As filed with the Securities and Exchange Commission on August 12, 2003
File No. 333-105221
--------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
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 Identification No.)
incorporation or organization)
4161 N.W. 5th Street, Plantation, FL 33317, (954) 581-9993
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Edward J. Lawson
21st Century Holding Company
4161 N.W. 5th Street
Plantation, FL 33317
(954) 581-9993
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
A. Jeffry Robinson, P.A.
Broad and Cassel
201 South Biscayne Boulevard
Miami Center, Suite 3000
Miami, Florida 33131
(305) 373-9400
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 the 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
registrations 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. [ ]
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 CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. 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 THE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE IN WHICH THE OFFER OR
SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, AUGUST 12, 2003
PROSPECTUS
125,000 SHARES OF COMMON STOCK
21ST CENTURY HOLDING COMPANY
This prospectus covers 125,000 shares of our common stock being offered
upon the exercise of warrants to purchase common stock at a price of $10.875 per
share expiring November 10, 2003, issued to and currently owned by Gilford
Securities Incorporated, the managing underwriter of our initial public
offering. These warrants may be transferred by Gilford at any time. We will
receive proceeds only upon the exercise of the warrants.
Our common stock is traded on the Nasdaq National Market under the
symbol "TCHC." On August 11, 2003, the last reported sale price of the common
stock on the Nasdaq National Market was $15.03 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 Shares" section beginning on page 6 of 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.
Neither the SEC nor any state securities commission has approved or
disapproved of these securities or passed upon the adequacy or accuracy of the
prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is August ____, 2003.
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY..........................................................1
RISKS OF INVESTING IN OUR SHARES............................................2
NOTE REGARDING FORWARD LOOKING STATEMENTS..................................10
USE OF PROCEEDS............................................................10
LEGAL OPINION..............................................................10
EXPERTS....................................................................10
WHERE YOU CAN FIND MORE INFORMATION........................................11
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE..........................11
INDEMNIFICATION OF DIRECTORS AND OFFICERS..................................12
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.
OVERVIEW
We are a vertically integrated insurance holding company, which,
through our subsidiaries, controls substantially all aspects of the insurance
underwriting, distribution and claims process. We underwrite personal automobile
insurance, homeowners insurance and mobile home property and casualty insurance
in the State of Florida through our wholly-owned subsidiaries, Federated
National Insurance Company and American Vehicle Insurance Company. During the
year ended December 31, 2002, 83.42%, 13.75% and 2.83% of the policies we
underwrote were for personal automobile insurance, homeowners' insurance and
mobile home property and casualty insurance, respectively. 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.
We market and distribute our own and third-party insurers' products and
our other services primarily in Central and South Florida, through a network of
23 agencies owned by Federated Agency Group, Inc., a wholly-owned subsidiary, 42
operating franchised agencies, and approximately 125 independent agents. Through
our wholly-owned subsidiary, FedUSA, Inc., we franchise agencies under the
FedUSA name. As of December 31, 2002, franchises were granted for 40 FedUSA
agencies, of which 34 were operating. We intend to focus our future expansion
efforts for our agency network on franchised agencies.
We offer income tax preparation software and service through Express
Tax Service, Inc., an 80% owned subsidiary, as well as franchise opportunities
for these services through EXPRESSTAX Franchise Corporation, a wholly-owned
subsidiary of Express Tax Service, Inc. As of December 31, 2002, there were 136
EXPRESSTAX franchises granted in nine states.
We believe that we can be distinguished from our competitors because we
generate revenue from substantially all aspects of the insurance underwriting,
distribution and claims process. 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
owned and franchised agencies to be a "one stop" shop for insurance, tax
preparation and other services, and will enhance our ability to expand in
Florida and to other states.
Our primary products are standard and nonstandard personal automobile
insurance. Of the total premiums we received in 2002, 3.3% were for standard
insurance policies and 96.7% were for nonstandard insurance policies. The
former is principally provided to insureds who present an average risk profile
in terms of payment history, driving record, vehicle and other factors. The
latter is principally provided to insureds who are unable to obtain preferred or
standard insurance coverage because of their payment history, driving record,
age, vehicle type or other factors, including market conditions for preferred or
standard risks. We believe that industry-wide underwriting standards for
standard insurance coverage have become more restrictive, thereby requiring more
drivers to seek coverage in the nonstandard automobile insurance market. We
believe that these factors have contributed to an increase in the size of the
nonstandard personal automobile insurance market.
We currently underwrite and sell personal automobile insurance only in
Florida; however, we intend to expand to other selected states and American
Vehicle has applied to obtain a license to underwrite and sell personal
automobile insurance in South Carolina and Louisiana. We will 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 receiving 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.
Our executive offices are located at 4161 N.W. 5th Street, Plantation,
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.
RISKS RELATED TO OUR BUSINESS
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 experiencing a "hard"
market in our automobile and property sectors. We cannot predict, however, how
long these market conditions will persist.
2
IF WE ARE UNABLE TO CONTINUE OUR GROWTH BY EXPANDING THE INSURANCE
PRODUCTS WE OFFER AND EXPANDING THE MARKETS IN WHICH WE OPERATE, OUR FUTURE
FINANCIAL RESULTS MAY SUFFER.
We have grown rapidly over the last few years. Our future growth will
depend on our ability to underwrite and market additional insurance products and
programs through our distribution network and our ability to further expand in
the Florida market by franchising additional insurance agencies and establishing
relationships with additional independent agents. Additionally, our goal is to
expand our operations into other states. Whether we are able to accomplish these
goals will depend on:
o the availability of adequate capital,
o our ability to obtain necessary regulatory approvals, and
o our ability to maintain our financial strength ratings.
AVAILABILITY OF CAPITAL. We believe that our company is sufficiently
capitalized to operate our business as it now exists. Our existing sources of
funds include our revolving loan from Flatiron Funding Company LLC, sales of our
securities such as our recent private placement of $7,500,000 of our senior
subordinated notes, and our earnings from operations and investments. Unexpected
catastrophic events in our market areas could result in greater claims losses
than anticipated, which could require us to limit or halt our growth while
redeploying our capital to pay these unanticipated claims.
REGULATORY APPROVALS. American Vehicle has applied to the State of
Alabama for a license to underwrite and sell personal automobile insurance.
Although we are unaware at this time of any issues that would prevent American
Vehicle from obtaining this license, the state insurance regulator may require
additional information, may add conditions to the license that we find
unacceptable, or may deny our license 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 is a time-consuming
process that adds to our operating expenses.
FINANCIAL STRENGTH RATINGS. Third-party ratings agencies assess and
rate the ability of insurers to pay its 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.
3
In 2002, A.M. Best Company 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). Federated
National and American Vehicle are rated "A" ("Unsurpassed," which is first of
six ratings) by Demotech, Inc. If our financial condition deteriorates, we may
not maintain our ratings. A downgrade or withdrawal of our ratings could
severely limit or prevent us from writing or renewing desirable insurance
policies or from obtaining adequate reinsurance.
ALTHOUGH WE FOLLOW THE INDUSTRY PRACTICE OF REINSURING A PORTION OF OUR
RISKS, WE MAY NOT BE ABLE TO SUCCESSFULLY ALLEVIATE RISK THROUGH REINSURANCE
ARRANGEMENTS.
We follow the insurance industry practice of reinsuring a portion of
our risks and paying for that protection based upon premiums received on all
policies subject to this reinsurance. Our business depends on our ability to
transfer or "cede" significant amounts of risk insured by us. Reinsurance makes
the assuming reinsurer liable to the extent of the risk ceded. Prevailing market
conditions in the property insurance market have limited the availability and
increased the cost of reinsurance, which has increased our costs and reduced our
profitability. We are also subject to credit risk with respect to our current
and future reinsurers, as the ceding of risk to reinsurers does not relieve us
of liability to our insureds regarding the portion of the risk that has been
reinsured, if the reinsurers fail to pay for any reason. The insolvency of any
reinsurers or their inability to pay claims would increase the claims that we
must pay, thereby also harming our results of operations.
Both Federated National and American Vehicle cede approximately 40% of
their premiums from automobile insurance policies to Transatlantic Reinsurance
Company. Federated National obtains reinsurance for its property insurance
policies on the private market in Bermuda and London and through the Florida
Hurricane Catastrophe Fund that reinsures Federated National for liabilities
resulting from a storm of $5.5 million to $39.0 million in the aggregate.
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. 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. 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, mortgage loans and
equity securities in order to generate investment income. In 2002, our interest
and dividends earned totaled $1.3 million, or 27 % our total net income of $4.6
million.
4
We experienced net realized investment losses of $1,369,961 for 2002,
$2,911,658 for 2001 and $109,256 for 2000. The net realized losses experienced
in 2001 and 2000 were primarily a function of the widely publicized declines in
the industrial common stock valuations. As a result of the declines in the
equity markets in 2001, we acquired securities in the more conservative and
highly rated industrial bond markets in late 2001 and the first half of 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. We have been experiencing a declining interest rate
environment during the past three years. The effect on our bond portfolio of
this declining interest rate environment has been to decrease our yields to
maturity and the interest income generated accordingly.
OUR LOSS RESERVES MAY BE INADEQUATE TO COVER OUR ACTUAL LIABILITY FOR
LOSSES, AND AS A RESULT OUR RESULTS OF OPERATIONS COULD BE ADVERSELY AFFECTED.
We maintain reserves to cover our estimated ultimate liabilities for
loss and loss adjustment expenses. 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 the Company compared its
reserve levels to its actual claims for the prior years, the Company increased
its liability for loss and loss adjustment expenses by $90,874 for 2002, by
$2,568,000 for 2001, and by $1,445,000 for 2000. These increases reflected
primarily the Company's loss experience under its 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.
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 of Florida, our state of
domicile, and will be subject to the laws of any 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 authorized
lines of business, capital surplus requirements, allowable rates and forms,
investment parameters, underwriting limitations, restrictions upon transactions
with affiliates, dividend limitations, changes in control, market conduct, and
limitations on premium financing service charges. If we do not comply with the
laws and regulations applicable to us, we may be subject to sanctions by the
Florida insurance commissioner or monetary penalties. In addition, we may not be
able to obtain necessary approvals to expand the types of insurance that we
offer.
5
WE 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.
We currently market and distribute Federated National's, American
Vehicle's and third-party insurers' products and our other services through a
network of 23 agencies that we own, 42 agencies that we franchise to others, and
approximately 125 independent agents. Approximately 51% of our insurance
products are sold through agents employed by us and franchised agents and
approximately 49% of our products are sold through independent agents. Many of
our competitors also rely on independent agents. As a result, we must compete
with other insurers for independent agents' business and other franchisors of
insurance agencies for franchisees. 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.
OUR PRIMARY INSURANCE PRODUCT, 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 our primary product, is
provided to insureds who 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.
6
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 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. We compete with respect to automobile insurance in Florida
with more than 100 companies, including companies of comparable or smaller size,
such as U.S. Security Insurance Company, United Automobile Insurance Company,
Direct General Insurance Company and Security National, as well as major
insurers such as Progressive Casualty Insurance Company. 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. We believe, however, that our strategy of
avoiding price competition is best over the long term because it enables us to
maintain the prices that we offer in line with our costs.
WITH OPERATIONS CONCENTRATED IN FLORIDA, WE COULD BE ADVERSELY AFFECTED
BY UNPREDICTABLE CATASTROPHIC EVENTS SUCH AS HURRICANES AND TROPICAL STORMS.
We write insurance policies that cover automobile owners, homeowners
and business owners for losses that result from catastrophes. Catastrophe 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 Florida, which is especially subject to adverse
weather conditions such as hurricanes and tropical storms. Although we have not
experienced significant claims as a result of a recent hurricane or other
weather event, the occurrence of a catastrophe in South Florida could
substantially harm us by causing claims to exceed our anticipated reserve for
losses.
OUR PRESIDENT AND CHIEF EXECUTIVE OFFICER, AND OUR PRESIDENT AND CHIEF
EXECUTIVE OFFICER OF OUR PRINCIPAL SUBSIDIARIES, 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 and president of Federated National, American Vehicle and
Assurance MGA. We have entered into an employment agreement with each of them
and we maintain $3 million and $1 million in key 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.
7
RISKS RELATED TO AN INVESTMENT IN OUR SHARES
THE TRADING OF WARRANTS MAY NEGATIVELY AFFECT THE TRADING PRICES OF OUR
COMMON STOCK.
We intend to list certain warrants to be issued in a private offering
for trading on the Nasdaq National Market. Each of the warrants to be listed
entitles the holder to purchase one-half of one share of our common stock at an
exercise price per share determined as of the closing date of the private
offering. The trading of the warrants may negatively affect the trading prices
of our common stock due to certain potential investment strategies that may be
utilized by certain holders of the warrants.
OUR LARGEST SHAREHOLDERS CONTROL APPROXIMATELY 32% 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
32% of our outstanding common stock. As our largest shareholders, and our only
shareholders owning more than 10% of our stock, the Lawsons have significant
influence over the outcome of any shareholder vote. This voting power may
discourage takeover attempts, changes in management 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 CHANGES IN MANAGEMENT.
Our articles of incorporation and bylaws contain provisions that may
discourage takeover attempts and may prevent changes in 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.
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.
8
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 DIVIDENDS TO THE HOLDING COMPANY AS THE PRIMARY SOURCE OF
OUR INCOME.
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 dividends, loans, advances or the reimbursement of
expenses. These payments can be made only when our subsidiaries have adequate
earnings. In addition, these payments made to us by our insurance subsidiaries
are restricted by Florida law governing the insurance industry. Generally,
Florida law limits the dividends payable under complicated formulas based on the
subsidiary's available capital and earnings. Under these formulas, Federated
National would be able to pay approximately $200,000 in dividends for the first
six months of 2003 and American Vehicle would be able to pay approximately
$70,000. Florida law does authorize the Florida insurance commissioner to
approve dividends that exceed the formula amounts.
No dividends were declared or paid by our subsidiaries in 2002, 2001 or
2002. Whether our subsidiaries will be able to pay dividends in 2003 depends on
the results of their operations and their expected needs for capital. If our
subsidiaries continue to achieve net income at current levels and conditions in
the insurance markets remain relatively consistent, then we anticipate that our
subsidiaries will begin to pay dividends to our company in 2003.
Historically, our operations and financing obligations have required
approximately $40 million per year. We anticipate that some of our obligations
will be met through future dividends from our subsidiaries and the remainder
from our existing sources of capital, such as our line of credit. The most
likely reason why we would not be able to meet our obligations is if a
catastrophic event expected to occur no more often than once in every 100 years
were actually to occur and simultaneously, our reinsurance arrangements were to
fail. If we need additional sources of capital, we currently expect that we
would offer our securities to investors or obtain financing secured by our
assets.
9
NOTE REGARDING FORWARD LOOKING STATEMENTS
Statements in this prospectus or in documents that are incorporated by
reference that are not historical fact are forward-looking statements that 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 the prospectus or
from time to time in our filings with the SEC.
USE OF PROCEEDS
We will receive proceeds of $10.875 per share when and if the warrants
are exercised. The likelihood of our receiving any proceeds from the exercise of
the warrants increases as the market price of our common stock increases above
the warrant exercise price. If all the warrants are exercised, we will receive
net proceeds of approximately $1,348,242 after deducting approximately $11,133
in expenses in connection with the registration statement. Such proceeds, if
any, will be used for working capital and general corporate purposes.
LEGAL OPINION
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 year
ended 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.
The financial statements of 21st Century Holding Company for the years
ended December 31, 2001 and 2000, incorporated by reference in this prospectus,
have been audited by McLean, Paul, Chrycy, Fletcher & Co., 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.
10
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.
Quotations for the prices of our common stock appear on the Nasdaq
National Market, and 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 Annual Report on Form 10-K for the year ended December 31,
2002, as amended,
o Our proxy statement for our 2003 Annual Meeting of
Shareholders,
o Our Quarterly Reports on Form 10-Q for the quarters ended
March 31, 2003 and June 30, 2003,
o Our Current Reports on Form 8-K dated May 3, 2003 and August
4, 2003, 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, 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
11
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
4161 NW 5th Street
Plantation, Florida 33317
Attention: James A. Epstein, General Counsel
Telephone: (954) 581-9993
Our file number under the Securities Exchange Act of 1934 is 0-2500111.
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 such 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.
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PART II
INFORMATION 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....................................... $ 133.38
Accounting fees and expenses............................... 3,000.00
Legal fees and expenses.................................... 7,500.00
Miscellaneous.............................................. 500.00
----------
Total............................................. $11,133.38
==========
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 (1)
4.2 Revised Representative's Warrant Agreement including form of
Representative's Warrant(1)
5.1 Opinion of Broad and Cassel(2)
23.1 Consent of Broad and Cassel (included in its opinion filed as
Exhibit 5.1)(2)
23.3 Consent of McKean, Paul, Chrycy, Fletcher & Co.(3)
23.4 Consent of De Meo, Young, McGrath(3)
25.1 Power of Attorney(2)
_____________
(1) Previously filed as exhibit of the same number to the
Registrant's Registration Statement on Form SB-2 (File No.
333-63623) and incorporated herein by reference.
(2) Filed with this Registration Statement, File Number
333-105221, as originally filed.
(3) Filed herewith.
II-1
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.
(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-2
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 Amendment
No. 1 to the registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Plantation, State of
Florida on this 11th day of August, 2003.
21ST CENTURY HOLDING COMPANY
By: /s/ Edward J. Lawson
------------------------------------
Edward J. Lawson,
Chairman of the Board and 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 date indicated.
SIGNATURES TITLE DATE
/s/ Edward J. Lawson Chairman of the Board and President August 11, 2003
------------------------- (Principal Executive Officer)
Edward J. Lawson
* Chief Financial Officer (Principal Financial and August 11, 2003
------------------------- Accounting Officer)
J. G. Jennings, III
* Chief Executive Officer and Director of the August 11, 2003
------------------------- Registrant; President of Federated National,
Richard A. Widdicombe American Vehicle, and Assurance MGA
* Director August 11, 2003
-------------------------
Carl Dorf
* Director August 11, 2003
-------------------------
Charles B. Hart, Jr.
* Director August 11, 2003
-------------------------
Bruce Simberg
II-3
SIGNATURES TITLE DATE
* Director August 11, 2003
-------------------------
James DePelisi
* Director August 11, 2003
-------------------------
Richard W. Wilcox, Jr.
*By: /s/ Edward J. Lawson
Attorney-in-fact
II-4
EXHIBIT INDEX
EXHIBIT DESCRIPTION
23.3 Consent of McKean, Paul, Chrycy, Fletcher & Co.
23.4 Consent of De Meo, Young, McGrath