As filed with the Securities and Exchange Commission on May 3, 2005
File No. 333- _________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
21ST CENTURY HOLDING COMPANY
(Exact name of registrant as specified in its charter)
Florida 65-0248866
--------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3661 West Oakland Park Blvd, Suite 300, Lauderdale Lakes, FL 33311
(954) 581-9993
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Richard A. Widdicombe
Chief Executive Officer
21st Century Holding Company
3661 West Oakland Park Blvd., Suite 300
Lauderdale Lakes, FL 33311
(954) 581-9993
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Nina S. Gordon, P.A.
Broad and Cassel
7777 Glades Road, Suite 300
Boca Raton, Florida 33434
Telephone: (561) 218-8856
Telecopier: (561) 218-8978
Approximate date of commencement of proposed sale
to the public: As soon as practicable after this
Registration Statement becomes effective.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. |_|
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, 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 statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
======================================= =================== ======================== =================== ======================
Proposed Maximum
Title of Each Class Amount to be Proposed Maximum (Aggregate Offering Amount of
of Securities to Be Registered Registered (1) Offering Price per Unit Price Registration Fee
--------------------------------------- ------------------- ------------------------ ------------------- ----------------------
Common Stock, $.01 par value 144,878 shares $13.40 $1,941,365 $228.50
======================================= =================== ======================== =================== ======================
(1) Also includes, pursuant to Rule 416 under the Securities Act of 1933, an
indeterminant number of shares and warrants that may be issued, offered or
sold to prevent dilution resulting from stock splits, stock dividends, or
similar transactions.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act.
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 this registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, MAY 3, 2005
PROSPECTUS
144,878 SHARES OF COMMON STOCK
21ST CENTURY HOLDING COMPANY
This prospectus covers 144,878 shares of our common stock issued by us as
payment of principal and interest due on both our 6% senior subordinated notes
due July 31, 2006 and our 6% senior subordinated notes due September 30, 2007.
We will not receive any proceeds from the sale of the common stock. We will pay
our out-of-pocket expenses, legal and accounting fees, and the other expenses of
registering the resale of the shares.
The shareholders named in this prospectus may offer and sell these
securities at any time using a variety of different methods. The actual number
of shares sold and the prices at which the shares are sold will depend upon the
market prices at the time of those sales; therefore, we have not included in
this prospectus information about the price to the public of the shares or the
proceeds to the selling shareholders.
Our common stock is traded on the Nasdaq National Market under the symbol
"TCHC." On April 29, 2005, the last reported sale price of the common stock on
the Nasdaq National Market was $14.50 per share.
The shares of common stock offered hereby involve a high degree of risk
and should be considered only by such persons capable of bearing the economic
risk of such investment. You should carefully consider the "Risks of Investing
in Our Securities" section beginning on page 3 of this prospectus.
Neither the SEC nor any state securities commission has approved or
disapproved of these securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is May _____, 2005.
TABLE OF CONTENTS
PAGE
PROSPECTUS SUMMARY.............................................................1
RECENT DEVELOPMENTS............................................................1
OVERVIEW ......................................................................2
RISKS OF INVESTING IN OUR SHARES...............................................3
The State of Florida, where our headquarters and a
substantial portion of our policies are located, has
experienced four hurricanes in August and September
2004...............................................................4
As a result of the hurricanes striking Florida in August
and September 2004, we are not in compliance with
certain regulatory requirements....................................5
We requested that A.M. Best cease rating our insurance
subsidiaries. As a result, we may be unable to write or
renew desirable insurance policies or obtain adequate
reinsurance, which would limit or halt our growth and
harm our business..................................................5
If we are unable to continue our growth because our capital
must be used to pay greater than anticipated claims, our
financial results may suffer.......................................6
The maximum credit commitment under our revolving loan could
be subject to reduction, which would adversely affect
our available working capital......................................6
We are subject to significant government regulation, which
can limit our growth and increase our expenses, thereby
reducing our earnings..............................................6
Our revenues and operating performance may fluctuate with
business cycles in the property and casualty insurance
industry...........................................................7
We may not obtain the necessary regulatory approvals to
expand the types of insurance products we offer or the
states in which we operate.........................................7
Although we follow the industry practice of reinsuring a
portion of our risks, our costs of obtaining reinsurance
have increased and we may not be able to successfully
alleviate risk through reinsurance arrangements....................7
Our loss reserves may be inadequate to cover our actual
liability for losses, causing our results of operations
to be adversely affected...........................................8
We currently rely on agents, most of whom are independent
agents or franchisees, to write our insurance policies,
and if we are not able to attract and retain independent
agents and franchisees, our revenues would be negatively
affected...........................................................9
Nonstandard automobile insurance historically has a higher
frequency of claims than standard automobile insurance,
thereby increasing our potential for loss exposure
beyond what we would be likely to experience if we
offered only standard automobile insurance.........................9
Florida's personal injury protection insurance statute
contains provisions that favor claimants, causing us to
experience a higher frequency of claims than might
otherwise be the case if we operated only outside of
Florida............................................................9
Our business strategy is to avoid competition in our
automobile insurance products based on price to the
extent possible. This strategy, however, may result in
the loss of business in the short term............................10
Our investment portfolio may suffer reduced returns or
losses, which would significantly reduce our earnings.............10
Our president and chief executive officer are key to the
strategic direction of our company. If we were to lose
the services of either of them, our business could be
harmed............................................................11
i
TABLE OF CONTENTS
(Continued)
PAGE
The trading of our warrants may negatively affect the
trading prices of our common stock if investors purchase
and exercise the warrants to facilitate other trading
strategies, such as short selling.................................11
Our largest shareholders control approximately 25% of the
voting power of our outstanding common stock, which
could discourage potential acquirors and prevent changes
in management.....................................................11
We have authorized but unissued preferred stock, which
could affect rights of holders of common stock....................11
Our articles of incorporation and bylaws and Florida law may
discourage takeover attempts and may result in
entrenchment of management........................................12
As a holding company, we depend on the earnings of our
subsidiaries and their ability to pay management fees
and dividends to the holding company as the primary
source of our income..............................................12
NOTE REGARDING FORWARD-LOOKING STATEMENTS.....................................13
USE OF PROCEEDS...............................................................13
SELLING SECURITY HOLDERS......................................................13
HOW THE SECURITIES MAY BE DISTRIBUTED.........................................16
LEGAL MATTERS.................................................................17
EXPERTS.......................................................................17
WHERE YOU CAN FIND MORE INFORMATION...........................................17
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.............................18
INDEMNIFICATION OF DIRECTORS AND OFFICERS.....................................19
ABOUT THIS PROSPECTUS
You should rely only on the information contained in this prospectus. No
dealer, salesperson or other person is authorized to give any information that
is not contained in this prospectus. This prospectus is not an offer to sell nor
is it seeking an offer to buy these shares in any jurisdiction where the offer
or sale is not permitted. The information contained in this prospectus is
correct only as of the date of this prospectus, regardless of the time of the
delivery of this prospectus or any sale of these shares.
ii
PROSPECTUS SUMMARY
This is only a summary and does not contain all of the information that
may be important to you. You should read the more detailed information contained
in this prospectus and all other information, including the financial
information and statements with notes, as discussed in the "Where You Can Find
More Information" section of this prospectus.
Recent Developments
Impact of 2004 Hurricane Season
In August and September 2004, the State of Florida experienced four
hurricanes, Charley, Frances, Ivan and Jeanne. Since then, we have been
receiving and processing claims made under our homeowners' and mobile home
owners' policies, a process that is expected to be substantially completed
during the first half of 2005. One of our subsidiaries, Federated National
Insurance Company ("Federated National"), incurred significant losses relative
to its homeowners' insurance line of business. As of December 31, 2004,
approximately 8,500 policyholders had filed hurricane-related claims totaling an
estimated $105.4 million, of which we currently estimate that our share of the
costs associated with these hurricanes will be approximately $43.5 million, net
of our reinsurance recoveries and amortized reinstatement premiums.
In August 2004, A.M. Best Company notified us that Federated National and
American Vehicle Insurance Company ("American Vehicle") were being placed under
review with negative implications. A.M. Best in 2003 had assigned Federated
National a B rating ("Fair," which is the seventh of 14 rating categories) and
American Vehicle a B+ rating ("Very Good," which is the sixth of 14 rating
categories). In connection with this review, we requested that A.M. Best cease
its ratings of these subsidiaries. The withdrawal of our ratings could limit or
prevent us from writing or renewing desirable insurance policies, from obtaining
adequate reinsurance or from borrowing on our line of credit. Federated National
and American Vehicle are currently rated "A" ("Unsurpassed," which is first of
six ratings) by Demotech, Inc.
To retain our certificates of authority, Florida insurance laws and
regulations require that our insurance company subsidiaries, Federated National
and American Vehicle, maintain capital surplus equal to the greater of 10% of
its liabilities or $4.0 million, as defined in the Florida Insurance Code. As of
December 31, 2004, Federated National and American Vehicle were in compliance
with statutory minimum capital and surplus requirement.
The insurance companies are also required to adhere to prescribed
premium-to-capital surplus ratios. As of December 31, 2004, Federated National
did not comply with the prescribed premium-to-capital surplus ratio, primarily
based on the incurred losses associated with the four hurricanes that occurred
in August and September 2004. As a result of a $6.1 million contribution made
during the first quarter of 2005 from the Company, Federated National's
compliance with the prescribed premium-to-capital surplus ratio has been
restored. American Vehicle has remained in compliance with the prescribed
premium-to-capital surplus ratios.
1
Although we believe that the occurrence of four hurricanes hitting Florida
within one year has not previously occurred for as long as records for weather
events have been kept, some weather analysts believe that a period of greater
hurricane activity has begun. To address this possibility, we are exploring
alternatives to reduce our exposure to these types of storms. Although these
measures may increase operating expenses, management believes that they will
assist us in protecting long-term profitability, although there can be no
assurances that will be the case.
Overview
We underwrite personal automobile, homeowners' and mobile home property
and casualty insurance through Federated National and personal automobile
property and casualty insurance and commercial general liability insurance
through American Vehicle. We market and distribute our insurance products
through our contractual relationships with our independent and general agents,
and we manage substantially all aspects of the insurance underwriting,
distribution and claims process. Federated National and American Vehicle are
both currently licensed to conduct business in Florida as domestic admitted
insurers. American Vehicle is also licensed to conduct business in Texas and
Louisiana as an admitted foreign insurer and in Georgia and Kentucky as a
non-admitted foreign insurer. American Vehicle has been approved for admission
into Alabama, subject to our funding of a statutorily required deposit, which is
in process
We internally process claims made by our own and third party insureds
through our wholly owned claims adjusting company, Superior Adjusting, Inc. We
also offer premium financing to our own and third-party insureds through our
wholly owned subsidiary, Federated Premium Finance, Inc.
During the year ended December 31, 2004, 62.0%, 24.1%, 12.4 % and 1.5% of
the policies we underwrote were for homeowners' property and casualty insurance,
personal automobile insurance, commercial general liability insurance, and
mobile home property and casualty insurance, respectively. During the year ended
December 31, 2003, 67.5%, 23.0%, 2.4% and 7.1% of the policies we underwrote
were for personal automobile insurance, homeowners' property and casualty
insurance, mobile home property and casualty insurance, and commercial general
liability insurance, respectively.
We market and distribute our own and third-party insurers' products and
other services primarily in South and Central Florida, through a network of
approximately 1,500 independent agents and a select number of general agents.
Assurance Managing General Agents, Inc. ("Assurance MGA"), a wholly owned
subsidiary, acts as Federated National's and American Vehicle's exclusive
managing general agent. Assurance MGA currently provides all underwriting policy
administration, marketing, accounting and financial services to Federated
National, and American Vehicle, and participates in the negotiation of
reinsurance contracts. Assurance MGA generates revenue through policy fee income
and other administrative fees from the marketing of companies' products through
the Company's distribution network. Assurance MGA plans to establish
relationships with additional carriers and add additional insurance products in
the future.
2
We believe that we can be distinguished from our competitors because we
generate revenue from insurance underwriting, and claims processing. We provide
quality service to both our agents and insureds by utilizing an integrated
computer system, which links our insurance and service entities. Our computer
and software systems allow for automated premium quotation, policy issuance,
billing, payment and claims processing and enables us to continuously monitor
substantially all aspects of our business. Using these systems, our agents can
access a customer's driving record, quote a premium, offer premium financing
and, if requested, generate a policy on-site. We believe that these systems have
facilitated our ability to market and underwrite insurance products on a
cost-efficient basis, allow our independent agents to be a "one stop" shop for
insurance and other services, and will enhance our ability to expand in Florida
and to other states.
Federated National and American Vehicle are both currently licensed to
conduct business in Florida as domestic admitted insurers. American Vehicle is
also licensed to conduct business in Texas and Louisiana as an admitted foreign
insurer and in Georgia and Kentucky as a non-admitted foreign insurer. American
Vehicle has been approved for admission into Alabama, subject to our funding of
a statutorily required deposit, which is in process. We select additional states
for expansion based on a number of criteria, including the size of the personal
automobile insurance market, statewide loss results, competition and the
regulatory climate. Our ability to expand into other states will be subject to
the prior regulatory approval of each state. Certain states impose operating
requirements upon licensee applicants, which may impose burdens on our ability
to obtain a license to conduct insurance business in those other states. There
can be no assurance that we will be able to obtain the required licenses, and
the failure to do so would limit our ability to expand geographically.
As we expand our operations, we continue to review our operations and
lines of business for strategies to further improve our efficiency and results
of operations. These strategies will most likely include expansion of operations
into additional states; possible acquisitions or dispositions of assets;
insurance policy enhancements and development of procedures to improve claims
history and mitigate losses from claims. There can be no assurances, however,
that any such strategies will be developed or successfully implemented.
Our executive offices are located at 3661 West Oakland Park Boulevard,
Suite 300, Lauderdale Lakes, Florida and our telephone number is (954) 581-9993.
RISKS OF INVESTING IN OUR SHARES
You should carefully consider the following risks, in addition to the
other information presented in this prospectus or incorporated by reference into
this prospectus, before making an investment decision. If any of these risks or
uncertainties actually occur, our business, results of operations, financial
condition, or prospects could be substantially harmed, which would adversely
affect your investment.
3
Risks Related to Our Business
The State of Florida, where our headquarters and a substantial portion of our
policies are located, has experienced four hurricanes in August and September
2004.
We write insurance policies that cover automobile owners, homeowners' and
business owners for losses that result from, among other things, catastrophes.
Catastrophic losses can be caused by hurricanes, tropical storms, tornadoes,
wind, hail, fires, riots and explosions, and their incidence and severity are
inherently unpredictable. The extent of losses from a catastrophe is a function
of two factors: the total amount of the insurance company's exposure in the area
affected by the event and the severity of the event. Our policyholders are
currently concentrated in South and Central Florida, which is especially subject
to adverse weather conditions such as hurricanes and tropical storms.
In August and September 2004, the State of Florida experienced four
hurricanes, Charley, Frances, Ivan and Jeanne. One of our subsidiaries,
Federated National, incurred significant losses relative to its homeowners' and
mobile homeowners' insurance lines of business. Approximately 8,500
policyholders have filed hurricane-related claims totaling an estimated $105.4
million, of which we estimate that our share of the costs associated with these
hurricanes will be approximately $43.5 million, net of reinsurance recoveries
and amortized reinstatement premiums.
For each catastrophic occurrence, the excess of loss treaty will insure us
for $24 million with the Company retaining the first $10 million of loss and
loss adjustment expenses. The treaty has a provision which, for an additional
prorated premium will insure us for another $24 million of loss and loss
adjustment expenses for subsequent occurrences with the Company retaining the
first $10 million in loss and loss adjustment expenses. As a result of the loss
and loss adjustment expenses incurred in connection with the Hurricanes Charles
and Frances, the Company has exhausted its recoveries of $48 million under the
terms of this treaty.
The excess of loss treaty also insures us for an additional $34 million in
excess of the Company's $10 million retention plus the next $24 million as
described above. Accordingly, loss and LAE incurred for Hurricanes Ivan, Jeanne
and any subsequent catastrophic events through June 30, 2005, up to $34 million
each, are the responsibility of the Company, as illustrated in the accompanying
table.
Gross Reinsurance Net
Hurricane Losses Recoveries Losses
--------- -------- ------- -------
(in millions)
Charley (August 13, 2004) $ 44.2 $ 34.2 $ 10.0
Frances (September 3, 2004) 37.7 27.7 10.0
Ivan (September 14, 2004) 13.7 -- 13.7
Jeanne (September 25, 2004) 9.8 -- 9.8
-------- ------- -------
Total Loss Estimate $ 105.4 $ 61.9 $ 43.5
======== ======= =======
Furthermore, as a result of the 2004 hurricanes, we incurred a net
reinstatement insurance premium of $3.0 million that is amortized through
operations from the reinstatement date of August 13, 2004 to June 30, 2005. As a
result of the hurricanes striking Florida in August and September 2004, we are
not in compliance with certain regulatory requirements.
4
To retain our certificates of authority, Florida insurance laws and
regulations require that our insurance company subsidiaries, Federated National
and American Vehicle, maintain capital surplus equal to the greater of 10% of
its liabilities or the 2004 statutory minimum capital and surplus requirement of
$4.00 million as defined in the Florida Insurance Code. As of December 31, 2004,
Federated National was not in compliance with its requirement to maintain
minimum capital surplus primarily based on the incurred losses associated with
the four hurricanes that occurred in August and September 2004. Under the
provisions afforded Federated National according to Statement of Statutory
Accounting Principles No 72 titled "Surplus and Quasi-reorganizations",
compliance with this provision was restored by way of a surplus infusion from
21st Century. American Vehicle remains in compliance with statutory minimum
capital and surplus requirement. The insurance companies are also required to
adhere to prescribed premium-to-capital surplus ratios. As of December 31, 2004,
Federated National did not comply with the prescribed premium-to-capital surplus
ratio, primarily based on the incurred losses associated with the four
hurricanes that occurred in August and September 2004. Under the provisions
afforded Federated National according to Statement of Statutory Accounting
Principles No 72, compliance with this provision was also restored. and we do
not currently anticipate any regulatory action relative to this matter. American
Vehicle remains in compliance with statutory minimum capital and surplus
requirement.
We requested that A.M. Best cease rating our insurance subsidiaries. As a
result, we may be unable to write or renew desirable insurance policies or
obtain adequate reinsurance, which would limit or halt our growth and harm our
business.
Third-party rating agencies assess and rate the ability of insurers to pay
their claims. These financial strength ratings are used by the insurance
industry to assess the financial strength and quality of insurers. These ratings
are based on criteria established by the rating agencies and reflect evaluations
of each insurer's profitability, debt and cash levels, customer base, adequacy
and soundness of reinsurance, quality and estimated market value of assets,
adequacy of reserves, and management. Ratings are based upon factors of concern
to agents, reinsurers and policyholders and are not directed toward the
protection of investors, such as purchasers of our common stock.
In August 2004, A.M. Best Company notified us that Federated National and
American Vehicle were being placed under review with negative implications. In
2003 A.M. Best had assigned Federated National a B rating ("Fair," which is the
seventh of 14 rating categories) and American Vehicle a B+ rating ("Very Good,"
which is the sixth of 14 rating categories). In connection with this review, we
requested that A.M. Best cease its ratings of these subsidiaries "NR-4 Not
rated, company's request". The withdrawal of our ratings could limit or prevent
us from writing or renewing desirable insurance policies, from obtaining
adequate reinsurance, or from borrowing on our line of credit, as described
below. Federated National and American Vehicle are currently rated "A"
("Unsurpassed," which is first of six ratings) by Demotech, Inc.
5
If we are unable to continue our growth because our capital must be used to pay
greater than anticipated claims, our financial results may suffer.
We have grown rapidly over the last few years. Our future growth will
depend on our ability to expand the types of insurance products we offer and the
geographic markets in which we do business. We believe that our company is
sufficiently capitalized to operate our business as it now exists and as we
currently plan to expand it. Our existing sources of funds include our revolving
loan from Flatiron Funding Company LLC, sales of our securities such as our
September 2004 and July 2003 private placements of $12,500,000 and $7,500,000,
respectively, of our senior subordinated notes, possible sales of our investment
securities, and our earnings from operations and investments. Unexpected
catastrophic events in our market areas, such as the hurricanes experienced in
Florida in August and September 2004, have resulted and will result in greater
claims losses than anticipated, which could require us to limit or halt our
growth while we redeploy our capital to pay these unanticipated claims unless we
are able to raise additional capital or increase our earnings in our other
divisions.
The maximum credit commitment under our revolving loan could be subject to
reduction, which would adversely affect our available working capital.
During September 2004, we negotiated a new revolving loan agreement in
which the maximum credit commitment available to us was reduced at our request
to $2.0 million with built-in options to incrementally increase the maximum
credit commitment up $4.0 million over the next three years. We believe that
this available credit is sufficient based on our current operations.
Pursuant to our loan agreement, if the A.M. Best rating of Federated
National falls below a "C," or if the financial condition of American Vehicle,
as determined by our lender (in its sole and absolute discretion) suffers a
material adverse change, then under the terms of our loan agreement, policies
written by that subsidiary will no longer be eligible collateral, causing our
available credit to be reduced if we do not have other collateral qualifying as
eligible collateral. As of December 31, 2004, policies written by Federated
National were not considered by our lender to be eligible collateral. In March
2005, our lender agreed to permit policies written by Federated National to be
eligible collateral up to $165,000. We currently believe that our available
credit under this loan agreement will be sufficient based on our current
operations. If policies written by our insurance subsidiaries again do not
qualify as eligible collateral under our loan agreement and we are not able to
obtain working capital from our operations or other sources, then we would have
to restrict our growth and, possibly, our operations.
We are subject to significant government regulation, which can limit our growth
and increase our expenses, thereby reducing our earnings.
We are subject to laws and regulations in Florida, our state of domicile,
and in Georgia, Louisiana, Kentucky and Texas, states in which we have been
authorized to do business, and will be subject to the laws of any other state in
which we conduct business in the future. These laws and regulations cover all
aspects of our business and are generally designed to protect the interests of
insurance policyholders. For example, these laws and regulations relate to
licensing requirements, authorized lines of business, capital surplus
requirements, allowable rates and forms, investment parameters, underwriting
limitations, restrictions on transactions with affiliates, dividend limitations,
changes in control, market conduct, and limitations on premium financing service
charges. The cost to monitor and comply with these laws and regulations adds
significantly to our cost of doing business. Further, if we do not comply with
the laws and regulations applicable to us, we may be subject to sanctions or
monetary penalties by the applicable insurance regulator.
6
Our revenues and operating performance may fluctuate with business cycles in the
property and casualty insurance industry.
Historically, the financial performance of the property and casualty
insurance industry has tended to fluctuate in cyclical patterns characterized by
periods of significant competition in pricing and underwriting terms and
conditions, which is known as a "soft" insurance market, followed by periods of
lessened competition and increasing premium rates, which is known as a "hard"
insurance market. Although an individual insurance company's financial
performance is dependent on its own specific business characteristics, the
profitability of most property and casualty insurance companies tends to follow
this cyclical market pattern, with profitability generally increasing in hard
markets and decreasing in soft markets. At present, we are beginning to
experience a soft market in our automobile sector while a hard market persists
in our property sector. We cannot predict, however, how long these market
conditions will persist. In the current soft automobile market, increased price
competition may cause us to have to reduce our premiums in order to maintain our
market share, which would result in a decrease in our automobile revenues.
We may not obtain the necessary regulatory approvals to expand the types of
insurance products we offer or the states in which we operate.
We currently have applications pending in California and Virginia to
underwrite and sell commercial general liability insurance. The insurance
regulators in these states may request additional information, add conditions to
the license that we find unacceptable, or deny our application. This would delay
or prevent us from operating in that state. If we want to operate in any
additional states, we must file similar applications for licenses, which we may
not be successful in obtaining.
Although we follow the industry practice of reinsuring a portion of our risks,
our costs of obtaining reinsurance have increased and we may not be able to
successfully alleviate risk through reinsurance arrangements.
We have a reinsurance structure that is a combination of private
reinsurance and the Florida Hurricane Catastrophe Fund. For each catastrophic
occurrence, the excess of loss treaty will insure us for $24 million with the
Company retaining the first $10 million of loss and loss adjustment expense.
There are two layers involved with our excess of loss reinsurance treaties, the
$24 million is considered the first layer. The treaty has a provision which, for
an additional prorated premium will insure us for another $24 million of loss
and loss adjustment expenses for subsequent occurrences with the Company
retaining the first $10 million in loss and loss adjustment expenses. As a
result of the loss and loss adjustment expenses incurred in connection with the
Hurricanes Charles and Frances, the Company has exhausted its recoveries of $48
million under the terms of this treaty.
7
The second layer of our excess of loss treaty insures us for an additional
$34 million in excess of the $34 million first layer noted above with the same
reinstatement provision. The excess of loss treaties expire on June 30, 2005 and
the Company is negotiating a new reinsurance treaty.
The Florida Hurricane Catastrophe Fund treaty provides protection for 90%
of loss and loss adjustment expenses and attaches at approximately $36.2
million. This treaty inures to the benefit of our excess of loss treaty and
expires on June 1, 2005.
Since our initial preliminary provision for losses from these hurricanes
of $33 million, net of reinsurance recoveries, as of September 30, 2004, we
revised our provision for losses as described above. Because the storms occurred
during the third quarter of 2004, we were not able to complete physical
inspections of a sufficiently large percentage of claims, nor were complete
repair estimates available. During the fourth quarter of 2004, as physical
property inspections and repair estimates were completed, our initial estimates
of losses for these storms were increased to reflect increased estimates of
claim severity on our homeowners' policies in Florida. We do not currently
anticipate further material increases to our loss estimates from the 2004
hurricanes.
As a result of the hurricanes experienced in Florida in August and
September 2004, however, we will review, and may determine to modify, our
reinsurance structure.
The insolvency of our primary reinsurer or any of our other current or
future reinsurers, or their inability otherwise to pay claims, would increase
the claims that we must pay, thereby significantly harming our results of
operations. In addition, prevailing market conditions have limited the
availability and increased the cost of reinsurance, which may have the effect of
increased costs and reduced profitability.
Our loss reserves may be inadequate to cover our actual liability for losses,
causing our results of operations to be adversely affected.
We maintain reserves to cover our estimated ultimate liabilities for loss
and loss adjustment expense. These reserves are estimates based on historical
data and statistical projections of what we believe the settlement and
administration of claims will cost based on facts and circumstances then known
to us. Actual losses and loss adjustment expenses, however, may vary
significantly from our estimates. For example, after we compared our reserve
levels to our actual claims for the prior years, we decreased our liability for
loss and loss adjustment expenses by $1,430,278 in 2004 and increased our
liability for loss and loss adjustment expenses by $1,234,047 in 2003 and
$90,874 in 2002. These adjustments primarily reflect our loss experience under
our personal automobile policies. Because of the uncertainties that surround
estimated loss reserves, we cannot be certain that our reserves will be adequate
to cover our actual losses. If our reserves for unpaid losses and loss
adjustment expenses are less than actual losses and loss adjustment expenses, we
will be required to increase our reserves with a corresponding reduction in our
net income in the period in which the deficiency is identified. Future loss
experience substantially in excess of our reserves for unpaid losses and loss
adjustment expenses could substantially harm our results of operations and
financial condition.
8
We currently rely on independent agents to write our insurance policies, and if
we are not able to attract and retain independent agents, our revenues would be
negatively affected.
We currently market and distribute Federated National's, American
Vehicle's and third-party insurers' products and our other services through a
network of approximately 1,500 independent agents. Our independent agents are
our primary source for our property insurance policies. Many of our competitors
also rely on independent agents. As a result, we must compete with other
insurers for independent agents' business. Our competitors may offer a greater
variety of insurance products, lower premiums for insurance coverage, or higher
commissions to their agents. If our products, pricing and commissions do not
remain competitive, we may find it more difficult to attract business from
independent agents and to attract franchisees for our agencies to sell our
products. A material reduction in the amount of our products that independent
agents sell would negatively affect our revenues.
Nonstandard automobile insurance historically has a higher frequency of claims
than standard automobile insurance, thereby increasing our potential for loss
exposure beyond what we would be likely to experience if we offered only
standard automobile insurance.
Nonstandard automobile insurance, which is second only to our property
insurance product, is provided to insureds that are unable to obtain preferred
or standard insurance coverage because of their payment histories, driving
records, age, vehicle types, or prior claims histories. This type of automobile
insurance historically has a higher frequency of claims than does preferred or
standard automobile insurance policies, although the average dollar amount of
the claims is usually smaller under nonstandard insurance policies. As a result,
we are exposed to the possibility of increased loss exposure and higher claims
experience than would be the case if we offered only standard automobile
insurance.
Florida's personal injury protection insurance statute contains provisions that
favor claimants, causing us to experience a higher frequency of claims than
might otherwise be the case if we operated only outside of Florida.
Florida's personal injury protection insurance statute limits an insurer's
ability to deny benefits for medical treatment that is unrelated to the
accident, that is unnecessary, or that is fraudulent. In addition, the statute
allows claimants to obtain awards for attorney's fees. Although this statute has
been amended several times in recent years, primarily to address concerns over
fraud, the Florida legislature has been only marginally successful in
implementing effective mechanisms that allow insurers to combat fraud and other
abuses. We believe that this statute contributes to a higher frequency of claims
under nonstandard automobile insurance policies in Florida, as compared to
claims under standard automobile insurance policies in Florida and nonstandard
and standard automobile insurance polices in other states. Although we believe
that we have successfully offset these higher costs with premium increases,
because of competition, we may not be able to do so with as much success in the
future.
9
Our business strategy is to avoid competition in our automobile insurance
products based on price to the extent possible. This strategy, however, may
result in the loss of business in the short term.
Although our pricing of our automobile insurance products is inevitably
influenced to some degree by that of our competitors, we believe that it is
generally not in our best interest to compete solely on price, choosing instead
to compete on the basis of underwriting criteria, our distribution network, and
our superior service to our agents and insureds. With respect to automobile
insurance in Florida, we compete with more than 100 companies, which underwrite
personal automobile insurance. Comparable companies which compete with us in the
personal automobile insurance market include Affirmative Insurance Holdings,
Inc., which recently acquired our non-standard automobile agency business in
Florida, U.S. Security Insurance Company, United Automobile Insurance Company,
Direct General Insurance Company and Security National Insurance Company, as
well as major insurers such as Progressive Casualty Insurance Company.
Comparable companies which compete with us in the homeowners' market include
Florida Family Insurance Company, Florida Select Insurance Company, Atlantic
Preferred Insurance Company and Vanguard Insurance Company. Comparable companies
which compete with us in the general liability insurance market include Century
Surety Insurance Company, Atlantic Casualty Insurance Company, Colony Insurance
Company and Burlington/First Financial Insurance Companies. Competition could
have a material adverse effect on our business, results of operations and
financial condition. If we do not meet the prices offered by our competitors, we
may lose business in the short term, which could also result in reduced
revenues.
Our investment portfolio may suffer reduced returns or losses, which would
significantly reduce our earnings.
As do other insurance companies, we depend on income from our investment
portfolio for a substantial portion of our earnings. During the time that
normally elapses between the receipt of insurance premiums and any payment of
insurance claims, we invest the funds received, together with our other
available capital, primarily in fixed-maturity investments and equity
securities, in order to generate investment income. A significant decline in
investment yields in our investment portfolio caused by fluctuations in interest
rates or volatility in the stock market, or a default by issuers of securities
that we own, could adversely affect the value of our investment portfolio and
the returns that we earn on our portfolio, thereby substantially harming our
financial condition and results of operations.
Net investment income increased by $1.6 million or 95.3% to $3.2 million
for the year ended December 31, 2004, as compared to $1.6 million for the year
ended December 31, 2003. The increase in investment income is a result of the
additional amounts of invested assets. Our overall investment yield increased by
.35%, from 4.47% for the year ended December 31, 2003 to 4.82% for the year
ended December 31, 2004.
Net realized investment gains decreased by $1.5 million or 69.1% to $0.7
million for the year ended December 31, 2004 as compared $2.2 million for the
year ended December 31, 2003. Although we experienced realized gains of $688,676
for the year ended December 31, 2004 and $2,231,333 for the year ended December
31, 2003, we experienced net realized investment losses in the past of
$1,369,961 for 2002. During 2002, we incurred a $2,000,000 decline in value of
our investment in WorldCom, Inc. bonds. This write down is reflected in the
$1,369,961 loss incurred in 2002.
10
Our president and chief executive officer are key to the strategic direction of
our company. If we were to lose the services of either of them, our business
could be harmed.
We depend, and will continue to depend, on the services of one of our
founders and principal shareholders, Edward J. Lawson, who is also our president
and chairman of the board, as well as Richard Widdicombe, who is our chief
executive officer. We have entered into an employment agreement with each of
them and we maintain $3 million and $1 million in key man life insurance on the
lives of Mr. Lawson and Mr. Widdicombe, respectively. Nevertheless, because of
Mr. Lawson's and Mr. Widdicombe's role and involvement in developing and
implementing our current business strategy, the loss of either of their services
could substantially harm our business.
Risks Related to an Investment in Our Shares
The trading of our warrants may negatively affect the trading prices of our
common stock if investors purchase and exercise the warrants to facilitate other
trading strategies, such as short selling.
Our warrants currently trade on the Nasdaq National Market under the
symbol of "TCHCW" and "TCHCZ." Each of the TCHCW warrants entitles the holders
to purchase three quarters of one share of our common stock at an exercise price
per whole share of $12.74 after giving effect to the September 2004
three-for-two stock split. Each of the TCHCZ warrants entitles the holders to
purchase one share of our common stock at an exercise price per share of $12.75.
Investors may purchase and exercise warrants to facilitate trading strategies
such as short selling, which involves the sale of securities not yet owned by
the seller. In a short sale, the seller must either purchase or borrow the
security in order to complete the sale. If shares of our common stock received
upon the exercise of warrants are used to complete short sales, this may have
the effect of reducing the trading price of our common stock.
Our largest shareholders control approximately 25% of the voting power of our
outstanding common stock, which could discourage potential acquirors and prevent
changes in management.
Edward J. Lawson and Michele V. Lawson beneficially own approximately 25%
of our outstanding common stock. As our largest shareholders, the Lawsons have
significant influence over the outcome of any shareholder vote. This voting
power may discourage takeover attempts, changes in our officers and directors or
other changes in our corporate governance that other shareholders may desire.
We have authorized but unissued preferred stock, which could affect rights of
holders of common stock.
Our articles of incorporation authorize the issuance of preferred stock
with designations, rights and preferences determined from time to time by our
board of directors. Accordingly, our board of directors is empowered, without
shareholder approval, to issue preferred stock with dividends, liquidation,
conversion, voting or other rights that could adversely affect the voting power
or other rights of the holders of common stock. In addition, the preferred stock
could be issued as a method of discouraging a takeover attempt. Although we do
not intend to issue any preferred stock at this time, we may do so in the
future.
Our articles of incorporation and bylaws and Florida law may discourage takeover
attempts and may result in entrenchment of management.
Our articles of incorporation and bylaws contain provisions that may
discourage takeover attempts and may result in entrenchment of management.
o Our board of directors is elected in classes, with only two or three
of the directors elected each year. As a result, shareholders would
not be able to change the membership of the board in its entirety in
any one year. Shareholders would also be unable to bring about,
through the election of a new board of directors, changes in our
officers.
o Our articles of incorporation prohibit shareholders from acting by
written consent, meaning that shareholders will be required to
conduct a meeting in order to vote on any proposals or take any
action.
o Our bylaws require at least 60 days' notice if a shareholder desires
to submit a proposal for a shareholder vote or to nominate a person
for election to our board of directors.
In addition, Florida has enacted legislation that may deter or frustrate
takeovers of Florida corporations, such as our company.
o The Florida Control Share Act provides that shares acquired in a
"control share acquisition" will not have voting rights unless the
voting rights are approved by a majority of the corporation's
disinterested shareholders. A "control share acquisition" is an
acquisition, in whatever form, of voting power in any of the
following ranges: (a) at least 20% but less than 33-1/3% of all
voting power, (b) at least 33-1/3% but less than a majority of all
voting power; or (c) a majority or more of all voting power.
o The Florida Affiliated Transactions Act requires supermajority
approval by disinterested shareholders of certain specified
transactions between a public corporation and holders of more than
10% of the outstanding voting shares of the corporation (or their
affiliates).
As a holding company, we depend on the earnings of our subsidiaries and their
ability to pay management fees and dividends to the holding company as the
primary source of our income.
11
We are an insurance holding company whose primary assets are the stock of
our subsidiaries. Our operations, and our ability to service our debt, are
limited by the earnings of our subsidiaries and their payment of their earnings
to us in the form of management fees, commissions, dividends, loans, advances or
the reimbursement of expenses. These payments can be made only when our
subsidiaries have adequate earnings. In addition, dividend payments made to us
by our insurance subsidiaries are restricted by Florida law governing the
insurance industry. Generally, Florida law limits the dividends payable by
insurance companies under complicated formulas based on the subsidiary's
available capital and earnings.
We received management fees from our subsidiaries, excluding Federated
National and American Vehicle, totaling $2.0 million, $2.0 million and $1.9
million for 2004, 2003 and 2002, respectively.
No dividends were declared or paid by our insurance subsidiaries in 2004,
2003 or 2002. Under these laws, neither Federated National nor American Vehicle
would be permitted to pay dividends to 21st Century in 2005. Whether our
subsidiaries will be able to pay dividends in 2005 depends on the results of
their operations and their expected needs for capital. We do not anticipate that
our subsidiaries will begin to pay dividends to the parent company during 2005.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Statements in this prospectus or in documents incorporated by reference
that are not historical fact are forward-looking statements. Forward-looking
statements are subject to certain risks and uncertainties that could cause
actual events and results to differ materially from those discussed herein.
Without limiting the generality of the foregoing, words such as "may," "will,"
"expect," "believe," "anticipate," "intend," "could," "would," "estimate," or
"continue" or the negative other variations thereof or comparable terminology
are intended to identify forward-looking statements. The risks and uncertainties
include, but are not limited to, the risks and uncertainties described in this
prospectus or from time to time in our filings with the SEC.
USE OF PROCEEDS
We will not receive any proceeds from the resale of the common stock by
the selling shareholders.
SELLING SECURITY HOLDERS
The following tables show certain information as of the date of this
prospectus regarding the number of shares of common stock owned by the selling
shareholders and that are included for sale in this prospectus. The table
assumes that all shares offered for sale in the prospectus are sold.
No selling shareholder has been within the last three years, or is
currently, affiliated with us.
13
Ownership of Ownership of
Common Stock Common Stock
Before Offering (1) Number Offered After Offering(1)
------------------------ By Selling -----------------------
Selling Shareholder Number Percent Shareholder Number Percent
------------------- ------ ------- ------------ ------ -------
Coastal Convertibles LTD. (1) 56,191 * 5,209 50,982 *
Corsair Capital Partners, LP 56,041 * 4,788 51,253 *
Corsair Capital Partners 100, LP 2,355 * 186 2,169 *
Corsair Capital Partners Investors, LTD 7,534 * 594 6,940 *
Cranshire Capital, LP 94,164 1.43% 7,423 86,741 1.32%
Hillson Partners Limited Partnership 85,854 1.31% 7,423 78,431 1.20%
Iroquois Capital LP 85,854 1.31% 7,423 78,431 1.20%
Newport Alternative Income Fund (1) 3,735 * 695 3,040 *
Omicron Master Trust (1) (2) 234,738 3.50% 18,318 216,420 3.23%
OTAPE Investments LLC (1) 39,654 * 1,736 37,918 *
Pandora Select Partners, LP (1) (2) 169,285 2.55% 14,368 154,917 2.33%
SilverCreek II Limited (1) 12,044 * 1,945 10,099 *
SilverCreek Limited Partnership (1) 21,574 * 4,306 17,268 *
Whitebox Convertible Arbitrage
Partners, LP (1) (2) 591,005 8.42% 51,006 539,999 7.69%
Whitebox Hedged High Yield
Partners, LP (1) 158,074 2.39% 13,890 144,184 2.18%
Whitebox Intermarket Partners, LP 64,391 * 5,567 58,824 *
----------
* Less than 1%.
(1) Includes shares underlying warrants held by the selling shareholders (each
of which is exercisable for .75 shares of common stock) as follows:
Coastal Convertibles LTD, 45,428 shares; Omicron Master Trust, 39,236
shares; OTAPE Investments LLC, 37,918 shares; Newport Alternative Income
Fund, 3,040 shares; Pandora Select Partners, LP, 71,271 shares;
SilverCreek II Limited, 10,099 shares; SilverCreek Limited Partnership,
17,268 shares; Whitebox Convertible Arbitrage Partners, LP, 140,008
shares; and Whitebox Hedged High Yield Partners, LP, 143,142 shares.
(2) Includes shares underlying warrants held by the selling shareholders (each
of which is exercisable for one share of common stock) as follows: Omicron
Master Trust, 156,863 shares; Pandora Select Partners, LP, 78,431 shares;
Whitebox Convertible Arbitrage Partners, LP, 392,156 shares; Whitebox
Intermarket Partners, LP, 58,824 shares; Iroquois Capital, LP, 78,431
shares; Cranshire Capital, LP, 78,431 shares; Corsair Capital Partners,
LP, 50,588 shares; Corsair Capital Partners 100, LP, 1,961 shares; Corsair
Capital Partners Investors, LTD, 6,275 shares; and Hillson Partners
Limited, 78,431 shares.
14
The selling shareholders listed above have provided us with additional
information regarding the individuals or entities that exercise control over the
selling shareholder. The proceeds of any sale of shares pursuant to this
prospectus will be for the benefit of the individuals that control the selling
entity. The following is a list of the selling shareholders and the entities
that may exercise the right to vote or dispose of the shares owned by each
selling shareholder:
o Coastal Convertibles LTD is managed by Tradewinds.
o Omicron Capital, L.P., a Delaware limited partnership ("Omicron
Capital"), serves as investment manager to Omicron Master Trust, a
trust formed under the laws of Bermuda ("Omicron"); Omicron Capital,
Inc., a Delaware corporation ("OCI"), serves as general partner of
Omicron Capital; and Winchester Global Trust Company Limited
("Winchester") serves as the trustee of Omicron. By reason of such
relationships, Omicron Capital and OCI may be deemed to share
dispositive power over the shares of our common stock owned by
Omicron, and Winchester may be deemed to share voting and
dispositive power over the shares of our common stock owned by
Omicron. Omicron Capital, OCI and Winchester disclaim beneficial
ownership of such shares of our common stock. Omicron Capital has
delegated authority from the board of directors of Winchester
regarding the portfolio management decisions with respect to the
shares of common stock owned by Omicron and, as of November 1, 2004,
Mr. Olivier H. Morali and Mr. Bruce T. Bernstein, officers of OCI,
have delegated authority from the board of directors of OCI
regarding the portfolio management decisions with respect to the
shares of common stock owned by Omicron. By reason of such delegated
authority, Messrs. Morali and Bernstein may be deemed to share
dispositive power over the shares of our common stock owned by
Omicron. Messrs. Morali and Bernstein disclaim beneficial ownership
of such shares of our common stock and neither of such persons has
any legal right to maintain such delegated authority. No other
person has sole or shared voting or dispositive power with respect
to the shares of our common stock being offered by Omicron, as those
terms are used for purposes under Regulation 13D-G of the Securities
Exchange Act of 1934, as amended. Omicron and Winchester are not
"affiliates" of one another, as that term is used for purposes of
the Securities Exchange Act of 1934, as amended, or of any other
person named in this prospectus as a selling shareholder. No person
or "group" (as that term is used in Section 13(d) of the Securities
Exchange Act of 1934, as amended, or the SEC's Regulation 13D-G)
controls Omicron and Winchester.
o OTAPE Investments, LLC is managed by OTA. Ira M. Leventhal, a U.S.
citizen, may be deemed to have dispositive power with regard to the
shares beneficially owned by OTAPE Investments, LLC. Mr. Leventhal
disclaims beneficial ownership of those shares.
o Each of Newport Alternative Income Fund, SilverCreek II Limited and
SilverCreek Limited Partnership is managed by SilverCreek.
o Each of Whitebox Convertible Arbitrage Partners, LP and Whitebox
Hedged High Yield Partners, LP is managed by Whitebox Advisors, LLC.
o Pandora Select Partners, LP is managed by Pandora Select Advisors,
LLC.
15
HOW THE SECURITIES MAY BE DISTRIBUTED
The selling shareholders may sell shares of common stock in various ways
and at various prices. Some of the methods by which the selling shareholders may
sell shares include:
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers or makes arrangements for other brokers to
participate in soliciting purchasers;
o privately negotiated transactions;
o block trades in which the broker or dealer will attempt to sell the
shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction;
o purchases by a broker or dealer as principal and resale by that
broker or dealer for the selling shareholder's account under this
prospectus on the Nasdaq National Market at prices and on terms
then-prevailing in the market;
o sales under Rule 144, if available, rather than using this
prospectus;
o a combination of any of these methods of sale; and
o any other legally permitted method.
The applicable sales price may be affected by the type of transaction.
The selling shareholders may also pledge shares as collateral for margin
loans under their customer agreements with their brokers. If there is a default
by a selling shareholder, the broker may offer and sell the pledged shares.
When selling shares, the selling shareholders intend to comply with the
prospectus delivery requirements under the Securities Act, by delivering a
prospectus to each purchaser. We may file any supplements, amendments or other
necessary documents in compliance with the Securities Act that may be required
in the event a selling shareholder defaults under any customer agreement with
brokers.
Brokers and dealers may receive commissions or discounts from the selling
shareholders or, in the event the broker-dealer acts as agent for the purchaser
of the shares, from that purchaser, in amounts to be negotiated. These
commissions are not expected to exceed those customary in the types of
transactions involved. We cannot estimate at the present time the amount of
commissions or discounts, if any, that will be paid by the selling shareholders
in connection with the sales of the shares.
The selling shareholders and any broker-dealers or agents that participate
with a selling shareholder in sales of the shares may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales. In that event, any commissions received by the broker-dealers or agents
and any profit on the resale of the shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
16
Under the securities laws of certain states, the shares may be sold in
those states only through registered or licensed broker-dealers. In addition,
the shares may not be sold unless the shares have been registered or qualified
for sale in the relevant state or unless the shares qualify for an exemption
from registration or qualification.
We have agreed to pay all of our out-of-pocket expenses and our
professional fees and expenses incident to the registration of the shares.
The selling shareholders and other persons participating in the
distribution of the securities offered under this prospectus are subject to the
applicable requirements of Regulation M promulgated under the Exchange Act in
connection with sales of the shares.
LEGAL MATTERS
Broad and Cassel, a partnership including professional associations,
Miami, Florida, is giving an opinion regarding the validity of the offered
shares of common stock.
EXPERTS
The financial statements of 21st Century Holding Company for the years
ended December 31, 2003 and December 31, 2002, incorporated by reference in this
prospectus, have been audited by De Meo, Young, McGrath, independent certified
public accountants, to the extent and for the periods set forth in their report
incorporated herein by reference, and are incorporated herein in reliance upon
such reports given upon the authority of said firm as experts in auditing and
accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-3 with the SEC in
connection with this offering. This prospectus does not contain all of the
information set forth in the registration statement, as permitted by the rules
and regulations of the SEC. This prospectus may include references to material
contracts or other material documents of ours; any summaries of these material
contracts or documents are complete and are either included in this prospectus
or incorporated by reference into this prospectus. You may refer to the exhibits
that are part of the registration statement for a copy of the contract or
document.
We also file annual, quarterly and current reports and other information
with the SEC. You may read and copy any report or document we file, and the
registration statement, including the exhibits, may be inspected at the SEC's
public reference room located at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Our SEC filings are also available to the public from
the SEC's website at http://www.sec.gov.
17
Quotations for the prices of our common stock appear on the Nasdaq
National Market, and quotations for our warrants will appear on the Nasdaq
National Market if and when trading in the warrants begins. Reports, proxy
statements and other information about us can also be inspected at the offices
of the National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents are incorporated by reference into this
prospectus:
o Our preliminary proxy statement for our 2005 Annual Meeting of
Shareholders filed with the SEC on April 12, 2005,
o Our Current Reports on Form 8-K filed with the SEC on March 9, 2005,
February 4, 2005, January 20, 2005 and January 6, 2005,
o Our Annual Report on Form 10-K and Form 10-K/A (Amendment No. 1) for
the year ended December 31, 2004, filed with the SEC on April 15,
2005 and April 29, 2005 respectively, and
o The description of our common stock contained in our registration
statement on Form 8-A filed with the SEC on October 28, 1998, as
this description may be updated in any amendment to the Form 8-A.
In addition, all documents filed by us pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934, other than information
furnished pursuant to Items 9 or 12 of Form 8-K, after the date of this
prospectus and prior to the filing of a post-effective amendment that indicates
that all securities registered hereby have been sold or that deregisters all
securities then remaining unsold, shall be deemed to be incorporated by
reference into this prospectus and to be a part hereof from the date of filing
of such documents with the SEC. Any statement contained in a document
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this prospectus to the extent that a statement contained herein,
or in a subsequently filed document incorporated by reference herein, modifies
or supersedes that statement. Any statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute part of this
prospectus.
You may obtain a copy of these filings, excluding all exhibits unless we
have specifically incorporated by reference an exhibit in this prospectus or in
a document incorporated by reference herein, at no cost, by writing or
telephoning:
21st Century Holding Company
3661 West Oakland Park Boulevard, Suite 300
Lauderdale Lakes, Florida 33311
Attention: J. Gordon Jennings, III, Chief Financial Officer
Telephone: (954) 581-9993
Our file number under the Securities Exchange Act of 1934 is 0-2500111.
18
INDEMNIFICATION OF DIRECTORS AND OFFICERS
We have authority under Section 607.0850 of the Florida Business
Corporation Act to indemnify our directors and officers to the extent provided
for in that law. Our articles of incorporation provide that we may insure, shall
indemnify and shall advance expenses on behalf of our officers and directors to
the fullest extent not prohibited by law. We also are a party to indemnification
agreements with each of our directors and officers.
The SEC is of the opinion that indemnification of directors, officers and
controlling persons for liabilities arising under the Securities Act is against
public policy and is, therefore, unenforceable.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Registrant estimates that its expenses in connection with this
registration statement will be as follows:
SEC registration fee.......................... $ 228.50
Accounting fees and expenses.................. 5,000.00
Legal fees and expenses ..................... 5,000.00
Miscellaneous................................. 1,771.50
----------
Total........................ $12,000.00
==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant has authority under Section 607.0850 of the Florida
Business Corporation Act to indemnify its directors and officers to the extent
provided for in such law. The Registrant's Amended and Restated Articles of
Incorporation provide that the Registrant may insure, shall indemnify and shall
advance expenses on behalf of its officers and directors to the fullest extent
not prohibited by law. The Registrant is also a party to indemnification
agreements with each of its directors and officers.
ITEM 16. EXHIBITS.
4.1 Specimen of Common Stock Certificate(2)
4.2 Revised Representative's Warrant Agreement including form of
Representative's Warrant(2)
4.3 Amendment dated October 1, 2003 to Warrant Agreement(3)
4.4 Form of 6% Senior Subordinated Note due July 31, 2006(4)
4.5 Form of Redeemable Warrant dated July 31, 2003(4)
4.6 Unit Purchase Agreement dated July 31, 2003 between the Company and
the Purchasers of the 6% Senior Subordinated Notes due July 31,
2006(5)
4.7 Amendment to Unit Purchase Agreement and Registration Rights
Agreement dated October 15, 2003 between the Company and the
Purchasers of the 6% Senior Subordinated Notes(6)
4.8 Form of 6% Senior Subordinated Note due September 30, 2007(7)
4.9 Form of Redeemable Warrant dated September 30, 2004(7)
4.10 Unit Purchase Agreement dated September 30, 2004 between the Company
and the Purchasers of the 6% Senior Subordinated Notes due September
30, 2007(7)
II-1
23.2 Consent of De Meo, Young, McGrath(1)
24.1 Power of Attorney(8)
----------
(1) Filed herewith.
(2) Previously filed as an exhibit of the same number to the Registrant's
Registration Statement on Form SB-2 (File No. 333-63623) and incorporated
herein by reference.
(3) Previously filed as an exhibit of the same number to the Registrant's
Registration Statement on Form S-3 (File No. 333-105221) and incorporated
herein by reference.
(4) Previously filed as Exhibits 4.1 and 4.2, respectively, to the Quarterly
Report on Form 10-Q for the quarter ended June 30, 2003 and incorporated
herein by reference.
(5) Previously filed as Exhibit 4.5 to the Registrant's Registration Statement
on Form S-3 (File No. 333-109313) and incorporated herein by reference.
(6) Previously filed as an exhibit of the same number to Amendment No. 1 to
the Registrant's Registration Statement on Form S-3 (File No. 333-108739)
and incorporated herein by reference.
(7) Previously filed as an exhibit of the same number to the Registrant's
Registration Statement on Form S-3 (File No. 333-120157) and incorporated
herein by reference.
(8) Included on page II-4 of this Registration Statement.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(a) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933, as amended;
(b) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement; and
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-2
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
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 SEC such indemnification
is against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by 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 of 1933 and will be governed by the
final adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Lauderdale Lakes, State of Florida on this 3rd day of
May, 2005.
21ST CENTURY HOLDING COMPANY
By: /s/ Richard A. Widdicombe
-------------------------------------
Richard A. Widdicombe,
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Edward
J. Lawson and Richard A. Widdicombe, or any one of them, as his or her true and
lawful attorneys-in-fact and agents with full power of substitution and
resubstitution for him or her and in his or her name, place and stead in any and
all capacities to execute in the name of each such person who is then an officer
or director of the Registrant any and all amendments (including post-effective
amendments) to this Registration Statement, and any registration statement
relating to the offering hereunder pursuant to Rule 462 under the Securities Act
of 1933 and to file the same with all exhibits thereto and other documents in
connection therewith with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents and each of them full power and authority to
do and perform each and every act and thing required or necessary to be done in
and about the premises as fully as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, to the
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
SIGNATURES TITLE DATE
----------------------------------- ------------------------------------ ----
/s/ Edward J. Lawson Chairman of the Board of Directors May 3, 2005
----------------------------------- And President
Edward J. Lawson
/s/ Richard A. Widdicombe Chief Executive Officer and Director May 3, 2005
----------------------------------- (Principal Executive Officer)
Richard A. Widdicombe
/s/ James Gordon Jennings, III Chief Financial Officer May 3, 2005
----------------------------------- (Principal Financial and
James Gordon Jennings, III Accounting Officer)
/s/ Bruce Simberg Director May 3, 2005
-----------------------------------
Bruce Simberg
/s/ Carl Dorf Director May 3, 2005
-----------------------------------
Carl Dorf
/s/ Charles B. Hart, Jr. Director May 3, 2005
-----------------------------------
Charles B. Hart, Jr.
/s/ Peter J. Prygelski Director May 3, 2005
-----------------------------------
Peter J. Prygelski
/s/ Richard W. Wilcox, Jr. Director May 3, 2005
-----------------------------------
Richard W. Wilcox, Jr.
II-4
EXHIBIT INDEX
EXHIBIT DESCRIPTION
23.2 Consent of De Meo, Young McGrath