As
filed
with the Securities and Exchange Commission on February 1, 2007
File
No. 333- _________
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
S-3
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
21ST
CENTURY HOLDING COMPANY
(Exact
name of Registrant as specified in its charter)
|
Florida
|
65-0248866
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer Identification No.)
|
|
incorporation
or organization)
|
|
3661
West Oakland Park Blvd, Suite 300, Lauderdale Lakes, FL
33311
(954)
581-9993
(Address,
including zip code, and telephone number, including area code, of Registrant's
principal executive offices)
Edward
J. Lawson
Chief
Executive Officer
21st
Century Holding Company
3661
West Oakland Park Blvd., Suite 300
Lauderdale
Lakes, FL 33311
(954)
581-9993
(Name,
address, including zip code, and telephone number, including area code, of
agent
for service)
Copies
to:
Laura
M. Holm
Berger
Singerman
350
East Las Olas Boulevard, Suite 1000
Fort
Lauderdale, Florida 33301
Telephone:
(954) 713-7518
Telecopier:
(954) 523-2872
Approximate
date of commencement of proposed sale to the public:
As
soon
as practicable after this Registration Statement becomes effective.
If
the
only securities being registered on this form are being offered pursuant to
dividend or interest reinvestment plans, please check the following box. o
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. o
If
this
form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. o
If
delivery of the prospectus is expected to be made pursuant to Rule 434, please
check the following box. o
CALCULATION
OF REGISTRATION FEE
|
Title of Each Class
of Securities to Be Registered
|
|
Amount to be
Registered
(1)
|
|
Proposed Maximum
Offering Price per Unit (2)
|
|
Proposed Maximum
Aggregate Offering
Price
|
|
Amount of
Registration Fee
|
|
|
Common Stock, $.01 par value
|
|
|
54,211
shares
|
|
$
|
20.91
|
|
$
|
1,133,552.01
|
|
$
|
121.29
|
|
|
(1)
|
Also
includes, pursuant to Rule 416 under the Securities Act of 1933,
an
indeterminant number of shares and warrants that may be issued, offered
or
sold to prevent dilution resulting from stock splits, stock dividends,
or
similar transactions.
|
| (2) |
Estimated
solely for the purpose of calculating the registration fee in accordance
with Rule 457 under the Securities
Act.
|
The
Registrant hereby amends this registration statement on such date or dates
as
may be necessary to delay its effective date until the Registrant shall file
a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
SUBJECT
TO COMPLETION, FEBRUARY 1, 2007
PROSPECTUS
54,211
SHARES OF COMMON STOCK
21ST
CENTURY HOLDING COMPANY
We
are
registering for resale an aggregate of 54,211 shares of common stock of
21st
Century
Holding Company that have been issued to the shareholders named in this
Prospectus and their transferees (“selling shareholders”). We originally issued
these shares to the selling shareholders on January 31, 2007 as payment of
principal and interest due on our 6% senior subordinated notes due September
30,
2007. We will not receive any proceeds from the sale of the common stock.
Our
common stock is traded on the Nasdaq National Market under the symbol “TCHC.” On
January 30, 2007, the last reported sale price of the common stock on the Nasdaq
National Market was $22.33 per share. The shares of common stock may be sold
from time to time by the selling shareholders in one or more transactions at
fixed prices, at market prices at the time of sale, at varying prices determined
at the time of sale or at negotiated prices. The selling shareholders and any
broker-dealer who may participate in the sale of the shares may use this
prospectus. See "Plan of Distribution."
An
investment in our common stock involves risks. See the section entitled “Risk
Factor” section beginning on page 3 of this prospectus.
Neither
the SEC nor any state securities commission has approved or disapproved of
these
securities or passed upon the adequacy or accuracy of this prospectus. Any
representation to the contrary is a criminal offense.
The
date
of this prospectus is February _____, 2007.
TABLE
OF CONTENTS
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PAGE
|
|
SPECIAL
NOTE ON FORWARD-LOOKING STATEMENTS
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1
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THE
COMPANY
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2
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RISK
FACTORS
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2
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USE
OF PROCEEDS
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14
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|
SELLING
SHAREHOLDERS
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14
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|
PLAN
OF DISTRIBUTION
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17
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LEGAL
MATTERS
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18
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EXPERTS
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19
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WHERE
YOU CAN FIND MORE INFORMATION
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19
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INFORMATION
INCORPORATED BY REFERENCE
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19
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SEC
POSITION OF INDEMNIFICATION OF DIRECTORS AND OFFICERS
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20
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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.
SPECIAL
NOTE ON FORWARD-LOOKING STATEMENTS
This
prospectus and the documents and information incorporated by reference in this
prospectus include “forward-looking statements” within the meaning of Section
27A of the Securities Act of 1933, as amended and Section 21E of the Securities
Exchange Act of 1934, as amended. Forward-looking statements include the
information concerning our possible or assumed future operating results,
business strategies, financing plans, competitive position, industry
environment, the anticipated impact on our business and financial results of
recent and future acquisitions, the effects of competition, our ability to
produce new products in a cost-effective manner and estimates relating to our
industry. Forward-looking statements may be identified by the use of words
like
“believes,” “intends,” “expects,” “may,” “will,” “should” or “anticipates,” or
the negative equivalents of those words or comparable terminology, and by
discussions of strategies that involve risks and uncertainties.
Actual
results may differ materially from those expressed or implied by forward-looking
statements for a number of reasons, including those appearing elsewhere in
this
prospectus under the heading “Risk Factors.” In addition, we base
forward-looking statements on assumptions about future events, which may not
prove to be accurate. In light of these risks, uncertainties and assumptions,
you should be aware that the forward-looking events described in this prospectus
and the documents incorporated by reference in this prospectus may not
occur.
THE
COMPANY
We
are an
insurance holding company, which, through our subsidiaries and our contractual
relationships with independent agents and general agents, control substantially
all aspects of the insurance underwriting, distribution and claims process.
We
are authorized to underwrite commercial general liability insurance, homeowners’
property and casualty insurance and personal automobile insurance in various
states with various lines of authority through our wholly owned subsidiaries,
Federated National Insurance Company (“Federated National”) and American Vehicle
Insurance Company (“American Vehicle”).
Federated
National is authorized to underwrite homeowners’ property and casualty insurance
and personal automobile insurance in Florida as an admitted carrier. American
Vehicle is authorized to underwrite commercial general liability insurance
and
personal and commercial automobile insurance in Florida as an admitted carrier.
In addition, American Vehicle is authorized to underwrite commercial general
liability insurance in Georgia, Kentucky, South Carolina, Virginia, Arkansas
and
Missouri as a surplus lines carrier and in Texas, Louisiana and Alabama as
an
admitted carrier.
During
the nine months ended September 30, 2006, 72.8%, 22.3 % and 4.9 % of the
premiums we underwrote were for homeowners’ property and casualty insurance,
commercial general liability insurance and personal automobile insurance,
respectively. During the nine months ended September 30, 2005, 61.4%, 19.6%
and
19.0% of the premiums we underwrote were for homeowners’ property and casualty
insurance, commercial general liability insurance and personal automobile
insurance, respectively.
Our
executive offices are located at 3661 West Oakland Park Boulevard, Suite 300,
Lauderdale Lakes, Florida and our telephone number is (954)
581-9993.
RISK
FACTORS
An
investment in our common stock involves a high degree of risk. You should
consider the following factors carefully before deciding to purchase shares
of
our common stock. Additional risks not presently known to us or that we
currently deem immaterial may also impair our business
operations.
You
should also review our disclosure under the heading “Special Note on
Forward-Looking Information” for additional risks and uncertainties that could
cause our actual results to differ materially from those anticipated.
Risks
Related to Our Business
The
State of Florida, where our headquarters and a substantial portion of our
policies are located, experienced nine hurricanes from August 2004 through
October 2005 and they affected our operating results.
We
write
insurance policies that cover homeowners, business owners and automobile owners
for losses that result from, among other things, catastrophes. Catastrophic
losses can be caused by hurricanes, tropical storms, tornadoes, wind, hail,
fires, riots and explosions, and their incidence and severity are inherently
unpredictable. The extent of losses from a catastrophe is a function of two
factors: the total amount of the insurance company's exposure in the area
affected by the event and the severity of the event. Our policyholders are
currently concentrated in South and Central Florida, which is especially subject
to adverse weather conditions such as hurricanes and tropical storms.
During
2004 and 2005, the State of Florida experienced nine hurricanes. One of our
subsidiaries, Federated National, incurred significant losses relative to its
homeowners’ insurance line of business in connection with these catastrophic
weather events. The table below illustrates the magnitude of each storm both
gross and net of our reinsurance arrangements as of September 30,
2006.
|
Hurricane
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|
Estimated
Claim
Count
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|
Gross
Losses
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|
Reinsurance
Recoveries
|
|
Net
Losses
|
|
| |
|
(Dollars
in Millions)
|
|
|
Charley
(August 13, 2004)
|
|
|
2,572
|
|
$
|
63
|
|
$
|
53
|
|
$
|
10
|
|
|
Frances
(September 3, 2004)
|
|
|
3,811
|
|
|
52
|
|
|
42
|
|
|
10
|
|
|
Ivan
(September 14, 2004)
|
|
|
1,063
|
|
|
26
|
|
|
|
|
|
26
|
|
|
Jeanne
(September 25, 2004)
|
|
|
1,564
|
|
|
13
|
|
|
|
|
|
13
|
|
|
Arlene
(June 7, 2005)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Dennis
(July 10, 2005)
|
|
|
324
|
|
|
3
|
|
|
|
|
|
3
|
|
|
Katrina
(August 25, 2005)
|
|
|
2,116
|
|
|
13
|
|
|
10
|
|
|
3
|
|
|
Rita
(September 20, 2005)
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
Wilma
(October 24, 2005)
|
|
|
11,458
|
|
|
155
|
|
|
152
|
|
|
3
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Loss Estimate
|
|
|
22,927
|
|
$
|
325
|
|
$
|
257
|
|
$
|
68
|
|
For
the
2006 hurricane season, we assembled a range of reinsurance products designed
to
insure the Company for an aggregate of approximately $414.5 million for a
minimum of two catastrophic events. The reinsurance treaties contain several
complex features and through a series of computations involving experience
based
retention levels, attachment points and limitations, additional coverage may
be
afforded Federated National for events beyond the first two catastrophic events.
Our retention will vary depending on the severity and frequency of each
catastrophic event.
In
contrast, for the 2005 hurricane season, the Company retained the first $3.0
million of loss and LAE with maximum coverage afforded from the combined
policies in effect totaling approximately $194.8 million and the cost to the
Company for this coverage was approximately $26 million.
Although
we follow the industry practice of reinsuring a portion of our risks, our costs
of obtaining reinsurance have increased and we may not be able to successfully
alleviate risk through reinsurance arrangements.
We
have a
reinsurance structure that is a combination of private reinsurance and the
FHCF.
Our reinsurance structure is comprised of several reinsurance companies with
varying levels of participation providing coverage for loss and LAE at
pre-established minimum and maximum amounts. Losses incurred in connection
with
a catastrophic event below the minimum and above the maximum are the
responsibility of Federated National.
As
a
result of the nine hurricanes experienced in Florida during the fourteen month
period between August 2004 and October 2005, we continue to review, and may
determine to modify, our reinsurance structure.
Although
the occurrence of hurricanes hitting Florida has increased during recent years,
some weather analysts believe that we have entered a period of greater hurricane
activity while others suggest a diminished expectation for the near future.
To
address this risk, we are exploring alternatives to reduce our exposure to
these
types of storms. Although these measures may increase operating expenses,
management believes that they will assist us in protecting long-term
profitability, although there can be no assurances that will be the case.
The
insolvency of our primary reinsurer or any of our other current or future
reinsurers, or their inability otherwise to pay claims, would increase the
claims that we must pay, thereby significantly harming our results of
operations. In addition, prevailing market conditions have limited the
availability and increased the cost of reinsurance, which may have the effect
of
increased costs and reduced profitability.
We
may experience financial exposure from climate change.
Our
financial exposure from climate change is most notably associated with losses
in
connection with the occurrence of hurricanes striking Florida. We mitigate
the
risk of financial exposure from climate change by restrictive underwriting
criteria, sensitivity to geographic concentrations and reinsurance.
Restrictive
underwriting criteria can include, but are not limited to, higher premiums,
higher deductibles and more specifically excluded policy risks such as fences
and screened in enclosures. New technological advances in computer generated
geographical mapping afford us an enhanced perspective as to geographic
concentrations of policyholders and proximity to flood prone areas. Our amount
of maximum reinsurance coverage is determined by subjecting our homeowner and
mobile homeowner exposures to statistical forecasting models that are designed
to quantify a catastrophic event in terms of the frequency of a storm occurring
once in every “n” years. Our reinsurance coverage contemplated a catastrophic
event occurring once every 100 years. Our amount of losses retained (our
deductible) in connection with a catastrophic event is determined by market
capacity, pricing conditions and surplus preservation.
Our
loss reserves may be inadequate to cover our actual liability for losses,
causing our results of operations to be adversely affected.
We
maintain reserves to cover our estimated ultimate liabilities for loss and
LAE.
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 loss and LAE
reserves, however, may vary significantly from our estimates.
Factors
that affect unpaid loss and LAE include the estimates made on a claim-by-claim
basis known as “case reserves” coupled with bulk estimates known as “incurred by
not reported.” Periodic estimates by management of the ultimate costs required
to settle all claim files are based on our analysis of historical data and
estimations of the impact of numerous factors such as (i) per claim information;
(ii) company and industry historical loss experience; (iii) legislative
enactments, judicial decisions, legal developments in the awarding of damages,
and changes in political attitudes; and (iv) trends in general economic
conditions, including the effects of inflation. Management revises its estimates
based on the results of its analysis. This process assumes that past experience,
adjusted for the effects of current developments and anticipated trends, is
an
appropriate basis for estimating the ultimate settlement of all claims. There
is
no precise method for subsequently evaluating the impact of any specific factor
on the adequacy of the reserves, because the eventual redundancy or deficiency
is affected by multiple factors.
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 LAE are less than actual losses and LAE, 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 LAE
could substantially harm our results of operations and financial condition.
The
failure of any of the loss limitation methods we employ could have a material
adverse effect on our financial condition or our results of
operations.
Various
provisions of our policies, such as limitations or exclusions from coverage
which have been negotiated to limit our risks, may not be enforceable in the
manner we intend. At the present time we employ a variety of endorsements to
our
policies that limit exposure to known risks, including but not limited to
exclusions relating to types
of
vehicles we insure, specific artisan activities and homes in close proximity
to
the coast line.
In
addition, the policies we issue contain conditions requiring the prompt
reporting of claims to us and our right to decline coverage in the event of
a
violation of that condition. While our insurance product exclusions and
limitations reduce the loss exposure to us and help eliminate known exposures
to
certain risks, it is possible that a court or regulatory authority could nullify
or void an exclusion or legislation could be enacted modifying or barring the
use of such endorsements and limitations in a way that would adversely effect
our loss experience, which could have a material adverse effect on our financial
condition or results of operations.
The
effects of emerging claim and coverage issues on our business are
uncertain.
As
industry practices and legal, judicial, social and other conditions change,
unexpected and unintended issues related to claims and coverage may emerge.
These issues may adversely affect our business by either extending coverage
beyond our underwriting intent or by increasing the number or size of claims.
In
some instances, these changes may not become apparent until some time after
we
have issued insurance contracts that are affected by the changes. As a result,
the full extent of liability under our insurance contracts may not be known
for
many years after a contract is issued.
Our
failure to pay claims accurately could adversely affect our business, financial
results and capital requirements.
We
must
accurately evaluate and pay claims that are made under our policies. Many
factors affect our ability to pay claims accurately, including the training
and
experience of our claims representatives, the culture of our claims organization
and the effectiveness of our management, our ability to develop or select and
implement appropriate procedures and systems to support our claims functions
and
other factors. Our failure to pay claims accurately could lead to material
litigation, undermine our reputation in the marketplace, impair our image and
negatively affect our financial results.
In
addition, if we do not train new claims adjusting employees effectively or
if we
lose a significant number of experienced claims adjusting employees, our claims
department’s ability to handle an increasing workload as we grow could be
adversely affected. In addition to potentially requiring that growth be slowed
in the affected markets, we could suffer decreased quality of claims work,
which
in turn could lower our operating margins.
If
we are unable to continue our growth because our capital must be used to pay
greater than anticipated claims, our financial results may suffer.
We
have
grown rapidly over the last few years. Our future growth will depend on our
ability to expand the types of insurance products we offer and the geographic
markets in which we do business both balanced by the business risks we chose
to
assume and cede. We believe that our company is sufficiently capitalized to
operate our business as it now exists and as we currently plan to expand it.
Our
existing sources of funds include the liquidation of our investment securities
and our earnings from operations and investments. Unexpected catastrophic events
in our market areas, such as the hurricanes experienced in Florida, have
resulted and will result in greater claims losses than anticipated, which could
require us to limit or halt our growth while we redeploy our capital to pay
these unanticipated claims unless we are able to raise additional capital or
increase our earnings in our other divisions.
We
may require additional capital in the future which may not be available or
only
available on unfavorable terms.
Our
future capital requirements depend on many factors, including our ability to
write new business successfully and to establish premium rates and reserves
at
levels sufficient to cover losses. To the extent that our present capital is
insufficient to meet future operating requirements and/or cover losses, we
may
need to raise additional funds through financings or curtail our growth. Based
on our current operating plan, we believe current capital together with our
anticipated retained earnings, will support our operations without the need
to
raise additional capital. However, we cannot provide any assurance in that
regard, since many factors will affect our capital needs and their amount and
timing, including our growth and profitability, our claims experience, and
the
availability of reinsurance, as well as possible acquisition opportunities,
market disruptions and other unforeseeable developments. If we had to raise
additional capital, equity or debt financing may not be available at all or
may
be available only on terms that are not favorable to us. In the case of equity
financings, dilution to our stockholders could result, and in any case such
securities may have rights, preferences and privileges that are senior to those
of the shares offered hereby. If we cannot obtain adequate capital on favorable
terms or at all, our business, financial condition or results of operations
could be materially adversely affected.
We
are subject to significant government regulation, which can limit our growth
and
increase our expenses, thereby reducing our earnings.
We
are
subject to laws and regulations in Florida, our state of domicile, additionally
Georgia, Louisiana, Kentucky, South Carolina, Virginia, Alabama, Texas, Missouri
and Arkansas are states in which we have been also authorized to do business,
and will be subject to the laws of any other states in which we conduct business
in the future. These laws and regulations cover all aspects of our business
and
are generally designed to protect the interests of insurance policyholders.
For
example, these laws and regulations relate to licensing requirements, authorized
lines of business, capital surplus requirements, allowable rates and forms,
investment parameters, underwriting limitations, restrictions on transactions
with affiliates, dividend limitations, changes in control, market conduct,
and
limitations on premium financing service charges. The cost to monitor and comply
with these laws and regulations adds significantly to our cost of doing
business. Further, if we do not comply with the laws and regulations applicable
to us, we may be subject to sanctions or monetary penalties by the applicable
insurance regulator.
Our
insurance companies are subject to minimum capital and surplus requirements,
and
our failure to meet these requirements could subject us to regulatory
action.
Our
insurance companies are subject to risk-based capital standards and other
minimum capital and surplus requirements imposed under applicable state laws,
including the laws of their state of domicile, Florida. The risk-based capital
standards, based upon the Risk-Based Capital Model Act adopted by the National
Association of Insurance Commissioners“(NAIC”) require our insurance companies
to report their results of risk-based capital calculations to state departments
of insurance and the NAIC. These risk-based capital standards provide for
different levels of regulatory attention depending upon the ratio of an
insurance company’s total adjusted capital, as calculated in accordance with
NAIC guidelines, to its authorized control level risk-based capital. Authorized
control level risk-based capital is the number determined by applying the NAIC’s
risk-based capital formula, which measures the minimum amount of capital that
an
insurance company needs to support its overall business operations.
Any
failure by one of our insurance companies to meet the applicable risk-based
capital or minimum statutory capital requirements imposed by the laws of Florida
or other states where we do business could subject it to further examination
or
corrective action imposed by state regulators, including limitations on our
writing of additional business, state supervision or liquidation. In 2005,
Federated National, statutory surplus did not exceed company action levels
established by the NAIC primarily due the negative effect on operations as
a
result of the occurrence of the nine hurricanes during the fourteen months
between August 2004 and October 2005. Federated National’s results required us
to submit a plan to the State of Florida documenting our plan for financial
improvement. Our plan, as submitted, centered on a significantly stronger
reinsurance structure and improved claims management. The State of Florida
did
not object to our plan.
Any
changes in existing risk-based capital requirements or minimum statutory capital
requirements may require us to increase our statutory capital levels, which
we
may be unable to do.
Our
revenues and operating performance may fluctuate with business cycles in the
property and casualty insurance industry.
Historically,
the financial performance of the property and casualty insurance industry has
tended to fluctuate in cyclical patterns characterized by periods of significant
competition in pricing and underwriting terms and conditions, which is known
as
a "soft" insurance market, followed by periods of lessened competition and
increasing premium rates, which is known as a "hard" insurance market. Although
an individual insurance company's financial performance is dependent on its
own
specific business characteristics, the profitability of most property and
casualty insurance companies tends to follow this cyclical market pattern,
with
profitability generally increasing in hard markets and decreasing in soft
markets. At present, we are beginning to experience a soft market in our
automobile and commercial general liability sectors while a hard market persists
in our property sector. We cannot predict, however, how long these market
conditions will persist. We do not compete entirely on price or targeted market
share. Our ability to compete is governed by our ability to assess and price
an
insurance product with an acceptable risk for obtaining profit.
Our
revenues and operating performance will fluctuate due to statutorily approved
assessments that support property and casualty insurance pools and
associations.
We
operate in a regulatory environment where certain entities and organizations
have the authority to require us to participate in assessments. Currently these
entities and organizations include, but are not limited to, the Florida Joint
Underwriters Association, the Florida Insurance Guarantee Association, Citizens
Property Insurance Company and the Florida Hurricane Catastrophic Fund. The
reason for these assessments is based on the catastrophic effects to the
property and casualty insurance industry in the State of Florida from the
hurricanes that occurred during the fourteen months between August 2004 and
October 2005.
Primarily,
all of the assessments result in a charge to current operations. The insurance
companies will then pass the assessments on to insurance policies which are
not
yet in force and reflect the collection of these assessments as fully earned
credits to operations in the period collected.
Future
assessments are undeterminable at this time.
We
may not obtain the necessary regulatory approvals to expand the types of
insurance products we offer or the states in which we
operate.
We
currently have an application pending in California to underwrite and sell
commercial general liability insurance. The
insurance regulators in this state may request additional information, add
conditions to the license that we find unacceptable, or deny our application.
This would delay or prevent us from operating in that state. If we want to
operate in any additional states, we must file similar applications for
licenses, which we may not be successful in obtaining.
We
requested that A.M. Best cease rating our insurance subsidiaries. As a result,
we may be unable to write or renew desirable insurance policies or obtain
adequate reinsurance, which would limit or halt our growth and harm our
business.
Third-party
rating agencies assess and rate the ability of insurers to pay their claims.
These financial strength ratings are used by the insurance industry to assess
the financial strength and quality of insurers. These ratings are based on
criteria established by the rating agencies and reflect evaluations of each
insurer's profitability, debt and cash levels, customer base, adequacy and
soundness of reinsurance, quality and estimated market value of assets, adequacy
of reserves, and management. Ratings are based upon factors of concern to
agents, reinsurers and policyholders and are not directed toward the protection
of investors, such as purchasers of our common stock.
In
August
2004, A.M. Best Company notified us that Federated National and American Vehicle
were being placed under review with negative implications. In 2003 A.M. Best
had
assigned Federated National a B rating ("Fair," which is the seventh of 14
rating categories) and American Vehicle a B+ rating ("Very Good," which is
the
sixth of 14 rating categories). In connection with this review, we requested
that A.M. Best cease its ratings of these subsidiaries “NR-4 Not rated,
company’s request”. The withdrawal of our ratings could limit or prevent us from
writing or renewing desirable insurance policies, from obtaining adequate
reinsurance, or from borrowing on our line of credit.
We
rely on independent agents to write our insurance policies, and if we are not
able to attract and retain independent agents, our revenues would be negatively
affected.
We
currently market and distribute Federated National's and American Vehicle's
and
third-party insurers' products and our other services through contractual
relationships with a network of approximately 1,500 independent agents and
a
selected number of general agents. Our independent agents are our primary source
for our automobile and property insurance policies. Many of our competitors
also
rely on independent agents. As a result, we must compete with other insurers
for
independent agents' business. Our competitors may offer a greater variety of
insurance products, lower premiums for insurance coverage, or higher commissions
to their agents. If our products, pricing and commissions do not remain
competitive, we may find it more difficult to attract business from independent
agents to sell our products. A material reduction in the amount of our products
that independent agents sell would negatively affect our revenues.
We
rely on our information technology and telecommunications systems, and the
failure of these systems could disrupt our operations.
Our
business is highly dependent upon the successful and uninterrupted functioning
of our current information technology and telecommunications systems. We rely
on
these systems to process new and renewal business, provide customer service,
make claims payments and facilitate collections and cancellations, as well
as to
perform actuarial and other analytical functions necessary for pricing and
product development. As a result, the failure of these systems could interrupt
our operations and adversely affect our financial results.
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 is provided to insureds that are unable to obtain preferred
or standard insurance coverage because of their payment histories, driving
records, age, vehicle types, or prior claims histories. This type of automobile
insurance historically has a higher frequency of claims than does preferred
or
standard automobile insurance policies, although the average dollar amount
of
the claims is usually smaller under nonstandard insurance policies. As a result,
we are exposed to the possibility of increased loss exposure and higher claims
experience than would be the case if we offered only standard automobile
insurance.
Florida's
personal injury protection insurance statute contains provisions that favor
claimants, causing us to experience a higher frequency of claims than might
otherwise be the case if we operated only outside of Florida.
Florida's
personal injury protection insurance statute limits an insurer's ability to
deny
benefits for medical treatment that is unrelated to the accident, that is
unnecessary, or that is fraudulent. In addition, the statute allows claimants
to
obtain awards for attorney's fees. Although this statute has been amended
several times in recent years, primarily to address concerns over fraud, the
Florida legislature has been only marginally successful in implementing
effective mechanisms that allow insurers to combat fraud and other abuses.
We
believe that this statute contributes to a higher frequency of claims under
nonstandard automobile insurance policies in Florida, as compared to claims
under standard automobile insurance policies in Florida and nonstandard and
standard automobile insurance polices in other states. Although we believe
that
we have successfully offset these higher costs with premium increases, because
of competition, we may not be able to do so with as much success in the future.
Our
success depends on our ability to accurately price the risks we
underwrite.
The
results of our operations and the financial condition of our insurance companies
depend on our ability to underwrite and set premium rates accurately for a
wide
variety of risks. Rate adequacy is necessary to generate sufficient premiums
to
pay losses, LAE and underwriting expenses and to earn a profit. In order to
price our products accurately, we must collect and properly analyze a
substantial amount of data; develop, test and apply appropriate rating formulas;
closely monitor and timely recognize changes in trends; and project both
severity and frequency of losses with reasonable accuracy. Our ability to
undertake these efforts successfully, and as a result price our products
accurately, is subject to a number of risks and uncertainties, some of which
are
outside our control, including:
| |
·
|
the
availability of sufficient reliable data and our ability to properly
analyze available data;
|
| |
·
|
the
uncertainties that inherently characterize estimates and
assumptions;
|
| |
·
|
our
selection and application of appropriate rating and pricing techniques;
and
|
| |
·
|
changes
in legal standards, claim settlement practices, medical care expenses
and
restoration costs.
|
Consequently,
we could under-price risks, which would negatively affect our profit margins,
or
we could overprice risks, which could reduce our sales volume and
competitiveness. In either event, the profitability of our insurance companies
could be materially and adversely affected.
Current
operating resources are necessary to develop future new insurance
products
We
currently intend to expand our product offerings by underwriting additional
insurance products and programs, and marketing them through our distribution
network. Expansion of our product offerings will result in increases in expenses
due to additional costs incurred in actuarial rate justifications, software
and
personnel. Offering additional insurance products may also require regulatory
approval, further increasing our costs. There can be no assurance that we will
be successful bringing new insurance products to our marketplace.
Our
business strategy is to avoid competition based on price to the extent possible.
This strategy, however, may result in the loss of business in the short term
Comparable
companies which compete with us in the homeowners’ market include Allstate
Insurance Company, State Farm Insurance Company, First Floridian Insurance
Company, and Vanguard Insurance Company.
Comparable
companies which compete with us in the general liability insurance market
include Century Surety Insurance Company, Atlantic Casualty Insurance Company,
Colony Insurance Company and Burlington/First Financial Insurance Companies.
Although
our pricing of our automobile insurance products is inevitably influenced to
some degree by that of our competitors, we believe that it is generally not
in
our best interest to compete solely on price, choosing instead to compete on
the
basis of underwriting criteria, our distribution network, and our superior
service to our agents and insureds. With respect to automobile insurance in
Florida, we compete with more than 100 companies, which underwrite personal
automobile insurance. Comparable companies which compete with us in the personal
automobile insurance market include Affirmative Insurance Holdings, Inc., which
acquired our non-standard automobile agency business in Florida in December
2004, U.S. Security Insurance Company, United Automobile Insurance Company,
Direct General Insurance Company and Security National Insurance Company, as
well as major insurers such as Progressive Casualty Insurance Company.
Competition
could have a material adverse effect on our business, results of operations
and
financial condition. If we do not meet the prices offered by our competitors,
we
may lose business in the short term, which could also result in reduced
revenues.
Our
investment portfolio may suffer reduced returns or losses, which would
significantly reduce our earnings.
As
do
other insurance companies, we depend on income from our investment portfolio
for
a substantial portion of our earnings. During the time that normally elapses
between the receipt of insurance premiums and any payment of insurance claims,
we invest the funds received, together with our other available capital,
primarily in fixed-maturity investments and equity securities, in order to
generate investment income.
Our
investment portfolio contains interest rate sensitive instruments, such as
bonds, which may be adversely affected by changes in interest rates. A
significant increase in interest rates could have a material adverse effect
on
our financial condition or results of operations. Generally, bond prices
decrease as interest rates rise. Changes in interest rates could also have
an
adverse effect on our investment income and results of operations. For example,
if interest rates decline, investment of new premiums received and funds
reinvested will earn less than expected.
Our
president and chief executive officer is key to the strategic direction of
our
company. If we were to lose this service our business could be harmed.
We
depend, and will continue to depend, on the services of our founder and
principal shareholder, Edward J. Lawson, who is also our president, chairman
of
the board and chief executive officer. We have entered into an employment
agreement with him and we maintain $3 million key man life insurance on the
life
of Mr. Lawson. Nevertheless, because of Mr. Lawson's role and involvement in
developing and implementing our current business strategy, his loss of service
could substantially harm our business.
Our
success also will depend in part upon our ability to attract and retain
qualified executive officers, experienced underwriting talent and other skilled
employees who are knowledgeable about our business. We rely substantially upon
the services of our executive management team. Although we are not aware of
any
planned departures or retirements, if we were to lose the services of members
of
our management team, our business could be adversely affected. We believe we
have been successful in attracting and retaining key personnel throughout our
history. We have employment agreements with James G. Jennings III, our Treasurer
and Chief Financial Officer, and other members of our executive management
team.
We also maintain a $1 million key man life insurance policy on the life of
Mr.
Jennings.
Risks
Related to an Investment in Our Shares
The
trading of our warrants may negatively affect the trading prices of our common
stock if investors purchase and exercise the warrants to facilitate other
trading strategies, such as short selling.
Our
warrants currently trade on the NASDAQ National Market under the symbol “TCHCZ.”
Each of the TCHCZ warrants entitles the holders to purchase one share of our
common stock at an exercise price per share of $12.75. Investors may purchase
and exercise warrants to facilitate trading strategies such as short selling,
which involves the sale of securities not yet owned by the seller. In a short
sale, the seller must either purchase or borrow the security in order to
complete the sale. If shares of our common stock received upon the exercise
of
warrants are used to complete short sales, this may have the effect of reducing
the trading price of our common stock.
Our
largest shareholders currently control approximately 10% of the voting power
of
our outstanding common stock, which could discourage potential acquirers and
prevent changes
in management.
Edward
J.
Lawson and Michele V. Lawson beneficially own approximately 10% of our
outstanding common stock. As our largest shareholders, the Lawson’s have
significant influence over the outcome of any shareholder vote. This voting
power may discourage takeover attempts, changes in our officers and directors
or
other changes in our corporate governance that other shareholders may desire.
We
have authorized but unissued preferred stock, which could affect rights of
holders of common stock.
Our
articles of incorporation authorize the issuance of preferred stock with
designations, rights and preferences determined from time to time by our board
of directors. Accordingly, our board of directors is empowered, without
shareholder approval, to issue preferred stock with dividends, liquidation,
conversion, voting or other rights that could adversely affect the voting power
or other rights of the holders of common stock. In addition, the preferred
stock
could be issued as a method of discouraging a takeover attempt. Although we
do
not intend to issue any preferred stock at this time, we may do so in the
future.
Our
articles of incorporation, bylaws and Florida law may discourage takeover
attempts and may result in entrenchment of management.
Our
articles of incorporation and bylaws contain provisions that may discourage
takeover attempts and may result in entrenchment of management.
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●
|
Our
board of directors is elected in classes, with only two or three
of the
directors elected each year. As a result, shareholders would not
be able
to change the membership of the board in its entirety in any one
year.
Shareholders would also be unable to bring about, through the election
of
a new board of directors, changes in our officers.
|
| |
●
|
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.
|
| |
●
|
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.
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●
|
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.
|
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●
|
The
Florida Affiliated Transactions Act requires supermajority approval
by
disinterested shareholders of certain specified transactions between
a
public corporation and holders of more than 10% of the outstanding
voting
shares of the corporation (or their affiliates).
|
As
a holding company, we depend on the earnings of our subsidiaries and their
ability to pay management fees and dividends to the holding company as the
primary source of our income.
We
are an
insurance holding company whose primary assets are the stock of our
subsidiaries. Our operations, and our ability to service our debt, are limited
by the earnings of our subsidiaries and their payment of their earnings to
us in
the form of management fees, dividends, loans, advances or the reimbursement
of
expenses. These payments can be made only when our subsidiaries have adequate
earnings. In addition, dividend payments made to us by our insurance
subsidiaries are restricted by Florida law governing the insurance industry.
Generally, Florida law limits the dividends payable by insurance companies
under
complicated formulas based on the subsidiary's available capital and
earnings.
No
dividends were declared or paid by our insurance subsidiaries in 2006, 2005
or
2004. Under
these laws, neither Federated National nor American Vehicle was permitted to
pay
dividends to 21st Century in 2006. Whether
our subsidiaries will be able to pay dividends in 2007 depends on the results
of
their operations and their expected needs for capital. We do not anticipate
that
our subsidiaries will begin to pay dividends to the parent company during
2007.
We
will
not receive any proceeds from the resale of the common stock by the selling
shareholders.
SELLING
SHAREHOLDERS
The
following tables show certain information as of the date of this prospectus
regarding the number of shares of common stock owned by the selling shareholders
and that are included for sale in this prospectus. The table assumes that all
shares offered for sale in the prospectus are sold.
No
selling shareholder has been within the last three years, or is currently,
affiliated with us.
| |
|
Ownership of
Common
Stock
Before Offering
(1)
|
|
Number
Offered
By Selling
|
|
Ownership of
Common
Stock
After Offering(1)
|
|
|
Selling
Securityholder
|
|
Number
|
|
Percent
|
|
Shareholder
|
|
Number
|
|
Percent
|
|
|
Corsair
Capital Partners, LP (1)
|
|
|
56,930
|
|
|
*
|
|
|
2,797
|
|
|
54,133
|
|
|
*
|
|
|
Corsair
Capital Partners 100, LP (1)
|
|
|
2,206
|
|
|
*
|
|
|
108
|
|
|
2,098
|
|
|
*
|
|
|
Corsair
Capital Partners Investors, LTD (1)
|
|
|
7,061
|
|
|
*
|
|
|
347
|
|
|
6,714
|
|
|
*
|
|
|
Cranshire
Capital, LP
|
|
|
48,237
|
|
|
*
|
|
|
4,337
|
|
|
43,900
|
|
|
*
|
|
|
Hillson
Partners Limited Partnership
|
|
|
302,990
|
|
|
3.83
|
%
|
|
4,337
|
|
|
298,653
|
|
|
3.78
|
%
|
|
Iroquois
Capital LP (1)
|
|
|
82,768
|
|
|
1.05
|
%
|
|
4,337
|
|
|
78,431
|
|
|
*
|
|
|
Omicron
Master Trust
|
|
|
68,488
|
|
|
*
|
|
|
5,926
|
|
|
62,562
|
|
|
*
|
|
|
Rockmore
Master Investment Fund, Ltd
|
|
|
36,050
|
|
|
*
|
|
|
2,748
|
|
|
33,302
|
|
|
*
|
|
|
Whitebox
Convertible Arbitrage Partners, LP
|
|
|
21,684
|
|
|
*
|
|
|
21,684
|
|
|
0
|
|
|
*
|
|
|
Whitebox
Intermarket Partners, LP
|
|
|
6,443
|
|
|
*
|
|
|
3,253
|
|
|
3,190
|
|
|
*
|
|
|
Pandora
Select Partners, LP
|
|
|
4,337
|
|
|
*
|
|
|
4,337
|
|
|
0
|
|
|
*
|
|
|
(1)
|
Includes
shares underlying warrants held by the selling shareholders (each
of which
is exercisable for one share of common stock) as follows: Iroquois
Capital, LP, 78,431 shares; Corsair Capital Partners, LP, 50,588
shares;
Corsair Capital Partners 100, LP, 1,961 shares; and Corsair Capital
Partners Investors, LTD, 6,275
shares.
|
The
selling shareholders listed above have provided us with additional information
regarding the individuals or entities that exercise control over the selling
shareholder. The proceeds of any sale of shares pursuant to this prospectus
will
be for the benefit of the individuals that control the selling entity. The
following is a list of the selling shareholders and the entities that may
exercise the right to vote or dispose of the shares owned by each selling
shareholder:
Jay
Petschek, serves as the managing member of Corsair Capital Advisors, LLC, the
general partner of Cosair Capital Partners, LP, Cosair Capital Partners 100,
LP
and Cosair Capital Investors, Ltd. Mr. Petschek exercises sole voting and
dispositive power over these securities.
Mitchell
P. Kopin, is the President of Downsview Capital, Inc., the General Partner
of
Cranshire Capital, L.P. Mr. Kopin has sole voting and dispositive power over
the
securities held by Cranshire Capital, LP.
Daniel
Abramowitz, is the President of Hillson Financial Management, Inc., the general
partner of Hillson Partners Limited Partnership. Mr. Abramowitz has sole voting
and dispositive power over the securities held by Hillson Partners Limited
Partnership.
Joshua
Silverman is a partner of Iroquois Capital, LP. Mr. Silverman has sole and
voting and dispositive power over the securities held by Iroquois Capital,
LP.
Omicron
Capital, L.P., a Delaware limited partnership ("Omicron Capital"), serves as
investment manager to Omicron Master Trust, a trust formed under the laws of
Bermuda ("Omicron"); Omicron Capital, Inc., a Delaware corporation ("OCI"),
serves as general partner of Omicron Capital; and Winchester Global Trust
Company Limited ("Winchester") serves as the trustee of Omicron. By reason
of
such relationships, Omicron Capital and OCI may be deemed to share dispositive
power over the shares of our common stock owned by Omicron, and Winchester
may
be deemed to share voting and dispositive power over the shares of our common
stock owned by Omicron. Omicron Capital, OCI and Winchester disclaim beneficial
ownership of such shares of our common stock. As of the date of this prospectus,
Mr. Olivier H. Morali, an officer of OCI, and Mr. Bruce T. Bernstein, a
consultant to OCI, have delegated authority from the board of directors of
OCI
regarding the portfolio management decisions with respect to the shares of
our
common stock owned by Omicron. By reason of such delegated authority, Messrs.
Morali and Bernstein may be deemed to share dispositive power over the shares
of
our common stock owned by Omicron. Messrs. Morali and Bernstein disclaim
beneficial ownership of such shares of our common stock and neither of such
persons has any legal right to maintain such delegated authority. No other
person has sole or shared voting or dispositive power with respect to the shares
of our common stock being offered by Omicron, as those terms are used for
purposes under Regulation 13D-G of the Securities Exchange Act of 1934, as
amended. Omicron and Winchester are not "affiliates" of one another, as that
term is used for purposes of the Securities Exchange Act of 1934, as amended,
or
of any other person named in this prospectus as a Selling Securityholder. No
person or "group" (as that term is used in Section 13(d) of the Securities
Exchange Act of 1934, as amended, or the SEC's Regulation 13D-G) controls
Omicron and Winchester.
Rockmore
Capital, LLC (“Rockmore Capital”) and Rockmore Partners, LLC (“Rockmore
Partners”), each a limited liability company formed under the laws of the State
of Delaware, serve as the investment manager and general partner, respectively
to Rockmore Investments (US) LP, a Delaware limited partnership, which invests
all of its assets through Rockmore Investment Master Fund, Ltd., an exempted
company formed under the laws of Bermuda (“Rockmore Master Fund”). By reason of
such relationships, Rockmore Capital and Rockmore Partners may be deemed to
share dispositive power over the shares of our common stock owned by Rockmore
Master Fund. Rockmore Capital and Rockmore Partners disclaim beneficial
ownership of such shares of our common stock. Rockmore Partners has delegated
authority to Rockmore Capital regarding the portfolio management decisions
with
respect to the shares of common stock owned by Rockmore Master Fund and, as
of
January 10, 2007, Mr. Bruce T. Bernstein and Mr. Brian Daly, as officers of
Rockmore Capital, are responsible for the portfolio management decisions of
the
shares of common stock owned by Rockmore Master Fund. By reason of such
authority, Messrs. Bernstein and Daly may be deemed to share dispositive power
over the shares of our common stock owned by Rockmore Master Fund. Messrs.
Bernstein and Daly disclaim beneficial ownership of such shares of our common
stock and neither of such persons has any legal right to maintain such
authority. No other person has sole or shared voting or dispositive power with
respect to the shares of our common stock as those terms are used for purposes
under Regulation 13D-G of the Securities Exchange Act of 1934, as amended.
No
person or “group” (as that term is used in Section 13(d) of the Securities
Exchange Act of 1934, as amended, or the SEC’s Regulation 13D-G) controls
Rockmore Master Fund.
Mr.
Andrew Redleaf is the managing member of the general partner for Whitebox
Convertible Arbitrage Partners, LP; Whitebox Intermarket Partners, LP, and
Pandora Select Partners, LP and exercises sole voting and dispositive power
over
the securities held by each of these entities.
PLAN
OF DISTRIBUTION
The
selling shareholders and any pledges, donees, transferees or other successors
in
interest of the selling shareholders (collectively, all shall be referred to
as
the “selling shareholders”) may, from time to time, sell any or all of their
shares on any stock exchange, market or trading facility on which the shares
are
traded or in private transactions. These sales may be in one or more
transactions at fixed prices, at varying prices determined at the time of sale,
at prevailing market prices at the time of sale or at negotiated prices. The
selling shareholders may use any one or more of the following methods when
selling shares:
| |
|
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
| |
|
|
|
| |
|
|
block
trades in which the broker-dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
| |
|
|
|
| |
|
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
| |
|
|
|
| |
|
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
| |
|
|
|
| |
|
|
privately
negotiated transactions;
|
| |
|
|
|
| |
|
|
short
sales;
|
| |
|
|
|
| |
|
|
broker-dealers
may agree with the selling shareholders to sell a specified number
of such
shares at a stipulated price per share;
|
| |
|
|
|
| |
|
|
a
combination of any such methods of sale; and
|
| |
|
|
|
| |
|
|
any
other method permitted pursuant to applicable
law.
|
The
selling shareholders may also sell shares under Rule 144 under the Securities
Act, if available, rather than under this prospectus.
We
will
not receive any of the proceeds from the sale by the selling shareholders of
the
shares of common stock. We will bear all fees and expenses incident to our
obligation to register the shares of common stock.
Broker-dealers
engaged by the selling shareholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the selling shareholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated. The
selling shareholders do not expect these commissions and discounts to exceed
what is customary in the types of transactions involved.
Any
profits on the resale of shares of common stock by a broker-dealer acting as
principal might be deemed to be underwriting discounts or commissions under
the
Securities Act. Discounts, concessions, commissions and similar selling
expenses, if any, attributable to the sale of shares will be borne by a selling
shareholder. The selling shareholders may agree to indemnify any agent, dealer
or broker-dealer that participates in transactions involving sales of the shares
if liabilities are imposed on that person under the Securities Act.
The
selling shareholders may from time to time pledge or grant a security interest
in some or all of the shares of common stock owned by them and, if they default
in the performance of their secured obligations, the pledgees or secured parties
may offer and sell the shares of common stock from time to time under this
prospectus after we have filed a supplement to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of 1933
supplementing or amending the list of selling shareholders to include the
pledgee, transferee or other successors in interest as selling shareholders
under this prospectus.
The
selling shareholders also may transfer and donate the shares of common stock
in
other circumstances, in which case the transferees, donees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus and may sell the shares of common stock from time to time under
this prospectus after we have filed a supplement to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of 1933
supplementing or amending the list of selling shareholders to include the
pledgee, transferee or other successors in interest as selling shareholders
under this prospectus.
There
can
be no assurance that any selling shareholder will sell any or all of the shares
of common stock registered pursuant to the shelf registration statement, of
which this prospectus forms a part.
The
selling shareholders and any broker-dealers or agents that are involved in
selling the shares of common stock may be deemed to be “underwriters” within the
meaning of the Securities Act in connection with such sales. In such event,
any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares of common stock purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
We
are
required to pay all fees and expenses incident to the registration of the shares
of common stock. We have agreed to indemnify the selling shareholders against
certain losses, claims, damages and liabilities, including liabilities under
the
Securities Act.
The
selling shareholders have advised us that they have not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their shares of common stock, nor is there
an underwriter or coordinating broker acting in connection with a proposed
sale
of shares of common stock by any selling stockholder. If we are notified by
any
selling shareholder that any material arrangement has been entered into with
a
broker-dealer for the sale of shares of common stock, if required, we will
file
a supplement to this prospectus. If the selling shareholders use this prospectus
for any sale of the shares of common stock, they will be subject to the
prospectus delivery requirements of the Securities Act unless an exemption
therefrom is available.
The
anti-manipulation rules of Regulation M under the Securities Exchange Act of
1934 may apply to sales of our common stock and activities of the Selling
Shareholders.
The
validity of the issuance of the shares offered by this prospectus will be passed
upon by Berger Singerman, P.A., Fort Lauderdale, Florida.
The
financial statements of 21st Century Holding Company for the years ended
December 31, 2005 and December 31, 2004, 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.
We
have
filed a registration statement on Form S-3 with the SEC under the Securities
Act
to register the securities offered by means of this prospectus. This prospectus,
which is a part of the registration statement, does not contain all of the
information identified in the registration statement. For further information
about us and the securities offered by means of this prospectus, we refer you
to
the registration statement and the exhibits filed as a part of the registration
statement. Statements contained in this prospectus as to the contents of any
contract or other document filed as an exhibit to the registration statement
are
not necessarily complete. If a contract or document has been filed as an exhibit
to the registration statement, we refer you to the copy of the contract or
document that has been filed.
We
are
subject to the information and periodic reporting requirements of the Securities
Exchange Act of 1934. In accordance with those requirements, we file annual,
quarterly and special reports, proxy statements and other information with
the
SEC. You can read and copy any document we file at the SEC's public reference
rooms at the following location: 100 F Street, N.E., Room 1580, Washington,
D.C., 20549.
You
can
request copies of these documents upon payment of a duplicating fee, by writing
to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on
the
operation of the public reference rooms and the procedure for obtaining
copies.
The
SEC
maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC. The documents that we file with the SEC, including the
registration statement, are available to investors on this web site. You can
log
onto the SEC's web site at http://www.sec.gov.
INFORMATION
INCORPORATED BY REFERENCE
The
SEC
allows us to "incorporate by reference" the information that we file with it,
which means that we can disclose important information to you by referring
to
those documents. As a result, you may need to review other documents filed
by us
with the SEC to obtain more information. The information contained in the
documents we incorporate by reference is considered a part of this prospectus.
Additionally, because information concerning us, whether contained in this
prospectus or in a document incorporated by reference, will be amended or
superseded by more current information contained in later filed documents,
the
information that we file with the SEC after the date of this prospectus will
update and supersede older information contained in, or incorporated by
reference into, this prospectus.
We
incorporate by reference into this prospectus all the documents listed
below:
| |
●
|
Our
Quarterly Reports on Form 10-Q for the quarters ended March 31, 2006,
June
30, 2006 and September 30, 2006;
|
| |
●
|
Our
Annual Report on Form 10-K for the year ended December 31, 2005,
filed
with the SEC on March 30, 2006;
|
| |
●
|
Our
Current Reports on Form 8-K filed with the SEC on April 19, 2006,
May 2,
2006, June 2, 2006, June 6, 2006, July 12, 2006, August 2, 2006,
November
1, 2006, November 15, 2006 and December 19,
2006;
|
| |
●
|
Our
definitive proxy statement for our 2006 Annual Meeting of Shareholders
filed with the SEC on April 17,
2006;
|
| |
●
|
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 to the documents listed above, we incorporate by reference into this
prospectus all documents that we file with the SEC under Sections 13(a), 13(c),
14 and 15(d) of the Securities Exchange Act of 1934 after the date of this
prospectus and until all of the securities being offered by means of this
prospectus have been sold or the registration statement which we have filed
with
the SEC relating to the securities ceases to be effective; provided, however,
that unless otherwise stated, nothing contained herein shall be deemed to
incorporate by reference into this prospectus information furnished to, but
not
filed with, the SEC.
We
will
deliver at no cost a copy of any document incorporated by reference into this
prospectus but not delivered with this prospectus to anyone who receives this
prospectus. Exhibits filed with the documents that are incorporated by reference
into this prospectus will be delivered only if the exhibits have been
specifically incorporated by reference. Requests for any of these documents
may
be made in writing or orally and should be directed to:
Corporate
Secretary
21st
Century
Holding Company
3661
West
Oakland Park Blvd. Suite 300
Lauderdale
Lakes, FL 33311
SEC
POSITION ON INDEMNIFICATION OF DIRECTORS AND OFFICERS
The
SEC
is of the opinion that indemnification of directors, officers and controlling
persons for liabilities arising under the Securities Act is against public
policy and is, therefore, unenforceable.
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
The
Registrant estimates that its expenses in connection with this registration
statement will be as follows:
|
SEC
registration fee
|
|
$
|
250.00
|
|
|
Accounting
fees and expenses
|
|
|
5,000.00
|
|
|
Legal
fees and expenses
|
|
|
10,000.00
|
|
|
Miscellaneous
|
|
|
1,750.00
|
|
| |
|
|
|
|
|
Total
|
|
$
|
17,000.00
|
|
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.
|
4.1
|
|
Unit
Purchase Agreement dated September 30, 2004 between the Company and
the
purchasers of the 6% Senior Subordinated Notes due September 30,
2007
(incorporated by reference to Exhibit 4.6 in the Company’s Registration
Statement on Form S-3 filed with the SEC on May 2, 2006 [File No.
333-133737])
|
| |
|
|
|
4.2
|
|
Form
of 6% Senior Subordinated Note due September 30, 2007 (incorporated
by
reference to Exhibit 4.7 in the Company’s Registration Statement on Form
S-3 filed with the SEC on May 2, 2006 [File No.
333-133737])
|
| |
|
|
|
4.3
|
|
Form
of Redeemable Warrant dated September 30, 2004 (incorporated by reference
to Exhibit 4.8 in the Company’s Registration Statement on Form S-3 filed
with the SEC on May 2, 2006 [File No. 333-133737])
|
| |
|
|
|
4.4
|
|
Registration
Rights Agreement dated September 30, 2004 between the Company and
the
purchasers of the 6% Senior Subordinated Notes (incorporated by reference
to Exhibit 4.9 in the Company’s Registration Statement on Form S-3 filed
with the SEC on May 2, 2006 [File No. 333-133737])
|
| |
|
|
| 5.1 |
|
Opinion of
Berger
Singerman, P.A.* |
| |
|
|
| 23.1 |
|
Consent of
Berger
Singerman, P.A. (contained in Exhibit 5.1)* |
| |
|
|
| 23.2 |
|
Consent of
De Meo,
Young, McGrath* |
| |
|
|
| 24.1 |
|
Power of
Attorney* |
*Filed
herewith
ITEM
17. UNDERTAKINGS.
|
(1)
|
The
undersigned Registrant hereby undertakes:
|
| |
(i)
|
To
file, during any period in which offers or sales are being made,
a
post-effective amendment to this registration statement:
|
| |
(ii)
|
To
include any prospectus required by section 10(a)(3) of the Securities
Act
of 1933;
|
| |
(iii)
|
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. Notwithstanding the foregoing, any increase or decrease
in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation
from
the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant
to
Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20% change in the maximum aggregate offering
price
set forth in the “Calculation of Registration Fee” table in the effective
registration statement.
|
provided,
however, that Paragraphs (1)(i), (1)(ii) and (1)(iii) of this section do not
apply if the registration statement is on Form S-3 or Form F-3 and the
information required to be included in a post-effective amendment by those
paragraphs is contained in reports filed with or furnished to the Commission
by
the Registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement, or is contained in a form of prospectus filed pursuant to Rule 424(b)
that is part of 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.
|
|
(4)
|
That,
for the purpose of determining liability under the Securities Act
of 1933
to any purchaser:
|
| |
(i)
|
If
the Registrant is relying on Rule 430B:
|
| |
(A)
|
Each
prospectus filed by the Registrant pursuant to Rule 424(b)(3)shall
be
deemed to be part of the registration statement as of the date the
filed
prospectus was deemed part of and included in the registration statement;
and
|
| |
(B)
|
Each
prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5),
or
(b)(7) as part of a registration statement in reliance on Rule 430B
relating to an offering made pursuant to Rule 415(a)(1)(i), (vii),
or (x)
for the purpose of providing the information required by section
10(a) of
the Securities Act of 1933 shall be deemed to be part of and included
in
the registration statement as of the earlier of the date such form
of
prospectus is first used after effectiveness or the date of the first
contract of sale of securities in the offering described in the
prospectus. As provided in Rule 430B, for liability purposes of the
issuer
and any person that is at that date an underwriter, such date shall
be
deemed to be a new effective date of the registration statement relating
to the securities in the registration statement to which that prospectus
relates, and the offering of such securities at that time shall be
deemed
to be the initial bona fide offering thereof. Provided, however,
that no
statement made in a registration statement or prospectus that is
part of
the registration statement or made in a document incorporated or
deemed
incorporated by reference into the registration statement or prospectus
that is part of the registration statement will, as to a purchaser
with a
time of contract of sale prior to such effective date, supersede
or modify
any statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such document
immediately prior to such effective date; or
|
| |
(ii)
|
If
the Registrant is subject to Rule 430C, each prospectus filed pursuant
to
Rule 424(b) as part of a registration statement relating to an offering,
other than registration statements relying on Rule 430B or other
than
prospectuses filed in reliance on Rule 430A, shall be deemed to be
part of
and included in the registration statement as of the date it is first
used
after effectiveness. Provided, however, that no statement made in
a
registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated
by
reference into the registration statement or prospectus that is part
of
the registration statement will, as to a purchaser with a time of
contract
of sale prior to such first use, supersede or modify any statement
that
was made in the registration statement or prospectus that was part
of the
registration statement or made in any such document immediately prior
to
such date of first use.
|
|
(5)
|
That,
for the purpose of determining liability of the Registrant under
the
Securities Act of 1933 to any purchaser in the initial distribution
of the
securities:
|
The
undersigned Registrant undertakes that in a primary offering of securities
of
the undersigned Registrant pursuant to this registration statement, regardless
of the underwriting method used to sell the securities to the purchaser, if
the
securities are offered or sold to such purchaser by means of any of the
following communications, the undersigned Registrant will be a seller to the
purchaser and will be considered to offer or sell such securities to such
purchaser:
| |
(i)
|
Any
preliminary prospectus or prospectus of the undersigned Registrant
relating to the offering required to be filed pursuant to Rule 424;
|
| |
(ii)
|
Any
free writing prospectus relating to the offering prepared by or on
behalf
of the undersigned Registrant or used or referred to by the undersigned
Registrant;
|
| |
(iii)
|
The
portion of any other free writing prospectus relating to the offering
containing material information about the undersigned Registrant
or its
securities provided by or on behalf of the undersigned Registrant;
and
|
| |
(iv)
|
Any
other communication that is an offer in the offering made by the
undersigned Registrant to the purchaser.
|
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 Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment 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 Act and will be governed by the final adjudication
of
such issue.
Pursuant
to the requirements of the Securities Act of 1933, the Registrant certifies
that
it has reasonable grounds to believe that it meets all of the requirements
for
filing on Form S-3 and has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Lauderdale Lakes, State of Florida on this 1st day of February, 2007.
| |
|
|
| |
21ST
CENTURY HOLDING COMPANY |
|
|
|
| |
By: |
/s/
Edward J.
Lawson |
| |
Edward
J. Lawson, |
| |
Chief
Executive Officer |
POWER
OF ATTORNEY
KNOW
ALL PERSONS BY THESE PRESENTS,
that
the undersigned officers and directors of 21st
Century
Holding Company, a Florida corporation, do hereby constitute and appoint Edward
J. Lawson, the Chief Executive Officer, and James Gordon Jennings, III, the
Chief Financial Officer, and each of them, the lawful attorneys-in-fact and
agents with full power and authority to do any and all acts and things and
to
execute any and all instruments which said attorneys and agents, and any one
of
them, determine may be necessary or advisable or required to enable said
corporation to comply with the Securities Act of 1933, as amended, and any
rules
or regulations or requirements of the Securities and Exchange Commission in
connection with this Registration Statement. Without limiting the generality
of
the foregoing power and authority, the powers granted include the power and
authority to sign the names of the undersigned officers and directors in the
capacities indicated below to this Registration Statement, to any and all
amendments, both pre-effective and post-effective, and supplements to this
Registration Statement, and to any and all instruments or documents filed as
part of or in conjunction with this Registration Statement or amendments or
supplements thereof, and each of the undersigned hereby ratifies and confirms
that all said attorneys and agents, or any one of them, shall do or cause to
be
done by virtue hereof. This Power of Attorney may be signed in several
counterparts.
|
SIGNATURES
|
|
TITLE
|
|
DATE
|
| |
|
|
|
|
|
/s/
Edward J. Lawson
Edward
J. Lawson
|
|
Chairman
of the Board of Directors,
Chief
Executive OfficerAnd President
(Principal
Executive Officer)
|
|
February
1, 2007
|
| |
|
|
|
|
|
/s/
James Gordon Jennings, III
James
Gordon Jennings, III
|
|
Chief
Financial Officer
(Principal
Financial and Accounting Officer)
|
|
February
1, 2007
|
| |
|
|
|
|
|
/s/
Bruce Simberg
Bruce
Simberg
|
|
Director
|
|
February
1, 2007
|
| |
|
|
|
|
|
/s/
Carl Dorf
Carl
Dorf
|
|
Director
|
|
February
1, 2007
|
| |
|
|
|
|
|
/s/
Charles B. Hart, Jr.
Charles
B. Hart, Jr.
|
|
Director
|
|
February
1, 2007
|
| |
|
|
|
|
|
/s/
Peter J. Prygelski
Peter
J. Prygelski
|
|
Director
|
|
February
1, 2007
|
| |
|
|
|
|
|
/s/
Richard W. Wilcox, Jr.
Richard
W. Wilcox, Jr.
|
|
Director
|
|
February
1, 2007
|
| |
|
|
|
|
|
SIGNATURES
|
|
TITLE
|
|
DATE
|
| |
|
|
|
|
|
|
|
Director
|
|
February
1, 2007
|
EXHIBIT
INDEX
| 5.1 |
Opinion
of Berger Singerman, P.A.*
|
| 23.1 |
Consent
of Berger Singerman, P.A. (contained in Exhibit
5.1)*
|
| 23.2 |
Consent
of De Meo, Young, McGrath*
|
| 24.1 |
Power
of Attorney (See page II-5 of this Form S-3 Registration
Statement)
|
*Filed
herewith