SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
21ST CENTURY HOLDING COMPANY
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on the table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
21ST CENTURY HOLDING COMPANY
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 8, 2004
To the Shareholders of 21st Century Holding Company:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Annual Meeting") of 21st Century Holding Company, a Florida corporation, will
be held at our principal executive offices at 4161 NW 5th Street, Suite 200,
Plantation, Florida 33317, at 11:00 A.M., on June 8, 2004 for the following
purposes:
1. To elect two directors to serve until 2007;
2. To authorize the possible issuance of 20% or more of our
common stock, $.01 par value (the "Common Stock"), in
connection with a July 2003 private placement in which we
received net proceeds of approximately $6.9 million from the
sale of units consisting of one note with a principal amount
of $1,000 and one warrant to purchase one-half of one share of
the Company's Common Stock; and,
3. To transact such other business as may properly come before
the Annual Meeting and any adjournment or postponements
thereof.
The Board of Directors has fixed the close of business on April 15,
2004 as the record date for determining those shareholders entitled to notice
of, and to vote at, the Annual Meeting and any adjournments or postponements
thereof.
Whether or not you expect to be present, please sign, date and return
the enclosed proxy card in the pre-addressed envelope provided for that purpose
as promptly as possible. No postage is required if mailed in the United States.
By Order of the Board of Directors,
JAMES A. EPSTEIN, Secretary
Plantation, Florida
May 3, 2004
ALL SHAREHOLDERS ARE INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. THOSE
SHAREHOLDERS WHO ARE UNABLE TO ATTEND ARE RESPECTFULLY URGED TO EXECUTE AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE. SHAREHOLDERS WHO EXECUTE A
PROXY MAY NEVERTHELESS ATTEND THE ANNUAL MEETING, REVOKE THEIR PROXY AND VOTE
THEIR SHARES IN PERSON.
21ST CENTURY HOLDING COMPANY
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 8, 2004
---------------------
PROXY STATEMENT
---------------------
TIME, DATE AND PLACE OF ANNUAL MEETING
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of 21st Century Holding Company, a Florida
corporation, of proxies from the holders of our common stock, par value $.01 per
share (the "Common Stock"), for use at the Annual Meeting of Shareholders to be
held at 11:00 A.M., on June 8, 2004, at our principal executive offices at 4161
NW 5th Street, Suite 200, Plantation, FL 33317, and at any adjournments or
postponements thereof (the "Annual Meeting"), pursuant to the enclosed Notice of
Annual Meeting.
The approximate date this Proxy Statement and the enclosed form of
proxy are first being sent to shareholders is May 3, 2004. Shareholders should
review the information provided herein in conjunction with our Annual Report to
Shareholders that accompanies this Proxy Statement. Our principal executive
offices are located at 4161 NW 5th Street, Suite 200, Plantation, FL 33317, and
our telephone number is (954) 581-9993.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of our Board of Directors.
The giving of a proxy does not preclude the right to vote in person should any
shareholder giving the proxy so desire. Shareholders have an unconditional right
to revoke their proxy at any time prior to the exercise thereof, either in
person at the Annual Meeting or by filing with our Secretary at our headquarters
a written revocation or duly executed proxy bearing a later date; however, no
such revocation will be effective until written notice of the revocation is
received by us at or prior to the Annual Meeting.
The cost of preparing, assembling and mailing this Proxy Statement, the
Notice of Annual Meeting and the enclosed proxy is to be borne by us. In
addition to the use of mail, our employees may solicit proxies personally and by
telephone. Our employees will receive no compensation for soliciting proxies
other than their regular salaries. We may request banks, brokers and other
custodians, nominees and fiduciaries to forward copies of the proxy material to
their principals and to request authority for the execution of proxies. We may
reimburse such persons for their expenses in so doing.
PURPOSES OF THE ANNUAL MEETING
At the Annual Meeting, our shareholders will consider and vote upon the
following matters:
1. To elect two directors to serve until 2007;
2. To authorize the possible issuance of 20% or more of our Common Stock
in connection with a July 2003 private placement in which we received
net proceeds of approximately $6.9 million from the sale of units
consisting of one note with a principal amount of $1,000 and one
warrant to purchase one-half of one share of our Common Stock; and,
3. To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponements thereof.
Unless contrary instructions are indicated on the enclosed proxy, all
shares represented by valid proxies received pursuant to this solicitation (and
which have not been revoked in accordance with the procedures set forth herein)
will be voted (a) for the election of the respective nominees for director named
below and (b) in favor of all other proposals described in the Notice of Annual
Meeting. In the event a shareholder specifies a different choice by means of the
enclosed proxy, the shareholder's shares will be voted in accordance with the
specification so made.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board of Directors has set the close of business on April 15, 2004
as the record date (the "Record Date") for determining shareholders entitled to
notice of and to vote at the Annual Meeting. As of the Record Date, there were
3,785,554 shares of Common Stock issued and outstanding, all of which are
entitled to be voted at the Annual Meeting. Each share of Common Stock is
entitled to one vote on each matter submitted to shareholders for approval at
the Annual Meeting.
The attendance, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum. Directors will be elected by a plurality of
the votes cast by the shares of Common Stock represented in person or by proxy
at the Annual Meeting. Proposal Two, regarding the possible issuance of
additional Common Stock as a result of our July 2003 private placement, will
require the affirmative vote of a majority of the total votes cast on the
proposal in person or by proxy at the Annual Meeting. If less than a majority of
the outstanding shares entitled to vote are represented at the Annual Meeting, a
majority of the shares so represented may adjourn the Annual Meeting to another
date, time or place, and notice need not be given of the new date, time or place
if the new date, time or place is announced at the meeting before an adjournment
is taken.
Prior to the Annual Meeting, we will select one or more inspectors of
election for the meeting. Such inspector(s) shall determine the number of shares
of Common Stock represented at the meeting, the existence of a quorum and the
validity and effect of proxies, and shall receive, count and tabulate ballots
and votes and determine the results thereof. Abstentions will be considered as
shares present and entitled to vote at the Annual Meeting and will be counted as
votes cast at the Annual Meeting, but will not be counted as votes cast for or
against any given matter.
A broker or nominee holding shares registered in its name, or in the
name of its nominee, which are beneficially owned by another person and for
which it has not received instructions as to voting from the beneficial owner,
may have discretion to vote the beneficial owner's shares with respect to the
election of directors and certain other matters addressed at the Annual Meeting.
Any such shares that are not represented at the Annual Meeting either in person
or by proxy will not be considered to have cast votes on any matters addressed
at the Annual Meeting.
BENEFICIAL SECURITY OWNERSHIP
The following table sets forth, as of the Record Date, information with
respect to the beneficial ownership of our Common Stock by (i) each person who
is known by us to beneficially own 5% or more of our outstanding Common Stock,
(ii) each of our executive officers named in the Summary Compensation Table in
the section "Executive Compenstation," (iii) each of our directors, and (iv) all
directors and executive officers as a group.
2
NUMBER OF
SHARES PERCENT OF
BENEFICIALLY CLASS
NAME AND ADDRESS OF BENEFICIAL OWNER (1) OWNED (2) OUTSTANDING
------------------------------------------------------ ------------- ----------
Edward J. Lawson (3).......................................... 1,136,928 30.0%
Michele V. Lawson (4)......................................... 1,136,928 30.0
Bruce F. Simberg (5).......................................... 110,500 2.9
Richard A. Widdicombe (6)..................................... 108,610 2.9
Carl Dorf (7)................................................. 60,800 1.6
Richard W. Wilcox, Jr. (8).................................... 23,000 *
J. Gordon Jennings, III (9)................................... 14,000 *
Charles B. Hart, Jr. (10)..................................... 10,000 *
Peter J. Prygelski (11) ...................................... 600 *
All directors and executive officers
as a group (9 persons) (12) 38.7%
----------------
* Less than 1%.
(1) Except as otherwise indicated, the address of each person named in the
table is c/o 21st Century Holding Company, 4161 NW 5th Street, Suite
200, Plantation, FL 33317.
(2) Except as otherwise indicated, the persons named in this table have
sole voting and investment power with respect to all shares of Common
Stock listed, which include shares of Common Stock that such persons
have the right to acquire a beneficial interest in within 60 days from
the date of this Proxy Statement.
(3) Represents 511,605 shares of Common Stock held of record by Michele V.
Lawson, 16,950 shares held in an account for a minor, 44,216 shares of
Common Stock issuable upon the exercise of stock options held by Mr.
Lawson and 13,784 shares of Common Stock issuable upon the exercise of
stock options held by Mrs. Lawson.
(4) Represents 550,373 shares of Common Stock held of record by Edward J.
Lawson, 16,950 shares held in an account for a minor, 13,784 shares of
Common Stock issuable upon the exercise of stock options held by Mrs.
Lawson and 44,216 shares of Common Stock issuable upon the exercise of
stock options held by Mr. Lawson.
(5) Includes 19,000 shares of Common Stock issuable upon the exercise of
stock options held by Mr. Simberg.
(6) Includes 60,000 shares of Common Stock issuable upon the exercise of
stock options held by Mr. Widdicombe.
(7) Includes 7,000 shares of Common Stock held in a joint account with Mr.
Dorf's spouse, 700 shares of Common Stock held in a joint account in
the names of Mr. Dorf's spouse and child, 9,500 shares of Common Stock
held by Dorf Partners 2001 LP and 4,000 shares of Common Stock issuable
upon the exercise of stock options held by Mr. Dorf.
(8) Includes 1,000 shares of Common Stock held in Mr. Wilcox's IRA and
10,000 shares of Common Stock issuable upon the exercise of stock
options held by Mr.Wilcox.
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(9) Includes 14,000 shares of Common Stock issuable upon the exercise of
stock options held by Mr. Jennings.
(10) Includes 10,000 shares of Common Stock issuable upon the exercise of
stock options held by Mr. Hart.
(11) Includes 200 shares of Common Stock held in Mr. Prygelski's IRA.
(12) Includes 175,000 shares of Common Stock issuable upon the exercise of
stock options.
PROPOSAL ONE: ELECTION OF DIRECTORS
Under our Articles of Incorporation, our Board of Directors is divided
into three classes. Each class of directors serves a staggered term. Edward J.
Lawson and Richard A. Widdicombe hold office until the 2004 Annual Meeting, and
each has been nominated for reelection to the Board, to serve as class III
directors until the Annual Meeting to be held in 2007 or until their successors
are duly elected and qualified. Carl Dorf and Charles B. Hart, Jr. are class I
directors and hold office until the 2005 Annual Meeting. Bruce Simberg, Richard
W. Wilcox, Jr. and Peter J. Prygelski are class II directors and hold office
until the 2006 Annual Meeting.
The accompanying form of proxy when properly executed and returned to
us, will be voted FOR the election to our Board of Directors of the two persons
named below, unless the proxy contains contrary instructions. Proxies cannot be
voted for a greater number of persons than the number of nominees named in the
Proxy Statement. We have no reason to believe that any of the nominees are
unable or unwilling to serve if elected. In the event that any of the nominees
should become unable or unwilling to serve as a director, however, the proxy
will be voted for the election of such person or persons as shall be designated
by the Board of Directors, unless a shareholder has withheld authority or voted
against the slate proposed in this proxy statement.
NOMINEES
The following persons were recommended by the Board of Directors and
are nominated as directors as follows:
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
Edward J. Lawson (2) 54 President, Chairman of the Board and Director
Richard A. Widdicombe 45 Chief Executive Officer and Director
EDWARD J. LAWSON co-founded the Company and has served as our President
and Chairman of the Board since the Company's inception in 1991. Mr. Lawson has
more than 18 years' experience in the insurance industry, commencing with the
founding of the Company's initial agency in 1983.
RICHARD A. WIDDICOMBE was appointed as our Chief Executive Officer in
June 2003. Mr. Widdicombe joined the Company in November 1999 as President of
Federated National Insurance Company ("Federated National") and Assurance
Managing General Agents, Inc. ("Assurance MGA"). In August 2001 he was appointed
as the President of American Vehicle Insurance Company ("American Vehicle"). Mr.
Widdicombe holds his adjuster's license and CPCU designation. Mr. Widdicombe is
a member of the Florida Department of Financial Services (previously Florida
Department of Insurance) Initial Disaster Assessment team. Mr. Widdicombe was
appointed to the Board of Directors in August 2001.
-----------------
(1) Member of Compensation Committee.
(2) Member of Investment Committee.
(3) Member of Audit Committee.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF ALL OF THE
NOMINEES FOR ELECTION AS DIRECTORS.
Set forth below is certain information concerning the directors who are
not currently standing for election:
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
Carl Dorf (2) (4) 63 Director
Charles B. Hart, Jr. (3) (4) 65 Director
Bruce F. Simberg (1) (2) (3) 55 Director
Richard W. Wilcox, Jr. (1) (3) (4) 62 Director
Peter J. Prygelski (3) (4) 35 Director
-------------------
(1) Member of Compensation Committee.
(2) Member of Investment Committee.
(3) Member of Audit Committee.
(4) Member of Nominating Committee.
CARL DORF is the principal of Dorf Asset Management, LLC, and is
responsible for all investment decisions made by that company. From January 1991
to February 2001, Mr. Dorf served as the Fund Manager of ING Pilgrim Bank and
Thrift Fund. Prior to his experience at Pilgrim, Mr. Dorf was a principal in
Dorf & Associates, an investment management company. Mr. Dorf was appointed to
the Board of Directors in August 2001.
CHARLES B. HART, JR. has over 40 years of experience in the insurance
industry. From 1973 to 1999, Mr. Hart served as President of Public Assurance
Group and as General Manager of Operations for Bristol West Insurance Services.
Since 1999, Mr. Hart currently has acted as an insurance consultant. Mr. Hart
was appointed to the Board of Directors in March 2002.
BRUCE F. SIMBERG has served as a director of the Company since January
1998. Mr. Simberg has been a practicing attorney for the last 23 years, most
recently as managing partner of Conroy, Simberg, Ganon, Krevans & Abel, P.A., a
law firm in Ft. Lauderdale, Florida, since October 1979. Mr. Simberg was
appointed to the Board of Directors in January 1998.
RICHARD W. WILCOX, JR. has been in the insurance industry for almost 40
years. In 1963, Mr. Wilcox began an insurance agency that eventually developed
into a business generating $10 million in annual revenue. In 1991, Mr. Wilcox
sold his agency to Hilb, Rogal and Hamilton Company ("HRH") of Fort Lauderdale,
for which he retained the position of President through 1998. In 1998, HRH of
Fort Lauderdale merged with Poe and Brown of Fort Lauderdale, and Mr. Wilcox
served as the Vice President. Mr. Wilcox retired in 1999 and joined the
Company's Board of Directors in January 2003.
PETER J. PRYGELSKI was appointed as a director of the Company in
January 2004. Mr. Prygelski is a Certified Internal Auditor with 12 years in the
internal audit department of American Express, where he was most recently the
Director/Assistant General Auditor of American Express Centurion Bank. As such,
Mr. Prygelski managed the company's audit activities and managed a staff of 12
audit professionals and an annual department budget of $2.5 million. His
responsibilities included preparing and implementing the company's annual audit
plan; supporting the company's audit committee by communicating issues related
to planning, audit results, plan status, and integrated audit coverage; managing
5
the relationships with senior management, the external auditors, and regulatory
authorities; and addressing risks and control gaps to ensure that the company
maintained an adequate control system.
Edward J. Lawson and Michele V. Lawson are husband and wife. Mrs.
Lawson co-founded the Company and is currently the Company's Treasurer. Mrs.
Lawson has 18 years of experience in the insurance business. There are no other
family relationships among the Company's directors and executive officers.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires executive officers, directors and holders of more than
10% of our Common Stock to file reports of ownership and changes in ownership
with the Securities and Exchange Commission and The Nasdaq National Market
("Nasdaq"). Such persons are required to furnish us with copies of all Section
16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or oral or written representations from certain reporting persons, we believe
that, with respect to the fiscal year ended December 31, 2003, all filing
requirements applicable to our executive officers, directors and 10% beneficial
owners were complied with.
CORPORATE GOVERNANCE
We have adopted a Code of Business Conduct for all employees and a Code
of Ethics for the Chief Executive Officer, President and senior financial
officers including the Chief Financial Officer. Copies of our Code of Business
Conduct and Code of Ethics are available on our web site at
www.21stcenturyholding.com.
---------------------------
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 2003, the Board of Directors held four formal meetings, two
special meetings and took actions by written consent on 15 occasions. During
2003, no director attended fewer than 75% of board and committee meetings held
during the period such director served on the Board. We do not have a policy
with regard to the attendance of directors at the annual meeting. All directors
attended last year's annual meeting.
The Board has determined that the following directors are independent
pursuant to NASD Rule 4200 and the Exchange Act: Carl Dorf, Charles B. Hart,
Jr., Peter J. Prygelski, and Richard W. Wilcox, Jr.
The standing committees of the Board of Directors are the Audit
Committee, the Nominating Committee and the Investment Committee.
The Company's Nominating Committee consists of the Board's independent
directors: Mr. Dorf, Mr. Hart, Mr. Prygelski, and Mr. Wilcox. A copy of the
Nominating Committee's charter is attached as an Appendix to this Proxy
Statement.
All nominees are considered utilizing criteria identified in the
Nominating Committee's charter, including knowledge and expertise of insurance
or related businesses, finance, marketing, distribution and other relevant
criteria. This year's nominees were recommended and approved by the Nominating
Committee.
Shareholders may recommend nominees to the Board by notifying the
Secretary, in writing, of the identity of the nominee and enclosing a resume,
curriculum vitae or other relevant information describing the nominee's
qualifications. The Secretary then forwards these materials to the Nominating
Committee, who will consider the candidate at the next meeting scheduled for the
purpose of considering nominees to the Board.
6
Shareholders may also nominate directors, along with the presentation
of other business, at our annual meeting, pursuant to Article II, Section 10 of
our Bylaws and SEC regulations. For business to be brought before an annual
meeting by a shareholder, notice thereof must be delivered to or mailed and
received at our principal executive offices, not less than 120 calendar days
before the date of the proxy statement released to shareholders in connection
with the previous year's annual meeting. The Bylaws require a shareholder's
notice to the Secretary to set forth as to each matter the shareholder proposes
to bring before the annual meeting (i) a brief description of the business
desired to be brought before the annual meeting and the reasons for conducting
such business at the annual meeting, (ii) the name and record address of the
shareholder proposing such business, (iii) the class and number of shares which
are beneficially owned by the shareholder, and (iv) any material interest of the
shareholder in such business.
With regard to the nomination of directors, such notice shall set forth
(a) as to each person whom the shareholder proposes to nominate for election or
re-election as a director, (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or employment of the
person, (iii) the class and number of shares of capital stock which are
beneficially owned by the person, (iv) the consent of each nominee to serve as a
director if so elected, and (v) any other information relating to the person
that is required to be disclosed in solicitations for proxies for the election
of directors pursuant to Rule 14a-3 under the Exchange Act; and (b) as to the
shareholder giving notice, (i) the name and record address of shareholder, and
(ii) the class and number of shares of capital stock which are beneficially
owned by the shareholder. We may require any proposed nominee to furnish such
other information as may reasonably be required to determine the eligibility of
such proposed nominee to serve as a director.
A shareholder may contact the Board through the Secretary.
The Audit Committee is currently composed of Charles B. Hart, Jr.,
Richard W. Wilcox, Jr. and Peter J. Prygelski. Mr. Prygelski is a "financial
expert" as that term is defined in the applicable rules and regulations of the
Exchange Act. The Audit Committee met on five occasions in 2003.
Pursuant to a charter adopted in June 2003 and attached as an appendix
to this Proxy Statement, the duties and responsibilities of the Audit Committee
include, but are not limited to, (a) the appointment of the independent
certified public accountants and any termination of engagement, (b) reviewing
the plan and scope of independent audits, (c) reviewing significant accounting
and reporting policies and operating controls, (d) having general responsibility
for all related auditing and financial statement matters, and (e) reporting its
recommendations and findings to the full Board of Directors. The Audit Committee
pre-approves all auditing services and permitted non-audit services (including
the fees and terms thereof) to be performed by the independent accountants,
subject to the de minimus exceptions for non-audit services described in Section
10A(i)(1)(B) of the Exchange Act that are approved by the Audit Committee prior
to the completion of the audit.
The Audit Committee has adopted guidelines regarding the engagement of
our independent auditor to perform services for us. For audit services
(including statutory audit engagements as required under state laws), the
independent auditor will provide the Audit Committee with an engagement letter
during the fourth quarter of each year outlining the scope of the audit services
proposed to be performed during the fiscal year. If agreed to by the Audit
Committee, this engagement letter will be formally accepted by the Audit
Committee at either its December or March Audit Committee meeting. The
independent auditor will submit to the Audit Committee for approval an audit
services fee proposal after acceptance of the engagement letter.
For non-audit services, Company management will submit to the Audit
Committee for approval (during December or June of each fiscal year) the list of
non-audit services that it recommends the Committee engage the independent
auditor to provide for the fiscal year. Company management and the independent
auditor will each confirm to the Audit Committee that each non-audit service on
the list is permissible under all applicable legal requirements. In addition to
the list of planned non-audit services, a budget estimating non-audit service
spending for the fiscal year will be provided. The Audit Committee will approve
both the list of permissible non-audit services and the budget for such
services. The Audit Committee will be informed routinely as to the non-audit
services actually provided by the independent auditor pursuant to this
pre-approval process.
To ensure prompt handling of unexpected matters, the Audit Committee
delegates to the Chair the authority to amend or modify the list of approved
permissible non-audit services and fees. The Chair will report action taken to
the Audit Committee at the next committee meeting.
The independent auditor must ensure that all audit and non-audit
services have been approved by the Audit Committee. The Chief Financial Officer
is responsible for tracking all independent auditor fees against the budget for
such services and report at least annually to the Audit Committee.
In March 2004, the Board determined that the independent directors,
meeting in executive session, would review and approve the compensation of our
executive officers and directors. In 2003, we did have a Compensation Committee.
The Compensation Committee was composed of Charles B. Hart, Jr., Richard W.
Wilcox, Jr. and Bruce Simberg. The Compensation Committee held three formal
meetings and acted seven times by written consent. The Compensation Committee
reviewed and approved the compensation of the Company's executive officers and
administered the Company's 1998 Stock Option Plan, 2001 Franchise Stock Option
Plan and 2002 Stock Option Plan.
The Investment Committee is currently composed of Edward J. Lawson,
Bruce Simberg, and Carl Dorf. The Investment Committee manages our investment
portfolio. The Investment Committee met informally via teleconference on several
occasions in 2003.
REPORT OF THE AUDIT COMMITTEE
The following report of the Audit Committee is made pursuant to the
rules of the Securities and Exchange Commission. This report shall not be deemed
incorporated by reference by a general statement incorporating by reference this
Proxy statement into any filing under the Securities Act of 1933 (the
"Securities Act") or the Exchange Act, except to the extent that we specifically
incorporate this information by reference, and shall not otherwise be deemed
filed under such acts.
The Audit Committee hereby reports as follows:
1. The Audit Committee has reviewed and discussed the audited financial
statements with our management.
2. The Audit Committee has discussed with De Meo, Young, McGrath
("DeMeo"), independent accountants, the matters required to be discussed by SAS
61 (Communication with Audit Committees).
3. The Audit Committee has received the written disclosures and the
letter from DeMeo required by the Independence Standards Board No. 1
(Independent Discussions with Audit Committees), and has discussed with DeMeo
their independence.
4. Based on the review and discussion referred to in paragraphs (1)
through (3) above, the Audit Committee recommended to the Board of the Company,
and the Board has approved, that the audited financial statements be included in
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2003, for filing with the Securities and Exchange Commission.
/s/ Peter J. Prygelski, Chairman
/s/ Charles B. Hart, Jr.
/s/ Richard W. Wilcox, Jr.
7
AUDIT AND NONAUDIT FEES
For the fiscal year ended December 31, 2003, fees for services provided
by DeMeo and McKean, Paul, Chrycy, Fletcher & Co. ("McKean") were as follows:
DeMeo McKean
----- ------
Audit Fees(1) $ 283,862 $ 76,010
Audit-Related Fees(2) $ 15,000 $ 0
Tax Fees(3) $ 2,140 $ 0
---------- -----------
Total $ 301,002 $ 76,010
-----------------
(1) Audit fees consisted of audit work performed in the preparation of
financial statements, as well as work generally only the independent
auditor can reasonably be expected to provide, such as statutory
audits.
(2) Audit-related fees consisted principally of audits of employee benefit
plans and special procedures related to regulatory filings in 2003.
(3) Tax fees consisted principally of assistance with tax compliance and
reporting.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes compensation earned for the years ended
December 31, 2003, 2002, and 2001, by our Chief Executive Officer and the three
other most highly compensated executive officers whose compensation exceeded
$100,000 during 2003 and is required to be reported (the "named executive
officers").
LONG-TERM
ANNUAL COMPENSATION (1) COMPENSATION
------------------------------------- -------------------------------- ----------------------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
--------------------------- ---- --------- -------- ---------- ---------------
Richard A. Widdicombe 2003 $126,250 0 -- $--
Chief Executive Officer 2002 122,200 0 --
2001 78,000 0 --
Edward J. Lawson, 2003 $156,000 0 -- $--
President and Chairman 2002 156,000 0 -- --
2001 156,000 0 -- 660 (2)
J. Gordon Jennings, III 2003 $104,000 0 -- $--
Chief Financial Officer 2002 89,800 0 -- --
2001 78,000 0 -- --
-----------------
(1) Perquisites and other personal benefits totaling less than the
applicable reporting threshold have been excluded.
(2) Includes $660 in contributions for Mr. Lawson to the Company's 401(k)
plan in 2001.
8
OPTION GRANTS IN LAST FISCAL YEAR
No grants of stock options were made during 2003 to any of the named
executive officers. We have never granted stock appreciation rights.
STOCK OPTION EXERCISES AND HOLDINGS
The following table sets forth certain information with respect to
stock options and/or warrants exercised during calendar year 2003 by the named
executive officers and unexercised stock options and/or warrants held as of
December 31, 2003 by such executive officers.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
UNDERLYING OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END
OPTIONS VALUE -------------------------- --------------------------------
NAME EXERCISED REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE(2) UNEXERCISABLE(2)
---- --------- ----------- ----------- ------------- -------------- ----------------
Richard A. Widdicombe 30,000 $213,600 60,000 -- $643,000 --
Edward J. Lawson 77,784 $234,891 44,216 -- $470,425 --
J. Gordon Jennings, III -- -- 7,000 23,000 $82,100 $264,400
-----------------
(1) All values are shown pretax and are rounded to the nearest whole dollar.
(2) Based on a fair market value of $22.80 per share at December 31, 2003.
9
EQUITY COMPENSATION PLAN INFORMATION
EQUITY COMPENSATION PLAN INFORMATION
------------------------------------
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
FUTURE ISSUANCE UNDER
NUMBER OF SECURITIES TO WEIGHTED-AVERAGE EQUITY COMPENSATION
BE ISSUED UPON EXERCISE EXERCISE PRICE OF PLANS (EXCLUDING
OF OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, SECURITIES REFLECTED IN
WARRANTS AND RIGHTS WARRANTS AND RIGHTS COLUMN (A))
PLAN CATEGORY (A) (B) (C)
-------------------------- ------------------- ------------------- -----------
Equity compensation plans
approved by security
holders* 831,694 $13.49 1,050,845
Equity compensation plans
not approved by security
holders** 7,800 $ 9.00 Not applicable
TOTAL
* Includes options from the 1998 Stock Option Plan, 2001 Franchise
Program Stock Option Plan and the 2002 Stock Option Plan.
** Warrants granted as part of an agreement executed in 1998 relating to our
acquisition of insurance agencies. The warrants were granted to the owner,
who became an employee of ours upon completion of the acquisition.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Under rules established by the Commission, we are required to provide a
report explaining the rationale and considerations that led to fundamental
compensation decisions affecting the executive officers (including the named
executive officers) during the past fiscal year. The report of our Compensation
Committee for 2003 is set forth below.
COMPENSATION PHILOSOPHY
The three principal components of executive compensation are salary,
bonus and stock options. These components are designed to facilitate fulfillment
of the Board's compensation objectives, which include (i) attracting and
retaining competent management, (ii) recognizing individual initiative and
achievement, (iii) rewarding management for short and long term accomplishments,
and (iv) aligning management compensation with the achievement of company goals
and performance.
The Compensation Committee endorses the position that equity ownership
by management is beneficial in aligning management's and shareholders' interests
in the enhancement of shareholder value. This alignment is amplified by the
extensive holdings by management of Common Stock and stock options. Base
salaries for new management employees are determined initially by evaluating the
responsibilities of the position held and the experience of the individual, and
by reference to the competitive marketplace for managerial talent, including a
comparison of base salaries for comparable positions at similar companies of
comparable sales and capitalization. Annual salary adjustments are determined by
evaluating the competitive marketplace, company performance, the performance of
the executive, and the responsibilities assumed by the executive.
10
In 2004, our independent directors, in lieu of the Compensation
Committee, will review existing management compensation programs on an ongoing
basis and will (i) meet with the chief executive officer to consider and set
mutually agreeable performance standards and goals for members of senior
management, as appropriate, or as otherwise required pursuant to any such
officer's employment agreement and (ii) consider and, as appropriate, approve
modifications to such programs to ensure a proper fit with the philosophy of the
Compensation Committee and the agreed-upon standards and goals. The independent
directors have not yet considered or approved the individual or corporate
performance goals or standards for the fiscal year ending December 31, 2003 with
respect to the management incentive programs.
CHIEF EXECUTIVE OFFICER COMPENSATION
The principal factors considered by the Board of Directors in
determining fiscal 2003 salary and bonus for Richard A. Widdicombe, the Chief
Executive Officer, included an analysis of the compensation of chief executive
officers of public companies within our industry and public companies similar in
size and capitalization. The Compensation Committee also considered the fiscal
2003 earnings, expectations for the fiscal year ending December 31, 2004 and
other performance measures in determining Mr. Widdicombe's compensation, but
there was no specific relationship or formula by which such compensation was
tied to company performance.
OTHER EXECUTIVE OFFICERS' COMPENSATION
Fiscal 2003 base salary and bonuses for our other executive officers
were determined by the Compensation Committee. This determination was made after
a review and consideration of a number of factors, including each executive's
level of responsibility and commitment, level of performance (with respect to
specific areas of responsibility and on an overall basis), past and present
contribution to and achievement of company goals and performance during fiscal
2003, compensation levels at competitive publicly held companies our historical
compensation levels. Although company performance was one of the factors
considered, the approval of the Compensation Committee was based upon an overall
review of the relevant factors, and there was no specific relationship or
formula by which compensation was tied to company performance.
STOCK OPTIONS
We maintain stock option plans, which are designed to attract and
retain directors, executive officers and other employees and to reward them for
delivering long-term value to 21st Century and its subsidiaries. In determining
the amount and timing of stock option grants, we review the individual's
existing share and option holdings, as well as performance-related factors.
/s/ Richard W. Wilcox, Jr., Chairman
/s/ Charles B. Hart
/s/ Peter J. Prygelski
COMPENSATION OF DIRECTORS
Non-employee directors receive a fee of $500 per meeting of the Board
of Directors or committee thereof attended and received annual grants of stock
options under the 1998 Stock Option Plan (the "1998 Plan") to purchase 3,000
shares of Common Stock. Directors who are also officers do not receive this
compensation. All directors are reimbursed for travel and lodging expenses in
connection with their attendance at meetings.
In June 2002, directors received six-year options under the 2002 plan
to purchase shares of Common Stock. Such options vest over a five-year period
commencing June 2003. The quantities of options granted to the directors in June
2002 were as follows: 10,000 each to Messrs. Simberg, Dorf and Hart. In January
2003, Richard W. Wilcox, Jr. was each granted 10,000 six-year options under the
2002 plan. In January 2004, Peter J. Prygelski was granted 10,000 six-year
options under the 2002 plan.
11
INDEMNIFICATION AGREEMENTS
We have entered into an indemnification agreement with each of our
directors and executive officers. Each indemnification agreement provides that
we will indemnify such person against certain liabilities (including
settlements) and expenses actually and reasonably incurred by him or her in
connection with any threatened or pending legal action, proceeding or
investigation (other than actions brought by us or in our right) to which he or
she is, or is threatened to be, made a party by reason of his or her status as a
director, officer or agent, provided that such director or executive officer
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to our best interests and, with respect to any criminal proceedings,
had no reasonable cause to believe his or her conduct was unlawful. With respect
to any action brought by us or in our right, a director or executive officer
will also be indemnified, to the extent not prohibited by applicable law,
against expenses and amounts paid in settlement, and certain liabilities if so
determined by a court of competent jurisdiction, actually and reasonably
incurred by him or her in connection with such action if he or she acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
our best interests.
EMPLOYMENT AGREEMENTS
Effective September 1, 1998, we entered into employment agreements with
each of Edward J. Lawson, the Company's President, and Michele V. Lawson, the
Treasurer. Effective June 10, 2003, we entered into an employment agreement with
Richard A. Widdicombe, Chief Executive Officer. Each employment agreement has a
"rolling" two-year term, so that at all times the remaining term of the
agreement is two years. The employment agreements provide for annual salaries
initially set at $156,000 for Mr. Lawson, $137,800 for Mr. Widdicombe, and
$78,000 for Mrs. Lawson, and such bonuses and increases as may be awarded by the
Board of Directors. Mr. Widdicombe receives a monthly car allowance in the
amount of $600.
Each employment agreement provides that the executive officer will
continue to receive his salary for a period of two years after the termination
of employment, if his or her employment is terminated for any reason other than
death, disability or Cause (as defined in the employment agreement), or for a
period of two years after termination of the agreement as a result of his or her
disability and a bonus equal to twice the amount paid to the executive officer
during the 12 months preceding the termination, and the executive officer's
estate will receive a lump sum payment equal to two year's salary plus a bonus
equal to twice the amount paid to the executive officer during the 12 months
preceding the termination by reason of his death. Each employment agreement also
prohibits the executive officer from directly or indirectly competing with us
for one year after termination for any reason except a termination without
Cause. If a Change of Control (as defined in the employment agreement) occurs,
the employment agreement provides for the continued employment of the executive
officer for a period of two years following the Change of Control. In addition,
following the Change of Control, if the executive officer's employment is
terminated by the Company other than for Cause or by reason of his death or
disability, or by the executive officer for certain specified reasons (such as a
reduction of compensation or a diminution of duties), he or she will receive a
lump sum cash payment equal to 299% of the cash compensation received by him or
her during the 12 calendar months prior to such termination.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Edward J. Lawson, the Company's President, served as a member of the
Compensation Committee, but resigned during the second quarter of 2003.
12
STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing the dollar change in the
cumulative total shareholder return on the Company's Common Stock for the period
beginning on November 5, 1998 and ending on December 31, 2003 as compared to the
cumulative total return of the Nasdaq Stock Market Index and the cumulative
total return of the Nasdaq Insurance Index. The graph depicts the value based on
the assumption of a $100 investment with all dividends reinvested.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN*
PERIOD ENDING
------------------------------------------------------------------
INDEX 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03
----------------------------------------------------------------------------------------------------------------------------
21st Century Holding Company 100.00 58.93 43.10 46.59 204.82 346.25
NASDAQ - Total US 100.00 185.95 113.19 89.65 61.67 92.90
NASDAQ Insurance Index* 100.00 77.56 97.40 104.39 105.21 130.03
SNL Property & Casualty Insurance Index 100.00 74.35 106.63 106.40 99.80 123.48
*Source: CRSP, Center for Research in Security Prices, Graduate School of
Business, The University of Chicago, 2004. Used with permission. All rights
reserved. crsp.com
Graph and index values provided by: SNL FINANCIAL LC, CHARLOTTESVILLE, VA (434)
977-1600 (C)2004. Used with permission. All rights reserved.
[OBJECT OMITTED]
Note: The stock price performance shown on the graph above is not necessarily
indicative of future price performance.
13
CERTAIN TRANSACTIONS
TRANSACTIONS
Bruce Simberg, a director, is a partner of the Fort Lauderdale, Florida
law firm of Conroy, Simberg, Ganon, Krevans & Abel, P.A., which renders legal
services to the Company. In 2003 and 2002, the Company paid legal fees to
Conroy, Simberg, Ganon, Krevans & Abel, P.A. for services rendered in the amount
of $219,293 and $266,000, respectively.
In September 2002 Carl Dorf, a director, who is also on the Investment
Committee, began to oversee an investment account for us. Commission fees paid
to this director in 2003 totaled $7,500. This oversight arrangement was
terminated in March 2003.
APPROVAL OF AFFILIATED TRANSACTIONS
We have adopted a policy that any transactions between the Company and
executive officers, directors, principal shareholders or their affiliates take
place on an arms-length basis and require the approval of a majority of our
independent directors. We believe that the transaction with Conroy, Simberg,
Ganon, Krevans & Abel, P.A. is on terms at least as favorable as those which we
could secure from a non-affiliated third party.
PROPOSAL TWO: APPROVAL OF THE POSSIBLE ISSUANCE OF 20% OR MORE OF THE
COMPANY'S COMMON STOCK IN CONNECTION WITH THE SECURITIES ISSUED IN
THE COMPANY'S JULY 2003 PRIVATE PLACEMENT
Pursuant to Nasdaq rules, we are required to submit for approval by our
shareholders any issuance of Common Stock in connection with a transaction
involving the potential issuance of 20% or more of our Common Stock outstanding
immediately before the transaction.
On July 31, 2003, we completed a private placement of our 6% Senior
Subordinated Notes, which were offered and sold to accredited investors as units
consisting of one note with a principal amount of $1,000 and one warrant to
purchase one-half of one share of our Common Stock. We sold an aggregate of $7.5
million of notes in this placement, which resulted in proceeds (net of placement
agent fees of $451,000 and offering expenses of $111,000) of approximately $6.9
million. The net proceeds were utilized to increase the surplus of our insurance
subsidiaries in order to allow these subsidiaries to expand their business in
the areas of property insurance and general liability insurance.
The notes pay interest at the annual rate of 6%, are subordinated to
senior debt, and mature on July 31, 2006. Quarterly payments of principal and
interest due on the notes may be made in cash or, at our option, in shares of
our Common Stock. If paid in shares of Common Stock, the number of shares to be
issued is determined by dividing the payment due by 95% of the weighted-average
volume price for the Common Stock on Nasdaq as reported by Bloomberg Financial
Markets for the 20 consecutive trading days preceding the payment date. We paid
the October 2003 and January 2004 quarterly principal and interest payments by
issuing 41,195 shares and 36,009 shares, respectively, of our Common Stock to
the holders of the notes.
We issued warrants to purchase shares of our Common Stock to the
purchasers of the notes and to the placement agent in the offering, J. Giordano
Securities, LLC. Each warrant entitles the holder to purchase one-half of one
share of our Common Stock. The total number of shares issuable upon exercise of
these warrants was determined after the expiration of 60 consecutive trading
days following July 31, 2003, which was the date of closing of the offering. The
number of shares issuable upon exercise of the warrants issued to purchasers
equals 377,112. The number of shares issuable upon exercise of the warrants
issued to the placement equals 31,388. The exercise price of the warrants is
$19.1153 per whole share.
14
The terms of the warrants provide for anti-dilution adjustments to the
exercise price and the number of shares issuable thereunder upon the occurrence
of certain events typical for private offerings of this type. The warrants will
be exercisable until July 31, 2006. The warrants may be redeemed, in whole or in
part, at any time or from time to time, at our sole option, commencing a year
from July 31, 2003 at a redemption price of $0.01 per whole share underlying the
warrants to be redeemed; provided, however, that before any such call for
redemption of the warrants may occur, the weighted-average volume price for our
Common Stock quoted on Nasdaq shall have been, for 20 consecutive trading days
ending not more than 10 days prior to the notice of redemption, more than 150%
of the exercise price, as such may be adjusted from time to time. Redemption of
the warrants may only occur upon 30 days' prior written notice to the holder,
such notice to include certification of the trading price of our Common Stock on
Nasdaq as reported by Bloomberg.
Under the terms of the notes, the number of shares that would be issued
to pay the quarterly principal and interest due is determined based on the
market prices of our Common Stock prior to each quarterly payment date, and
therefore it is not possible to determine precisely the number of shares that
ultimately may be issued by us. Our ability to pay the principal and interest in
shares rather than cash enables us to conserve our cash reserves and deploy them
as needed to fund our operations. In addition, the anti-dilution adjustments to
the warrants may require us to issue an indeterminate number of additional
shares of Common Stock. The terms of the notes and the warrants provide that we
will not issue shares to pay principal and interest on the notes or make
anti-dilution adjustments to the warrants in violation of the Nasdaq rule
described above. Nevertheless, the Board of Directors desires to obtain
shareholder approval should we decide that payment of principal and interest in
shares of Common Stock rather than cash is in the best interests of 21st Century
and our shareholders, or should the anti-dilution provisions of the warrants be
triggered, and the issuances in the aggregate would total more than 20% of our
Common Stock outstanding before the sale of the notes.
The Board of Directors recommends that shareholders authorize the
potential issuance of 20% or more of our Common Stock in connection
with the private placement described above. If the shareholders do not authorize
this issuance, the transactions will, nonetheless, be valid. We may, however, be
in violation of the Nasdaq requirements described above, which could be cited by
Nasdaq as a basis for delisting our shares from Nasdaq.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THIS
PROPOSAL. THE APPROVAL OF THIS PROPOSAL REQUIRES THE AFFIRMATIVE VOTE OF A
MAJORITY OF THE TOTAL VOTES CAST ON THE PROPOSAL IN PERSON OR BY PROXY.
OTHER BUSINESS
The Board knows of no other business to be brought before the Annual
Meeting. If, however, any other business should properly come before the Annual
Meeting, the persons named in the accompanying proxy will vote proxies as in
their discretion they may deem appropriate, unless they are directed by a proxy
to do otherwise.
HOUSEHOLDING OF ANNUAL DISCLOSURE DOCUMENTS
As permitted by the Exchange Act, only one copy of this Proxy Statement
is being delivered to shareholders residing at the same address, unless such
shareholders have notified us of their desire to receive multiple copies of the
Proxy Statement.
We will promptly deliver, upon oral or written request, a separate copy
of the Proxy Statement to any shareholder residing at an address to which only
one copy was mailed. Requests for additional copies should be directed to the
Chief Financial Officer by phone at (954) 581-9993 or by mail to the Chief
Financial Officer, 4161 NW 5th Street, Suite 200, Plantation, Florida 33317.
Shareholders residing at the same address and currently receiving only
one copy of the Proxy Statement may contact the Chief Financial Officer by phone
at (954) 581-9993 or by mail to the Chief Financial Officer, 4161 NW 5th Street,
Suite 200, Plantation, Florida 33317 to request multiple copies of the Proxy
Statement in the future.
15
INFORMATION CONCERNING SHAREHOLDER PROPOSALS
Pursuant to Rule 14a-8 promulgated by the Securities and Exchange
Commission, a shareholder intending to present a proposal to be included in the
proxy statement for our 2005 Annual Meeting of Shareholders must deliver a
proposal in writing to our principal executive office no later than January 13,
2005.
Shareholder proposals intended to be presented at, but not included in
the proxy materials for that meeting must be received by us no later than March
23, 2005, at our principal executive offices; otherwise, such proposals will be
subject to the grant of discretionary authority contained in the form of proxy
to vote on them.
By Order of the Board of Directors
JAMES A. EPSTEIN, Secretary
Plantation, Florida
May 3, 2004
16
21ST CENTURY HOLDING COMPANY
ANNUAL MEETING OF SHAREHOLDERS - JUNE 8, 2004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
21ST CENTURY HOLDING COMPANY
The undersigned hereby appoints Edward J. Lawson and Michele V. Lawson,
as Proxies, each with full power to appoint a substitute, to represent and to
vote, with all the powers the undersigned would have if personally present, all
the shares of common stock, $.01 par value per share, of 21st Century Holding
Company (the "Company") held of record by the undersigned on April 15, 2004 at
the Annual Meeting of Shareholders to be held on June 8, 2004 or any
adjournments or postponements thereof.
PROPOSAL 1. ELECTION OF DIRECTORS
[ ] FOR ALL THE NOMINEES LISTED BELOW
[ ] WITHHOLD AUTHORITY (except as marked to the contrary below) TO VOTE
FOR ALL NOMINEES LISTED BELOW.
Edward J. Lawson Richard A. Widdicombe
(INSTRUCTION: To withhold authority for any individual nominees, write that
nominee's name in the space below.)
--------------------------------------------------------------------------------
PROPOSAL 2. APPROVAL OF THE POSSIBLE ISSUANCE OF 20% OR MORE OF THE COMPANY'S
COMMON STOCK IN CONNECTION WITH THE SECURITIES ISSUED IN THE COMPANY'S JULY 2003
PRIVATE PLACEMENT
[ ] For [ ] Against [ ] Abstain
In their discretion, the Proxies are authorized to vote upon other
business as may come before the meeting.
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned shareholder. If no direction is made, the
Proxy will be voted FOR Proposals 1 and 2.
Dated: , 2004
-------------------------------
--------------------------------------------
(Signature)
--------------------------------------------
(Signature)
PLEASE SIGN HERE
Please date this proxy and sign your name exactly as it appears hereon.
Where there is more than one owner, each should sign.
When signing as an agent, attorney, administrator,
executor, guardian, or trustee, please add your title
as such. If executed by a corporation, the proxy
should be signed by a duly authorized officer who
should indicate his office.
PLEASE DATE, SIGN, AND MAIL THIS PROXY CARD IN THE ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
Appendix A
June 2003
21ST CENTURY HOLDING COMPANY
AUDIT COMMTTEE CHARTER
PURPOSE
The Audit Committee is appointed by the Board of Directors (the "Board") to
assist the Board in monitoring (1) the integrity of the financial statements of
21st Century Holding Company (the "Company"), (2) the independent accountants'
qualifications and independence, (3) the performance of the Company's internal
audit function and independent accountants, and (4) the compliance by the
Company with legal and regulatory requirements.
The Audit Committee shall prepare the report required by the rules of the
Securities and Exchange Commission (the "Commission") to be included in the
Company's annual proxy materials.
COMMITTEE MEMBERSHIP
The Audit Committee shall consist of no fewer than three members. The members of
the Audit Committee shall meet the independence and experience requirements of
Section 10A(m)(3) of the Securities Exchange Act of 1934 (the "Exchange Act"),
the rules and regulations of the Commission and the rules and regulations of the
Nasdaq Stock Market, Inc. At least one member of the Audit Committee shall be a
"financial expert" as defined by the Commission.
The members of the Audit Committee shall be appointed by the Board and may be
replaced by the Board.
MEETINGS
The Audit Committee shall meet as often as it determines, but not less
frequently than quarterly. The Audit Committee shall meet periodically with
management, the internal auditors and the independent accountants in separate
executive sessions. The Audit Committee may request any officer or employee of
the Company or the Company's outside counsel or independent accountants to
attend a meeting of the Committee or to meet with any members of, or consultants
to, the Audit Committee.
COMMITTEE AUTHORITY AND RESPONSIBILITIES
The Audit Committee shall have the sole authority to appoint or replace the
independent accountants. The Audit Committee shall be directly responsible for
the compensation and oversight of the work of the independent accountants
(including resolution of disagreements between management and the independent
accountants regarding financial reporting) for the purpose of preparing or
issuing an audit report or related work. The independent accountants shall
report directly to the Audit Committee.
The Audit Committee shall pre-approve all auditing services and permitted
non-audit services (including the fees and terms thereof) to be performed for
the Company by its independent accountants, subject to the de minimus exceptions
for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act
which are approved by the Audit Committee prior to the completion of the audit.
The Audit Committee may form and delegate authority to subcommittees consisting
of one or more members when appropriate, including the authority to grant
pre-approvals of audit and permitted non-audit services, provided that decisions
of such subcommittee to grant pre-approvals shall be presented to the full Audit
Committee at its next scheduled meeting.
A-1
The Audit Committee shall have the authority, to the extent it deems necessary
or appropriate, to retain independent legal, accounting or other advisors. The
Company shall provide for appropriate funding, as determined by the Audit
Committee, for payment of compensation to the independent accountants for the
purpose of rendering or issuing an audit report and to any advisors employed by
the Audit Committee.
The Audit Committee shall make regular reports to the Board. The Audit Committee
shall review and reassess the adequacy of this Charter annually and recommend
any proposed changes to the Board for approval.
The Audit Committee, to the extent it deems necessary or appropriate, shall:
Financial Statement and Disclosure Matters
------------------------------------------
1. Review and discuss with management and the independent accountants the
annual audited financial statements, including disclosures made in
management's discussion and analysis, and recommend to the Board
whether the audited financial statements should be included in the
Company's Form 10-K.
2. Review and discuss with management and the independent accountants the
Company's quarterly financial statements prior to the filing of its
Form 10-Q, including the results of the independent accountants' review
of the quarterly financial statements.
3. Discuss with management and the independent accountants significant
financial reporting issues and judgments made in connection with the
preparation of the Company's financial statements, including any
significant changes in the Company's selection or application of
accounting principles, any major issues as to the adequacy of the
Company's internal controls and any special steps adopted in light of
material control deficiencies.
4. Review and discuss quarterly reports from the independent accountants
on:
(a) All critical accounting policies and practices to be used,
including critical and significant accounting releases.
(b) All alternative treatments of financial information within
generally accepted accounting principles that have been
discussed with management, ramifications of the use of such
alternative disclosures and treatments, and the treatment
preferred by the independent accountants.
(c) Other material written communications between the independent
accountants and management, such as any management letter or
schedule of unadjusted differences.
5. Discuss with management the Company's earnings press releases,
including the use of "pro forma" or "adjusted" non-GAAP information, as
well as financial information and earnings guidance provided to
analysts and rating agencies. Such discussion may be done generally
(consisting of discussing the types of information to be disclosed and
the types of presentations to be made).
6. Discuss with management and the independent accountants the effect of
regulatory and accounting initiatives as well as off-balance sheet
items on the Company's financial statements.
7. Discuss with management the Company's major financial risk exposures
and the steps management has taken to monitor and control such
exposures, including the Company's risk assessment and risk management
policies.
8. Discuss with the independent accountants the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the
conduct of the audit, including any difficulties encountered in the
course of the audit work, any restrictions on the scope of activities
or access to requested information, and any significant disagreements
with management.
A-2
9. Review disclosures made to the Audit Committee by the Company's CEO and
CFO during their certification process for the Form 10-K and Form 10-Q
about any significant deficiencies in the design or operation of
internal controls or material weaknesses therein and any fraud
involving management or other employees who have a significant role in
the Company's internal controls.
Oversight of the Company's Relationship with the Independent Accountants
------------------------------------------------------------------------
10. Review and evaluate the lead partner of the independent accountants'
team.
11. Obtain and review a report from the independent accountants at least
annually regarding (a) the independent accountants' internal
quality-control procedures, (b) any material issues raised by the most
recent internal quality-control review, or peer review, of the firm, or
by any inquiry or investigation by governmental or professional
authorities within the preceding five years respecting one or more
independent audits carried out by the firm, (c) any steps taken to deal
with any such issues, and (d) all relationships between the independent
accountants and the Company. Evaluate the qualifications, performance
and independence of the independent accountants, including considering
whether the accountants' quality controls are adequate and the
provision of permitted non-audit services is compatible with
maintaining the accountants' independence, and taking into account the
opinions of management and internal auditors.
12. Ensure the rotation of the lead (or coordinating) audit partner having
primary responsibility for the audit and the audit partner responsible
for reviewing the audit as required by law.
13. Recommend to the Board policies for the Company's hiring of employees
or former employees of the independent accountants who participated in
any capacity in the audit of the Company.
14. Meet with the independent accountants prior to the audit to discuss the
planning and staffing of the audit.
Oversight of the Company's Internal Audit Function
--------------------------------------------------
15. Review the appointment and replacement of the senior internal auditor.
16. Review the significant reports to management prepared by the internal
auditing department and management's responses.
17. Discuss with the independent accountants and management the internal
audit department responsibilities, budget and staffing and any
recommended changes in the planned scope of the internal audit.
Compliance Oversight Responsibilities
-------------------------------------
18. Obtain from the independent accountants assurance that Section 10A(b)
of the Exchange Act has not been implicated.
19. Obtain reports from management, the Company's internal audit department
and the independent accountants that the Company and its
subsidiary/foreign affiliated entities are in conformity with
applicable legal requirements and the Company's Code of Business
Conduct and Ethics. Review reports and disclosures of insider and
affiliated party transactions. Advise the Board with respect to the
Company's policies and procedures regarding compliance with applicable
laws and regulations and with the Company's Code of Business Conduct
and Ethics.
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20. Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters, and the confidential,
anonymous submission by employees of concerns regarding questionable
accounting or auditing matters.
21. Discuss with management and the independent accountants any
correspondence with regulators or governmental agencies and any
published reports which raise material issues regarding the Company's
financial statements or accounting policies.
22. Discuss with the Company's General Counsel legal matters that may have
a material impact on the financial statements or the Company's
compliance policies.
LIMITATION OF AUDIT COMMITTEE'S ROLE
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the Company's financial statements and disclosures are
complete and accurate and are in accordance with generally accepted accounting
principles and applicable rules and regulations. These are the responsibilities
of management and the independent accountants.
A-4
Appendix B
21ST CENTURY HOLDING COMPANY
NOMINATING COMMITTEE CHARTER
PURPOSE
The Nominating Committee is appointed by the Board of Directors to:
o Identify candidates to become board members.
o Select, or recommend that the Board select, the director nominees for
the next annual meeting of shareholders.
COMMITTEE MEMBERSHIP
The Committee will be composed entirely of directors who satisfy the definition
of "independent" under the listing standards of The Nasdaq Stock Market
(Nasdaq). The Committee members will be appointed by the Board and may be
removed by the Board in its discretion. The Committee shall have the authority
to delegate any of its responsibilities to subcommittees as the Committee may
deem appropriate, provided the subcommittees are composed entirely of
independent directors.
MEETINGS
The Committee shall meet as often as its members deem necessary to perform the
Committee's responsibilities.
COMMITTEE AUTHORITY AND RESPONSIBILITIES
The Committee will make regular reports to the Board and will propose any
necessary action to the Board. The Committee will review and reassess the
adequacy of this charter annually and recommend any proposed changes to the
Board for approval. The Committee will annually evaluate the Committee's own
performance. The Committee, to the extent it deems necessary or appropriate,
will:
o Identify and evaluate candidates to serve on the Board of Directors,
and select, or recommend that the Board of Directors select, the
candidates for all directorships to be filled by the Board of Directors
or by the shareholders at an annual or special meeting. In identifying
candidates for membership on the Board of Directors, the Committee
shall take into account all factors it considers appropriate, which
include:
o Ensuring that the Board of Directors as a whole is diverse and
consists of individuals with various and relevant career
experience, relevant technical skills, industry knowledge and
experience, financial expertise (including expertise that
could qualify a director as a "financial expert," as that term
is defined by the rules of the SEC), and local or community
ties.
o Minimum individual qualifications, including strength of
character, mature judgment, familiarity with the Company's
business and industry, independence of thought and an ability
to work collegially.
o The Committee will also consider the extent to which the
candidate would fill a present need on the Board of Directors.
o Adopt procedures for shareholders to submit recommendations for
candidates to the Board of Directors.
o Conduct all necessary and appropriate inquiries into the backgrounds
and qualifications of possible candidates.
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