sec document
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------
SCHEDULE 13D
(RULE 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No. 3)(1)
Vesta Insurance Group, Inc.
---------------------------
(Name of Issuer)
Common Stock, $.01 Par Value
----------------------------
(Title of Class of Securities)
925391104
---------
(CUSIP Number)
STEVEN WOLOSKY, ESQ.
OLSHAN GRUNDMAN FROME ROSENZWEIG & WOLOSKY LLP
Park Avenue Tower
65 East 55th Street
New York, New York 10022
(212) 451-2300
--------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
September 28, 2005
------------------
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box |_|.
NOTE. Schedules filed in paper format shall include a signed original
and five copies of the schedule, including all exhibits. See Rule 13d-7 for
other parties to whom copies are to be sent.
(Continued on following pages)
(Page 1 of 17 Pages)
--------
1 The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
NOTES).
----------------------- --------------------
CUSIP No. 925391104 13D Page 2 of 17 Pages
----------------------- --------------------
================================================================================
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
NEWCASTLE PARTNERS, L.P.
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |X|
(b) |_|
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) |_|
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
TEXAS
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 3,050,700
OWNED BY -----------------------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING
PERSON WITH - 0 -
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
3,050,700
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
- 0 -
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
3,050,700
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* |_|
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.5%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
--------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
----------------------- --------------------
CUSIP No. 925391104 13D Page 3 of 17 Pages
----------------------- --------------------
================================================================================
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
NEWCASTLE CAPITAL MANAGEMENT, L.P.
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) /_/
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) /_/
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
TEXAS
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 3,050,700
OWNED BY
EACH
REPORTING
PERSON WITH -----------------------------------------------------------------
8 SHARED VOTING POWER
- 0 -
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
3,050,700
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
- 0 -
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
3,050,700
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* /_/
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.5%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
-------------------- -------------------
CUSIP No. 925391104 13D Page 4 of 17 Pages
-------------------- -------------------
================================================================================
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
NEWCASTLE CAPITAL GROUP, L.L.C.
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) /_/
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) /X/
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
TEXAS
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 3,050,700
OWNED BY
EACH
REPORTING
PERSON WITH -----------------------------------------------------------------
8 SHARED VOTING POWER
- 0 -
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
3,050,700
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
- 0 -
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
3,050,700
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* /_/
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.5%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
OO
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
-------------------- -------------------
CUSIP No. 925391104 13D Page 5 of 17 Pages
-------------------- -------------------
================================================================================
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
MARK E. SCHWARZ
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) /_/
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) /_/
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 3,050,700
OWNED BY
EACH
REPORTING
PERSON WITH -----------------------------------------------------------------
8 SHARED VOTING POWER
- 0 -
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
3,050,700
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
- 0 -
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
3,050,700
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* /_/
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.5%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
-------------------- -------------------
CUSIP No. 925391104 13D Page 6 of 17 Pages
-------------------- -------------------
================================================================================
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
JAMES C. EPSTEIN
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) /_/
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) /_/
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 3,050,700**
OWNED BY
EACH
REPORTING
PERSON WITH -----------------------------------------------------------------
8 SHARED VOTING POWER
- 0 -
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
3,050,700**
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
- 0 -
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
3,050,700**
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* /_/
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.5%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
================================================================================
-----------
** Constitutes the 3,050,700 shares of Common Stock beneficially owned by
Newcastle Partners, L.P. Mr. Epstein disclaims any pecuniary interest in such
shares.
*SEE INSTRUCTIONS BEFORE FILLING OUT!
-------------------- -------------------
CUSIP No. 925391104 13D Page 7 of 17 Pages
-------------------- -------------------
================================================================================
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
MARK J. MORRISON
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) / /
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 3,050,700**
OWNED BY
EACH
REPORTING
PERSON WITH -----------------------------------------------------------------
8 SHARED VOTING POWER
- 0 -
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
3,050,700**
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
- 0 -
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,050,700**
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* /_/
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.5%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
================================================================================
--------------------
** Constitutes the 3,050,700 shares of Common Stock beneficially owned by
Newcastle Partners, L.P. Mr. Morrison disclaims any pecuniary interest in such
shares.
*SEE INSTRUCTIONS BEFORE FILLING OUT!
-------------------- -------------------
CUSIP No. 925391104 13D Page 8 of 17 Pages
-------------------- -------------------
================================================================================
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
STEVEN J. PULLY
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) / /
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 3,050,700**
OWNED BY
EACH
REPORTING
PERSON WITH -----------------------------------------------------------------
8 SHARED VOTING POWER
- 0 -
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
3,050,700**
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
- 0 -
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,050,700**
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* /_/
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.5%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
================================================================================
--------------------
** Constitutes the 3,050,700 shares of Common Stock beneficially owned by
Newcastle Partners, L.P. Mr. Pully disclaims any pecuniary interest in such
shares.
*SEE INSTRUCTIONS BEFORE FILLING OUT!
-------------------- -------------------
CUSIP No. 925391104 13D Page 9 of 17 Pages
-------------------- -------------------
The following constitutes Amendment No. 3 ("Amendment No. 3") to the
Schedule 13D filed by the undersigned. This Amendment No. 3 amends the Schedule
13D as specifically set forth.
Item 4 is hereby amended to add the following:
On September 28, 2005, NP delivered a letter to the Issuer to (i)
nominate James C. Epstein, Mark J. Morrison and Steven J. Pully (collectively,
the "Nominees"), as set forth therein, for election to the Issuer's Board of
Directors at the Issuer's 2005 annual meeting of stockholders, or any other
meeting of stockholders held in lieu thereof, and any adjournments,
postponements, reschedulings or continuations thereof (the "Annual Meeting") and
(ii) propose that stockholders of the Issuer adopt a resolution recommending to
the Issuer's Board of Directors that the Issuer reimburse NP for all expenses it
incurs in connection with the proxy solicitation to elect the Nominees at the
Annual Meeting, including, but not limited to, all litigation expenses resulting
therefrom. A copy of this letter is attached hereto as Exhibit 5 and is
incorporated herein by reference.
Item 5(a) is hereby amended and restated to read as follows:
(a) The aggregate percentage of shares of Common Stock reported to be
owned by the Reporting Persons is based upon 36,079,564 shares outstanding,
which is the total number of shares outstanding as reported in the Issuer's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, as filed with
the Securities and Exchange Commission on August 9, 2004.
As of September 28, 2005, NP beneficially owned 3,050,700 shares of
Common Stock, representing approximately 8.5% of the issued and outstanding
Common Stock of the Issuer.
NCM, as the general partner of NP, may also be deemed to beneficially
own the 3,050,700 shares of Common Stock beneficially owned by NP.
NCG, as the general partner of NCM, which in turn is the general
partner of NP, may also be deemed to beneficially own the 3,050,700 shares of
Common Stock beneficially owned by NP.
Mark E. Schwarz, as the managing member of NCG, the general partner of
NCM, which in turn is the general partner of NP, may also be deemed to
beneficially own the 3,050,700 shares of Common Stock beneficially owned by NP.
NCM, NCG and Mr. Schwarz disclaim beneficial ownership of the shares
of Common Stock held by NP, except to the extent of their pecuniary interest
therein.
Messrs. Epstein, Morrison and Pully do not beneficially own any shares
of Common Stock other than the shares of Common Stock held by NP that each may
be deemed to beneficially own if they are considered as a "group" with NP and
-------------------- -------------------
CUSIP No. 925391104 13D Page 10 of 17 Pages
-------------------- -------------------
the Controlling Persons under Section 13(d)(3) of the Act. Messrs. Epstein,
Morrison and Pully disclaim any pecuniary interest in the Shares held by NP.
Item 5(c) is hereby amended to add the following:
(c) There have been no transactions in the shares of Common Stock by
the Reporting Persons during the past sixty days.
Item 7 is hereby amended to add the following exhibit:
5. Director Nomination Letter from Newcastle Partners, L.P. to Vesta
Insurance Group, Inc., dated September 28, 2005
-------------------- -------------------
CUSIP No. 925391104 13D Page 11 of 17 Pages
-------------------- -------------------
SIGNATURES
After reasonable inquiry and to the best of his knowledge and belief,
each of the undersigned certifies that the information set forth in this
Statement is true, complete and correct.
Dated: September 29, 2005 NEWCASTLE PARTNERS, L.P.
By: Newcastle Capital Management, L.P.,
its General Partner
By: Newcastle Capital Group, L.L.C.,
its General Partner
By: /s/Mark E. Schwarz
-----------------------------------
Mark E. Schwarz, Managing Member
NEWCASTLE CAPITAL MANAGEMENT, L.P.
By: Newcastle Capital Group, L.L.C.,
its General Partner
By: /s/Mark E. Schwarz
-----------------------------------
Mark E. Schwarz, Managing Member
NEWCASTLE CAPITAL GROUP, L.L.C.
By: /s/Mark E. Schwarz
-----------------------------------
Mark E. Schwarz, Managing Member
/s/Mark E. Schwarz
-----------------------------------
MARK E. SCHWARZ
/s/ James C. Epstein
-----------------------------------
JAMES C. EPSTEIN
/s/ Mark J. Morrison
------------------------------------
MARK J. MORRISON
/s/ Steven J. Pully
------------------------------------
STEVEN J. PULLY
-------------------- -------------------
CUSIP No. 925391104 13D Page 12 of 17 Pages
-------------------- -------------------
EXHIBIT INDEX
-------------
Exhibit Page Page
------------ ----
1. Director Nomination Letter from Newcastle Partners, L.P. to Vesta
Insurance Group, Inc., dated March 21, 2005 (previously filed). --
2. Joint Filing and Solicitation Agreement, dated March 21, 2005
(previously filed). --
3. Letter from Newcastle Partners, L.P. to the Corporate Secretary
of Vesta Insurance Group, Inc., dated July 8, 2005, requesting a
stockholders list and other corporate records (previously filed). --
4. Complaint filed on July 8, 2005 with the Delaware Court of
Chancery (previously filed). --
5. Director Nomination Letter from Newcastle Partners, L.P. to Vesta
Insurance Group, Inc., dated September 28, 2005. 13-17
-------------------- -------------------
CUSIP No. 925391104 13D Page 13 of 17 Pages
-------------------- -------------------
NEWCASTLE PARTNERS, L.P.
300 Crescent Court, Suite 1110
Dallas, Texas 75201
September 28, 2005
VIA FACSIMILE AND FEDERAL EXPRESS
Vesta Insurance Group, Inc.
3760 River Run Drive
Birmingham, Alabama 35243
Attn: Corporate Secretary
Re: NOTICE OF INTENTION TO NOMINATE INDIVIDUALS FOR ELECTION AS DIRECTORS
AT THE 2005 ANNUAL MEETING OF STOCKHOLDERS OF VESTA INSURANCE GROUP,
INC.
Dear Sir:
This letter shall serve to satisfy the advance notice requirements of
Article II, Section 2.7(A) of the Bylaws (the "Bylaws") of Vesta Insurance
Group, Inc. ("Vesta") as to the nomination by Newcastle Partners, L.P., a Texas
limited partnership ("Newcastle"), of three (3) nominees for election to the
Board of Directors of Vesta (the "Vesta Board") at the 2005 annual meeting of
stockholders of Vesta on November 17, 2005, or any other meeting of stockholders
held in lieu thereof, and any adjournments, postponements, reschedulings or
continuations thereof (the "Annual Meeting").
This letter and all Exhibits attached hereto are collectively referred to
as the "Notice." Newcastle is the beneficial owner of 3,050,700 shares of common
stock, $.01 par value per share (the "Common Stock"), of Vesta, 1,000 shares of
which are held of record by Newcastle. Newcastle's address, as believed to
appear on Vesta's books, is 300 Crescent Court, Suite 1110, Dallas, Texas 75201.
Through this Notice, Newcastle hereby (i) nominates and notifies you of its
intent to nominate James C. Epstein, Mark J. Morrison and Steven J. Pully as
nominees (the "Nominees") to be elected to the Vesta Board at the Annual
Meeting. Newcastle believes that the terms of three (3) Class III directors
currently serving on the Vesta Board expire at the Annual Meeting and (ii)
proposes that stockholders of Vesta adopt a resolution recommending to the Vesta
Board that Vesta reimburse Newcastle for all expenses it incurs in connection
with the proxy solicitation to elect the Nominees in the Annual Meeting,
including, but not limited to, all litigation expenses resulting therefrom.
ELECTION OF DIRECTORS:
The information concerning the Nominees required by Article II, Section
2.7(A) of the Bylaws is set forth below:
-------------------- -------------------
CUSIP No. 925391104 13D Page 14 of 17 Pages
-------------------- -------------------
JAMES C. EPSTEIN (Age 47) has served as Chief Risk Officer of Contran
Corporation, a diversified holding company with controlling interests in public
and private companies, since January 2005. He has served as Chairman of the
Board and Chief Executive Officer of EWI RE, Inc., an insurance and reinsurance
brokerage and consulting firm and Contran Corporation affiliate, since November
2004, and as its President from 1995 to December 2000. He has served as Chairman
of the Board of Tall Pines Insurance Company, a Vermont captive insurer and
Contran Corporation affiliate, since November 2004. Mr. Epstein has been a
director of Hallmark Financial Services, Inc., a property and casualty insurance
holding company, since May 2003. Certain relatives of Mr. Epstein are investors
in Newcastle Partners. The business address of Mr. Epstein is 5400 LBJ Freeway,
Suite 1060, Dallas, Texas 75240. As of the date hereof, Mr. Epstein did not
beneficially own any securities of Vesta other than the shares of Common Stock
held by Newcastle that Mr. Epstein may be deemed to beneficially own by virtue
of being a member of the Group (as hereinafter defined). Mr. Epstein has not
purchased or sold any securities of Vesta during the past two years.
MARK J. MORRISON (Age 45) has served as Chief Operating Officer since April
2005 and as Executive Vice President and Chief Financial Officer since March
2004 of Hallmark Financial Services, Inc., a property and casualty insurance
holding company. From January 2001 to March 2004, he served as President of
Associates Insurance Group, a subsidiary of St. Paul Travelers, a national
provider of property casualty insurance and asset management services. From 1996
to 2000, he served as Senior Vice President and Chief Financial Officer of
Associates Insurance Group, the insurance division of Associates First Capital
Corporation, an international provider of finance and insurance products. The
business address of Mr. Morrison is 777 Main Street, Suite 100, Fort Worth,
Texas 76102. As of the date hereof, Mr. Morrison did not beneficially own any
securities of Vesta other than the shares of Common Stock held by Newcastle that
Mr. Morrison may be deemed to beneficially own by virtue of being a member of
the Group. Mr. Morrison has not purchased or sold any securities of Vesta during
the past two years.
STEVEN J. PULLY (Age 45) has served as the President of Newcastle
Management, the general partner of Newcastle Partners, a private investment
partnership, since January 2003 and has been with Newcastle Partners since
December 2001. Mr. Pully has served as a director of Whitehall Jewellers, Inc.,
a specialty retailer of fine jewelry, since June 22, 2005 and as Chairman of the
Board since July 5, 2005. He has served as Chief Executive Officer and a
director of New Century Equity Holdings Corp., a company formerly engaged in
investing in high-growth companies, since June 2004. He has served as a director
of Pizza Inn, Inc., a franchisor and operator of pizza restaurants, since
December 2002. From January 2003 to June 2004, he served as Chief Executive
Officer of privately-held Pinnacle Frames and Accents, Inc., a domestic picture
frame manufacturer. Prior to joining Newcastle Management, from May 2000 to
December 2001, he served as a managing director in the mergers and acquisitions
department of Banc of America Securities, Inc. and from January 1997 to May 2000
he was a member of the investment banking department of Bear Stearns where he
became a senior managing director in 1999. Mr. Pully is a CPA, a CFA, and a
member of the Texas Bar. The business address of Mr. Pully is c/o Newcastle
Capital Management, L.P., 300 Crescent Court, Suite 1110, Dallas, Texas 75201.
As of the date hereof, Mr. Pully did not beneficially own any securities of
Vesta other than the shares of Common Stock held by Newcastle that Mr. Pully may
-------------------- -------------------
CUSIP No. 925391104 13D Page 15 of 17 Pages
-------------------- -------------------
be deemed to beneficially own by virtue of being a member of the Group. Mr.
Pully has not purchased or sold any securities of Vesta during the past two
years.
To the extent there are in excess of three (3) vacancies on the Vesta Board
to be filled by election at the Annual Meeting or Vesta increases the size of
the Vesta Board above its existing size, Newcastle reserves the right to
nominate additional nominees to be elected to the Vesta Board at the Annual
Meeting. Additional nominations made pursuant to the preceding sentence are
without prejudice to the position of Newcastle that any attempt to increase the
size of the current Vesta Board or to reconstitute or reconfigure the classes on
which the current directors serve constitutes an unlawful manipulation of
Vesta's corporate machinery. If this Notice shall be deemed for any reason by a
court of competent jurisdiction to be ineffective with respect to the nomination
of any of the Nominees at the Annual Meeting, or if any individual Nominee shall
be unable to serve for any reason, this Notice shall continue to be effective
with respect to the remaining Nominee(s) and as to any replacement Nominee(s)
selected by Newcastle.
REIMBURSEMENT OF EXPENSES:
The stockholders of Vesta are being asked to adopt the following resolution
recommending to the Vesta Board that Vesta reimburse Newcastle for its expenses
incurred in connection with the proxy solicitation to elect its Nominees,
including, but not limited to, all litigation expenses resulting therefrom:
"Resolved, that the stockholders recommend to the Board of Directors
that Vesta Insurance Group, Inc. reimburse Newcastle Partners, L.P.
for all expenses it incurs in connection with its solicitation of
proxies for the annual meeting of stockholders scheduled to be held on
November 17, 2005, or any advancements, postponements, rescheduling or
continuation thereof, including, but not limited to, all litigation
expenses resulting therefrom."
Newcastle is seeking reimbursement of its expenses from Vesta because it
believes that the proxy solicitation will benefit all stockholders of Vesta.
Although Newcastle is expending its own working capital to finance this
solicitation while Vesta management is paying for its solicitation with Vesta's
cash, the Nominees, if elected, will not seek reimbursement on behalf of
Newcastle if Vesta's stockholders do not approve this proposal.
ADDITIONAL INFORMATION ON NEWCASTLE AND ITS AFFILIATES:
On March 21, 2005, Newcastle, Newcastle Capital Management, L.P., Newcastle
Capital Group, L.L.C., Mark E. Schwarz and each of the Nominees (collectively,
the "Group") entered into a Joint Filing and Solicitation Agreement in which,
among other things, (a) the parties agreed to the joint filing on behalf of each
of them of statements on Schedule 13D with respect to the securities of Vesta to
the extent required under applicable securities laws, (b) the parties agreed to
solicit proxies or written consents for the election of the Nominees, or any
other person(s) nominated by Newcastle, to the Vesta Board at the Annual Meeting
(the "Solicitation"), and (c) Newcastle agreed to bear all expenses incurred in
connection with the Group's activities, including approved expenses incurred by
any of the parties in connection with the Solicitation, subject to certain
limitations.
-------------------- -------------------
CUSIP No. 925391104 13D Page 16 of 17 Pages
-------------------- -------------------
Pursuant to letter agreements dated March 21, 2005, Newcastle agreed to
indemnify each of Messrs. Epstein, Morrison and Pully against any and all claims
of any nature arising from the solicitation of proxies from Vesta's stockholders
at the Annual Meeting and any related transactions.
Other than as stated above, there are no arrangements or understandings
between Newcastle and each Nominee or any other person or person pursuant to
which the nominations described herein are to be made, other than the consents
by the Nominees to serve as directors of Vesta if elected as such at the Annual
Meeting, attached hereto and incorporated herein by reference.
Except as set forth in this Notice (including the Exhibits hereto), (i)
during the past 10 years, no Nominee has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors); (ii) no Nominee directly
or indirectly beneficially owns any securities of Vesta; (iii) no Nominee owns
any securities of Vesta which are owned of record but not beneficially; (iv) no
Nominee has purchased or sold any securities of Vesta during the past two years;
(v) no Nominee is, or within the past year was, a party to any contract,
arrangements or understandings with any person with respect to any securities of
Vesta, including, but not limited to, joint ventures, loan or option
arrangements, puts or calls, guarantees against loss or guarantees of profit,
division of losses or profits, or the giving or withholding of proxies; (vi) no
associate of any Nominee owns beneficially, directly or indirectly, any
securities of Vesta; (vii) no Nominee owns beneficially, directly or indirectly,
any securities of any parent or subsidiary of Vesta; (viii) no Nominee or any of
his associates was a party to any transaction, or series of similar
transactions, since the beginning of Vesta's last fiscal year, or is a party to
any currently proposed transaction, or series of similar transactions, to which
Vesta or any of its subsidiaries was or is to be a party, in which the amount
involved exceeds $60,000; (ix) no Nominee or any of his associates has any
arrangement or understanding with any person with respect to any future
employment by Vesta or its affiliates, or with respect to any future
transactions to which Vesta or any of its affiliates will or may be a party; and
(x) no person, including the Nominees, who is a party to an arrangement or
understanding pursuant to which the Nominees are proposed to be elected has a
substantial interest, direct or indirect, by security holdings or otherwise in
any matter to be acted on at the Annual Meeting.
A representative of Newcastle intends to appear in person or by proxy at
the Annual Meeting to nominate the persons specified in this Notice for election
to the Vesta Board.
Each of the Nominees has consented to be named as a nominee in this Notice,
to be named as a nominee in any proxy statement filed by Newcastle in connection
with the Solicitation and to serve as a director of Vesta, if so elected. Such
consents are attached hereto as Exhibit A.
Please address any correspondence to Newcastle Partners, L.P., Attention:
Mark E. Schwarz, telephone (214) 661-7474, facsimile (214) 661-7475 (with a copy
to our counsel, Olshan Grundman Frome Rosenzweig & Wolosky LLP, Park Avenue
Tower, 65 East 55th Street, New York, New York 10022, Attention: Steven Wolosky,
Esq., telephone (212) 451-2333, facsimile (212) 451-2222). The giving of this
Notice is not an admission that any procedures for notice concerning the
nomination of directors to the Vesta Board are legal, valid or binding, and
Newcastle reserves the right to challenge their validity. This Notice supercedes
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CUSIP No. 925391104 13D Page 17 of 17 Pages
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the notice of nomination sent by Newcastle to Vesta on March 21, 2005 (the
"March 21 Notice") to the extent that the Annual Meeting on November 17, 2005
was first publicly announced through a press release of Vesta on September 20,
2005. Newcastle reserves its right to reinstate the March 21 Notice if an
earlier announcement of the Annual Meeting is deemed to be public by Vesta.
Very truly yours,
NEWCASTLE PARTNERS, L.P.
By: Newcastle Capital Management, L.P.,
its General Partner
By: Newcastle Capital Group, L.L.C.,
its General Partner
By: /s/ Mark E. Schwarz
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Mark E. Schwarz, Managing Member