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<S> <C>
As filed with the Securities and Exchange Commission on June 8,1998. File No. 333-37485
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------------------
SAXON ACQUISITION CORP.
(Name of small business issuer in its charter)
----------------------------
Delaware 6200 11-3391961
- ------------------- ------------------------- ----------------------
(State or other (Primary Standard (I.R.S. Employer
jurisdiction Industrial Classification Identification No.)
of incorporation or Code Number)
organization)
------------------------------------
Nicholas J. Seccafico Jr.
Saxon Acquisition Corp.
33 Eleventh Avenue
Huntington Station, N.Y. 11746
(516) 423-8280
(Address and telephone number of principal executive offices)
------------------------------------
Nicholas J. Seccafico Jr.
Saxon Acquisition Corp.
33 Eleventh Avenue
Huntington Station, N.Y. 11746
(516) 423-8280
(Name, address and telephone number of agent for service)
------------------------------------
Copies of all communications should be sent to:
Steven Morse, Esq.
Lester Morse P.C.
111 Great Neck Road
Great Neck, NY 11021
(516) 487-1446
(516) 487-1452 (fax)
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this Registration Statement becomes
effective. [X]
If any of the securities being registered on this form are to be offered on a
delayed basis pursuant to Rule 415 under the Securities Act of 1933, check the
following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
--------------------
If the delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
Proposed Proposed
Maximum Maximum
Amount to Offering Aggregate Offering
Title of Each Class of Securities to be be Price Per Price (1) Amount of
Registered Registered Share (1) Registration Fee
- --------------------------------------- ---------- ---------- ------------------ ----------------
<S> <C> <C> <C> <C>
Shares of Common Stock, par value 2,466,735 $. 4054 $1,000,015 $ 295.00
$.001 per share ("Common Stock")
(2)(3)
- --------------------------------------- ---------- ---------- ------------------ ----------------
Totals $1,000,015 $ 295.00 (4)
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______________
(1) Total estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(f)(2) based upon the book value of the Registrant.
(2) Includes 2,465,735 shares owned by NJS Acquisition Corp. to be distributed
to its stockholders of record as described in the Prospectus.
(3) Includes the resale of 703,735 shares by certain Selling Security Holders.
(4) Previously paid $302.91.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
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SAXON ACQUISITION CORP.
CROSS-REFERENCE SHEET TO PROSPECTUS ON FORM S-1
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<CAPTION>
Item Form S-1 Caption Location in Prospectus
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1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus Outside Front Cover Page
2. Inside Front and Outside Back Cover Available Information;
Pages of Prospectus Inside Front Cover Pages
3. Summary Information, Risk Factors and Prospectus Summary;
Ratio of Earnings to Fixed Charges Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Cover Page; Plan of
Distribution/
Market Information
6. Dilution Not Applicable
7. Selling Security Holders Selling Security Holders
8. Plan of Distribution Plan of Distribution/Market
Information; Outside
Front Cover Page
9. Description of Securities to be Description of Common Stock
Registered
10. Interest of Named Experts and Counsel Legal Matters; Experts
11. Information with Respect to the
Registrant:
(a) Description of Business Business
(b) Description of Property Business
(c) Legal Proceedings Business
(d) Market Price of and Dividends Description of Common Stock;
on the Registrant's Common Equity Dividend Policy; Plan of Distribution/
and Related Stockholder Matters Market Information
(e) Financial Statements Financial Statements
(f) Selected Financial Data Selected Financial Data
(g) Supplementary Financial Information Not Applicable
(h) Management's Discussion and Analysis Management's Discussion and Analysis of
of Financial Condition and Results of Financial Condition and Results
of Operations of Operations
(i) Disagreements with Accountants on
Accounting and Financial Disclosure Not applicable
(j) Directors and Executive Officers Management
(k) Executive Compensation Executive Compensation
(l) Security Ownership of Certain Security Ownership of
Beneficial Owners and Management Management and Others
(m) Certain Relationships and
Related Transactions Certain Transactions
12. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities Executive Compensation
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SUBJECT TO COMPLETION JUNE _____, 1998 PROSPECTUS
SAXON ACQUISITION CORP.
2,465,735 SHARES OF COMMON STOCK
As of the date of this Prospectus, Saxon Acquisition Corp. ("Saxon") is a
wholly-owned subsidiary of NJS Acquisition Corporation ("NJS") and has 2,465,735
shares of Common Stock issued and outstanding (the "Saxon Common Stock"). As of
the date of this Prospectus, NJS has 9,862,940 shares of NJS Common Stock issued
and outstanding held by approximately 155 stockholders of record as of May 31,
1998. This Prospectus relates to (i) the distribution by NJS of all of its
outstanding 2,465,735 shares of Saxon Common Stock to the stockholders of NJS
and (ii) the resale of 703,735 shares of Saxon's Common Stock (the
"Securities") to be received by two officers/directors of NJS and their
immediate family (the "Selling Security Holders"). The distribution of Saxon
Common Stock by NJS was approved by NJS' Board of Directors and a majority of
its stockholders in November, 1997. Each NJS stockholder of record as of the
close of business on June __, 1998 (the "Record Date"), will receive on June __,
1998 (the "Payment Date"), 0.25 shares of Saxon Common Stock for each
outstanding share of NJS Common Stock (the "Conversion Ratio"). In lieu of
fractional shares, all amounts will be rounded-up to the nearest whole number of
shares. Saxon registered an additional 1,000 shares to be used solely for
rounding-up purposes. These shares would be issued from Saxon's treasury with
officers and directors contributing up to 1,000 shares from their personal
holdings to treasury as may be needed.
The Securities offered hereby may be sold from time to time directly by the
Selling Security Holders. Alternatively, the Selling Security Holders may from
time to time offer the Securities through underwriters, dealers or agents. The
distribution of the Securities by the Selling Security Holders may be effected
in one or more transactions that may take place on the over-the-counter market,
including ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more broker-dealers for resale of the Securities as
principals, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. Usual and customary
or specifically negotiated brokerage fees or commissions may be paid by the
Selling Security Holders in connection with such sales of securities. The
Selling Security Holders and intermediaries through whom such securities are
sold may be deemed "underwriters" within the meaning of the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Securities offered,
and any profits realized or commissions received may be deemed underwriting
compensation. Usual and customary or specially negotiated brokerage fees may
be paid by the Selling Security Holders in connection with sales of the
Securities.
No offering price is indicated herein since the recipients of the NJS
distribution will not pay anything in order to receive such distribution. Prior
to NJS' distribution of its Saxon Common Stock, there has been no public market
for the Saxon Common Stock and there can be no assurance that such a market for
the Saxon Common Stock will develop after the Payment Date or that, if
developed, it will be sustained. Saxon's securities do not trade on any stock
exchange or in the over-the-counter market. See "Risk Factors."
<PAGE>
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AS DESCRIBED HEREIN. FOR A
DISCUSSION OF CERTAIN MATERIAL FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH THE RECEIPT OF SAXON COMMON STOCK FROM NJS. SEE "RISK FACTORS" BEGINNING
ON PAGE 8.
Saxon is a holding company that owns Dupont Securities Group, Inc., a
corporation formed in November 1996 and licensed as a member of the National
Association of Securities Dealers, Inc. ("NASD") in June 1997. Saxon's
activities from June 10, 1997 through May 31, 1998 have been limited to
executing retail orders for its approximate 200 non-affiliated customers and for
its own account trading as an investor. Dupont has nine registered
representatives, none of whom have engaged in "cold calling" (as defined herein)
to open new accounts.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The expenses of this Offering, estimated at $75,000, are being paid by NJS.
THE DATE OF THE PROSPECTUS IS _________, 1998
The following legend should appear in red on the left side of this page:
------------------------------------------------------------------------
"Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State."
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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN, AND IF GIVEN OR
MADE, NO SUCH INFORMATION OR REPRESENTATION MAY BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY SAXON. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY
THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE
AFFAIRS OF SAXON SINCE THE DATE AS OF WHICH SUCH INFORMATION IS GIVEN. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO
BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED HEREBY, OR AN OFFER TO SELL
OR SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM SUCH
OFFER OR SOLICITATION WOULD BE UNLAWFUL.
UNTIL _______, 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WITH RESPECT TO THEIR SOLICITATIONS TO PURCHASE THE
SECURITIES OFFERED HEREBY.
AVAILABLE INFORMATION
Prior to this Offering, Saxon is not a reporting company under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). As a result
of the distribution of securities by NJS to its stockholders of its shares of
Saxon Common Stock, Saxon will become subject to the informational requirements
of Section 15(d) of the Exchange Act and in accordance therewith will file
periodic reports and other information with the Securities and Exchange
Commission (the "SEC"). The Registration Statement (file no. 333-37485) of
which this Prospectus forms a part, as well as reports and other information
filed by Saxon may be inspected and copied at the public reference facilities
maintained by the SEC at 450 Fifth Street, N.W., Washington, DC 20549 and at the
SEC's regional offices at 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511 and 7 World Trade Center, New York, NY 10048. Copies of such
material can be obtained at prescribed rates from the Public Reference Section
of the SEC at 450 Fifth Street, N.W., Washington, DC 20549. Material filed
electronically through Edgar (Electronic Data Gathering Analysis and Retrieval
System) may also be accessed through the SEC's home page on the World Wide WEB
at http://www.sec.gov.
Saxon intends to furnish its stockholders with annual reports containing
audited financial statements examined and reported upon by an independent
certified public accounting firm and to make available copies of quarterly
reports containing unaudited financial statements. Saxon's fiscal year end is
May 31.
NJS is currently a reporting company that had its obligation to file
reports automatically suspended in 1991 since its number of record holders of
Common Stock was, and continued to be, less than 300.
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TABLE OF CONTENTS
Page
----
Prospectus Summary
Risk Factors
Use of Proceeds
Selected Financial Data
Management's Discussion and Analysis
of Financial Condition and Results of
Operations
Business
Management
Executive Compensation
Certain Transactions
Security Ownership of Management and Others
Description of Common Stock
Shares Eligible for Future Sale
Selling Security Holders
Plan of Distribution/Market Information
Legal Matters
Experts
Additional Information
Index to Financial Statements
4
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND MUST BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THE
PROSPECTUS. ALL REFERENCES TO SHARES AND PER SHARE AMOUNTS GIVE RETROACTIVE
EFFECT TO A ONE-FOR-TWO REVERSE STOCK SPLIT EFFECTIVE SEPTEMBER 10, 1997.
THE COMPANY
Saxon Acquisition Corp. ("Saxon") was formed under the laws of the State of
Delaware on July 9, 1997 as a wholly-owned subsidiary of NJS Acquisition
Corporation ("NJS"). On November 7, 1996, NJS formed Dupont Securities Group,
Inc. ("Dupont") as a wholly-owned subsidiary under the laws of the State of New
York to engage in the securities business. On July 28, 1997, NJS transferred
its entire stock ownership in Dupont to Saxon. Currently, Saxon's only business
is through the operations of Dupont, a broker-dealer registered with the United
States Securities and Exchange Commission ("SEC") and the National Association
of Securities Dealers, Inc. ("NASD"). As of May 15, 1998, Dupont is licensed
to do business in 23 states, namely, CA, CO, CT, FL, GA, IA, IL, IN, MA, MD,
MN, MO, NJ, NV, NY, OH, OK, PA, RI, TX, VA, VT and WA. All references to "the
Company" include Saxon and its wholly-owned subsidiary, Dupont, unless the
context indicates otherwise.
Dupont commenced operations as a new broker-dealer on June 10, 1997.
Dupont's activities are subject to all the risks of a new enterprise and have
been limited to executing retail orders for its approximate 200 non-affiliated
customer accounts (as of May 31, 1998) and for its own account trading as an
investor. Dupont has nine registered representatives with NASD licenses
including two executive officers, namely Michael F. Franzese and Louis
Galeotafiore, which when combined with one other administrative person brings
the total number of full-time employees to ten. Messrs. Franzese and
Galeotafiore each have been in the securities business for over 30 years.
Dupont's revenues are dependent upon the sales efforts of its registered
representatives. The loss of any of its registered representatives could have a
material adverse effect on Dupont's operations. While the Company is currently
seeking to hire approximately three additional registered representatives, no
assurances can be given that it will be successful in these efforts. See "Risk
Factors."
Dupont's registered representatives do not engage in "cold calling," which
is an effort by a registered representative to obtain new customers by
initiating telephone calls to persons on lists either supplied to or purchased
by the registered representative. The term "cold calling" is not applicable to
persons recommended to a broker by a present account or an acquaintance of such
broker.
Dupont has a clearing agreement dated as of October 17, 1997 with Schroder
& Co. Inc. ("Schroder") to act as its clearing agent on a "fully disclosed"
basis. The term "fully disclosed" means that the clearing firm maintains the
customer accounts, i.e. it holds the customer funds and securities', issues
account statements, executes customer trades on
5
<PAGE>
the exchanges in which it is a member, issues confirmations of purchases and
sales and settles all transactions, receives and safeguards funds and securities
and handles the regulation of credit extension and preparation of monthly
account statements. All Schroder correspondent clearing clients whose accounts
are carried on its books and records received $50 million insurance protection
without any cost to the client. This protection is provided by the Securities
Investor Protection Corporation ("SIPC"), amounting to a total of $500,000
including up to $100,000 on cash. In addition to SIPC coverage, Schroder has a
separate Excess SIPC policy issued by Aetna Casualty & Surety Co. ("Aetna")
increasing its clients' securities protection by additional $49.5 million
without any additional cost to Schroder clients. Thus, the maximum coverage
provided by Schroder is $50 million of which $100,000 continues to be on cash.
Schroder has over 20 years of experience in serving as clearing agent for many
firms. Schroder is an international merchant and investment banking group with
presence in financial centers worldwide.
Dupont intends to effect transactions as principal and to make markets in
various over-the-counter stocks. Such intended activities will be limited by
the amount of Dupont's then available net capital. Currently, Dupont's
restriction letter with the NASD, requires that Dupont will seek NASD District
Office No. 10 review and permission before it makes markets in more than 10
securities of different companies. Dupont has also agreed with the NASD that
all trading activities will be handled solely by qualified personnel under the
direct supervision of the registered principal responsible for the firm's
trading department, to clear all transactions on a fully disclosed basis through
one or more clearing broker-dealers, to maintain minimum net capital of at least
$100,000 and to file trial balances, capital computations and supporting
schedules with the NASD. Although Dupont has no current intention to engage in
private placements, its NASD restriction letter also requires Dupont to seek the
NASD's review and permission before it engages in its first private placement
activity. See "Business."
Saxon's principal office is located at 33 Eleventh Avenue, Huntington
Station, New York 11746 and its telephone no. is 1-516-423-8280. Dupont's
offices are located at 19 Townsend Square, Oyster Bay, New York 11771 and 270
Greenwich Avenue, Greenwich, Connecticut. Dupont's telephone no. 1-888-652-
6502.
6
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THE OFFERING
Securities Offered As of the date of this Prospectus, Saxon is a wholly-
owned subsidiary of NJS and has 2,465,735 shares of
Saxon Common Stock issued and outstanding. As of the
date of this Prospectus, NJS has 9,862,940 shares of
NJS Common Stock issued and outstanding held by
approximately 155 stockholders of record as of May 31,
1998. This Prospectus relates to (i) the distribution
by NJS of all of its outstanding 2,465,735 shares of
Saxon Common Stock to the stockholders of NJS and (ii)
the resale of 703,735 shares of Saxon's Common Stock
(the "Securities") to be received by two
officers/directors of NJS and their immediate family
(the "Selling Security Holders"). The distribution of
Saxon Common Stock by NJS was approved by NJS' Board of
Directors and a majority of its stockholders in
November, 1997. Each NJS stockholder of record as of
the close of business on June __, 1998 (the "Record
Date"), will receive on June __, 1998 (the "Payment
Date"), 0.25 shares of Saxon Common Stock for each
outstanding share of NJS Common Stock (the "Conversion
Ratio"). In lieu of fractional shares, all amounts will
be rounded-up to the nearest whole number of shares.
Saxon registered an additional 1,000 shares to be used
solely for rounding-up purposes. These shares would be
issued from Saxon's treasury with officers and
directors contributing up to 1,000 shares from their
personal holdings to treasury as may be needed.
Common Stock
outstanding 2,465,735 shares
Risk Factors The Saxon Common Stock offered hereby involves a high
degree of risk to investors. Persons receiving the
Saxon Common Stock should review carefully and consider
the information contained in the Prospectus and
particularly the items set forth under "Risk Factors."
The Company's risks include, without limitation,
Limited Client Base; Limited Operating History/Need to
Hire Additional Registered Representatives with NASD
Licenses; Dependence upon Dupont/1997 Losses;
Dependence upon Key Management and Personnel;
Dependence upon Licenses; Net Capital Rule; and
Possible Need for Additional Funds.
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RISK FACTORS
AN INVESTMENT IN SAXON'S COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
PERSONS RECEIVING FROM NJS A DISTRIBUTION OF THE SAXON COMMON STOCK SHOULD
CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS, IN EVALUATING AN INVESTMENT IN
THE SAXON COMMON STOCK.
LIMITED CLIENT BASE
As of May 31, 1998, Dupont has an approximate 200 non-affiliated customer
accounts. It is Dupont's policy not to engage in "cold calling." Dupont
intends to attempt to increase its client base by hiring up to five additional
experienced registered representatives and through recommendations of other
clients. No assurances can be given that Dupont will be successful in these
efforts. The lack of a large and diverse customer base and Dupont's possible
inability to maintain and expand such customer base may adversely effect
Dupont's future operations. See "Business."
LIMITED OPERATING HISTORY/NEED TO HIRE ADDITIONAL REGISTERED
REPRESENTATIVES WITH NASD LICENSES
Dupont commenced operations as a new broker-dealer on June 10, 1997.
Dupont's activities are subject to all the risks of a new enterprise and have
been limited to executing retail orders for its approximate 200 non-affiliated
customer accounts (as of May 15, 1998) and for its own account trading as an
investor. The likelihood of the success of the Company must be considered in
light of the problems, expenses, complications and delays frequently encountered
in connection with a firm commencing its business operations. Dupont has nine
registered representatives with NASD licenses including two executive officers,
namely Michael F. Franzese and Louis Galeotafiore. Dupont's revenues are
dependent upon the sales efforts of its limited number registered
representatives. The loss of any of its registered representatives could have a
material adverse effect on Dupont's operations. While the Company is currently
seeking to hire approximately three additional experienced registered
representatives, no assurances can be given that it will be successful in these
efforts. See "Business" and "Management."
DEPENDENCE UPON DUPONT/1997 LOSSES
Saxon was formed by NJS on July 9, 1997 to own Dupont. Dupont was formed
on November 7, 1996 and commenced operations as a licensed broker-dealer on June
10, 1997. The Company is wholly dependent upon the success of Dupont's
brokerage operations. As a consequence, the Company's operations are subject to
many of the risks inherent in the establishment of a new business enterprise.
Since the inception of Dupont through March 31, 1998, the Company incurred a
net loss of $414,739 (unaudited.) There can be no assurance that the Company
will achieve profitable operations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Business."
8
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DEPENDENCE UPON KEY MANAGEMENT AND PERSONNEL
Saxon is highly dependent upon Nicholas J. Seccafico, Jr., its President.
Dupont is highly dependent upon its two executive officers and principals,
namely Michael Franzese and Louis Galeotafiore. The Company's loss of Messrs.
Seccafico's, Franzese's and/or Galeotafiore's services could have a material
adverse effect on the Company. The Company does not carry key-man life
insurance on such key individual lives and does not have an employment contract
with them. The Company's operations are also dependent upon Dupont retaining
and recruiting qualified personnel with NASD licenses to act as principals,
supervisory personnel and registered representatives, as discussed herein under
"Limited Operating History/Need to Hire Additional Registered Representatives"
and "Dependence upon Licenses." No assurances can be given that the Company
will be successful in this regard. See "Management."
DEPENDENCE UPON LICENSES
Dupont is a general securities broker-dealer and registered with the SEC,
the NASD and SIPC. In addition, Dupont is licensed in 23 states, namely, CA,
CO, CT, FL, GA, IA, IL, IN, MA, MD, MN, MO, NV, NJ, NY, OH, OK, PA, RI, TX, VA,
VT and WA. Dupont intends to obtain licenses as a broker-dealer in other states
in which it expects to conduct business. There can be no assurance that Dupont
will be able to obtain such additional licenses, or that once obtained, it will
maintain licensing in all required states, in which case Dupont's operations may
be significantly impaired. Currently, there are nine employees of Dupont that
have NASD licenses, four of whom have licenses to act as principal. Of the four
persons with principal NASD licenses, only two of these persons (Michael F.
Franzese and Louis Galeotafiore) are registered principals of Dupont. Although,
Messrs. Franzese and Galeotafiore intend to maintain their respective NASD
licenses with Dupont, there can be no assurance that such principals will remain
so registered and, therefore, there can be no assurance that Dupont would not be
adversely affected if the principals left. See "Management" and "Business."
NET CAPITAL RULE
Dupont is subject to an SEC Regulation known as the "Net Capital Rule"
which is designed to measure the financial integrity and liquidity of a broker-
dealer. The Net Capital Rule requires that a minimum amount of its assets be
relatively liquid and imposes a duty on a broker-dealer of prompt notification
to the SEC and NASD if the broker-dealer is not in compliance. Net capital is
essentially defined as net worth (assets minus liabilities) plus certain
qualifying subordinated loans, less various mandatory deductions. Such
deductions result from excluding assets not readily convertible into cash and
from conservative valuation of certain other assets. Among such mandatory
deductions are adjustments (called "haircuts") in the market value of securities
to reflect the possibility of a market decline prior to disposition. The Net
Capital Rule as applied to Dupont requires that the ratio of aggregate
indebtedness, as defined by the rule, to net capital not exceed fifteen to one.
Moreover, Dupont is required to maintain a minimum net capital of 12.5% of
aggregate indebtedness or $100,000, whichever is greater under the SEC Net
Capital
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Rule. Compliance with the Net Capital Rule, as well as other financial
requirements, will limit those operations of the Company which require the
intensive use of capital, such as trading and other market making activities. As
of the date of this Prospectus, Dupont is in compliance with the Net Capital
Rule and has been in compliance at all times in the past since it commenced
operations in June, 1997. As of March 31, 1998, Dupont has net capital of
$344,386 and excess net capital of $244,386. No assurances can be given that
Dupont's operations will enable it to maintain compliance with the SEC Net
Capital Rule in the future. The failure to maintain compliance with the SEC Net
Capital Rule could lead to the termination of Dupont's operations and may
adversely affect the Company. See "Business-Net Capital Rule."
NEED FOR ADDITIONAL FUNDS
The Company's capital and operational requirements cannot be predicted with
certainty and are subject to modification from time to time in the future, in
part based upon events which may be beyond its control. While Management
believes that the Company's existing working capital of approximately $430,000
at March 31, 1998 provides sufficient liquidity and capital resources for the
Company's operations over the next 12 to 15 months, the Company may require
additional debt or equity funds in the future for Dupont's brokerage and trading
activities due to operating losses, and/or to make markets in more than a
limited number of securities. No assurances can be given that such additional
funds will be available on terms acceptable to the Company, if at all. The
failure to obtain such additional funds may cause the Company to cease or
curtail operations and may result in the complete loss of any value of the Saxon
Common Stock. See "Business" and "Management's Discussion and Analysis of
Financial Contribution and Results of Operations."
NATURE OF BROKERAGE BUSINESS
The Company's current and intended stock brokerage and trading business,
by its nature, is subject to various risks, particularly those arising from
volatile markets, including the risk of losses from customers' inability to meet
commitments (such as margin obligations), market-making activities, customer
fraud, employee misconduct and errors, mistakes in the processing of securities
transactions and litigation. Dupont is directly affected by national and
international economic and political conditions, broad trends in business and
finance, legislation and regulation affecting the national and international
financial and business communities and securities markets, changes in securities
laws, the level of volatility of interest rates and substantial fluctuations in
volume and price levels in the securities markets. Reduced volume of securities
transactions and reduced market liquidity generally result in lower revenues
from principal transactions and commissions. Lower price levels of securities
may result in losses from declining market value of securities held in trading
positions. In periods of reduced sales and trading activity, profitability may
be adversely affected because certain expenses remain relatively fixed. In
addition, the securities industry is exposed to risk of loss from clearance and
processing problems which may be especially acute during periods of heavy
trading volume. See "Business."
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LEGAL PROCEEDINGS AND LITIGATION POTENTIAL
Many aspects of Dupont's business involve substantial risks of liability.
Underwriters are subject to substantial potential liability for material
misstatements and omissions in prospectuses and other communications with
respect to public and private underwritten offerings. There has been an
increased incidence of litigation in the securities industry in recent years,
including class action law suits which generally seek substantial damages. Any
litigation, whether or not meritorious, could consume significant resources of
Dupont and could substantially affect its ability to carry on normal business
operations.
RELIANCE ON SCHRODER
Dupont incurs obligations to its customers which are supported by
obligations to it from Schroder, its clearing agent, through which all of
Dupont's accounts will be settled. Maintenance of a clearing relationship
entails a risk of unreconciled differences, especially in periods of high
trading volume. The inability of Schroder to meet its obligations could result
in substantial losses to Dupont and the loss of the investors' entire
investment. Any disruption in Dupont's relationship with Schroder may have an
adverse effect on Dupont's ability to conduct its business. See "Business."
LIMITATIONS ON AND SPECIAL FACTORS RELATING TO MARKET-MAKING ACTIVITIES
Dupont trades securities for its own account. In the future, depending
upon capital requirements, Dupont intends to make a market in one or more over-
the-counter securities. Dupont is subject to a restriction letter with the NASD
whereby it may not make a market in more than ten securities of different
companies. In market making, trading profits depend upon the skills of
employees in market-making activities, the capital allocated to positions in
securities, the volatility of the securities markets, and the general trend of
prices in the securities markets. Trading as a principal requires the commitment
of substantial capital and creates opportunities for profit as well as the risk
of loss due to market fluctuations. While Dupont currently has enough available
net capital to undertake the aforementioned market making activities, no
assurances can be given that it will have sufficient net capital in the future
or that Dupont will generate profits in its proposed market making and trading
activities for Dupont. See "Business."
LIMITED SOURCES OF REVENUES
The Company's activities of Dupont currently are limited to executing
retail trades for its customers and for its own account trading as an investor.
Accordingly, the Company's revenues are generated from a limited number of
activities. Although Dupont expects to conduct market making and potentially
investment banking activities in the future, there can be no assurance that it
will be able to do so. Reliance upon a limited set of revenue sources
significantly increases Dupont's vulnerability to poor performance in any one of
its business activities. See "Business."
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FLUCTUATING VOLUME AND PRICES OF SECURITIES
Dupont and the securities industry in general are directly affected by
national and international economic and political conditions, broad trends in
business and finance, legislation and regulation effecting the national and
international financial and business communities and securities markets,
currency values, changes in securities laws, the level of volatility of interest
rates and substantial fluctuations in volume and price levels in the securities
markets. Dupont and the securities industry in general are subject to other
risks, including, but not limited to, risks of loss from counterparty (a party
to which Dupont has credit or performance exposure) failures to meet
commitments, customer fraud, employee errors or misconduct and litigation. In
addition, price fluctuations may cause losses on securities positions. The
anticipated concentration of capital in the securities of those issuers held in
inventory would increase the risk of loss from reductions in the market price of
such securities. Since certain of Dupont's profits would be derived from the
difference between the purchase price of a security and the sale price,
declining prices generally result in reduced revenues. In addition, Dupont
charges a commission on each transaction in which it acts as an agent, and
therefore low trading volume results in reduced revenues. Under these
conditions, profitability is adversely affected since many costs, other than
commission compensation and bonuses, are fixed.
The securities industry is subject to substantial fluctuations in volume
and price levels of securities transactions. These fluctuations can occur on a
daily basis, as well as over longer periods, as a result of local, national and
international economic and political events and as a result of trends in
business and finance. Reduced volume and prices generally result in lower
commissions and may affect Dupont particularly acutely in light of the non-
diversified nature of its activities and the degree to which many of its
expenses are fixed. Dupont will be subject to each of such influences, and there
can be no assurance that it will successfully overcome those risks associated
with the securities business. See "Business."
COMPETITION
All aspects of Dupont's business are highly competitive. In its brokerage
activities, Dupont competes directly with national broker-dealers, which are
large, well-known firms with substantially greater financial and personnel
resources than Dupont. Dupont competes with many other financial institutions
for key personnel, including salespeople, managers and other key persons. Many
of Dupont's competitors conduct extensive advertising and actively solicit
potential clients in order to increase their business. Dupont also competes with
a number of smaller regional brokerage firms as well as discount brokerage firms
which offer lower commission rates to their customers. In recent years,
institutions such as large commercial banks, insurance companies and financial
service companies have begun offering to their customers some of the same
services Dupont offers, and as a result the competitive environment for
brokerage firms such as Dupont may be adversely affected. See "Business."
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REGULATION
The business of Dupont is subject to regulation by various state and
federal regulatory authorities which are charged with protecting the integrity
of the securities and financial markets and protecting the interests of
consumers. The SEC and the NASD, among others, may conduct administrative
proceedings which can result in censure, fine, suspension or expulsion of a
broker-dealer, its officers or employees. Both the SEC and the NASD have
stringent rules governing the operations of securities firms including the rules
with respect to the net capital requirements of securities firms. The principal
purpose of regulation and discipline of broker/dealers is the protection of
customers and securities markets rather than the protection of creditors and
stockholders of broker-dealers. In addition, Dupont is required to comply with
all state licensing and other rules and regulations applicable to the brokerage
business. Failure to comply with any of these laws, rules and regulations would
have a material adverse effect upon Dupont. Further, the continued compliance
with such regulations will create a continuing and significant financial
expense. No assurances can be given that Dupont will be able to comply with all
SEC, NASD and state rules and regulations and, in the event it is unsuccessful,
the investors in this offering may lose their entire investment. See
"Business."
LACK OF PUBLIC MARKET
As of the date hereof, there is no public market for Saxon's Common Stock.
After NJS completes its distribution of Saxon's Common Stock on the Payment Date
to its shareholders of record on the Record Date, Saxon will attempt to obtain a
presently unidentified broker/dealer registered with the NASD to file a 15(c)2-
11 application with the NASD in order for the Saxon Common Stock to trade on the
over-the-counter NASD Electronic Bulletin Board. The Company will also seek to
obtain other market makers for the Saxon Common Stock. No assurances can be
given that Saxon's efforts to develop a public market for its Common Stock will
be successful or, if successful, that there will be an established market for
Saxon's Common Stock in the future. See "Plan of Distribution/Market
Information."
CONTROL BY PRINCIPAL SHAREHOLDERS
Following the completion of NJS' distribution of Saxon Common Stock on the
Payment Date to its stockholders of record on the Record Date, Nicholas
Seccafico, Jr., and Lindo Garuffi including members of their immediate families
(the "Control Group"), will beneficially own and control approximately 45% of
the outstanding Saxon Common Stock. Such Control Group may be in a position to
influence the election of the Board of Directors of the Company and other
stockholder matters. See "Security Ownership of Management and Others."
NO DIVIDENDS AND NONE ANTICIPATED
The payment by the Company of cash dividends on its Common Stock, if any,
in the future rests within the discretion of its Board of Directors and will
depend, among other
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things, upon the Company's earnings, its capital requirements and its financial
condition as well as other relevant factors. The Company has not paid or
declared any cash dividends upon its Common Stock since its inception and, by
reason of its present financial status and its contemplated future financial
requirements, does not contemplate or anticipate making any cash distributions
upon its Common Stock in the foreseeable future. See "Description of Common
Stock."
SHARES ELIGIBLE FOR FUTURE SALE
After the Payment Date, Saxon's officers and directors will beneficially
own and control 703,735 shares (not including options to purchase 800,000
shares) of Saxon's outstanding 2,465,735 shares of Common Stock all of which
have been registered for distribution to the NJS stockholders of record on the
Record Date. It is the intention of the Company to register the 800,000 shares
of Common Stock underlying the options beneficially owned by Saxon's officers
and directors, pursuant to a Form S-8 Registration Statement to be filed after
the date of this Prospectus. Of the 2,465,735 shares, 703,735 have been
registered for resale in this Prospectus on behalf of Saxons two officers and
directors and their family members. In the event this Prospectus becomes
outdated or options get exercised without the Company registering such shares on
a Form S-8 Registration Statement, such persons may sell their shares of Common
Stock of Saxon in compliance with Rule 144 of the Securities Act. Ordinarily,
under Rule 144, a person holding restricted securities for a period of one year
may, every three months thereafter, sell in ordinary brokerage transactions or
in transactions directly with a market maker, an amount of shares equal to the
greater of one percent of the Company's then-outstanding Common Stock or the
average weekly trading volume in the same securities during the four calendar
weeks prior to such sale. See "Shares Eligible for Future Sale."
"PENNY STOCK" REGULATIONS
The SEC has adopted regulations under the Exchange Act which generally
define a "penny stock" to be any equity security that has a market price (as
defined in the Exchange Act) of less than $5.00 per share or an exercise price
of less than $5.00 per share, subject to certain exceptions. If the Saxon
Common Stock is not traded on a National Market Exchange or NASDAQ, the Saxon
Common Stock may be deemed to be a "penny stock" and become subject to rules
that impose additional sales practice requirements on broker-dealers who sell
such securities. For any transaction involving a penny stock, unless exempt,
the rules require delivery, prior to the transaction, of a disclosure schedule
prepared by the SEC relating to the penny stock market. The broker-dealer also
must disclose the commissions payable to both the broker-dealer and the
registered representative, current quotations for the Saxon Common Stock
information on the limited market in penny stocks and, if the broker-dealer is
the sole market maker, the broker-dealer must disclose this fact and the broker-
dealer's presumed control over the market. In addition, the broker-dealer must
obtain a written acknowledgment from the customer that such disclosure
information was provided and must retain such acknowledgment for at least three
years. Further, monthly statements must be sent disclosing current price
information for the penny stock held in the account. Such rules
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<PAGE>
may adversely effect a market from developing in the Saxon Common Stock and, if
developed, the ability of broker-dealers to sell the Saxon Common Stock.
LIMITATION ON DIRECTOR LIABILITY
As permitted by Delaware corporation law, the Company's Certificate of
Incorporation limits the liability of Directors to the Company or its
stockholders to monetary damages for breach of a Director's fiduciary duty
except for liability in certain instances. As a result of the Company's charter
provision and Delaware law, stockholders may have a more limited right to
recover against Directors for breach of their fiduciary duty other than as
existed prior to the enactment of the law. See "Management-Limitation of
Directors' Liability; Indemnification."
ABSENCE OF INDEPENDENT DIRECTORS
The Company has two directors each of whom are an officer and/or principal
stockholder of the Company and NJS. The absence of outside or disinterested
directors may result in less objectivity and an increased risk for conflicts of
interest with respect to (i) decisions made by the Board of Directors, (ii)
competition for corporate opportunities and transactions between the Company and
NJS. The Company has not adopted any procedure for dealing with such conflicts
of interest. See "Management."
COMPANY WILL NOT RECEIVE PROCEEDS FROM SALES BY NJS STOCKHOLDERS
This Prospectus relates to Saxon Common Stock to be distributed by NJS to
its stockholders. The Company will not receive any proceeds from the
distribution or subsequent sale of the Saxon Common Stock by NJS stockholders or
Selling Security Holders. See "Use of Proceeds."
USE OF PROCEEDS
The Company will not realize any proceeds from the completion of NJS'
distribution of its Saxon Common Stock on the Payment Date to NJS stockholders
of record on the Record Date or from sales made by selling security holders. The
expenses of this Offering, estimated at $75,000, will be paid by NJS.
SELECTED FINANCIAL DATA
Saxon was formed on July 9, 1997 under the laws of the State of Delaware.
As of July 9, 1997, Saxon had no operations and was formed at a cost of
approximately $342. Between the date of inception and August 15, 1997, Saxon
issued 2,465,735 shares of Common Stock to NJS at a cost of $10,000. See
"Certain Transactions." The following selected information has been derived
from the historical financial statements of Dupont, the Company's wholly-owned
subsidiary, included elsewhere in this Prospectus and should be read in
conjunction therewith, including the notes thereto.
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<PAGE>
INCOME STATEMENT DATA:
Period From
November 7, 1996
(Inception) to
May 31, 1997
----------------------
Revenues (Dividend Income) $18,408
Operating Expenses 38,471
Net Loss (20,063)
BALANCE SHEET DATA:
May 31, 1997
------------
Working Capital $764,639
Total Assets 861,651
Total Liabilities 14,504
Stockholders' Equity 847,147
The following selected information has been derived from the historical
consolidated unaudited financial statements of the Company included elsewhere in
this Prospectus and should be read in conjunction therewith, including the
consolidated notes thereto.
INCOME STATEMENT DATA:
Period From
July 9, 1997
(Inception) to
March 31, 1998
---------------
Total Revenues $ 414,228
Operating Expenses 676,153
Loss from operations (261,925)
Loss from trading activities (152,814)
Net Loss (414,739)
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BALANCE SHEET DATA:
December 31, 1997
-----------------
Working Capital $431,533
Total Assets 753,892
Total Liabilities 190,484
Stockholders' Equity 563,408
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Saxon was formed under the laws of the State of Delaware on July 9, 1997
and Dupont was formed under the laws of the State of New York on November 7,
1996. Saxon is a holding company whose entire operations are conducted through
Dupont. On June 10, 1997, Dupont commenced initial operations as a
broker/dealer. Prior to that date, planned principal operations of Dupont had
not commenced, and it had no revenues, earnings or history of operations.
Dupont's activities from inception through June 10, 1997 consisted of: filing
necessary incorporation and organization documents, filings made with the SEC,
NASD and state securities commissions of various documents to become a
registered broker/dealer authorized to conduct business in various states and
entering into a clearing agreement with a clearing firm. NJS contributed
$750,000 to Dupont as an initial capital contribution. This financing provided
the monies Dupont needed to become licensed as a broker-dealer and to commence
operations. In June 1975, the Financial Accounting Standards Board, in its
Statement No. 7, set forth guidelines for identifying an enterprise in the
development stage and the standards of financial accounting and reporting
applicable to such an enterprise. In the opinion of the Company, its activities
from the inception of Dupont in November 1996 through July 28, 1997, fall
within the referenced guidelines. Accordingly, the Company has reported its
activities in accordance with the aforesaid Statement of Financial Accounting
Standards No. 7.
On July 28, 1997, the Company acquired Dupont from NJS as a capital
contribution. During the period July 9, 1997 through March 31, 1998, the
Company had consolidated total revenues of $414,228 and incurred a consolidated
net loss of $414,739 primarily as a result of operating expenses of $676,153 and
trading losses from investments for Dupont's own account, totaling $152,814.
Dupont is seeking to expand its client base and the potential revenues to be
derived there from by attempting to hire approximately three additional
Registered Representatives and through client referrals.
LIQUIDITY AND CAPITAL RESOURCES
NJS contributed to Dupont a total of $750,000 as an initial capital
contribution in order to fund the start-up operations of Dupont which commenced
on June 10, 1997. Subsequently, NJS contributed to Dupont a total of an
additional $293,000 as a capital
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contribution. The Company's capital and operational requirements cannot be
predicted with certainty and are subject to modification from time to time in
the future, in part based upon events which may be beyond its control. While
Management believes that the Company's existing working capital of approximately
$430,000 at March 31, 1998 provides sufficient liquidity and capital resources
for the Company's operations over the next 12 to 15 months, the Company may
require additional debt or equity funds in the future for Dupont's brokerage and
trading activities due to operating losses and/or to make markets in more than a
limited number of securities. No assurances can be given that such additional
funds will be available on terms acceptable to the Company, if at all. The
failure to obtain such additional funds may cause the Company to cease or
curtail operations and result in the complete loss of any value of the Saxon
Common Stock. See "Business."
During the period from July 9, 1997 through March 31, 1998, net cash was
used in operating activities and investment activities. Cash used in investment
activities were used to make capital expenditures and purchase marketable equity
securities. Net cash was provided by financing activities as a result of
capital contributions from NJS, margin loans and loans from an officer of the
Company.
PLAN OF OPERATIONS
The Company through its wholly-owned subsidiary, Dupont, has operated as a
NASD licensed broker-dealer since June 10, 1997. As of May 31, 1998, Dupont
has nine registered representatives with NASD licenses. Dupont is currently
executing retail orders for its approximate 200 non-affiliated customers and for
its own account trading as an investor. Dupont is seeking to expand its
customer base by hiring approximately three additional experienced registered
representatives with NASD licenses and through recommendations of existing
clients. Dupont anticipates that its current facilities are sufficient for its
immediate future and that it has the available space at its New York facility
(which is only approximately 60% being utilized) to meet its anticipated needs,
should Dupont be successful in hiring up to five additional registered
representatives. Dupont intends to spend approximately $20,000 to purchase an
order entry system for its brokerage business and approximately $2,000 per newly
hired broker in computer equipment. Management believes that Dupont's existing
working capital provides sufficient cash to carry out its plan of operations.
See "Liquidity and Capital Resources."
BUSINESS
INTRODUCTION
Saxon was formed under the laws of the State of Delaware on July 9, 1997
as a wholly-owned subsidiary of NJS. On November 7, 1996, NJS formed Dupont as
a wholly-owned subsidiary under the laws of the State of New York to engage in
the securities business. On July 28, 1997, NJS transferred its entire stock
ownership in Dupont to Saxon. Currently, Saxon's only business is through the
operations of Dupont, a broker-dealer registered with the SEC and the NASD. As
of May 15, 1998, Dupont is licensed to do business in 23 states, namely, CA, CO,
CT, FL, GA, IA, IL, IN, MA, MD, MN, MO,
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NJ, NV, NY, OH, OK, PA, RI, TX, VA, VT and WA. All references to "the Company"
include Saxon and its wholly-owned subsidiary, Dupont, unless the context
indicates otherwise.
Dupont commenced operations as a new broker-dealer on June 10, 1997.
Dupont's activities are subject to all the risks of a new enterprise and have
been limited to executing retail orders for its approximate 200 non-affiliated
customer accounts (as of May 31, 1998) and for its own account trading as an
investor. From June 1997 through May 15, 1998, Dupont has executed
approximately 9,500 transactions for its customers and approximately 4,000
transactions for its own account. Dupont has nine registered representatives
with NASD licenses including two executive officers, namely Michael F. Franzese
and Louis Galeotafiore, which when combined with one other administrative person
brings the total number of full-time employees to ten. Messrs. Franzese and
Galeotafiore each have been in the securities business for over 30 years.
Dupont's revenues are dependent upon the sales efforts of its registered
representatives. The loss of any of its registered representatives could have a
material adverse effect on Dupont's operations. While the Company is currently
seeking to hire additional registered representatives, no assurances can be
given that it will be successful in these efforts.
Dupont's registered representatives do not engage in "cold calling," which
is an effort by a registered representative to obtain new customers by
initiating telephone calls to persons on lists either supplied to or purchased
by the registered representative. The term "cold calling" is not applicable to
persons recommended to a broker by a present account or an acquaintance of such
broker.
NASD RESTRICTION LETTER
Dupont intends to effect transactions as principal and to make markets in
various over-the-counter stocks. Such intended activities will be limited by
the amount of Dupont's then available net capital. Currently, Dupont's
restriction letter with the NASD requires that Dupont will seek NASD District
Office No. 10 review and permission before it (i) engages in its first private
placement activity (it being noted that Dupont does not presently intend to
engage in such activity) and (ii) makes markets in more than 10 securities of
different companies. Dupont has also agreed with the NASD that all trading
activities will be handled solely by qualified personnel under the direct
supervision of the registered principal responsible for the firm's trading
department, to clear all transactions on a fully disclosed basis through one or
more clearing broker-dealers, to maintain minimum net capital of at least
$100,000 and to file trial balances, capital computations and supporting
schedules with the NASD.
OPERATIONS OF DUPONT
Securities Brokerage
- --------------------
Dupont's clientele consists of approximately 98% individuals and 2% trusts,
partnerships and corporate accounts. These clients have accounted for 100% of
Dupont's
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historical revenues (exclusive of Dupont's trading for its own account) derived
from Dupont executing transactions in equity and debt securities as agent for
such customers. In the future, Dupont proposes to also effect transactions as
principal and make a market in one or more over-the-counter securities. As of
May 31, 1998, Dupont has not derived any revenues from these proposed
activities.
Agency Business
- ---------------
Dupont acts on an agency basis in securities transactions for its
customers. Such transactions generate securities commission revenues.
Commissions are charged on both exchange and over-the-counter agency
transactions for individual customers in accordance with a schedule which Dupont
has formulated, which may change from time to time. In certain cases, discounts
from the schedule may be granted to customers. Dupont's securities commissions
result from executing transactions in listed and over-the-counter stocks and
bonds with an estimated 50% in NASDAQ securities, 38% New York Stock Exchange
securities and 2% American Stock Exchange securities. The remaining
transactions (approximately 10%) are in options on various exchanges.
Principal Transactions
- ----------------------
Dupont intends to act as a principal in executing trades in over-the-
counter equity securities. When transactions are executed by Dupont on a
principal basis, Dupont will receive, in lieu of commissions, mark-ups or mark-
downs which constitute revenues from principal transactions. Inventories of
over-the-counter securities will at times be carried to facilitate sales to
customers and other dealers.
The level of positions carried in Dupont's trading accounts may fluctuate
significantly. The size of the securities positions on any one date may not be
representative of Dupont's exposure on any other date because the securities
positions vary substantially depending upon economic and market conditions, the
allocation of capital among types of inventories, customer demands and trading
volume. The aggregate value of inventories that Dupont may carry is limited by
certain requirements of the SEC's Net Capital Rule as described herein under
"Net Capital."
Dupont intends to make a market, in effect maintaining firm bid and offer
prices, in common stocks which are traded on the NASD's Automated Quotation
System and common stocks which are traded on the NASD's Electronic Bulletin
Board. The amount of stocks that Dupont intends to make a market at any one
time will fluctuate and Dupont may make a market in securities of up to ten
different companies without NASD consent. In the event that Dupont desires to
make a market in securities of more than 10 companies, it is required to seek
permission of its local NASD district office and obtain consent prior to making
a market in additional equity securities.
In the event Dupont executes principal transactions, such transactions
expose it to risk because securities positions are subject to fluctuations in
market value and liquidity.
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Each trader registered with Dupont is expected to internal position limits and
Dupont will review regularly the age and composition of its securities
positions.
Clearing Arrangements and Customer Credit
- -----------------------------------------
Dupont does not maintain its own customer accounts or provide customer
credit. Dupont utilized, on a fully disclosed basis, the services of Oscar Gruss
& Son Incorporated ("Oscar Gruss"), pursuant to a clearing agreement dated April
4, 1997, to process all securities transactions and maintain the accounts of its
customers. On October 17, 1997, Dupont entered into a new Clearing Agreement
with Schroder to act as its clearing agent on a "fully disclosed" basis and
subsequently terminated its relationship with Oscar Gruss. All transactions are
currently being executed for Dupont by Schroder, a non-affiliated corporation.
Pursuant to its clearing agreement, Schroder maintains its customer accounts
which includes holding the customer funds and securities, issuing monthly
statements, executing customer trades or exchanges in which it is a member,
issuing confirmations of purchases and sales and settling all transactions,
receiving and safeguarding funds and securities and handling the regulation of
credit extension and preparation of monthly account statements. Management
believes that Schroder provides these services to Dupont and its customers at a
total cost which is less than it would cost Dupont to process such transactions
on its own. All Schroder correspondent clearing clients whose accounts are
carried on Schroder's books and records received $50 million insurance
protection without any cost to the client. This protection is provided by SIPC
amounting to a total of $500,000 including up to $100,000 on cash. In addition
to SIPC coverage, Schroder has a separate Excess SIPC policy issued by Aetna
increasing its clients' securities protection by additional $49.5 million
without any additional cost to Schroder clients. Thus, the maximum coverage
provided by Schroder is $50 million of which $100,000 continues to be on cash.
Schroder has over 20 years of experience in serving as clearing agent for many
firms. Schroder is an international merchant and investment banking group with
presence in financial centers worldwide.
Schroder lends funds to Dupont's customers through the use of margin
credit. These loans are made to customers on a secured basis, with Schroder
maintaining collateral in the form of saleable securities, cash or cash
equivalents. Under the terms of the clearing agreement with Schroder, Dupont
indemnifies Schroder on any loss of these credit arrangements.
Dupont's clearing agreement with Schroder can be canceled by either party
upon 60 days prior written notice. Dupont's clearing agreement provides for
certain events of default and various terms and conditions. One of such
requirements is that the broker-dealer clearing through it must maintain minimum
net capital in accordance with the SEC rules and regulations under the
Securities Act.
Net Capital Rule
- ----------------
Dupont is subject to an SEC Regulation known as the "Net Capital Rule"
which is designed to measure the financial integrity and liquidity of a broker-
dealer. The Net
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Capital Rule requires that a minimum amount of its assets be relatively liquid
and imposes a duty on a broker-dealer of prompt notification to the SEC and NASD
if the broker-dealer is not in compliance. Net capital is essentially defined as
net worth (assets minus liabilities) plus certain qualifying subordinated loans,
less various mandatory deductions. Such deductions result from excluding assets
not readily convertible into cash and from conservative valuation of certain
other assets. Among such mandatory deductions are adjustments (called
"haircuts") in the market value of securities to reflect the possibility of a
market decline prior to disposition. The Net Capital Rule as applied to Dupont
requires that the ratio of aggregate indebtedness, as defined by the rule, to
net capital not exceed fifteen to one. Moreover, Dupont is required to maintain
a minimum net capital of 12.5% of aggregate indebtedness or $100,000, whichever
is greater under the SEC Net Capital Rule. Compliance with the Net Capital Rule,
as well as other financial requirements, will limit those operations of the
Company which require the intensive use of capital, such as trading and other
market making activities. As of the date of this Prospectus, Dupont is in
compliance with the Net Capital Rule and has been in compliance at all times in
the past since it commenced operations in June, 1997. As of March 31, 1998,
Dupont has net capital of $344,386 and excess net capital of $244,386. No
assurances can be given that Dupont's operations will enable it to maintain
compliance with the SEC Net Capital Rule in the future. The failure to maintain
compliance with the SEC Net Capital Rule could lead to the termination of
Dupont's operations and may adversely affect the Company.
Regulatory Matters
- ------------------
The securities business is subject to extensive regulation under federal
and state laws. The principal purpose of regulation of broker-dealers is the
protection of customers and the securities markets rather than protection of
creditors, shareholders and partners of broker-dealers. The SEC is the federal
agency charged with administration of federal securities laws. Much of the
regulation of broker-dealers, however, has been delegated to self-regulatory
organizations ("SRO), principally the National Association of Securities Dealers
("NASD") and the national securities exchanges, such as the NEW YORK STOCK
EXCHANGE ("NYSE") and AMERICAN STOCK EXCHANGE ("AMEX"). The self-regulatory
organizations adopt rules (subject to approval by the SEC) which governs the
industry. These SRO's also conduct periodic examinations of member broker-
dealers. Securities firms are also subject to regulation by state securities
administrators in states in which they are registered. Other regulations to
which broker-dealers are subject cover all aspects of the securities business,
including sales methods, trading practices among broker-dealers, capital
structure of securities firms, record keeping and the conduct of directors,
officers and employees. Additional legislation, changes in rules promulgated by
the SEC and by SRO's, or changes in the interpretation or enforcement of
existing laws and rules often directly affect the method of operation and
profitability of brokers and dealers. The SEC, the SRO's and state securities
commissions may conduct administrative proceedings which, after appropriate
hearings and an appeal process, can result in censure, fine, issuance of cease-
and-desist orders or suspension or expulsion of a broker-dealer, its officers or
employees, any of which could have a material adverse effect on the business of
such broker-dealer.
22
<PAGE>
Dupont is registered as a Broker-Dealer with the SEC, is a member of the
NASD, is licensed as a broker-dealer in many states and intends to register as a
broker-dealer in additional states as needed. If for any reason Dupont's
ability to register in additional states is foreclosed or otherwise limited, its
business operations can be adversely affected.
COMPETITION
Competition in the securities brokerage and investment banking business is
highly intense. Dupont competes directly with discount and full-service
brokerage firms and commercial banks, almost all of which are established, have
substantially greater financial and other resources, and have achieved greater
public acceptance than Dupont. Commercial banks presently provide many of the
services offered by brokerage firms and may provide more in the future. Dupont
will be a minor factor in the United States securities brokerage industry.
EMPLOYEES
Saxon has no employees. Dupont has ten full-time employees including nine
that have NASD licenses and one clerical person.
FACILITIES
Dupont has a one year lease of approximately 1,000 square feet of space in
Greenwich, CT pursuant to which it is paying a monthly base rental of
approximately $500. Dupont also has a three year lease of approximately 3,000
square feet of space in Oyster Bay, NY at a monthly base rental of approximately
$3,000. Since July 1997, Saxon utilizes the office of Nicholas J. Seccafico,
Jr. rent free at 33 Eleventh Avenue, Huntington Station, NY 11746. The use of
his office is limited to an immaterial amount of usage of his telephone.
LEGAL PROCEEDINGS
There are currently no legal proceedings pending or, to the best of
Management's knowledge, threatened against the Company.
23
<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The names of the directors and executive officers of Saxon are as follows:
Name Age Position
- ---- --- --------
Nicholas J. Seccafico, Jr. 58 President, Chief Financial Officer,
Director
Lindo Garuffi 65 Secretary, Treasurer, Director
Set forth below is a biographical description of each director and
executive officer of Saxon based upon information supplied by them:
Nicholas J. Seccafico, Jr. has been an officer and director of Saxon since
July 1997. Since May 1995, Mr. Seccafico has been an officer and director of NJS
and was previously an officer and director of NJS from March 1988 through
November 1989. Since 1977, Mr. Seccafico has been president and chief executive
officer of CPC Corp., currently a manufacturing based technology coating
company. Since 1992, Mr. Seccafico has been founder and chief executive officer
of Pathfinder International Group, Inc., a company which services include
investment banking, business evaluation and merger and acquisition development.
He has worked in areas of development, production, marketing and selling cutting
technologies. He has owned and assisted in the development of environmental
remediation companies (emphasis on lead paint testing and bioremediation) and
mariculture. Mr. Seccafico has served as an investment banker and business
consultant to a U.S. lead testing company and an investment banker and business
partner to West Indies Mariculture. Mr. Seccafico also developed the IBIS
Program (International Business Incubation Systems) and introduced this Program
to the Long Island Association Program. He developed proprietary cost effective
research and business development services that allow small and medium sized
companies to analyze finance and implement global ventures. Mr. Seccafico is a
Trustee at Dowling College, Oakdale, NY.
Lindo Garuffi has been an officer and director of the Company since July
1997. Since May 1995, Mr. Garuffi has been an officer and director of NJS. For
the past 20 years, Mr. Garuffi is co-founder, president and chief executive
officer of Associated Marble Industry, Inc., a company that developed an
international network of quarry suppliers. Mr. Garuffi has extensive
international business experience throughout Europe, Africa and the Middle East.
24
<PAGE>
The names of the directors and executive officers of Dupont are as follows:
Name Age Position
- ---- --- --------
Michael F. Franzese 54 President, Chief Executive Officer, Director
Louis Galeotafiore 55 Treasurer, Secretary, Director
Set forth below is a biographical description of each director and
executive officer of Dupont based upon information supplied by them:
Michael F. Franzese has been President, Chief Executive Officer and a
Director of Dupont since its inception in November 1996. Mr. Franzese has 30
years of experience in the brokerage business having held positions at various
firms. From 1991 to November, 1996, Mr. Franzese served as a consultant to
government dealers, banks and brokerage firms. From May 1996 to November 1996,
he was a registered representative of American Classic Financial Co. and Senior
Vice President at NFS Services Inc. from August 1995 to November 1996. From
February 1992 to June 1993, he was a consultant to Berkeley Securities Corp.
From May 1991 to August 1995, he was President and Chief Executive Officer of
Michael Franzese & Associates. At Dupont, he is a Registered Representative
(Series 7 and 63), General Securities Principal (Series 24) and Municipal
Principal (Series 53). Mr. Franzese serves as the Compliance Officer at Dupont.
Louis Galeotafiore has been Treasurer, Secretary and Director of Dupont
since its inception in November 1996. Mr. Galeotafiore has over 30 years of
experience in the securities brokerage business, having held positions at
various firms. From October 1993 to October 1996, he was a branch manager at
Midwood Securities and prior thereto from September 1990 to October 1993, he was
a registered representative at R.J. Forbes. At Dupont, he is the Registered
Options Principal (Series 4), Registered Representative (Series 7 and 63),
General Securities Principal (Series 24) and Financial Principal (Series 27).
Mr. Galeotafiore serves as the Branch Manager at Dupont.
All directors of the Company hold office until the next annual meeting of
shareholders of the Company or until their successors are elected and qualified.
Executive officers hold offices at the pleasure of the Board and until their
successors are elected and qualified, subject to earlier removal by the Board of
Directors.
FOUNDER/CONTROL PERSON
NJS may be deemed to be a founder or control person of Saxon. Prior to the
Payment Date, NJS owns 100% of the outstanding Common Stock. NJS has not been
involved in any legal proceedings since its inception in 1987.
25
<PAGE>
EXECUTIVE COMPENSATION
From the inception of the Saxon to the date of this Prospectus, no
compensation has been paid to its Chief Executive Officer or any other officer
except for the stock options described under "Stock Option Plan." From the
inception of Dupont in November 1996 through December 31, 1997, no executive
officer of Dupont was paid salary and bonus of $100,000 or more and no
compensation was paid to Dupont's Chief Executive Officer. The following is the
summary compensation table for the Company's and Dupont's Chief Executive
Officers for the period November through December 1996 and calendar year l997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
------------------------------------
Annual Compensation Awards Payouts
------------------------------ ------------------------ ---------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other All
Name Annual Restricted Other
and Compen- Stock LTIP Compen-
Principal sation Award(s) Number of Payouts sation
Position Year Salary ($) Bonus ($) ($) ($) (1) Options ($) ($) (2)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Nicholas J. 1997 -0- -0- -0- -0- 400,000 -0- -0-
Seccafico, Jr.
CEO of Saxon 1996 -0- -0- -0- -0- -0- -0- -0-
- ----------------------------------------------------------------------------------------------------------
Michael F. 1997 15,000 -0- -0- -0- -0- -0- -0-
Franzese,
CEO of Dupont 1996 -0- -0- -0- -0- -0- -0- -0-
=============================================================================================================
</TABLE>
The foregoing does not reflect compensation paid ( i.e. $6,000 per month) by NJS
as a consulting fee to a company controlled by Mr. Seccafico but does include
compensation paid by NJS to Mr. Franzese in his capacity as an executive officer
of Dupont.
26
<PAGE>
OPTION GRANTS TABLE
The information provided in the table below provides information with
respect to Saxon's individual grants of stock options during fiscal 1997 of each
of the executive officers named in the summary compensation table above. Saxon
did not grant any stock appreciation rights during 1997.
Option Grants in Last Fiscal Year
---------------------------------
<TABLE>
<CAPTION>
Potential
Realizable Value at
Assumed Annual
Individual Grants Rates of Stock Price
Appreciation
for Option Term (2)
------------------------------------------- -------------------------
(a) (b) (c) (d) (e) (f) (g)
% of
Total
Options/
Granted to
Options Employees Exercise Expira-
Granted in Fiscal Price tion
Name (#) Year (1) ($/Sh) Date 5% ($) 10% ($)
- --------------------------------------------------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Nicholas J. Seccafico, 400,000 50.0% .10 9/11/02 11,051 24,420
Jr.
- --------------------------------------------------------------------------------------------------------
Michael F. Franzese -0- -0- N/A N/A -0- -0-
========================================================================================================
</TABLE>
N/A - Not Applicable.
(1) The percentage of total options granted to employees in fiscal year is
based upon options granted to officers, directors and employees.
(2) The potential realizable value of each grant of options assumes that the
market price of Saxon's Common Stock appreciates in value from the date of
grant to the end of the option term at annualized rates of 5% and 10%,
respectively, and after subtracting the exercise price from the potential
realizable value.
27
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
The information provided in the table below provides information with
respect to each exercise of Saxon stock option during fiscal 1997 by each of the
executive officers named in the summary compensation table and the fiscal year
end value of unexercised options.
<TABLE>
<S> <C> <C> <C> <C>
=================================================================================
(a) (b) (c) (d) (e)
Value of
Number of Unexercised
Shares Unexercised In-the-Money
Acquired Options at Options
on Value FY-End (#) at Fy-End($)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($)(1) Unexercisable Unexercisable(1)
=================================================================================
<S> <C> <C> <C> <C>
Nicholas J. -0- -0- 400,000/-0- N/A / -0-
Seccafico, Jr.
- ---------------------------------------------------------------------------------
Michael F. -0- -0- -0- / -0- -0- / -0-
Franzese
- ---------------------------------------------------------------------------------
</TABLE>
- ----------------
(1) The aggregate dollar values in column (c) and (e) are required to be
calculated by determining the difference between the fair market value of
the Common Stock underlying the options and the exercise price of the
options at exercise or fiscal year end, respectively. In calculating the
dollar value realized upon exercise, the value of any payment of the
exercise price is not included. However, since there is no public market
for Saxon's Common Stock, no calculation is included in column (e) and N/A
(not applicable) is placed in the table above.
Stock Option Plan
- -----------------
The Company granted on September 11, 1997 non-qualified stock options to
purchase an aggregate of 800,000 shares of its Common Stock at an exercise price
of $.10 per share over a term of five years. Nicholas J. Seccafico, Jr. and
Lindo Garuffi each received options to purchase 400,000 shares. These options,
which are immediately exercisable, were granted pursuant to a stock option plan
(the "Plan") adopted in 1997. The Plan covers 1,000,000 shares of Common Stock
(subject to adjustment to cover stock splits, stock dividends, recapitalizations
and other capital adjustments). Employees, including officers and directors and
consultants of the Company are eligible to participate in the Plan. The Plan
provides that options to be granted under the Plan will be designated as
incentive stock options or non-incentive stock options by the Board of Directors
or a committee thereof, which also will have discretion as to the persons to be
granted options, the number of shares subject to the options and the terms of
the options. Options designated as incentive stock options are intended to
receive incentive stock option tax treatment pursuant to Section 422 of the
Internal Revenue Code of 1986, as amended.
28
<PAGE>
The Plan provides that all options granted thereunder shall be exercisable
during a period of no more than 10 years from the date of grant (five years for
incentive stock options granted to holders of 10% or more of the outstanding
shares of Common Stock), depending upon the specific stock option agreement and
that the option exercise price for incentive stock options shall be at least
equal to 100% of the fair market value of Common Stock on the date of grant
(110% for options granted to holders of 10% or more of the outstanding shares of
Common Stock), but in no event less than the initial public offering price of
the Company's proposed public offering. Pursuant to the provisions of the Plan,
the aggregate fair market value (determined on the date of grant) of the shares
of the Common Stock for which incentive stock options are first exercisable
under the terms of the Plan by an option holder during any one calendar year
cannot exceed $100,000.
Currently, the Plan provides that if the employment of an optionee is
terminated other than by reason of death, disability or retirement at age 65,
any incentive stock options granted to the optionee will immediately terminate.
If employment is terminated by reason of disability or retirement at age 65, the
optionee may, within one year from the date of termination, in the event of
termination by reason of disability, or three months from the date of
termination, in the event of termination by reason of retirement at age 65,
exercise the incentive stock option (but not after the normal termination date
of the option). If employment is terminated by death, the person or persons to
whom the optionee's rights under the incentive stock option are transferred by
will or the laws of descent and distribution have similar rights of exercise
within three months after such death (but not after the normal termination date
of the option). Any termination provisions of non-statutory stock options will
be fixed by the board of directors or a committee thereof.
Options are not transferable otherwise than by will or the laws of descent
and distribution and during the optionee's lifetime are exercisable only by the
optionee. Shares subject to options which expire or terminate may be the
subject of future options. The Plan will terminate in 2007. As of the date of
this Prospectus, the Company has outstanding options to purchase 800,000
shares.
EMPLOYMENT AGREEMENTS
None of the Company's officers and directors have any employment contracts
with the Company.
DIRECTOR COMPENSATION
None of the Company's directors have received any compensation from the
Company except as described under "Stock Option Plan." Payment of compensation
in the future will be at the sole discretion of the Board of Directors of the
Company.
29
<PAGE>
LIMITATION OF DIRECTORS' LIABILITY; INDEMNIFICATION
Pursuant to Saxon's By-Laws, Saxon must, to the fullest extent permitted by
the General Corporation Law of the State of Delaware (the "GCL"), as amended
from time to time, indemnify all persons (e.g., directors and officers) whom it
may indemnify pursuant thereto and to advance expenses incurred in defending any
proceeding for which such right to indemnification is applicable, provided that,
if the GCL so requires, the indemnitee must provide Saxon with an undertaking to
repay all amounts advanced if so determined by a final judicial decision.
Saxon's Certificate of Incorporation contains a provision eliminating, to the
full extent permitted by Delaware law, the personal liability of Saxon's
directors for monetary damages for breach of a fiduciary duty. By virtue of
this provision, under current Delaware law, a director of Saxon will not be
personally liable for monetary damages for breach of his fiduciary duty as a
director, except for liability for (i) any breach of his duty of loyalty to
Saxon or to its stockholders, (ii) acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) dividends or
stock purchases or redemptions that are unlawful under Delaware law and (iv) any
transaction from which he derives an improper personal benefit. This provision
of Saxon's Certificate of Incorporation pertains only to breaches of duty by
directors as directors and not in any other corporate capacity such as officers,
and limits liability only for breaches of fiduciary duties under Delaware
corporate law and not for violations of other laws such as the federal
securities laws. As a result of the inclusion of such provision, stockholders
may be unable to recover monetary damages against directors for actions taken by
them that constitute negligence or gross negligence or that are in violation of
their fiduciary duties, although it may be possible to obtain injunctive or
other equitable relief with respect to such actions. The inclusion of this
provision in Saxon's Certificate of Incorporation may have the effect of
reducing the likelihood of derivative litigation against directors, and may
discourage or deter stockholders or management from bringing a lawsuit against
directors for breach of their duty of care, even though such an action if
successful, might otherwise have benefitted Saxon and its stockholders.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
CERTAIN TRANSACTIONS
On July 10, 1997 and August 15, 1997, Saxon sold 100 shares and 2,465,635
shares, respectively, of Saxon's Common Stock to NJS for a total purchase price
of $10,000. This Prospectus relates to the distribution by NJS of all of its
outstanding 2,465,735 shares of Saxon Common Stock to the stockholders of NJS.
See "Plan of Distribution/Market Information."
30
<PAGE>
On July 28, 1997, NJS transferred its entire ownership of Dupont's
outstanding common stock to Saxon as a capital contribution. Prior thereto, NJS
made a $750,000 contribution to the capital of Dupont. Thereafter, NJS made
additional capital contributions to Saxon totaling approximately $248,000.
SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS
As of the date of this Prospectus, NJS owns 2,465,735 shares of Saxon's
Common Stock, representing 100% of Saxon's outstanding Common Stock. Nicholas
J. Seccafico Jr. and Lindo Garuffi each own options to purchase 400,000 shares
of Saxon's Common Stock equivalent to 14% of the outstanding shares of Saxon.
After the Payment Date, all of Saxon's Common Stock will be distributed by NJS
to its stockholders of record on the Record Date. The following table sets
forth certain information as of the Payment Date regarding the beneficial
ownership of Saxon's Common Stock by: (i) all persons known by Saxon to own
beneficially more than 5% of Saxon's Common Stock; (ii) each director and
officer of Saxon individually; and (iii) all directors and officers of Saxon as
a group.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
PERCENTAGE OF
COMMON STOCK
AMOUNT AND OUTSTANDING
NATURE OF AFTER
NAME AND ADDRESS OF BENEFICIAL PAYMENT DATE
BENEFICIAL OWNER (1) OWNERSHIP (2)
===================================================================
<S> <C> <C>
Nicholas J. Seccafico, Jr.
33 Eleventh Ave.
Huntington Station, NY 11746 (4) 603,750 21.1
- -------------------------------------------------------------------
Lindo Garuffi
92 Parsons Blvd.
Malba, NY 11357 (3) (4) 849,985 29.7
- -------------------------------------------------------------------
All officers and
directors
as a group
(2 persons) 1 ,453,735 44.5
- -------------------------------------------------------------------
</TABLE>
_________________
(1) Unless otherwise indicated below, all shares are owned beneficially and of
record.
(2) Based upon 2,465,735 shares of Saxon Common Stock outstanding.
(3) Includes shares of Saxon Common Stock owned by members of Lindo Garuffi's
family.
(4) The table includes options to purchase 400,000 shares of Saxon's Common
Stock granted to each of Messrs. Seccafico and Garuffi. See "Executive
Compensation - Stock."
31
<PAGE>
DESCRIPTION OF COMMON STOCK
Saxon's Certificate of Incorporation (the "Certificate of Incorporation")
authorizes the issuance of 20,000,000 shares of Common Stock, $.001 par value.
The following is a brief description of Saxon's Common Stock. The rights of the
stockholders of Saxon are established by its Certificate of Incorporation, the
Bylaws, and laws of the State of Delaware. The descriptions set forth below are
intended as summaries only and are qualified in their entirety by reference to
the Certificate of Incorporation, the Bylaws, and the relevant Delaware law.
COMMON STOCK
The authorized Common Stock of Saxon consists of 20,000,000 shares of
Common Stock, par value $.001 per share. As of the date of this Prospectus,
2,465,735 shares of Saxon Common Stock were outstanding. Holders of shares of
the Saxon Common Stock are entitled to one vote per share on all matters to be
voted upon by the stockholders and are not entitled to cumulative voting for the
election of directors. Holders of shares of Saxon Common Stock are entitled to
receive ratably such dividends, if any, as may be declared from time to time by
the Board of Directors out of funds legally available therefor. However, it is
the present intention of Saxon not to pay any cash dividends, but to reinvest
earnings, if any, into the Company. In the event of liquidation, dissolution or
winding up of Saxon, the holders of shares of Saxon Common Stock are entitled to
share ratably in all assets after payment of any preference to the holders of
Preferred Stock, if any. Shares of Saxon Common Stock have no preemptive,
conversion or other subscription rights. There are no redemption or sinking
fund provisions applicable to the Saxon Common Stock.
ANTI-TAKEOVER STATUTE
Section 203 of the Delaware General Corporation Law provides that if a
person acquires 15% or more of the stock of a Delaware corporation, he becomes
an "interested stockholder" and may not engage in a "business combination" with
that corporation for a period of three years. The term "business combination"
includes a merger, a sale of assets, or a transfer of stock. The three year
moratorium may be terminated if any of the following conditions are met: (1)
the Board of Directors approved the acquisition of stock or the business
combination before the person became an interested stockholder, (2) the
interested stockholder acquired 85% of the outstanding voting stock in such
transaction, excluding in the determination of outstanding stock is any stock
owned by individuals who are officers and directors of the corporation and any
stock owned by certain employee stock plans, or (3) the business combination is
approved after the person became an interested stockholder by two-thirds of the
voting stock which is not owned by the interested stockholder. The foregoing
provisions do not currently apply to the Company and its principal stockholders,
Nicholas Seccafico, Jr., and Lindo Garuffi, because the Company does not have
voting stock held of record by more than 2,000 stockholders and securities
authorized for quotation on The NASDAQ Stock Market.
32
<PAGE>
SELLING SECURITY HOLDERS
This Prospectus includes the resale of 703,735 shares of Saxon's Common Stock to
be received by two officers and directors of NJS and their immediate family
members.
<TABLE>
<CAPTION>
Percent of Common Stock
Name of Beneficial Owner Common Stock Owned Owned%
- ------------------------------------------------------------------------------------------
Prior to After Prior to After
Offering Offering Offering Offering
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nicholas J. Seccafico, Jr. (1) 603,750 400,000 21.1 14.0
- ------------------------------------------------------------------------------------------
Lindo Garuffi (1) 649,985 400,000 22.7 14.0
- ------------------------------------------------------------------------------------------
Susan Borriello (2) 25,000 -0- 1.0 -0-
- ------------------------------------------------------------------------------------------
Susan Borriello f/b/o
Salvatore Alexis Borriello,
an infant (2) 25,000 -0- 1.0 -0-
- ------------------------------------------------------------------------------------------
Susan Borriello f/b/o Erica
Alexia Borriello, an infant (2) 25,000 -0- 1.0 -0-
- ------------------------------------------------------------------------------------------
Susan Borriello f/b/o Giulia
Alexandra Borriello, an
infant (2) 25,000 -0- 1.0 -0-
- ------------------------------------------------------------------------------------------
Linda G. Imperiale (2) 25,000 -0- 1.0 -0-
- ------------------------------------------------------------------------------------------
Linda G. Imperiale f/b/o
Marco A. Imperiale,
an infant (2) 25,000 -0- 1.0 -0-
- ------------------------------------------------------------------------------------------
Linda G. Imperiale f/b/o
Mario L. Imperiale, an
infant (2) 25,000 -0- 1.0 -0-
- ------------------------------------------------------------------------------------------
Linda G. Imperiale f/b/o
Michael E. Imperiale,
an infant (2) 25,000 -0- 1.0 -0-
- ------------------------------------------------------------------------------------------
</TABLE>
(1) An executive officer and director of Saxon.
(2) These shares are owned of record and beneficially by the persons named in
the table. However, such persons are relatives of Mr. Garuffi and he may
be deemed to be the beneficial owner of these shares since he believes he
has considerable influence as to voting and/or disposition of shares of the
Company's Common Stock owned by the persons named in the table above. If
an additional 200,000 shares are beneficially owned by Mr. Garuffi, he
would beneficially own 849,985 shares before the offering representing
29.7% and 400,000 shares after the offering representing 14.0%.
33
<PAGE>
The Securities offered hereby may be sold from time to time directly by the
Selling Security Holders. Alternatively, the Selling Security Holders may from
time to time offer the Securities through underwriters, dealers or agents. The
distribution of the Securities by the Selling Security Holders may be effected
in one or more transactions that may take place on the over-the-counter market,
including ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more broker-dealers for resale of the Securities as
principals, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. Usual and customary
or specifically negotiated brokerage fees or commissions may be paid by the
Selling Security Holders in connection with such sales of securities. The
Selling Security Holders and intermediaries through whom such securities are
sold may be deemed "underwriters" within the meaning of the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Securities offered,
and any profits realized or commissions received may be deemed underwriting
compensation. Usual and customary or specially negotiated brokerage fees may
be paid by the Selling Security Holders in connection with sales of the
Securities.
At the time a particular offer of the Securities is made by or on behalf of
the Selling Security Holders, to the extent required, a prospectus will be
distributed which will set forth the number of the Securities being offered and
the terms of the offering, including the name or names of any underwriters,
dealers or agents, if any, the purchase price paid by any underwriter for the
Securities purchased from the Selling Security Holders and any discounts,
commissions or concessions allowed or reallowed or paid to dealers, and the
proposed selling price to the public.
Under the Exchange Act, and the regulations thereto, any person engaged in
a distribution of the shares of Saxon Common Stock of the Company offered by the
Selling Security Holders may not simultaneously engage in market-making
activities with respect to securities of the Company during the applicable
"cooling off" period (up to 5 days) prior to the commencement of such
distribution. In addition, and without limiting the foregoing, the Selling
Security Holders will be subject to applicable provisions of the Exchange Act
and the rules and regulations thereunder, including without limitation,
Regulation M, in connection with transactions in the Securities, which
provisions may limit the timing of purchase and sales of the Securities by the
Selling Security Holders.
PLAN OF DISTRIBUTION
The Securities offered hereby may be sold from time to time directly by the
Selling Security Holders. Alternatively, the Selling Security Holders may from
time to time offer the Securities through underwriters, dealers or agents. The
distribution of the Securities by the Selling Security Holders may be effected
in one or more transactions that may take place on the over-the-counter market,
including ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more broker-dealers for resale of the Securities as
principals, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. Usual and customary
or specifically negotiated brokerage fees or commissions may be paid by the
Selling
34
<PAGE>
Security Holders in connection with such sales of securities. The Selling
Security Holders and intermediaries through whom such securities are sold may be
deemed "underwriters" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Securities offered, and any
profits realized or commissions received may be deemed underwriting
compensation. Usual and customary or specially negotiated brokerage fees may be
paid by the Selling Security Holders in connection with sales of the
Securities.
At the time a particular offer of the Securities is made by or on behalf of
the Selling Security Holders, to the extent required, a prospectus will be
distributed which will set forth the number of the Securities being offered and
the terms of the offering, including the name or names of any underwriters,
dealers or agents, if any, the purchase price paid by any underwriter for the
Securities purchased from the Selling Security Holders and any discounts,
commissions or concessions allowed or reallowed or paid to dealers, and the
proposed selling price to the public.
SHARES ELIGIBLE FOR FUTURE SALE
After the Payment Date, Saxon's officers and directors will beneficially
own and control 703,735 shares (not including options to purchase 800,000
shares) of Saxon's outstanding 2,465,735 shares of Common Stock all of which
have been registered for distribution to the NJS stockholders of record on the
Record Date. It is the intention of the Company to register the 800,000 shares
of Common Stock underlying the options beneficially owned by Saxon's officers
and directors, pursuant to a Form S-8 Registration Statement to be filed after
the date of this Prospectus. Of the 2,465,735 shares, 703,735 shares have been
registered for resale in this Prospectus on behalf of Saxon's two officers and
directors and their family members. In the event this Prospectus becomes
outdated or options get exercised without the Company registering such shares on
a Form S-8 Registration Statement, such persons may sell their shares of Common
Stock of Saxon in compliance with Rule 144 of the Securities Act. Ordinarily,
under Rule 144, a person holding restricted securities for a period of one year
may, every three months thereafter, sell in ordinary brokerage transactions or
in transactions directly with a market maker, an amount of shares equal to the
greater of one percent of the Company's then-outstanding Common Stock or the
average weekly trading volume in the same securities during the four calendar
weeks prior to such sale.
LEGAL MATTERS
The validity of the issuance of the Securities offered hereby will be
passed upon for the Company by the law firm of Lester Morse P.C. Members of the
family of Lester Morse will own, upon the completion of this Offering,
approximately 1% of the outstanding shares.
35
<PAGE>
EXPERTS
Saxon's balance sheet and notes thereto as of July 18, 1997 and Dupont's
financial statements and notes thereto as of May 31, 1997 included in this
Prospectus, have been audited by Baron & Baron, independent certified public
accountants, to the extent and for the periods set forth in their report
appearing elsewhere herein, which are included in reliance upon the authority of
said firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Commission in Washington, D.C., a
Registration Statement on Form S-1, File No. 333-37485 (of which this Prospectus
is a part) under the Securities Act with respect to the Securities offered
hereby. This Prospectus does not contain all of the information set forth in
the Registration Statement and the exhibits thereto. For further information
about the Company and the distribution of securities contemplated herein,
reference is made to the Registration Statement and to the exhibits filed as a
part thereof. The statements contained in this Prospectus are not necessarily
complete and, in each instance, reference is made to a copy of the relevant
contract or document filed as an exhibit to the Registration Statement, each
statement being qualified in any and all respects by such reference. The
Registration Statement, including exhibits, may be inspected without charge at
the Public Reference facilities of the Commission located at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 10549, and at the
offices of the Commission located at the Northeast Regional Office, 7 World
Trade Center, 13th Floor, New York, NY 10048 and the Midwest Regional Office,
Northwestern Atrium Center, 500 West Madison Street, Room 1400, Chicago, IL
60661, and copies of such material can be obtained upon request and payment of
the appropriate fee from the Public Reference Section of the Commission located
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
Material filed electronically through Edgar (Electronic Data Gathering Analysis
and Retrieval System) may also be accessed through the SEC's home page on the
World Wide WEB at http://www.sec.gov.
Year 2000 Issues
- ----------------
Many existing computer programs use only two digits to identify a year in
the date field. There programs were designed and developed without considering
the impact of the upcoming change in the century. If not corrected, many
computer applications could fail or create erroneous results by or at the year
2000. The Company's vendors and clearing firm are currently working to correct
the problem and they have assured the Company that the problem will be resolved
before the year 2000 and, therefore, its operations will not be materially
impacted by the year 2000 issues.
36
<PAGE>
SAXON ACQUISITION CORP.
FINANCIAL STATEMENTS
MARCH 31, 1998
<PAGE>
SAXON ACQUISITION CORP.
TABLE OF CONTENTS
JULY 9, 1997 (INCEPTION) TO MARCH 31, 1998
Page
----
Balance Sheet 1
Statement of Operations 2
Statement of Stockholders' Equity 3
Statement of Cash Flows 4
Notes to Financial Statements 5-7
<PAGE>
Page 1
SAXON ACQUISITION CORP.
BALANCE SHEET
MARCH 31, 1998
<TABLE>
<CAPTION>
A S S E T S
<S> <C>
Current assets:
Cash and cash equivalents $354,118
Receivable from clearing agent (note 3) 16,526
Marketable equity securities 228,392
Prepaid expenses and other receivables 22,981
--------
Total current assets 622,017
Property and equipment (note 4) 128,965
Security deposits 2,910
--------
$753,892
========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
Current liabilities:
Accounts payable and accrued expenses $ 25,389
Margin loans payable 154,924
Loans payable, stockholder 10,171
Total current liabilities 190,484
--------
Commitments
Stockholders' equity: (notes 6 and 7)
Common stock 2,466
Additional paid-in capital 995,744
Accumulated deficit (434,802)
--------
563,408
--------
$753,892
========
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
Page 2
SAXON ACQUISITION CORP.
STATEMENT OF OPERATIONS
FOR THE PERIOD JULY 9, 1997
(INCEPTION) TO MARCH 31, 1998
<TABLE>
<S> <C>
Revenues:
Commissions $389,713
Dividend income 24,515
--------
414,228
--------
Expenses:
Employee compensation and benefits 304,830
Clearance fees 101,945
Communications and data processing 136,603
Rent 29,025
Professional fees 13,232
Regulatory and licensing fees 10,065
Interest 10,577
Other operating expenses 69,876
--------
676,153
--------
Loss from operations (261,925)
Loss from trading activities (152,814)
---------
Net loss $(414,739)
==========
Earnings per share ($.17)
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
Page 3
SAXON ACQUISITION CORP.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD JULY 9, 1997
(INCEPTION) TO MARCH 31, 1998
<TABLE>
<CAPTION>
Additional
Common Paid-in
Total stock capital (Deficit)
---------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Inception, July 9, 1997 $ 9,991 $ 4,931 $ 5,060 $ -
Adjustment for pooling
of interests (20,063) - - (20,063)
One for two stock split - (2,465) 2,465 -
Contribution to capital 988,219 - 988,219 -
Net loss (414,739) - - (414,739)
---------- -------- ---------- ----------
March, 31, 1998 $ 563,408 $ 2,466 $995,744 $(434,802)
========= ======= ======== =========
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
Page 4
SAXON ACQUISITION CORP.
STATEMENT OF CASH FLOWS
FOR THE PERIOD JULY 9, 1997
(INCEPTION) TO MARCH 31, 1998
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss $ (414,739)
Adjustment to reconcile net loss to
net cash used by operating activities:
Depreciation 9,188
Changes in assets and liabilities:
Receivable from clearing agent (16,526)
Prepaid expenses and other assets (15,900)
Accounts payable and accrued expenses 25,389
----------
Net cash used by operating activities (412,588)
----------
Cash flows used by investing activities:
Capital expenditures (138,153)
Marketable equity securities (228,392)
----------
Net cash used by investing activities (366,545)
----------
Cash flows from financing activities:
Contribution to capital, net from
issuance of common stock 968,156
Margin loans payable 154,924
Loans from officer 10,171
----------
Net cash provided by financing activities 1,133,251
----------
Net increase in cash and cash equivalents 354,118
Cash and cash equivalents, beginning of period -
----------
Cash and cash equivalents, end of period $ 354,118
==========
Supplementary disclosure of cash flow information:
Cash paid during the period for:
Interest $ 10,577
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
Page 5
SAXON ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
JULY 9, 1997 (INCEPTION) TO MARCH 31, 1998
1. Organization:
Saxon Acquisition Corp. (the "Company") was incorporated in the state of
Delaware on July 9, 1997. The Company is a wholly owned subsidiary of NJS
Acquisition Corporation. On November 7, 1996, NJS formed Dupont Securities
Group, Inc. ("Dupont") as a wholly owned subsidiary under the laws of the
state of New York to engage in the securities business. On July 28, 1997, NJS
transferred its entire stock ownership in Dupont Securities Group, Inc. to
the Company.
Currently, Saxon's only business is through the operations of Dupont, a
broker dealer, registered with the United States Securities and Exchange
Commission ("SEC") and National Association of Securities Dealers, Inc.
("NASD").
Dupont commenced operations on June 10, 1997.
2. Summary of significant accounting policies:
a. Cash and cash equivalents:
Cash and cash equivalents include time deposits, certificates of deposit
and all highly liquid debt instruments with original maturities of three
months or less.
b. Marketable securities:
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity
Securities". The Company's investment securities are classified as
"trading securities". Accordingly, securities are carried at market value
with any unrealized gains and losses being included in income. Realized
gains or losses are computed based on the average cost of the securities
sold.
c. Property and equipment:
Property and equipment are stated at cost. Depreciation is computed over
the useful lives of the assets using the straight-line method.
Leasehold improvements are amortized over the remaining lease term.
Expenditures for repairs and maintenance are charged to operations in the
period incurred.
<PAGE>
Page 6
SAXON ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
2. Summary of significant accounting policies: (Continued)
d. Income taxes:
The provision for income taxes is computed on the pre-tax income of the
Company. Deferred taxes result from the future tax consequences associated
with temporary differences between the amount of assets and liabilities
recorded for tax and financial accounting purposes.
e. Concentrations of credit risk:
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments. The
Company places its cash investments with high quality financial
institutions in an effort to minimize the credit risk. (see note 3)
f. Earnings per share:
The Computation of earnings per share is based on the average number of
outstanding common shares.
g. Revenue recognition:
Consulting and advisory fee revenue was recognized when services provided
were substantially completed.
Transactions in securities and related commissions expense are recorded on
a trade date basis.
3. Receivable from clearing agent:
The Company's subsidiary, Dupont, has a clearing agreement dated October
17, 1997 with Schroder & Co., Inc. to act as its clearing agent on a fully
disclosed basis. Schroder maintains the customer accounts. All Schroder
correspondent clearing clients whose accounts are maintained on its books
and records receive $50 million insurance protection without any cost to
the client.
Maintenance of a clearing relationship entails a risk of unreconcilable
differences. The inability of Schroder to meet its obligations could
result in substantial losses to the Company and the loss of the investors
entire investment.
At March 31, 1998, commissions receivable from the clearing agent amounted
to $16,526.
<PAGE>
Page 7
SAXON ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
4. Property and equipment:
<TABLE>
<S> <C>
Computer equipment $102,074
Furniture, office equipment and
leasehold improvements 36,079
--------
138,153
Less accumulated depreciation
and amortization 9,188
--------
$128,965
========
</TABLE>
The property and equipment was placed in service on June 10, 1997 which is
the date the Company began operations.
5. Net capital requirements:
As a registered broker/dealer, the Company is subject to the Securities and
Exchange Commission's net capital rule which requires that the Company
maintain a minimum net capital as defined, of 12.5% of aggregate
indebtedness or $100,000, whichever is greater.
Net capital and aggregate indebtedness change from day-to-day, but, as of
March 31, 1998, the Company had net capital of $344,386 which exceeded
requirements by $244,386.
6. Stockholders' equity:
At March 31, 1998, the Company was authorized to issue 20,000,000 shares of
common stock with $.001 par value. At that date, 2,465,735 shares were
issued and outstanding.
On July 28, 1997, the Company's parent transferred its entire interest in
Dupont Securities Group, Inc. to the Company. During July and August 1998,
the stockholders contributed $968,156 after deducting expenses of $75,000 to
register the shares in the public market. As of March 31, 1998, these shares
have not been registered.
7. Stock options:
On September 2, 1997, the Company granted stock options to purchase 800,000
shares of common stock to two individuals who are executive officers and
directors of the Company.
The Plan is non-qualified stock option plan, the options are exercisable at
$.10 per share over a term of five years. At this date, there is no public
market for the Company's common stock.
8. Lease commitment:
The Company leases office facilities pursuant to the terms and conditions of
a one year and three year three month lease.
At March 31, 1998, the minimum future rental commitments under
noncancellable leases payable over the remaining lives of the leases are:
<TABLE>
<S> <C> <C>
Twelve months ending March 31, 1999 $37,850
2000 33,600
2001 33,600
</TABLE>
<PAGE>
SAXON ACQUISITION CORP.
TABLE OF CONTENTS
JULY 18, 1997
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report 1
Balance Sheet 2
Notes to Financial Statements 3-5
</TABLE>
<PAGE>
[LETTERHEAD OF BARON & BARON]
INDEPENDENT AUDITORS' REPORT
Board of Directors
Saxon Acquisition Corp.
Greenwich, CT
We have audited the accompanying balance sheet of Saxon Acquisition Corp. as of
July 18, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Saxon Acquisition Corp. as of
July 18, 1997, in conformity with generally accepted accounting principles.
/s/ Baron & Baron
New York, NY
August 15, 1997
<PAGE>
Page 2
SAXON ACQUISITION CORP.
BALANCE SHEET
JULY 18, 1997
A S S E T S
Current assets:
$ -
======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ -
------
Stockholders' equity:
Common stock, .001 par value
20,000,000 shares authorized;
2,465,735 issued and outstanding $4,931
Paid-in capital 5,060
------
$9,991
------
Less:
Stock Subscription Receivables 9.991
------
$ -
======
The accompanying notes are an integral
part of the financial statements.
<PAGE>
Page 3
SAXON ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
JULY 18, 1997
1. Organization:
Saxon Acquisition Corp. (the "Company") was incorporated in the state of
Delaware on July 9, 1997. The Company is a wholly owned subsidiary of NJS
Acquisition Corporation.
On July 28, 1997 subsequent to the balance sheet date; NJS Acquisition
Corporation transferred its entire stock ownership in Dupont Securities
Group, Inc. ("Dupont") to the Company.
Dupont was incorporated in the state of New York on November 7, 1996 to
engage in the brokerage and investment advisory business. Dupont began
operations on June 10, 1997.
2. Summary of significant accounting policies:
a. Cash and cash equivalents:
Cash and cash equivalents include time deposits, certificates of deposit
and all highly liquid debt instruments with original maturities of three
months or less.
b. Marketable securities:
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity
Securities". The Company's investment securities are classified as
"trading securities". Accordingly, securities are carried at market value
with any unrealized gains and losses being included in income. Realized
gains or losses are computed based on the average cost of the securities
sold.
c. Property and equipment:
Property and equipment are stated at cost. Depreciation is computed over
the useful lives of the assets using the straight-line method.
Leasehold improvements are amortized over the remaining lease term.
Expenditures for repairs and maintenance are charged to operations in the
period incurred.
d. Income taxes:
The provision for income taxes is computed on the pre-tax income of the
Company. Deferred taxes result from the future tax consequences
associated with temporary differences between the amount of assets and
liabilities recorded for tax and financial accounting purposes.
<PAGE>
Page 4
SAXON ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
JULY 18, 1997
2. Summary of significant accounting policies: (Continued)
e. Concentrations of credit risk:
Financial instruments that potentially subject the Company to
significant concentrations of credit risk consist principally of cash
investments. The Company places its cash investments with high quality
financial institutions in an effort to minimize the credit risk.
f. Earnings per share:
The Computation of earnings per share is based on the average number of
outstanding common shares.
3. Subsequent event:
On July 28, 1997 the Company's parent (NJS Acquisition Corporation)
transferred its entire stock ownership in Dupont Securities Group, Inc.
("Dupont") to the Company.
Information from Dupont's audited financial statements as of May 31, 1997
reflected the following information:
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
Current assets:
<S> <C>
Cash and cash equivalents $769,143
Prepaid expenses 10,000
--------
Total current assets 779,143
Property and equipment 79,708
Security deposits 2,800
--------
$861,651
========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Current liabilities:
<S> <C>
Accounts payable and accrued expenses $ 14,504
--------
Stockholders' equity:
Common stock 750,000
Additional paid-in capital 117,210
Accumulated deficit (20,063)
--------
847,147
--------
$861,651
========
</TABLE>
<PAGE>
Page 5
SAXON ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
JULY 18, 1997
3. Subsequent event: (Continued)
STATEMENT OF OPERATIONS
(period from November 7, 1996
(inception) to May 31, 1997)
Dividend income $ 18,408
Operating expenses 38,471
--------
Net loss $(20,063)
========
Dupont began operations on June 10, 1997 (note 1). Unaudited pro-forma
financial information for the two months ended July 31, 1997 reflected the
following:
STATEMENT OF OPERATIONS
Revenues $ 4,172
Operating expenses 33,751
--------
Net loss $(29,579)
========
<PAGE>
DUPONT SECURITIES GROUP, INC.
FINANCIAL STATEMENTS
MAY 31, 1997
<PAGE>
DUPONT SECURITIES GROUP, INC.
TABLE OF CONTENTS
November 7, 1996 (Inception) to May 31, 1997
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Independent Auditors' Report 1
Balance Sheet 2
Statement of Operations 3
Statement of Stockholders' Equity 4
Statement of Cash Flows 5
Notes to Financial Statements 6-8
Supporting Schedules:
Computation of Net Capital Pursuant to Rule 15c3-1 9
Computation for Determination of the Reserve
Requirements and Information Relating to
Possession or Control Requirements for Brokers
and Dealers Pursuant to Rule 15c3-3 10
Reconciliation of the Audited Computation of Net
Capital and Focus Report - Part IIA Pursuant
to Rule 17A-5 11
Independent Auditors' Supplementary Report on
Internal Accounting Control 12-13
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Dupont Securities Group, Inc.
Greenwich, CT
We have audited the accompanying balance sheet of Dupont Securities Group, Inc.
as of May 31, 1997, and the related statements of operations, stockholders'
equity and cash flows for the period from November 7, 1996 (inception) to May
31, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Dupont Securities Group, Inc.
as of May 31, 1997, and the results of their operations and their cash flows for
the period from November 7, 1996 (inception) to May 31, 1997, in conformity with
generally accepted accounting principles.
Our audit was conducted for the purpose of expressing an opinion on the basic
financial statements taken as a whole. The information contained on pages 9
through 11, inclusive, is presented for purposes of additional analysis and is
not a required part of the basic financial statements, but is supplementary
information required by Rules 15c3-1, 15c3-3 and 17a-5 of the Securities and
Exchange Commission. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ Baron & Baron
New York, NY
June 27, 1997
-1-
<PAGE>
DUPONT SECURITIES GROUP, INC.
BALANCE SHEET
May 31, 1997
<TABLE>
<CAPTION>
ASSETS
CURRENT ASSETS
<S> <C>
Cash and cash equivalents $ 769,143
Prepaid expenses 10,000
----------
Total current assets 779,143
----------
Property and equipment (Note 3) 79,708
Security deposits 2,800
----------
$ 861,651
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 14,504
----------
Stockholders' equity:
Common stock (Note 4) 750,000
Additional paid-in-capital 117,210
Accumulated deficit (20,063)
----------
847,147
----------
$ 861,651
==========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
<PAGE>
DUPONT SECURITIES GROUP, INC.
STATEMENT OF OPERATIONS
Period from November 7, 1996 (inception) to May 31, 1997
<TABLE>
<S> <C>
Revenues:
Dividend income $ 18,408
----------
Expenses:
Regulatory and licensing fees 12,618
Professional fees 16,718
Other operating expenses 7,935
----------
37,271
----------
Loss before provision for income taxes (18,863)
Provision for income taxes 1,200
----------
Net loss $ (20,063)
==========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
-3-
<PAGE>
DUPONT SECURITIES GROUP, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
period from November 7, 1996 (inception) to May 31, 1997
<TABLE>
<CAPTION>
Additional
Paid-
Total Common Stock in-Capital (Deficit)
-------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
November 7, 1996 (inception) $ - $ - $ - $ -
Issuance of common stock 750,000 750,000 - -
Contribution of capital 117,210 - 117,210 -
Net loss (20,063) - - (20,063)
-------- ----------- ----------- ---------
May 31, 1997 $847,147 $ 750,000 $ 117,210 $ (20,063)
======== =========== =========== =========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
-4-
<PAGE>
DUPONT SECURITIES GROUP, INC.
STATEMENT OF CASH FLOWS
period from November 7, 1996 (inception) to May 31, 1997
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (20,063)
Adjustments to reconcile net loss to net cash
used by operating activities:
Changes in assets and liabilities:
Prepaid expenses and other assets (12,800)
Accounts payable and accrued expenses 14,504
----------
Net cash used by operating activities (18,359)
----------
CASH FLOWS USED BY INVESTING ACTIVITIES
Capital expenditures (79,708)
----------
CASH FLOWS USED BY FINANCING ACTIVITIES
Issuance of common stock and capital contributions 867,210
----------
Net increase in cash and cash equivalents 769,143
CASH AND CASH EQUIVALENTS, beginning of period -
----------
CASH AND CASH EQUIVALENTS, end of period $ 769,143
==========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
-5-
<PAGE>
DUPONT SECURITIES GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
May 31, 1997
NOTE 1. ORGANIZATION
The Company was incorporated in the State of New York on November 7, 1996
to engage in the brokerage and investment advisory business. The Company
is a wholly owned subsidiary of NJS Acquisition Corporation. The Company
began operations on June 10, 1997.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Cash and cash equivalents:
Cash and cash equivalents include time deposits, certificates of
deposit and all highly liquid debt instruments with original
maturities of three months or less.
b. Marketable securities:
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 115, "Accounting for Certain Investments in Debt and
Equity Securities". The Company's investment securities are classified
as "trading securities". Accordingly, securities are carried at market
value with any unrealized gains and losses being included in income.
Realized gains or losses are computed based on the average cost of the
securities sold.
c. Property and equipment:
Property and equipment are stated at cost. Depreciation is computed
over the useful lives of the assets using the straight-line method.
Leasehold improvements are amortized over the remaining lease term.
Expenditures for repairs and maintenance are charged to operations in
the period incurred.
d. Income taxes:
The provision for income taxes is computed on the pre-tax income of
the Company. Deferred taxes result from the future tax consequences
associated with temporary differences between the amount of assets and
liabilities recorded for tax and financial accounting purposes.
e. Concentrations of credit risk:
Financial instruments that potentially subject the Company to
significant concentrations of credit risk consist principally of cash
investments. The Company places its cash investments with high quality
financial institutions in an effort to minimize the credit risk.
-6-
<PAGE>
DUPONT SECURITIES GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
May 31, 1997
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (CONTINUED)
f. Revenue recognition:
Consulting and advisory fee revenue was recognized when services
provided were substantially completed.
Transactions in securities and related commission expense are recorded
on a trade date basis.
g. Start-up costs:
The Company expensed all start-up costs associated with the
development of its brokerage and investment advisory business. The
Company began operations on June 10, 1997.
NOTE 3. PROPERTY AND EQUIPMENT
<TABLE>
<S> <C>
Computer equipment $ 43,629
Furniture and office equipment 23,555
Leasehold improvements 12,524
---------
79,708
Less accumulated depreciation and amortization -
---------
$ 79,708
=========
</TABLE>
The property and equipment was placed in service on June 10, 1997 which is
the date the Company began operations.
NOTE 4. STOCKHOLDERS' EQUITY
At May 31, 1997, the Company was authorized to issue 200 shares of common
stock with no par value. At that date 100 shares were issued and
outstanding.
NOTE 5. NET CAPITAL REQUIREMENTS
As a registered broker/dealer, the Company is subject to the Securities
and Exchange Commission's net capital rule which requires that the Company
maintain a minimum net capital as defined, of 12.5% of aggregate
indebtedness or $100,000, whichever is greater.
Net capital and aggregate indebtedness change from day-to-day, but, as of
May 31, 1997, the Company had net capital of $754,639 which exceeded
requirements by $654,639.
-7-
<PAGE>
DUPONT SECURITIES GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
May 31, 1997
NOTE 6. LEASE COMMITMENT
The Company leases office facilities pursuant to the terms and conditions
of a one year and three year three month lease.
At May 31, 1997, the minimum future rental commitments under
noncancellable leases payable over the remaining lives of the leases are:
<TABLE>
<S> <C>
Year ending May 31, 1998 $37,850
1999 33,600
2000 33,600
</TABLE>
-8-
<PAGE>
DUPONT SECURITIES GROUP, INC.
COMPUTATION OF NET CAPITAL REQUIREMENTS
PURSUANT TO RULE 15C3-1
May 31, 1997
<TABLE>
<S> <C>
Credits:
Stockholders' equity $ 847,147
Debits:
Non-allowable assets:
Prepaid expenses and other assets 12,800
Property and equipment 79,708
----------
Net capital 754,639
Minimum net capital requirements - greater of 12.5% of aggregate
indebtedness or $100,000 100,000
----------
Net capital in excess of requirements $ 654,630
==========
Ratio of aggregate indebtedness to net capital 1.9%
==========
Aggregate indebtedness:
Accounts payable and accrued expenses $ 14,504
==========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
-9-
<PAGE>
DUPONT SECURITIES GROUP, INC.
COMPUTATION FOR DETERMINATION OF
THE RESERVE REQUIREMENTS AND INFORMATION RELATING TO
POSSESSION OR CONTROL REQUIREMENTS FOR BROKERS
AND DEALERS PURSUANT TO RULE 15C3-3
May 31, 1997
As of May 31, 1997, the Company has not effected any transactions for anyone
defined as a customer under Rule 15c3-3. Accordingly, there are no items to
report under the requirements of this rule.
-10-
<PAGE>
DUPONT SECURITIES GROUP, INC.
RECONCILIATION OF THE AUDITED COMPUTATION OF
NET CAPITAL AND FOCUS REPORT - PART IIA
PURSUANT TO RULE 17a-5
May 31, 1997
<TABLE>
<S> <C>
Net capital per focus report Part IIA $ 769,143
Accounts payable and accrued expenses (14,504)
----------
Net capital 754,639
==========
</TABLE>
-11-
<PAGE>
DUPONT SECURITIES GROUP, INC.
INDEPENDENT AUDITORS' SUPPLEMENTARY REPORT ON
INTERNAL ACCOUNTING CONTROL
May 31, 1997
<PAGE>
INDEPENDENT AUDITORS' SUPPLEMENTARY REPORT
ON INTERNAL ACCOUNTING CONTROL
Board of Directors
Dupont Securities Group, Inc.
Greenwich, CT
In planning and performing our audit of the financial statements of Dupont
Securities Group, Inc. for the period from November 7, 1996 (inception) to May
31, 1997, we considered its internal control structure, including procedures for
safeguarding securities, in order to determine our auditing procedures for the
purpose of expressing our opinion on the financial statements and not to provide
assurance on the internal control structure.
We also made a study of the practices and procedures followed by the Company in
making the periodic computations of aggregate indebtedness and net capital under
rule 17a-3(a)(11) and the procedures for determining compliance with the
exemptive provisions of rule 15c3-3. We did not review the practices and
procedures followed by the Company in making the quarterly securities
examinations, counts, verifications and comparisons, and the recordation of
differences required by rule 17a-13 or in complying with the requirements for
prompt payment for securities under section 8 of Regulation T of the Board of
Governors of the Federal Reserve System, because the Company does not carry
security accounts for customers or perform custodial functions relating to
customer securities.
The management of the Company is responsible for establishing and maintaining an
internal control structure and the practices and procedures referred to in the
preceding paragraph. In fulfilling this responsibility, estimates and judgments
by management are required to assess the expected benefits and related costs of
internal control structure policies and procedures and of the practices and
procedures referred to in the preceding paragraph and to assess whether those
practices and procedures can be expected to achieve the Commission's above
mentioned objectives. Two of the objectives of an internal control structure and
the practices and procedures are to provide management with reasonable, but not
absolute, assurance that assets for which the Company has responsibility are
safeguarded against loss from unauthorized use or disposition and that
transactions are executed in accordance with management's authorization and
recorded properly to permit preparation of financial statements in conformity
with generally accepted accounting principles. Rule 17a-5(g) lists additional
objectives of the practices and procedures listed in the preceding paragraph.
Because of inherent limitations in any internal control structure or the
practices and procedures referred to above, errors or irregularities may occur
and not be detected. Also, projection of any evaluation of them to future
periods is subject to the risk that they may become inadequate because of
changes in conditions or that the effectiveness of their design and operation
may deteriorate.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be material
weaknesses under standards established by the American Institute of Certified
Public Accountants. A material weakness is a condition in which the design or
operation of the specific internal control structure elements does not reduce to
a relatively low level the risk that errors or irregularities in amounts that
would be material in relation to the financial statements being audited may
occur and not be detected within a timely period by employees in the normal
course of performing their assigned functions. However, we noted no matters
involving the internal control structure, including procedures for safeguarding
securities, that we consider to be material weaknesses as defined above.
-12-
<PAGE>
We understand that practices and procedures that accomplish the objectives
referred to in the second paragraph of this report are considered by the
Commission to be adequate for its purposes in accordance with the Securities
Exchange Act of 1934 and related regulations, and that practices and procedures
that do not accomplish such objectives in all material respects indicate a
material inadequacy for such purposes. Based on this understanding and on our
study, we believe that the Company's practices and procedures were adequate at
May 31, 1997, to meet the Commission's objectives.
This report recognizes that it is not practicable in an organization the size of
the Company's to achieve all the divisions of duties and cross-checks generally
included in a system of internal accounting control and that alternatively
greater reliance must be placed on surveillance by management.
This report is intended solely for the use of management, the Securities and
Exchange Commission, the National Association of Securities Dealers, Inc. and
other regulatory agencies which rely on Rule 17a-5(g) under the Securities
Exchange Act of 1934, and should not be used for any other purpose.
New York, NY
June 27, 1997
-13-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
-------------------------------------------
The following table is the estimated expenses of this offering.
Securities and Exchange Commission
Registration fee $ 303.03
Printing of Prospectus and Certificates 10,000.00
Legal fees (including blue sky) 40,000.00
Accountants' fees 10,000.00
Fees and expenses of Transfer Agent 5,000.00
Miscellaneous 9,697.97
----------
Total $75,000.00
==========
Item 14. Indemnification of Directors and Officers
-----------------------------------------
The Registrant's Certificate of Incorporation contains a provision which,
in substance, eliminates the personal liability of the directors of the
Registrant and its stockholders for monetary damages for breaches of their
fiduciary duties as directors to the fullest extent permitted by Delaware law.
By virtue of this provision, under current Delaware law a director of the
Registrant will not be personally liable for monetary damages for breach of his
fiduciary duty, except for liability for (a) breach of his duty of loyalty to
the Registrant or to its stockholders, (b) acts or omissions not in good faith
or that involve intentional misconduct or a knowing violation of law, (c)
dividends or stock repurchases or redemptions that are unlawful under Delaware
laws and (d) any transaction from which he receives an improper personal
benefit. This provision pertains only to breaches of duty by directors as
directors and not in any other corporate capacity, such as officers, and limits
liability only for breaches of fiduciary duties under Delaware corporate law and
not for violations of other laws such as the federal securities laws. As a
result of the inclusion of such provision, stockholders may be unable to recover
monetary damages against directors for actions taken by them that constitute
negligence or gross negligence or that are in violation of their fiduciary
duties, although it may be possible to obtain injunctive or other equitable
relief with respect to such actions. The inclusion of this provision in the
Registrant's Certificate of Incorporation may have the effect of reducing the
likelihood of derivative litigation against directors, and may discourage or
deter stockholders or Management from bringing a lawsuit against directors for
breach of their duty of care, even though such an action, if successful, might
otherwise have benefitted the Registrant and its stockholders.
The General Corporation Law of Delaware provides generally that a
corporation may indemnify any person who was or is a party to or is threatened
to be made a party to
II-1
<PAGE>
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative in nature to procure a judgment in
its favor, by reason of the fact that he is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees) and, in a proceeding not by or in the right of the
corporation, judgments, fines and amounts paid in settlement, actually and
reasonably incurred by him in connection with such suit or proceeding, if he
acted in good faith and in a manner believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reason to believe his conduct was unlawful. Delaware law
further provides that a corporation will not indemnify any person against
expenses incurred in connection with an action by or in the right of the
corporation if such person shall have been adjudged to be liable for negligence
or misconduct in the performance of his duty to the corporation unless and only
to the extent that the court in which such action or suit was brought shall
determine that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for the expenses which such court shall deem proper.
The indemnification and advancement of expenses provided by, or granted
pursuant to Delaware Corporation Law is not be deemed exclusive of any other
rights to which those seeking indemnification or advance of expenses may be
entitled under any bylaw, agreement, vote of stockholders of disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office.
Article IX of the Registrant's By-Laws provides that the officers and
directors of the Registrant shall be entitled to indemnification to the maximum
extent permitted by Delaware law.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment of the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-2
<PAGE>
Item 15. Recent Sales of Unregistered Securities
---------------------------------------
On July 10, 1997 and August 15, 1997, Saxon sold 50 shares and
4,931,420 shares respectively, of Saxon's Common Stock to NJS Acquisition
Corporation ("NJS") for a total purchase price of $10,000.
Exemption is claimed on the sale of an aggregate of 4,931,420 shares
of the Registrant's Common Stock to NJS Acquisition Corp. pursuant to Section
4(2) of the Securities Act of 1933, as amended, inasmuch as the sale was made to
the founder of the Registrant. On September 10, 1997, the Registrant declared
a one-for-two reverse stock split. Exemption is claimed pursuant to Rule
145(a)(1) of the Securities Act. On September 11, 1997, the Registrant granted
options to purchase 400,000 shares of the Registrant's Common Stock to each of
Nicholas J. Seccafico, Jr., and Lindo Garuffi, executive officers and directors
of the Registrant. Exemption is claimed for the grant of the aforementioned
options under Section 4(2) of the Securities Act inasmuch as they have agreed to
take for investment purposes and no underwriter was involved in the grant of
such securities.
Item 16. Exhibits and Financial Statement Schedules
------------------------------------------
(a) Exhibits. The following exhibits have been previously filed unless
otherwise noted.
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
3.1 Articles of Incorporation of Registrant
3.2 By-Laws of Registrant
5 Opinion re: legality *
10.1 Clearing Agreement dated October 17, 1997 between
Dupont Securities Group, Inc. and Schroder & Co., Inc.*
10.2 Dupont lease for facilities in New York *
10.3 Stock Option Plan
11 Earnings per share - See notes to financial statements
21 Subsidiaries of Registrant - (See "Prospectus Summary"
included in the Prospectus which forms a part of this
Registration Statement.)
23 Consent of Baron & Baron *
27 Selected Financial Data *
</TABLE>
_______________
* Filed herewith.
II-3
<PAGE>
(b) Financial Statement Schedules - Not applicable.
Item 17. Undertakings
------------
The undersigned Registrant hereby further undertakes:
(1) To file, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act of 1933, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment of the Registrant of expenses incurred or paid by a
director, officer, or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
For determining any liability under the Securities Act, the Registrant will
treat the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant
II-4
<PAGE>
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act as part of
this Registration Statement as of the time the Commission declared it effective.
For determining any liability under the Securities Act, the Registrant will
treat each post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Huntington Station, State
of New York on June 8, 1998.
By: /s/ Nicholas J. Seccafico
---------------------------------------
Nicholas J. Seccafico, President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
Signatures Titles Date
- ---------- ------ ----
President, Chief Financial
/s/ Nicholas J. Seccafico and Accounting Officer
- ------------------------- and a Director of the
Nicholas J. Seccafico Company June 8, 1998
/s/ Lindo Garuffi
- ------------------------- Secretary and a Director
Lindo Garuffi of the Company June 8, 1998
II-6
<PAGE>
EXHIBIT 5.0
LESTER MORSE P.C.
111 GREAT NECK ROAD
GREAT NECK, NEW YORK 11021
TELEPHONE (516) 487-1446
TELECOPIER (516) 487-1452
June 8, 1998
Board of Directors
Saxon Acquisition Corp.
33 Eleventh Avenue
Huntinton Station, NY 11746
Re: Saxon Acquisition Corp.
Registration Statement on Form S-1
File No. 333-37485
----------------------------------
Gentlemen:
We have reviewed the Certificate of Incorporation and amendments thereto,
By-Laws (as amended), corporate proceedings and other documents of Saxon
Acquisition Corp. (the "Company") and based upon the foregoing, it is our
opinion that the securities being registered with the Securities and Exchange
Commission pursuant to the Registration Statement (File No. 333-37485), as
amended, will when sold, be legally issued, fully paid and non-assessable.
No consents, approvals, authorizations or orders of agencies, officers or
other regulatory authorities are necessary for the valid authorization, issuance
or sale of the shares hereunder, except as such may be required under the
Securities Act of 1933, as amended, or state securities, or Blue Sky laws.
We consent to the filing of this opinion as an exhibit to the aforesaid
Registration Statement and further consent to the reference made to us under the
caption "Legal Matters" in the Prospectus constituting a part of such
Registration Statement. Nothing contained herein shall be considered an
omission that we are deemed an expert within the meaning of the Securities Act
of 1933, as amended.
Very truly yours,
LESTER MORSE P.C.
/s/ Steven Morse
SM:ag
<PAGE>
EXHIBIT 10.1
AGREEMENT
This agreement, made this 17th day of October 1997 (the "Agreement'~
between Schroder & Co. Inc. a Delaware corporation ("Schroder" or the "Clearing
Firm'), and Dupont Securities Group Inc. (the "Introducing Firm")
WITNESSETH THAT:
WHEREAS, the Introducing Firm desires to avail itself of the clearing
services of Schroder as more fully set forth herein, and
WHEREAS, Schroder desires to extend such clearing services to the
Introducing Firm;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and other good and valuable considerations the receipt of which is hereby
acknowledged, the parties hereby covenant and agree as follows:
I. SERVICES TO BE PERFORMED BY SCHRODER.
A. Schroder will carry individually on its books on a fully disclosed basis
the securities accounts on behalf of the Introducing Firm's customers whose
accounts have been introduced by the Introducing Firm and are accepted by
Schroder and will similarly carry all of the Introducing Firm's firm accounts
(collectively the "Introduced Accounts") commencing with the trade date of
_________________________.
B. Schroder will prepare and mail to the Introduced Accounts confirmations of
purchases and sales of securities imprinted "Upon Instructions of' the
Introducing Firm and monthly statements of account (or quarterly statements
where appropriate due to inactivity) imprinted "In account with" the Introducing
Firm and bearing the name of Schroder and reflecting all transactions reported
to Schroder as having been executed by the Introducing Firm for the Introduced
Accounts pursuant to paragraph LA. above,
C. Schroder shall be responsible for establishing and implementing procedures
for the transmission or execution of orders for the Introduced Accounts.
D. Schroder will settle all transactions reported to it pursuant to paragraph
I.B. above and all related contracts.
E. Schroder will perform all cashiering functions in connection with
transactions reported to it by the Introducing Firm for the Introduced Accounts
including, but not limited to, the receipt, transfer and delivery of securities
purchased, sold, borrowed and loaned, making and receiving payment therefore,
and if requested by the Introducing Firm, holding in custody and safekeeping all
securities and cash so received
F. Schroder will process warrants, exchange offers. rights offerings, tender
offers and redemptions for securities which are held by Schroder in the same
manner such offers and redemptions are processed for Schroder's own accounts, or
as mutually agreed between Schroder and the Introducing Firm.
G. Schroder will forward all annual reports, proxy materials, proxies and
other reports with respect to securities which are held by Schroder in
accordance with applicable rules and regulations, to the extent such material is
provided on a timely basis to Lewco Securities Corp. by the applicable company.
1
<PAGE>
H. Schroder will accept and remit dividends and interest for securities which
are held by Schroder (or in its name of any subsidiary or nominee) for
Introduced Accounts,
I. In accordance with the requirements of the Securities and Exchange
Commission ("SEC') and all the national securities exchanges and associations
having jurisdiction over such activities, Schroder will prepare, maintain and
preserve for the required periods books, records and documentation of all
transactions with respect to which it has performed clearance or cashiering
services for the Introduced Accounts. Provided, however that Schroder shall not
------------------
be responsible for the filing of any regulatory reports required of the
Introducing Firm by the SEC, the National Association of Securities Dealers,
Inc. ("NASD") or any national securities, commodities or other exchange, which
shall be the sole responsibility of the Introducing Firm.
J. Schroder will maintain appropriate stock inventory records for securities
which are deposited with Schroder in connection with transactions cleared by
Schroder for the Introduced Accounts.
K. Schroder will prepare and deliver to the Introducing Firm duplicate
confirmations and statements with respect to transactions cleared for the
Introduced Accounts and daily and monthly computer summaries of all transactions
cleared by Schroder for the Introduced Accounts on the same schedule as
comparable reports are prepared for Schroder's own accounts, or as mutually
agreed.
L. Schroder will comply with all applicable rules and regulations governing
the handling of accounts for employees or officers of member organizations and
self regulatory organizations including, but not limited to, sending duplicate
confirmations to the proper employer for all transactions executed by or cleared
through Schroder for all Introduced Accounts so identified to Schroder,
M. Schroder expressly disclaims an obligation to furnish investment advice to
any Introduced Account. The furnishing of investment advice is to be the
responsibility of the Introducing Firm or any third party investment adviser who
may be employed by the customer.
N. For purposes of the Securities Investor Protection Act and the Securities
and Exchange Commission's financial responsibility rules. Introduced Accounts
are accounts of the Clearing Firm, and not the Introducing Firm.
II. CHARGES.
A. For the services to be performed by Schroder hereunder, the Introducing
Firm agrees to pay the charges listed on Exhibit 1 attached hereto and made
apart hereof
B. In the event that the Introducing Firm or any customer of the Introducing
Firm shall direct any securities transactions (other than those referred to
above) to Schroder during the term of this Agreement, Schroder may either, as
mutually agreed, (i) give appropriate recognition thereto by the reduction of
one or more amounts payable by the Introducing Firm to Schroder hereunder or
(ii) provide additional compensation to the Introducing Firm,
III. OPENING OF ACCOUNTS.
A. At the opening of each Introduced Account, the Introducing Firm shall
furnish Schroder with all customary information concerning its customer which
Schroder requests. At the time of the opening of an Introduced Account. Schroder
shall cause to be delivered to and solicit the return from the customer,
Customers' Agreements on Schroder's forms (or assignments, inform satisfactory
to Schroder, of existing agreements between the customer and the Introducing
Firm) and such other documents as Schroder shall deem necessary with respect to
the account- Schroder's failure to receive any of the above documents
2
<PAGE>
required to be executed and returned shall not be deemed a waiver of the above
requirements. Schroder shall also inform the customer of the existence of this
Agreement pursuant to Rule 382(c) of the New York Stock Exchange. In addition,
on Schroder's request, the Introducing Firm shall furnish Schroder with any
other documents, letters and/or agreements which may be reasonably requested by
Schroder in connection with the opening, operating or maintaining of any
Introduced Account.
B. The Introducing Firm and Schroder shall each have the right to reject any
account, Schroder shall have the right, in its sole discretion, to reject any
account accepted by the Introducing Firm which is then referred to Schroder, and
the right to terminate any account previously accepted by it. Any such action
will be discussed in advance with the Introducing Firm. Any account previously
accepted by Schroder may not be terminated by the Introducing Firm except by
written notice to Lewco Securities Corp., 2 Broadway, New York, NY 10004, on a
form provided by Lewco Securities Corp. in order to permit the closing of all
open transactions.
IV. INTEREST.
Schroder will charge interest on debit balances of Introduced Accounts,
whether cash or margin, in accordance with Schroder's cash or margin account
agreement then in use, with Schroder's letter to customers regarding Credit
Charges and Margin Requirements and with Regulation T of the Board of Governors
of the Federal Reserve System and other applicable laws, rules and regulations.
Consistent with the foregoing, the Introduced Accounts shall be charged interest
at such rates as shall be mutually agreed by the parties hereto. Schroder shall
be responsible for compliance with Regulation T of the Federal Reserve Board and
New York Stock &change regulation, with respect to any margin accounts accepted
by it.
V. TRANSACTIONS AND MARGIN.
A. Schroder will advise the Introducing Firm promptly of initial and
maintenance margin deposits by Introduced Accounts required by law, rule or
regulation or in accordance with Schroder's Margin Account Agreement. The
Introducing Firm shall be responsible for assuring that any initial margin so
required is deposited on or before the settlement date for each margin
transaction and that full payment is made on the settlement date for each cash
transaction. In addition, the Introducing Firm will use its best efforts to
assist Schroder in obtaining the deposit of any maintenance margin so required
The maintenance margin required by Schroder for the Introduced Accounts shall be
the same that Schroder requires of its own customers. This requirement, which
may be changed at any time in Schroder's sole discretion, shall initially be 35%
B. In the event any such deposit is not timely made, Schroder will inform the
Introducing Firm of such situation and discuss with the Introducing Firm
appropriate action; provided, however, that whenever Schroder deems action
appropriate pursuant to the applicable margin agreement, it may, after notice to
the Introducing Firm, exercise any and all rights granted to it under said
margin agreement.
C. The Introducing Firm shall be responsible, and hereby agrees to indemnify
Schroder, for any loss or expense, including interest expense, suffered by
Schroder because of the failure of any Introduced Account.. without fault on the
part of Schroder, after prior notice to such Introduced Account and the
Introducing Firm, (i) to pay for securities purchased for its account by
settlement date; (ii) to promptly deliver securities sold or otherwise disposed
of for such account in proper negotiable form; (iii) to deposit by settlement
date sufficient and adequate initial margin in connection with any margin
transactions; or (iv) to promptly deposit sufficient and adequate maintenance
margin upon Schroder's request to the Introducing Firm. The Introducing Firm
agrees to pay promptly any loss or expense as determined by Schroder under this
paragraph V.C, such determination shall be in a manner consistent with that
charged both internal Schroder departments and all other clearing firms.
3
<PAGE>
D. In the event any designated officer of the Introducing Firm requests in
writing that Schroder withhold contemplated actions to "sell out" or "buy in" on
Introduced Accounts for a specified period of time and Schroder complies in full
or in part with such request, the Introducing Firm agrees to reimburse Schroder
promptly for any loss or expenses (including but not limited to interest on any
such loss or expense) sustained by any total or partial compliance with such
request.
E. Where the Introducing Firm designates the contra broker in any transaction
executed by Schroder on the Introducing Firm's instruction, the Introducing Firm
shall assume the risk of default by the contra broker and shall indemnify
Schroder for any loss or expense including loss or expense resulting from
failure or liquidation of the contra broker which latter loss or expense shall
be shared in the same ratio as commissions are shared hereunder, Schroder shall
similarly indemnify the Introducing Firm if Schroder designates the contra
broker on any transaction it executes.
V1. SUPERVISION
A. The Introducing Firm shall maintain an organized program of supervision and
compliance, consistent with the rules and regulations of the SEC, the National
Association of Securities Dealers, Inc., if applicable, and any applicable
national securities exchanges, Such program shall include, but not be
necessarily limited to, the following types of procedures:
(i) Inquiry review, verification and approval of all new accounts for the
purpose of establishing the identity, capacity to contract, reputability,
financial condition, credit worthiness, investment objectives and needs of each
prospective client for whom it is proposed to open an Introduced Account (and,
if applicable, essential information concerning his agent).
(ii) Review and approval of the basis for any suitability of all stock,
bond or option recommendations.
(iii) Establish and implement procedures for the transmission and
execution of orders received by the Introducing Firm and from its customers or
initiated by the Introducing Firm pursuant to discretionary authority or power
of attorney.
(iv) Screen all orders transmitted and all transactions reported by the
Introducing Firm to Schroder prior to execution and all transactions prior to
settlement.
(v) Review of all daily transactions and monthly account statements on a
timely basis.
(vi) Review and approval of all restricted or insider securities
transactions, with prior notification of such transactions to and clearance by
the Compliance Department of Schroder and such other persons as shall, from time
to time, be designated by Schroder.
(vii) Review and approval of all discretionary account trading author and
all discretionary transactions.
(viii) Review and approval of all customer purchases of new and
secondary issues.
(ix) Registration of the Introducing Firm as a broker/dealer and of its
sales personnel in all states in which the Introducing Firm conducts business
and such registration is required.
B. The Introducing Firm represents that one or more of its officers has been
designated as having supervisory responsibility for all of the Introduced
Accounts and that the Introducing Firm has established,
4
<PAGE>
and will implement on a continuous basis, written supervisory procedures to
assure that all transactions cleared by Schroder for Introduced Accounts are in
compliance with applicable Federal and state securities laws and the rules and
regulations of the NASD and applicable exchanges.
C. The Introducing Firm further represents that it is in compliance with the
applicable net capital requirements of the SEC, the NASD, if applicable, and any
applicable securities exchanges and that it will provide to persons designated
by Schroder copies of each Statement of Financial Condition contained in a
Financial and Operational Uniform Single ("FOCUS") Report filed by the
Introducing Firm with the SEC, and any other applicable regulatory authority
simultaneous with the filing thereof.
D. The Introducing Firm shall be responsible, and hereby agrees to indemnify
Schroder, for any loss, liability, damage and expense, including reasonable fees
and expenses of legal counsel, which Schroder may incur or sustain because of
the failure of the Introducing Firm or any of its officers to perform the
supervision provided in this paragraph V1.
VII PAYMENT
A. Payment for services hereunder, and reimbursement to the Introducing Firm
for commissions received on its behalf by Schroder shall be made in the
following manner:
(i) On the 15th day of each month (or the next business day if the 15th day
is not a business day) the Introducing Firm shall be paid 90% of the net amount
due it hereunder for transactions settled through the end of the last complete
calendar week ending prior to such 15th day:
(ii) On the last business day of each month the Introducing Firm shall be
paid 90% of the net amount due it hereunder for transactions settled through the
end of the last complete calendar week ending prior to such last business day
(less any amounts paid pursuant to paragraph (i) immediately above); and
(iii) On the 15th day of each month (or the next business day if such 15th
day is not a business day) the Introducing Firm shall be paid the net balance
due it for all transactions settled through the last business day of the
preceding calendar month and not previously paid to it pursuant to paragraphs
(i) and (ii) immediately above.
B. Schroder shall deliver to the Introducing Firm a monthly reconciliation
summarizing the calculation of such amounts on the 15th of each month during the
term hereof.
C.. All payments to be made by Schroder to the Introducing Firm hereunder
shall be by funds wired to the bank designated by the Introducing Firm or by a
transfer of funds to one or more accounts of the Introducing Firm at Schroder.
VIII. ERRORS, CONTROVERSIES AND INDEMNITIES.
A. Errors, misunderstandings or controversies, except those specifically
otherwise covered in this Agreement, with Introduced Accounts which shall arise
out of the acts or omissions of the Introducing Firm or its employees when not
at the direction of Schroder, without fault on the part of Schroder, shall be
the responsibility and liability of the Introducing Firm, In the event, however,
that by reason of such error, misunderstanding or controversy, the Introducing
Firm in its discretion deems it advisable to commence an action or proceeding
against an Introduced Account, the Introducing Firm shall provide prior notice
to Schroder of such commencement and shall indemnify and hold the Clearing Firm
harmless from any loss, liability, damage, cost or expense (including but not
limited to fees and expenses of legal counsel) which the Clearing Firm may incur
or sustain in connection therewith or under any settlement thereof.
5
<PAGE>
B. Errors, misunderstandings or controversies, except those specifically
otherwise covered in this Agreement, with Introduced Accounts which shall arise
out of the acts or omissions of Schroder or its employees when not at the
direction of the Introducing Firm, without fault on the part of the Introducing
Firm, shall be the responsibility and liability of Schroder- In the event,
however, that by reason of such error, misunderstanding or controversy, Schroder
in its discretion deems it advisable to commence an action or proceeding against
an Introduced Account, Schroder shall provide prior notice to the Introducing
Firm of such commencement and shall indemnify and hold the Introducing Firm
harmless from any loss, liability, damage, cost or expense (including, but not
limited, to fees and expenses of legal counsel), which the Introducing Firm may
incur or sustain in connection therewith or under any settlement thereof.
Schroder recognizes that it would be desirable to resolve any such errors,
misunderstandings or controversies without litigation, and if possible, by
negotiation between Schroder and the Introducing Firm. To this end, Schroder
will give the Introducing Firm as much prior notice before commencing an action
or proceeding against an Introduced Account as Schroder deems consistent with
adequate protection Of its interests.
C. (i) Schroder shall have the right to take whatever action it deems
necessary to promptly effect a mitigation of damages or mitigation of losses
arising out of a controversy or misunderstanding between Schroder and an
Introduced Account without obtaining the consent of the Introducing Firm,
provided such action shall be without prejudice to the rights of either party
hereunder. Schroder recognizes the Introducing Firm's desire to preclude
Schroder's direct contact with the client with respect to any such action
referred to above, without initially contacting the Introducing Firm whenever
such contact is possible, consistent with Schroder's protection of its
interests.
(ii) If any error, controversy or misunderstanding shall result in the
bringing of an action or proceeding against the Introducing Firm or Schroder by
an Introduced Account, the party against whom such action or proceeding is
brought shall give written notice to the other party to this Agreement if a
claim is intended to be asserted against such other party with respect to any
loss, liability, damage or expense arising out of such action or proceeding, and
such other party shall be entitled to participate in the defense thereof at its
own expense.
D. Schroder and the Introducing Firm each agrees to indemnify the other and
hold the other harmless from and against any loss, liability, damage, cost or
expense (including but not limited to reasonable fees and expenses of legal
counsel) arising out of or resulting from any failure by the indemnifying party
or any of its employees to carry out fully the duties and responsibilities
assigned to the indemnifying party herein or any breach of any representation or
warranty made herein by the indemnifying party.
E. The indemnification provisions of this Agreement, including but not limited
to those in paragraphs V., VI, VIII.A., VIII.B., VIII.C and VIII.D. above shall
remain operative and in full force and effect, regardless of the termination of
this Agreement, and shall survive any such termination.
IX CUSTOMER COMPLAINTS.
Each of the Introducing Firm and Schroder shall notify the other of any
complaints and regulatory inquiries received. In the event, however, that by
reason of any such complaint or inquiry, either the Introducing Firm or Schroder
deems it advisable to settle the complaint, the settling party shall (provided
the non-settling party is without fault with respect thereto) indemnify and hold
the other harmless from any loss, liability, damage, cost or expense (including
but not limited to reasonable fees and expenses of legal counsel) which it may
incur or sustain in connection therewith or any settlement thereof.
6
<PAGE>
X. REPRESENTATIONS AND WARRANTIES.
A. The Introducing Firm represents and warrants as follows:
(i) The Introducing Firm is in compliance, and during the term of this
Agreement will remain in compliance with (a) the capital requirements of the
SEC, the NASD, if applicable, and all applicable Exchanges and (b) the capital
requirements of every state in which the Introducing Firm is licensed as a
broker/dealer.
(ii) The Introducing Firm will immediately notify Schroder should it be in
violation of the net capital rules and regulations of any regulatory or self-
regulatory organization to whose jurisdiction the Introducing Firm is subject.
(iii) The Introducing Firm is a member in good standing of the NASD. The
Introducing Firm will promptly notify Schroder of any changes in its exchange or
association memberships or affiliations.
(iv) The Introducing Firm is and during the term of this Agreement will
remain duly registered or licensed and in good standing as a broker/dealer under
all applicable Federal and state laws, rules and regulations as well as under
the constitutions, rules and regulations of all applicable self-regulatory
organizations.
(v) The Introducing Firm shall keep confidential any information it may
acquire as a result of this Agreement regarding the business and affairs of the
Clearing Firm, which requirement shall survive the termination of this
Agreement.
B. Schroder represents and warrants as follows:
(i) Schroder is in compliance, and during the term of this Agreement will
remain in compliance with (a) the capital and financial reporting requirements
of every national securities exchange and national securities brokers or dealers
association of which it is a member, (b) the capital requirements of the SEC,
and (c) the capital requirements of every state in which it is licensed as a
broker/dealer.
(ii) Schroder will immediately notify the Introducing Firm should it be in
I violation of the net capital rules and regulations of any regulatory or self-
regulatory organization to whose jurisdiction Schroder is subject.
(iii) Schroder is a member in good standing of the NYSE, the Chicago Board
Options Exchange and the Boston, Midwest and Philadelphia Stock Exchanges, AMEX,
and the NASD. Schroder will promptly notify the Introducing Firm of any changes
in its exchange memberships or affiliations.
(iv) Schroder is and during the term of this Agreement will remain duly
registered or licensed and in good standing as a broker/dealer under all
applicable laws, rules and regulations as well as under the constitutions, rules
and regulations of all applicable self-regulatory organizations.
(v) The names and addresses of the Introducing Firm's customers which have
or which may come to Schroder's attention in connection with the clearing and
related functions it has assumed under this Agreement are confidential and shall
not be utilized by Schroder except in connection with the functions performed by
Schroder pursuant to this Agreement.
(vi) Schroder shall keep confidential any information it may acquire as a
result of this Agreement regarding the business, affairs and Introduced Accounts
(unless required by legal process) of
7
<PAGE>
the Introducing Firm which requirement shall survive termination of this
Agreement, and shall provide to the Introducing Firm reasonable access to
Schroder's records pertaining to the Introduced Accounts.
XI. TERMINATION - EVENTS OF DEFAULT
Notwithstanding any provision in the Agreement, the occurrence of a,!
following events shall constitute an Event of Default under this Agreement:
(1) Either Schroder or the Introducing Firm shall fail to perform or
observe any term, covenant or condition to be performed or observed by it
hereunder and such failure shall continue to be unremedied for a period of
thirty (30) days after written notice from the non-defaulting party to the
defaulting party specifying the failure and demand that the same be remedied; or
(2) any representation or warranty made by either Schroder or the
Introducing Firm herein shall prove to be incorrect at any time in any material
respect; or
(3) a receiver, liquidator or trustee of Schroder or the Introducing Firm
or any of the property of either, is appointed by court order and such order
remains in effect for more than 30 days; or Schroder or the Introducing Firm is
adjudicated bankrupt or insolvent; or any of the property of either is
sequestered by court order and such order remains in effect for more than 30
days; or a petition is filed against Schroder or the Introducing Firm under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt..
dissolution or liquidation law of any jurisdiction, whether now or hereafter in
effect, and is not dismissed within 30 days after such filing; or
(4) Schroder or the Introducing Firm files a petition in voluntary
bankruptcy or seeking relief under any provision of any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in effect, or
consents to the filing of any petition against it under any such law; or
(5) Schroder or the Introducing Firm makes an assignment for the benefit of
its creditors, or admits in writing its inability to pay its debts generally as
they become due, or consents to the appointment of a receiver, trustee or
liquidator of Schroder or the Introducing Firm or of all or any part of its
property.
Upon the occurrence of any such Event of Default, the nondefaulting party
may, at its option, by written notice to the defaulting party declare that this
Agreement shall be thereby terminated and such termination shall be effective as
of the date such notice has been received by the defaulting party. Upon the
termination of this Agreement, whether pursuant to this paragraph XI., paragraph
X111. hereof or otherwise, Schroder shall cause the Introduced Accounts to be
transferred to the Introducing Firm or its designee.
XII. REMEDIES CUMULATIVE.
The enumeration herein of specific remedies shall not be exclusive of any
other remedies. Any delay or failure by any party to this Agreement to exercise
any right, power, remedy or privilege herein contained, or now or hereafter
existing under any applicable statute or law, shall not be construed to be a
waiver of such right, power, remedy or privilege or to limit the exercise of
such right, power, remedy or privilege. No single, partial or other exercise of
any such right, power, remedy or privilege shall preclude the further exercise
thereof or the exercise of any other right, power, remedy or privilege.
8
<PAGE>
XIII. MISCELLANEOUS.
A. This Agreement may be cancelled by either party upon sixty (60) days
written notice. Notice shall be effective only upon receipt. Notice shall be
given at the addresses listed below or such other address as shall be specified
in a written notice delivered in accordance herewith. Notices to Schroder shall
be delivered to Michael F Dura and Patrick J. Borruso, at the office of Schroder
& Co. Incorporated, Equitable Center, 787 Seventh Avenue, New York NY 10019.
Notice to the Introducing Firm shall be delivered to:
Louis Galeotafiore.. CFO
------------------------
Dupont Securities Group Inc.
----------------------------
19 Townsend Square
------------------
O~ster Bay, NY H 771
--------------------
(888) 652-6502
--------------
B. This Agreement shall be submitted to and effective only upon approval by
any national securities exchange or regulatory or self-regulatory body having
authority to approve this Agreement.
C. Any dispute or controversy between parties to this Agreement relating to or
arising out of this Agreement, including but not limited to matters reserved for
mutual agreement, shall be settled by arbitration in accordance with the rules
then obtaining of (i) the NYSE if NYSE arbitration is available and (h) the
American Arbitration Association in all other cases. The award of the
arbitrators hereunder shall be final, and judgment upon the award rendered may
be entered in any court having jurisdiction and the parties hereto submit
themselves and their personal representatives to the jurisdiction of any such
court for the purpose of such arbitration and the entering of such judgment,
D. Any assignment of this Agreement shall be subject to the requisite review
and/or approval of any regulatory or self-regulatory agency or body whose review
an&or approval must be obtained prior to the effectiveness and validity of such
assignment. No assignment of this Agreement shall be valid unless the non-
assigning parties consent to such an assignment in writing. Anything herein to
the contrary notwithstanding, Schroder shall have the right unilaterally to
assign this agreement as part of the sale of all or substantially all of the
assets or a majority interest in Schroder.
E. Neither this Agreement nor any operation hereunder is intended to be, shall
not be deemed to be, and shall not be treated as a general or limited
partnership, association or joint venture or agency relationship between the
Introducing Firm and Schroder.
F. Whenever hereinabove reference is made to services to be rendered by or
rights or indemnification of Schroder, such references shall be deemed to
include Schroder's subsidiary Lewco Securities Corp. which may perform services
contemplated hereby at the direction of Schroder, but the performance of
services by Lewco, Securities Corp. shall in no way affect Schroder's
obligations to the Introducing Firm hereunder and, for the purposes of this
Agreement, any services performed by Lewco Securities Corp. shall be deemed to
have been performed by Schroder.
G. The construction and effect of every provision of this Agreement, the
rights of the parties hereunder and any questions arising out of the Agreement
shall he subject to the statutory and common law of the State of New York.
H. The headings preceding the text and paragraphs hereof have been inserted
for convenience and reference only and shall not be construed to affect the
meaning, construction or effect of this Agreement.
9
<PAGE>
I. If any provision or condition of this Agreement shall be held to be
invalid or unenforceable by any court, or regulatory or self-regulatory agency
or body, such invalidity or unenforceability shall attach only to such provision
or condition. The validity of the remaining provisions and conditions shall not
be affected thereby and this Agreement shall be carried out as if any such
invalid or unenforceable provision or condition were not contained herein.
J. Schroder will make available money market funds or other investment
vehicles as mutually agreed, for investment of credit balances of the Introduced
Accounts, and, with regard to money market funds, will provide automatic
features for the investment of cash and the liquidation of shares of such funds
to pay for purchases of other securities. These features will be made available
for other investment vehicles to the extent legally permissible.
K. Schroder will reserve the right to pass along to the Introducing Firm
applicable costs associated with a deconversion.
Made and executed at New York New York on the date first hereinabove set forth.
SCHRODER & CO. INC.
BY /s/ Michael F. Dura
-----------------------------------------
Michael F. Dura, Managing Director
AGREED & ACCEPTED:
DUPONT SECURITIES GROUP INC.
BY /s/ Louis Galeotafiore
----------------------------
Louis Galeotafiore
Chief Financial Officer
10
<PAGE>
EXHIBIT 10.2
LEASE
PARTIES
This lease made this 10th day of March, 1997, by and between Cozy Realty Inc.
("Landlord") and NJS Acquisition Corporation 33-11th Ave, Hunt Sta. N.Y. 11
743, ("Tenant"),
PREMISES
Landlord leases to tenant and tenant leases from landlord, the property with
improvements known as 19 Townsend Square Oyster Bay N.Y. 11771 , hereon referred
to as "premises".
TERM
This lease shall commence on the Fifteenth day of March, 1997, for a period of
39 months, unless sooner terminated according to provisions hereof. Payment
will begin on June 15th (March, April and May abated) and end on May 30th,
2000. Tenant has the option to renew at 6% inc for a term determined at a later
date.
RENTAL
Tenant shall promptly pay as monthly rental hereunder the sum of $2800.00
payable to landlord at 35 Townsend Square, Oyster Bay N.Y. 11771 in advance on
or before the first day of each calendar month during the period of this lease.
If all rent due is not paid on or before the tenth of the month, tenant agrees
to pay a late charge of 2% of the total balance. Tenant agrees to pay a $15.00
charge for each returned check, plus late payment charges.
SECURITY DEPOSIT
Receipt is hereby acknowledged of $2,800.00 as security deposit for the faithful
performance of all the terms and conditions of this lease. Under no circumstance
is the said security deposit to be construed as rent, and tenant shall not be
entitled to any interest on same. Landlord is authorized to place security
deposit in an interest bearing account with interest accruing to landlord. The
security deposit will be returned to tenant only upon the occurrence of all of
the following conditions: (a) payment of all rent due; (b)the vacating of the
premises in clean condition; (c ) return of all keys to landlord ; (d) removal
of abandoned articles; and (e) upon furnishing a forwarding address to landlord.
Deductions from the security deposit shall be made for any damages done to the
premise, normal wear and tear expected, including, but not limited to ,
insufficient light bulbs, scratches, bums, stains, holes in walls, as well as
damages to personal property, if any. After the above conditions have been
complied by tenant, security deposit , along with an itemized accounting of any
charges or damages or other sums owed by tenant, will be mailed no later than
thirty (30) days after the termination of this lease.
Tenant shall not withhold payment of the last month's rental or any portion
thereof on the grounds that the security serves as security for the unpaid
rental.
Tenant agrees to give landlord thirty (30) days advance written notice of
vacating premises, and failure to do so shall constitute the forfeiture of the
security deposit herein.
1
<PAGE>
ABANDONED ARTICLES
All articles left in or upon the premises by the tenant upon termination of this
lease for any reason shall be disposed of by the landlord as becomes necessary
and in a manner as landlord may see fit and proper, and without recourse by
tenant. The landlord herein is further given the right to use the tenants
security deposit to cover the landlord's expenses in disposing of the tenant's
articles.
HOLDOVER
Unless another lease is signed by the parties or unless written notice of
termination is given by either party thirty (30) days prior to the expiration
date hereof, this lease shall be automatically renewed on a month to month basis
at a $168.00 rental increase per month. After expiration of the original term
hereof, thirty (30) days advance written notice is required by either party for
termination.
NOTICE REQUIREMENTS
Any notice required hereunder shall be given by personal delivery or regular
mail at landlord's address or the address of the leased premises.
FAILURE TO OCCUPY
If tenant fails to occupy premises in accordance with this lease, all deposits
hereunder shall be automatically forfeited.
CARE AND MAINTENANCE OF PREMISES
Tenant accepts the premises in its present condition and agrees to take good
care of the premises and to make no alterations, additions, repairs or
improvements without the prior written consent of landlord. Tenant agrees to
report promptly, in writing, to landlord when any portion of the premises is out
of repair, and to promptly reimburse landlord for any damage to the premises or
furnishings thereof caused by the negligence, misuse, or any other occurrence
attributable to tenant, tenant's agents, family or guests.
EQUIPMENT
Any electrical equipment which is part of the premises, including heating and
air conditioning equipment, will be delivered by the landlord in good operating
order. It is expressly understood that the tenant will properly operate all
such equipment and surrender same in good operating order at the termination of
this lease.
UTILITIES
Tenant will be responsible for electric usage, heat is included in rent.
OCCUPANCY
The premises shall be used only as an office. Neither whole or part of the
premises, nor any portion thereof, shall be assigned or sublet by tenant to any
other person without the prior written consent of landlord. Tenant accepts
existing locks as safe and acceptable In the event that tenant changes or adds
locks as security devices, keys or access shall be furnished to landlord.
2
<PAGE>
NUISANCE CLAUSE
Tenant and the family and guests of tenant shall fully comply with all federal,
state, municipal, and other laws and ordinances, and shall not commit any act
which is a nuisance or annoyance to the neighborhood.
LIABILITY OF LANDLORD
The landlord shall not be liable to tenant of tenant's invitees, family,
employees, agents or servants for any personal injuries or damage to personal
property caused by defects, disrepair or faulty construction of the premises.
Tenant hereby agrees to indemnify and hold hannless the landlord from and
against any and all claims for damages to premises or personal injury arising
from tenants use of premises, or from any activity, work or thing done,
permitted or suffered by tenant in or about the premises. If in landlords
judgement, there is substantial damages to the premises, landlord may terminate
this lease by giving written notice to tenant and the rent shall be prorated and
the balance refunded to tenant, less lawful deductions.
The landlord shall not be liable for personal injuries or property damage or
loss from theft, vandalism, fire, water, hurricane, rain, explosion, or other
causes whatsoever, unless the same is due to negligence or fault of landlord.
Landlord shall have no duty to furnish smoke detectors except as required by
statute. When smoke detectors are furnished, landlord shall test same and
provide initial batteries at lease commencement; thereafter tenant shall pay for
and replace smoke detector batteries, if any, as needed.
TENANTS INSURANCE
Tenant is hereby notified that landlord's insurance does not insure tenant
against loss of personal property on the premise due to fire, theft, vandalism,
or other causes. Tenant is responsible for insurance on tenant's own property
for fire and casualty loss and for tenant's family for liability insurance
coverage.
CONTRACTUAL LIEN
Tenant does, by the execution of this commercial lease, grant to the landlord an
express contract lien and security interest upon all fixtures, goods and
property of the tenant now or hereafter placed in or upon the premise in order
to secure the prompt payment of rent herein provided, and the full compliance by
tenant of all agreements and covenants hereunder. This contract lien shall be in
addition to such statutory liens as landlord may have under and by virtue of the
laws of the state of New York, as presently existing or as may be amended. In
order to exercise contractual or statutory lien rights when tenant is in default
hereunder, landlord may peacefully enter the premises and remove and store all
property therein, except property exempt by statute, provided, however, tenant
must be present or written notice of entry must be left afterward.
POST OFFICE BOX KEY
It is hereby acknowledged that tenant received one (1) post office box key. It
is hereby understood by tenant that a fee of twenty five ($25.00) dollars will
be paid to landlord for any lost key before landlord replaces said key.
DEFAULT
In the event the tenant shall default in the prompt payment of rent when same is
due, or fail to perform any of the provisions of this lease, or in the event the
tenant shall abandon the premises, or leave vacant, landlord, without further
notice, may re-enter the premises by summary proceedings, or by force, without
being liable for prosecution thereof Landlord may also take possession of said
premises, and remove all of the
3
<PAGE>
persons or property therefrom, and may elect to either cancel this lease, or to
relet the premises and receive the rent therefor. Such rent shall be applied
first to the expenses incurred by landlord in entering and reletting, and then
to the payment due under this lease, tenant shall be remain liable for any
deficiency in the total amount due under said lease Tenant's absence from the
premises for three (3) consecutive days while all or any portion of rent is
delinquent, shall be deemed anabondonment of the premises. If tenant otherwise
violates the terms of this lease, landlord may terminate tenants right of
occupancy by giving three (3) days notice in writing. Landlord shall
specifically have the right to institute and maintain the statutory suit of
Forcible Entry and Detainer in proper court, and obtain a writ for possession
thereby. In addition to all other remedies provided herein, tenant agrees to
compensate landlord for all reasonable expenses necessary to enforce this lease
and to collect the rental or damages for breach of this lease, including, but
not limited to, all court costs and reasonable attorney's fees incurred in
connection therewith.
INSPECTION
Landlord shall have the right to enter the premises at all reasonable hours to
examine same or to make repairs and to show the premises to prospective tenants
or purchasers.
NO WARRANTY OF HABITABILITY
Landlord and realtor hereby disclaim any Warranty of Habitability covering the
premises and tenant hereby knowingly, voluntarily and for consideration waives
any such warranty of habitability, it being expressly agreed and understood that
the tenant has inspected the premises and has accepted it as "As is" in its
present condition as habitable, suitable for tenants purposes. Tenant expressly
further agrees that landlord shall have no duty or obligation whatsoever, unless
otherwise specified herein, to make any subsequent repairs to the premises, or
any part thereof during the term of this lease that effect or may effect the
habitability of the premises or the physical health or safety of the tenant,
whether or not the premises later become in a state of disrepair by reason of
ordinary wear and tear or otherwise. Tenant expressly acknowledges and
understands that the rental negotiated by the parties hereto takes into account
the fact that the premises is being rented in "As is""present condition.
FAIR HOUSING
In accordance with the law, this premises is offered without respect to race,
color, religion, sex, or national origin of tenant.
MISCELLANEOUS
This lease shall constitute a full understanding between the parties herein, and
no other agreement unless in writing and signed by the parties hereto shall be
binding upon the subject property.
SPECIAL CONDITIONS
Cozy realty Will provide all plumbing material, including toilet, bathroom sink,
kitchen srnk, all piping and fittings, removal and installation of concrete and
demolition of partitions.
NJS will provide floor tile and labor, spackle, paint and labor, lighting,
electrical fixtures and labor, waste container, any carpeting and cabinetry.
Cozy Realty will coordinate plumber and NJS will pay plumber no more than
$500.00 upon completion of the job.
4
<PAGE>
SIGNED
_____________________________
TENANT
_____________________________
TENANT
GUARANTY
In consideration of the execution of the within lease by the landlord, at the
request of the undersigned and in reliance of this guaranty, the undersigned
hereby guarantees unto the landlord, its successors and assigns, the prompt
payment of all rent and the performance of all of the terms, covenants and
conditions provided in said lease, hereby waiving all notice of default, and
consenting to any extensions of time or changes in the manner of payment or
performance of any of the terms and conditions of the said lease the landlord
may grant the tenant, and huther consenting to the assignment and the successive
assignments of the said lease, and any modifications thereof, including the sub-
letting and changing the use of the demised premises, all without notice to the
undersigned. The undersigned agrees to pay the land lord all expenses incurred
in enforcing the obligations of the tenant under the within lease and in
enforcing his guaranty.
5
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITOR
We consent to the inclusion in this Registration Statement on Form S-1 of our
report dated June 27, 1997 of the financial statement of Dupont Securities
Group, Inc. and of our report dated August 15, 1997 of the financial statements
of Saxon Acquisition Corp. We also consent to the references to our firm under
the caption "Experts."
Baron & Baron
New York, New York
June 8, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUL-09-1997
<PERIOD-END> MAR-31-1997
<CASH> 354,118
<SECURITIES> 228,392
<RECEIVABLES> 39,507
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 622,017
<PP&E> 128,965
<DEPRECIATION> 0
<TOTAL-ASSETS> 753,892
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0
0
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<NET-INCOME> (414,739)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> (.17)
</TABLE>
