total stockholders' equity.................................... 2,515 7,517
-------------------- ---------------------
Total capitalization..................................... $5,579 17,828
==================== =====================
- ----------
</TABLE>
(1) Assuming the maximum Units offered are sold and net proceeds,
after fees and expenses, are $5.0 million.
(2) Excludes 954,000 shares of Common Stock reserved for issuance upon
exercise of outstanding options as of June 30, 1999, 916,500 shares
reserved for issuance upon exercise of the Warrants issued to Unit
purchasers, 341,650 shares issuable upon exercise of the Placement
Agent's Warrants and Investment Banking Warrants to be issued to the
Placement Agent.
(3) There are 1,444,000 Common Stock Warrants presently outstanding.
Upon the sale of all of the Units offered hereunder, there will be a
total of 1,385,650 Warrants then outstanding, exercisable from a
period of 0 to 9 years at an exercise price ranging from $.50 to
$9.00.
<PAGE>
SUMMARY SELECTED FINANCIAL DATA
The following summary selected financial data should be read
in conjunction with the Company's Consolidated Financial Statements and the
related Notes thereto contained in the Form 10K-SB attached as Exhibit D hereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included herein. The consolidated statement of operations data for
the years ended June 30, 1998 and 1999 are derived from, and are qualified by
reference to, the audited Consolidated Financial Statements and the related
Notes thereto contained in the Form 10K-SB attached as Exhibit D hereto.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1999 1998
REVENUE:
Precious metal sales $29,131,960 $1,425,315
Refining 5,337,828 1,874,829
Total revenue 34,469,788 3,300,144
COST OF SALES:
Cost of precious metal sales 27,970,518 1,335,607
Cost of refining 3,451,001 807,221
Total cost of sales 31,421,519 2,142,828
GROSS PROFIT 3,048,269 1,157,316
OPERATING EXPENSES:
Selling, general and administrative expenses 2,732,680 1,377,159
Depreciation and amortization 166,897 94,696
Total operating expenses 2,899,577 1,471,855
EARNINGS (LOSS) FROM OPERATIONS 148,692 (314,539)
OTHER EXPENSES (INCOME):
Interest expense 276,148 132,090
Interest income (28,714) (22,188)
Total other expenses 247,434 109,902
LOSS BEFORE PROVISION FOR INCOME TAXES (98,742) (424,441)
PROVISION FOR INCOME TAXES (Note 10) -
NET LOSS $(184,694) $(424,441)
NET LOSS PER SHARE - Basic and Diluted $ (0.06) $ (0.20)
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING - Basic and Diluted 3,197,586 2,173,139
</TABLE>
<PAGE>
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.
o Westbury International, Inc.
Commodity and risk management services, including metals leasing,
financing arrangements, cash and forward purchases and sales for
internal metals management requirements. This newly formed entity is
responsible for the ongoing management and operations of the Peruvian
subsidiary, which is 98 percent owned by the Company.
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.
o Reliable-West Tech, Inc. ("RWT")
Manufacture and sale of precious and base metal products for use by
industry.
o Westbury Alloys, Inc.
Refining services to accumulators and manufacturers of precious metals.
o West-Cat (trade name)
Catalyst procurement and collection for the purpose of processing and
recovery of platinum group metals.
Results of Operations
The following table sets forth, as a percentage of revenue, certain
items appearing in the Company's Statements of Operations for the indicated
fiscal years ended June 30.
Revenues: 1999 1998
Sales 84.5% 43.2%
Refining 15.5 56.8
Total Revenues 100.0% 100.0%
The net loss for the years ended June 30, 1999 and June 30, 1998 was ($184,694)
and ($424,441), respectively. The net loss per diluted share for the years ended
June 30, 1999 and June 30, 1998 was ($.06) and ($.20) respectively.
<PAGE>
Comparison of Fiscal Year Ended June 30, 1999 versus Fiscal year Ended
June 30, 1998
Revenues were $34,470,000 for fiscal 1999 compared to $3,300,000 for
fiscal 1998. Of the total increase, $27,707,000 was attributable to increases in
industrial product sales and industrial commodities management activities, while
$3,463,000 was attributable to increases in our refining and processing
activities. This increase is primarily the result of expanding operations
outside of the refining services offered in the past.
RWT, the Company's manufacturer and seller of base and precious metal
products for industrial uses commenced operations on April 1, 1998. RWT recorded
gross revenues of $8,908,000, compared to $1,425,000 for the four months in
which it operated during fiscal 1998. The industrial products management
division started business in July 1998 and generated $20,224,000 in gross
revenues for fiscal 1999. The division revenues relate to precious metal sales
to industrial end users. Combined product and precious metal sales were
$29,132,000 for fiscal 1999 compared to $1,425,000 for fiscal 1998, resulting in
an increase of $27,707,000.
Through the diversification of its refining area and greater
efficiencies in its catalyst operations, net refining revenues for fiscal 1999
were $5,338,000, compared to $1,875,00 for fiscal 1998 for an increase of
$3,463,000.
The percentage of total revenues for fiscal 1999 compared to fiscal
1998 by revenue source were as follows: product and precious metal sales were
84.5% and 43.2%, respectively, and refining revenues were 15.5% and 56.8%,
respectively.
Cost of precious metal sales were $27,971,000 or 96.0% of sales for
fiscal 1999 compared to $1,336,000 or 93.7% of sales for fiscal 1998. This
increase of 2.3% in cost of sales is due to the Company's strategy of increasing
its trading volume given the limitation of the Company's capital base. This
strategy results in the Company holding its positions for shorter periods and
receiving a lower average margin on an increased volume of transactions.
Cost of refining revenue were $3,451,000 or 64.7% of refining fees for
fiscal 1999 compared to $807,000 or 43.5% of refining fees for fiscal 1998. This
increase of 21.2% in cost of refining is primarily due to the increased cost of
catalysts, labor and facilities incurred in connection with the expansion of the
Company's Stillwater joint venture.
Selling, general and administrative expenses increased by $1,356,000,
or 98.4%, in fiscal 1999, as the Company hired new sales, administrative and
operations employees to support the expansion of the Company.
Depreciation and amortization expense was $167,000 for fiscal 1999
compared to $95,000 for fiscal 1998. This increase of $72,000, or 76.2%, was due
to the depreciation on the acquired building, machinery and equipment in the
current fiscal year and the full year impact on fixed assets acquired in the
prior fiscal year.
Interest expense was $276,000 for the year ended June 30, 1999 compared
to $132,000 for the year ended June 30, 1998. The increase of $144,000 or 109.1%
was primarily due to borrowings under the revolving credit facility which was
established in September 1998.
<PAGE>
The provision for income taxes of $86,000 for the year ended June 30,
1999 is primarily attributable to the income derived from the 98% owned Peruvian
subsidiary.
Liquidity, Capital Resources and Other Financial Data
Operating activities
Net cash used in operating activities was ($617,000) in fiscal 1999
compared to ($555,000) in fiscal 1998 which represent an increase of $62,000.
Working net operating capital decreased by $1,862,000, primarily due to an
increase in accounts receivable and to the operating loss incurred in fiscal
1999, which were partially offset by the increase in amounts due to customers.
Investing activities
Net cash used in investing activities in fiscal 1999 included the
September 1998 acquisition of the 900 Shames Drive, Westbury, New York facility,
for $510,000, which is primarily used for the processing of catalysts, as well
as for administrative offices.
On June 30, 1999 the Company purchased the land and building at which
Reliable operated its business for $185,000. Closing of this acquisition for
accounting purposes is June 30, 1999. The property located at 302 Platts Mill
Road, Waterbury, Connecticut. The facility will be used for manufacturing and
sales offices for RWT.
Financing activities
Net cash provided by financing activities in fiscal 1999 is primarily
due to the proceeds received under the revolving credit agreement which
commenced in October 1998, as well as from the exercise of stock warrants.
During the fiscal year ended June 30, 1999, the Company issued 50,000
shares of common stock to warrant holders at an exercise price of $2.00 per
share for total proceeds of $100,000.
The Company has been relying on a gold consignment program and
internally generated funds to finance its metal purchases, 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, 1999 the Company held $2,334,000 of precious metal under a
<PAGE>
consignment agreement with Republic National Bank for which the Company is
changed a consignment fee based on current market rates. There can be no
assurances that fluctuations in the price and availability of precious metals
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.
On September 28, 1998 the Company entered into a loan agreement with a
credit corporation for a $2,000,000 revolving line of credit used for working
capital requirements. The Company was charged an origination fee of 2% of the
available line, an underutilized loan fee of 1% and interest at the prime rate
plus 2%. In July 1999, the Company replaced this loan agreement with a
$12,000,000 revolving credit loan from Bank Boston N.A. The Company, RWT,
Westbury International, Inc. and Westbury Alloys, Inc. are co-borrowers under
the credit facility. This $12,000,000 revolving credit loan has a $7,000,000
sublimit for a consignment facility, $1,500,000 credit facility for forward
contracts and the remaining balance may be utilized to meet working capital
requirements. Interest on the consignment of precious metals accrues at the Bank
Boston Precious Metals Cost of funds rate plus 2.50%. Interest on the remaining
borrowings accrues at the option of the Company at LIBOR plus 2.50% or Prime
plus .50%. The co-borrowers' obligations are secured by a security interest in
the assets of the co-borrowers and the guaranties of the cop-borrowers. In
addition, the loan obligations are further secured by an unlimited guaranty
agreement of the Company, which is secured by a first priority security interest
in all of its tangible and intangible personal property and by a pledge of the
stock of RWT, Westbury International, Inc. and Westbury Alloys, Inc. In
addition, the same entities received a two-year subordinated term note (the
"Note") from Alliance Capital Investments Corp. ("Alliance") in the amount of
$2,000,000. Interest on the Note accrues at a rate equal to prime plus 4% and is
payable monthly. The principal portion of the Note becomes due July 2001. The
co-borrowers' obligations are secured by a second priority security interest in
their assets. As additional consideration for the loan, Westbury also granted to
Alliance a warrant for the purchase of 90,000 shares of the Company's Common
Stock at an exercise price of $9.00 per share. The warrants become exercisable
in July 2000 and expire in January 2002.
Management has purchased the property, plant and equipment and business
of Reliable Corporation of Waterbury, Connecticut. This acquisition was
effective for accounting purposes on June 30, 1999. Reliable Corporation is a
major manufacturer of silver in various forms and shapes, plating salts as well
as tin and tin-lead anodes to the industrial manufacturing and plating
industries.
The activities of this acquisition will be integrated with our RWT
subsidiary (formerly West Tech Inc.). With the addition of plant and equipment,
management believes that there will be significant growth in this area.
Year 2000
Many currently installed computer systems, software products and
manufactured products that utilize microprocessors are coded to accept only
two-digit entries in the date code field. These date code fields will need to
accept four-digit entries to distinguish twenty-first century dates. This is
commonly referred to as the "Year 2000 issue". The Company is aware of the Year
2000 issue and during fiscal 1998 commenced a program to identify, remediate,
test and develop contingency plans for the Year 2000 issue (the "Y2K Program"),
to be substantially completed by the fall of 1999.
<PAGE>
Under the Y2K Program, the Company began to assess the Year 2000
readiness of the software and computer information systems used in the internal
business ("CIS") of the Company ("Company CIS"); and the CIS of its key
customers. Although the Y2K Program is still underway, the Company does not
currently anticipate that the cost of the Y2K Program will be material to its
financial condition or results of operations. Satisfactorily addressing the Year
2000 issue is dependent on many factors, some of which are not completely within
the Company's control, such as the availability of certain resources,
third-party remediation plans and other factors.
As of June 30, 1999, the results of the assessment being conducted
under the Y2K Program were as follows:
Computer Information Systems (Company CIS): The company has acquired
new software and hardware to replace all non-compliant aspects of
existing CIS.
Customers: The Company has solicited statements of compliance from its
key customers with respect to their CIS. In the event that its key customers are
unable to certify that they will be Year 2000 compliant by the fall of 1999, the
Company will be assessing the accounts receivable collection risk of such key
customers.
Costs: The cost to replace to existing software programs used in the
Company CIS of approximately $100,000 has already been expended by the Company.
There are no significant expenditures anticipated by the company to complete its
Year 2000 compliance program.
The Year 2000 issue presents far-reaching implications, some of which
cannot be anticipated with any degree of certainty. Based on the assessment that
has been made under the Y2K Program, and other than as stated above, the Company
has no other contingency plans in the event of any Year 2000 noncompliance and
does not currently believe that any other contingency plans are necessary.
However, management is not able to determine the effect of any Year 2000
noncompliance (including with respect to a "worst-case scenario") on the
Company, but there can be no guarantee that any such noncompliance would not
have an adverse effect on the Company's CIS, results of operations or financial
condition.
Inflation
Inflation potentially affects the Company in two principal ways. First,
a portion of the Company's debt is tied to prevailing short-term interest rates
which may change as a result of inflation rates, translating into changes in
interest expense. Second, general inflation can impact metals purchases and
other costs. In the past few years, however, inflation has not been a
significant factor.
<PAGE>
Recent Pronouncements of the Financial Accounting Standards Board
In fiscal 1999, the Company Adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SAFS 130") and Statement
of Financial Standards No. 131, "Disclosure About Segments of an Enterprise and
Related Information" ("SAFS 131"). Each of these statements required additional
disclosure in the Company's consolidated financials statements but did not have
a material effect on the Company's consolidated financial position or results of
operations.
Recent pronouncements of the Financial Accounting Standards Board which
are not required to be adopted at this date include Statement of Financial
Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133"). SFAS 133, as deferred by SFAS 137, is effective for fiscal
quarters of all fiscal years beginning after June 15, 1999. Based upon current
data, the adoption of this pronouncements is not expected to have a material
impact on the Company's consolidated financial statements.
<PAGE>
MANAGEMENT
Directors and Executive Officers
The following table set froth information concerning the Company's
directors and executive officers upon completion of this Offering:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Name Age Position
Mandel Sherman 60 President, Chief Executive Officer and Director
Roger Shukla 61 Chief Operating Officer, Reliable-West Tech
David Nadler 52 Chief Financial Officer, Treasurer
Michael J. Huber 43 Vice President, Westbury International, Inc.
Jean Phillips 43 Vice President, Westbury Alloys, Inc.
Michael A. O'Hanlon 51 Director
Michael Riess 57 Director
David W. Sass 62 Secretary
- ----------
</TABLE>
Mandel Sherman, President, Chief Executive Officer and Director
Mandel Sherman, 60, 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 investments 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 recover 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 of EFS with sales of approximately $10 million at
the time of his departure. Mr. Sherman received his BS/BA in Business
Administration from Boston University in 1959.
Roger Shukla, Chief Operating Officer, Reliable-West Tech
Roger Shukla, 61, has been the owner/operator of Reliable Corp. for
nearly 25 years. Before that he had a professional accounting
background. Mr. Shukla will lead Westbury's combined Reliable-West
Tech fabrication operations.
<PAGE>
David Nadler, Chief Financial Officer, Treasurer
David Nadler, 52, joined Westbury metals Group as the Chief Financial
Officer and Controller in March 1998. From 1993 to when he joined Westbury, 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 a 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 the New
York State Society of Certified Public Accountants.
Michael J. Huber, Vice President, Westbury International, Inc.
Michael J. Huber, 43, joined Westbury in July 1998, to head its
commodities management division. For the ten years before joining Westbury, he
was a senior executive at BankBoston/Rhode Island Hospital Trust, first as Vice
President and senior risk manager in precious metals global capital markets, and
more recently, as First Vice President of precious metals asset based lending
and global capital markets. From 1983 to 1988, he was senior risk manager at
Leach and Garner Company a major manufacturer of jewelry findings and precious
metals mill products. From 1978 to 1983, Mr. Huber was an accountant and risk
manager at Refinement International, where he reported to Mr. Sherman. Mr. Huber
received his degree in accounting at Providence College. He is a director of the
Silver Users Association and a member of the International Precious Metals
Institute and the Providence Jewelers Club.
Jean Phillips, Vice President, Westbury Alloys, Inc.
Jean Phillips, 45, has made her career at Westbury. She joined the
company in 1975 as office manager. Subsequently, she assumed responsibility for
the company's processing and refining operations and has been managing this
business since 1983. Ms. Phillips negotiated the exclusive contract between
Westbury Alloys and Stillwater Mining to supply Stillwater with spent catalyst
from automobile exhaust systems. She has recently established a nationwide
network to accumulate catalytic converters and a new facility at Westbury to
collect, sort and process them. She is a member of the International Precious
Metals Institute.
Michael A. O'Hanlon, Director
Michael A. O'Hanlon, 52, has been the President and Chief Executive
Officer of DVI, Inc., since November 1995 and served as Executive Vice
President and Director since 1993. DVI is an independent specialty
finance company that conducts a medical equipment finance business and
related business in medical accounts receivable. From 1984 to 1993,
Mr. O'Hanlon served as President and Chief Executive Officer of
Concord Leasing, Inc. and its subsidiary, W.S. Concord, Inc. Concord
<PAGE>
Leasing provides medical, aircraft, shipping and industrial equipment
financing. Previously, 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, 58, has been President of Materials Management
Corporation, a consulting firm specializing in precious and nonferrous metals
since 1978. He has headed the North American metals risk management operations
of the Gulf Oil Corporation, Brascan, Ltd.. and W.C.Heraeus, GmbH. He also
managed Heraeus' U.S. precious metals refining and has been involved in risk
management and marketing a broad range of materials, including metals, secondary
materials 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 Finances 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, 63, has, for the past 38 years, been a practicing
attorney in New York City and is currently a senior partner in the law firm of
McLaughlin & Stem, LLP, counsel to Westbury. Mr. Sass is a director and officer
of Ionic Fuel Technology, Inc., a Company engaged in the sale and distribution
of emission control systems, a director of the Harmat Organization, 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.
<PAGE>
CERTAIN TRANSACTIONS
The information set forth herein describes certain transactions between
the Company and certain affiliated parties.
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 an 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
$2,000,000 as security for its guaranty.
On July 22, 1996, Lawrence Raskin, former president of Westbury New
York signed 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. 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, the Company has the option to renew the lease at a mutually agreeable
rental at least 30 days prior to expiration. In addition, the Company 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 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 Alloys, Inc. 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 pre-tax 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 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
<PAGE>
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 common stock of Westbury Alloys, Inc. at the
time of the merger between Westbury Alloys, LLC and Westbury Alloys, Inc.
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, pursuant to which Westbury Alloys, Inc. has become a
wholly-owned subsidiary of the Company. Westbury Alloys, Inc. 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 Alloys, Inc. have
become the principals of the Company and are now the largest
shareholders of the Company.
A borrowing facility of $2,000,000 for the financing of accounts
receivable has been approved by DVI Business Credit Corporation ("DVI") and
became available on October 1, 1998. Michael A. O'Hanlon of the Company is an
officer of DVI.
The Company paid to the firm of McLaughlin & Stern, LLP during the year
ended June 30, 1999, the sum of $55,485 for various legal services. David W.
Sass, the Secretary of the Company, is a member of this firm.
The Company paid to DVI during the year ended June 30, 1999, the sum of
$139,250 for interest and financing fees related to the $2,000,000 credit line
established for the financing of accounts receivable. Michael A. O'Hanlon, a
director of the Company, is the president and chief executive officer of DVI.
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth as of the date of this Memorandum the
amount of the Company's Common Stock beneficially owned by each officer and
director of the Company and by each person owning more than five percent of any
class of the Company's voting securities. As of the date of the Memorandum,
there are no other equity securities of the Company outstanding, other than the
Common Stock.
Name and Address Number of Shares Percent
Beneficially Owned(1)
Dartmouth Capital Partners(2)
210 Dartmouth Street
Pawtucket, RI 02860 832,500 26%
Mandel Sherman(3) 450,166 14.1%
Michael A. O'Hanlon (4) 110,000 3.1%
Michael Riess(4) 10,000 -0-
Directors and Officers as a Group(3) 550,166 17.2%
- ---------------------
(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 share 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.
(4) Includes 10,000 stock options issued and vested in February 1999. An
additional 5,000 stock options, not included, will be vested in February 2000.
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Common Stock
Holders of the Common Stock are entitled to one vote for each share
held by them of record on the books of the Company in all matters to be voted on
by the stockholders. Holders of Common Stock are entitled to receive such
dividends as may be declared from time to time by the Board of Directors out of
funds legally available, and in the event of liquidation, dissolution or winding
up of the Company, to share ratably in all assets remaining after payment of
liabilities. Declaration of dividends on Common Stock is subject to the
discretion of the Board of Directors and will depend upon a number of factors,
including the future earnings, capital requirements and financial condition of
the Company. The Company has not declared dividends on its Common Stock in the
past and the management currently anticipates that retained earnings, if any, in
the future will be applied to the expansion and development of the Company
rather than the payment of dividends. The holders of Common Stock have no
preemptive or conversion rights and are not subject to further calls or
assessments by the Company. There are no redemption or sinking fund provisions
applicable to the Common Stock. The Common Stock currently outstanding is, and
the Common Stock offered by the Company hereby will, when issued, be validly
issued, fully paid and nonassessable.
<PAGE>
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceeding and no such
proceeding is known to be contemplated.
ADDITIONAL INFORMATION
The Company undertakes, to the extent it can do so without unreasonable
effort or expense, to make available to every prospective investor or his, her
or its personal representative or investment advisor, during the course of this
transaction and prior to sale, the opportunity to ask questions of and receive
answers from the Company or any person acting on its behalf relating to the
terms and conditions of this Offering, and to obtain any additional information
necessary to verify the accuracy of the information made available to such
investor or his, her or its personal representative or advisor.
Prior to making an investment decision respecting the Units described
herein, prospective investors should carefully review and consider this entire
Memorandum. Prospective investors are urged to make arrangements with the
Company to inspect any books, records, contracts or instruments referred to in
this Memorandum and any other data relating thereto. The Company is prepared to
furnish, upon request, a copy of the forms of any documents referenced in this
Memorandum. Representatives of the Company and the Placement Agent will be
available to discuss with prospective investors and their representatives and
advisors, if any, any matter set forth in this Memorandum or any other matter
relating to the Units described herein, so that prospective investors and their
representatives and advisors, if any, may have available to them all
information, financial and otherwise, necessary to formulate a well-informed
investment decision. Additional information and materials concerning the Company
will be made available to prospective investors and their representatives and
advisors, if any, at a mutually convenient location upon reasonable request.
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The Company may be contacted at: Westbury Metals Group, Inc.
......... 750 Shames Drive
......... Westbury, NY 11590
......... (800) 645-3442
......... Attention: Michael Huber
The Placement Agent may be contacted at: KSH Investment Group, Inc.
......... 245 Great Neck Road
......... Great Neck, NY 11021
......... (516) 466-1117
......... Attention: Francis P. Anderson
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WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND
MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE STATE SECURITIES LAWS,
SUPPORTED BY AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY AND
ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
EXERCISABLE ON OR BEFORE ________________ ___, 200_
No. Warrants to purchase ________ shares
Warrant Certificate
WESTBURY METALS GROUP, INC.
Warrant, dated as of _____________ __, _____, issued by WESTBURY METALS
GROUP, INC., a New York corporation, (the "Company") to
____________________________ (the "Holder") or registered assigns.
The Company hereby agrees as follows:
1. Grant. The Company hereby grants to Holder, the right, privilege and
option to purchase from the Company ____________ shares (the "Warrant Shares")
of common stock, par value $0.001 per share (the "Common Stock"), of the
Company, subject to adjustment as provided in Section 6, at the exercise price
of $4.00 per share (the "Exercise Price"), all subject to the terms and upon the
conditions set forth herein.
2. Exercise of Warrant. This Warrant is exercisable commencing on the
date hereof and will expire at 5:00 p.m., New York City time, on
______________ __, 200_ (the "Expiration Date"), subject to the right
of the Company to redeem this Warrant as described in Section 3.
3. Method of Exercise and Redemption of Warrant. Unless this Warrant
has been redeemed by the Company as provided in this Section 3, the
Holder may exercise this Warrant at or prior to its expiration on the
Expiration Date. This Warrant may be exercised by the Holder or
redeemed by the Company as follows:
(a) This Warrant may be exercised in whole at any time, or in
part from time to time, by delivery of this Warrant to the Company at its
principal place of business, accompanied by a check payable to the Company in
payment of the Exercise Price for the number of Warrant Shares as to which this
Warrant is exercised.
<PAGE>
(b) As soon as practicable after each such exercise of the
Warrant Shares, but not later than seven (7) days from the date of such
exercise, the Company shall issue and deliver to the Holder a certificate for
the Warrant Shares issuable upon such exercise, registered in the name of the
Holder or its designee. If this Warrant shall be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to purchase
the balance of the Warrant Shares purchasable hereunder. Upon receipt by the
Company of this Warrant at its office in proper form for exercise, the Holder
shall be deemed to be the holder of record of the Warrant Shares issuable upon
such exercise, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such Warrant Shares shall
not then be physically delivered to the Holder.
(c) The Company may redeem this Warrant as to one-third of the
number of Warrant Shares, at a price of $.0001 per Warrant Share (the
"Redemption Price"), at its option, at any time if the average of the closing
average of bid and asked prices for the Common Stock on the NASD Over the
Counter Bulletin Board (the "Bulletin Board") or, if the Common Stock then
trades on any national exchange (including the NASDAQ), on such national
exchange, is at least $5.50 per share for twenty (20) consecutive trading days.
The Company may redeem this Warrant as to an additional one-third of the number
of originally issued Warrant Shares, at the Redemption Price, at its option, at
any time if the average of the closing average of bid and asked prices for the
Common Stock on the Bulletin Board or the applicable national exchange is at
least $6.25 per share for twenty (20) consecutive trading days. The Company may
redeem this Warrant as to all of the Warrant Shares, at the Redemption Price, at
its option, at any time if the average of the closing average of bid and asked
prices for the Common Stock on the Bulletin Board or the applicable national
exchange is at least $7.00 per share for twenty (20) consecutive trading days.
From and after the date fixed for redemption by notice given pursuant to Section
3(d) (the "Redemption Date"), the right to purchase Warrant Shares with respect
to the redeemed portion of this Warrant shall cease, and the Holder shall be
entitled to payment of the Redemption Price with respect to the portion of this
Warrant so redeemed (and to receive a new Warrant of like tenor and date with
respect to the unredeemed portion of this Warrant) upon surrender of this
Warrant to the Company. The Company cannot redeem Warrant Shares pursuant to
this provision more than once in any thirty (30) day period.
(d) Notice of redemption of this Warrant shall be given at
least thirty (30) days prior to the Redemption Date by mailing, by registered or
certified mail, return receipt requested, a copy of such notice to the Holder at
its address appearing on the books or transfer records of the Company or such
other address as may be designated by the Holder by notice to the Company.
Notwithstanding the giving of such notice, the Holder shall be entitled to
exercise this Warrant at any time prior to the Redemption Date.
4. Payment of Taxes.
(a) The Company shall pay all documentary stamp taxes
attributable to the issuance of shares of Common Stock upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax that may be payable in respect of any transfer involved in the issuance and
delivery of any Warrants, warrant certificates or certificates for Warrant
Shares purchased pursuant hereto in a name other than that of the Holder, and
the Company shall not be required to issue or deliver such Warrants, warrant
certificates or other certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
<PAGE>
(b) The Company's obligation to deliver Warrant Shares upon
the exercise of this Warrant or any portion thereof shall be subject to the
payment by the Holder of any applicable federal, state and local withholding
tax. The Company shall, to the extent permitted by law, have the right to deduct
from any payment of any kind otherwise due to the Holder of any federal, state
or local taxes required to be withheld with respect to such payment. Subject to
the right of the Company's Board of Directors or any committee thereof to
disapprove any such election and require payment of the withholding tax in cash,
the Holder shall have the right to elect to pay the withholding tax with shares
of Common Stock to be received upon exercise of this Warrant or any portion
thereof or which are otherwise owned by the Holder. Upon the exercise of any
portion of this Warrant, any election to pay withholding taxes with stock shall
be irrevocable once made with respect to such portion. For purposes of this
Section 4(b), shares of Common Stock used to pay withholding tax shall be valued
at the then current market price.
5. Restriction on Transfer of Warrants. The Holder hereof, by the
Holder's acceptance hereof, hereby represents and warrants to, and agrees with,
the Company that (a) the Holder has been informed that neither this Warrant nor
the Warrant Shares have been registered for sale under any federal or state
securities laws and that this Warrant is being offered and sold to the Holder
and, upon the exercise of this Warrant, the Warrant Shares will be sold to the
Holder, pursuant to an exemption from registration under the Securities Act, or
pursuant to a registration statement filed by the Company pursuant to
registration rights granted in connection with the issuance of this Warrant; (b)
the Holder is an "accredited investor" (as defined in Rule 501(a) of Regulation
D under the Securities Act) and is acquiring this Warrant and, if the exercise
of this Warrant is not registered under the Securities Act and applicable state
securities laws, will acquire the Warrant Shares for the Holder's own account
for investment only and not with a view to distribution; (c) this Warrant and
the Warrant Shares may not be transferred or sold, in whole or in part, unless
such transfer or sale is registered under the Securities Act and applicable
state securities laws or exempt from such registration; and (d) if the exercise
of this Warrant is not registered under the Securities Act and applicable state
securities laws, prior to the exercise of this Warrant, the Holder shall provide
to the Company in writing such information as the Company may reasonably request
to establish that the exercise of this Warrant by the Holder is exempt from
registration under the Securities Act and applicable state securities laws.
If a transfer of this Warrant is permitted pursuant to the preceding
paragraph of this Section 5, the Holder shall execute and deliver to the
Company, a completed Assignment in the form attached hereto as Exhibit A. Upon
the Company's determination that the requirements for transfer of this Warrant
have been satisfied, receipt of the completed and duly executed Assignment, and
surrender of this Warrant, the Company shall, as promptly as practicable,
deliver to the transferee a new Warrant of like tenor and date for that portion
of the Warrant Shares as to which this Warrant is being transferred and shall
deliver to the Holder a new Warrant of like tenor and date for the balance, if
any, of the Warrant Shares.
<PAGE>
6. Anti-Dilution Provisions.
(a) In the event the Company shall (i) declare or pay a
dividend on its outstanding shares of Common Stock in shares of Common Stock or
make a distribution to all holders of its outstanding shares of Common Stock in
shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock
into a greater number of shares of Common Stock, (iii) combine its outstanding
shares of Common Stock into a smaller number of shares of Common Stock or (iv)
issue by reclassification of its outstanding shares of Common Stock other
securities of the Company (including any such reclassification in connection
with a consolidation, merger or other business combination in which the Company
is the surviving corporation), the number and kind of Warrant Shares issuable
upon exercise of this Warrant and/or the Exercise Price shall be adjusted as the
Company's Board of Directors determines to be equitable so that the Holder upon
exercise hereof shall be entitled to receive the number and kind of Warrant
Shares or other securities of the Company that the Holder would have been
entitled to receive after the occurrence of any of such events had this Warrant
been exercised immediately prior to the occurrence of such event or any record
date with respect thereto. An adjustment made pursuant to this Section 6(a)
shall become effective on the date of the dividend payment, distribution,
subdivision, combination or reclassification, retroactive to any record date
with respect thereto. The provisions of this Section 6(a) shall similarly apply
to successive events on a cumulative basis.
(b) In case of any consolidation of the Company with, or
merger of the Company into, another person (whether or not the Company is the
surviving corporation), or in the case of any sale, transfer or lease to another
person of all or substantially all of the assets of the Company, the Company or
such successor, as the case may be, shall deliver to the Holder an undertaking
that the Holder shall have the right thereafter upon payment of the Exercise
Price in effect immediately prior to such transaction to purchase upon exercise
of this Warrant the kind and amount of securities, cash and property which the
Holder would have been entitled to receive after the consummation of such
consolidation, merger, sale, transfer or lease had this Warrant been exercised
immediately prior to such transaction, and if the successor or purchaser is not
a corporation, such person shall provide tax indemnification with respect to
such shares and other securities and property so that, upon exercise of this
Warrant, the Holder will have the same benefits the Holder otherwise would have
had if such successor or purchaser were a corporation. The provisions of this
Section 6(b) shall similarly apply to successive consolidations, mergers, sales,
transfers or leases.
7. Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of Common Stock upon the
exercise of this Warrant, nor shall it be required to issue scrip or pay cash in
lieu of fractional interests, it being the intent of the parties that all
fractional interests shall be eliminated by the Company by rounding down to the
nearest whole number of shares of Common Stock.
8. Reservation of Securities.The Company shall at all times reserve and
keep available out of its authorized shares of Common Stock, solely for the
purpose of issuance upon the exercise of this Warrant, such number of shares of
Common Stock as shall be issuable upon the exercise hereof. The Company
covenants and agrees that, upon exercise of this Warrant for and payment of the
Exercise Price therefor, all shares of Common Stock issuable upon such exercise
shall be duly authorized, validly issued, fully paid, nonassessable and not
subject to preemptive rights of any stockholder.
<PAGE>
9. Right to Notice. If the Company shall propose to engage in any
transaction with respect to which adjustment of the Exercise Price or the kind
or amount of securities, property or other assets receivable upon exercise of
this Warrant would be required pursuant to Section 6, the Company shall cause to
be mailed to the Holder, at least ten (10) days prior to the applicable date
hereinafter specified, a notice describing such transaction and stating (a) in
the case of any dividend, distribution or grant of rights or warrants to all
holders of shares of Common Stock, the date on which a record is to be taken for
such purpose or, if a record is not to be so taken, the date as of which the
holders of Common Stock of record to be entitled thereto are to be determined,
(b) in the case of any other transaction described in Section 6 in which all
holders of Common Stock of record are entitled to participate, the date on which
such transaction is expected to become effective and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities, property or other assets
deliverable upon such transaction, and (c) in the case of any other transaction,
the date on which it is expected to occur or become effective. Failure to give
such notice or any defect therein shall not affect the validity of any action
taken or transaction consummated by the Company.
10. No Rights as a Stockholder. Nothing contained in this Warrant shall
be construed as conferring upon the Holder the right to vote or to consent or to
receive notice as a stockholder in respect of any meetings of stockholders for
the election of directors or any other matter, or as having any rights
whatsoever as a stockholder of the Company.
11. Notices. All notices, requests, consents and other communications
hereunder shall be effective only if given in writing and shall be deemed to
have been duly made or given when delivered, or three days after being mailed by
registered or certified mail, return receipt requested:
(a) If to the Holder, to the address of the Holder as shown on the
books of the Company or as otherwise designated as provided for
herein; or
(b) If to the Company, to 750 Shames Drive, Westbury, New York 11590,
Attention: Michael Huber, or to such other address as the Company may
designate by notice to the Holder.
12. Amendment. This Warrant may not be amended or supplemented except
by an instrument in writing executed by the Company and the Holder.
13. Governing Law. This Warrant shall be deemed to be a contract made
under the laws of the State of New York and for all purposes shall be
construed in accordance with the laws of such State (without regard to
the conflict of laws principles thereof).
14. Jurisdiction. Any legal action or proceeding with respect to this
Warrant may be brought exclusively in the courts of the State of New York or of
the United States of America for the Southern District of New York, and by
acceptance of this Warrant, the Holder accepts for itself and in respect of its
property, generally and unconditionally, the exclusive jurisdiction of the
<PAGE>
aforesaid courts. By acceptance of this Warrant, the Holder waives and agrees
not to assert as a defense in any action, suit or proceeding for the
interpretation or enforcement of this Warrant, that the Holder is not subject to
the jurisdiction of such courts or that such action, suit or proceeding may not
be brought or is not maintainable in said courts or that this Warrant may not be
enforced in or by said courts or that the Holder's property is exempt or immune
from execution, that the suit, action or proceeding is brought in an
inconvenient forum, that the venue of the suit, action or proceeding is improper
or (provided that process shall be served in any manner referred to in the
following sentence) that service of process upon the Holder is ineffective.
Service of process in any such action, suit or proceeding may be made upon the
Company or the Holder in any manner permitted by the laws of the State of New
York or the federal laws of the United States or as follows: (i) by personal
service or (ii) by certified or registered mail to the Holder or the Company, as
applicable, at its address for notice pursuant to Section 11. Service of process
upon the Holder or the Company in any manner referred to in the preceding
sentence shall be deemed in every respect effective service of process upon the
Holder or the Company.
15. Benefits of This Warrant. Nothing in this Warrant shall be
construed to give to any person other than the Company and the Holder and its
assigns any legal or equitable right, remedy or claim under this Warrant, and
this Warrant shall be for the exclusive benefit of the Company and the Holder
and its assigns.
16. Headings. The headings in this Warrant are intended solely for
convenience of reference and shall be given no effect in the
construction or interpretation of this Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed on its behalf.
WESTBURY METALS GROUP, INC.
By:_____________________________
Name:___________________________
Title:___________________________
<PAGE>
EXECUTION COPY
EXHIBIT A
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if the holder desires to
transfer the Warrants)
FOR VALUE RECEIVED, ___________________________________ hereby
sells, assigns and transfers the within Warrant No. _____ of WESTBURY METALS
GROUP, INC. (the "Company"), dated ____________, _____, to the extent of the
rights evidenced by said Warrants to purchase ___________________ Warrant
Shares, unto ________________________ at an address of
___________________________________________________________________, together
with all right, title and interest therein, and does hereby irrevocably
constitute and appoint ___________________________________________ attorney, to
transfer said Warrant on the books of the Company, with full power of
substitution.
If this assignment is made as to less than all of the Warrant Shares
evidenced by said Warrant, a new Warrant of like tenor and date shall be issued
in the name of and delivered to the registered holder for the balance of the
Warrant Shares evidenced by said Warrant.
DATED:___________________________________
Signature:
- ------------------------------------------
(Signature must conform in all respects to name of Holder as specified on the
face of the Warrant, in every particular, without alteration or enlargement or
any change whatsoever.)
