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. 4)(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)
November 17, 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 28 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 28 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 28 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 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 4 of 28 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 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*
OO
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
----------------------- ----------------------
CUSIP No. 925391104 13D Page 5 of 28 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 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*
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
----------------------- ----------------------
CUSIP No. 925391104 13D Page 6 of 28 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 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*
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 28 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 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*
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 28 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 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*
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 28 Pages
----------------------- ----------------------
The following constitutes Amendment No. 4 ("Amendment No. 4") to the
Schedule 13D filed by the undersigned. This Amendment No. 4 amends the Schedule
13D as specifically set forth.
Item 2 is hereby amended to add the following:
In connection with the Settlement Agreement described and
defined in Item 4, NP withdrew its nomination of James C. Epstein, Mark J.
Morrison and Steven J. Pully (the "Nominees") for election at the 2005 annual
meeting of stockholders of the Issuer held on November 17, 2005 (the "Annual
Meeting") and the Issuer agreed to appoint Mark E. Schwarz and Mark J. Morrison
to the Board of Directors following the Annual Meeting. Accordingly, Messrs.
Epstein and Pully are no longer members of the Section 13(d) group and shall
cease to be Reporting Persons immediately after the filing of this Statement.
NP, NCM, NCG, Mr. Schwarz and Mr. Morrison will continue filing as a group
statements on Schedule 13D with respect to their beneficial ownership of
securities of the Issuer to the extent required by applicable law.
Item 4 is hereby amended to add the following:
On November 17, 2005, the Reporting Persons and the Issuer
(together, the "Parties") entered into a Settlement and Standstill Agreement
(the "Settlement Agreement"), a copy of which is attached hereto as Exhibit 6
and is incorporated herein by reference. Pursuant to the Settlement Agreement,
the Reporting Persons agreed to withdraw their Nominees for election at the
Annual Meeting and their stockholder proposal recommending to the Issuer's Board
of Directors (the "Board") that the Issuer reimburse NP for all expenses it
incurred in connection with the proxy solicitation to elect the Nominees at the
Annual Meeting. The Reporting Persons agreed to cause all shares of Common Stock
beneficially owned by the Reporting Persons to be present for quorum purposes
and to be voted in favor of Tambra L.G. Bailie, Norman W. Gayle III and Michael
J. Gough (collectively, the "Vesta Nominees") at the Annual Meeting. The Parties
agreed that within three business days following election of the Vesta Nominees
at the Annual Meeting, (i) the Board will increase the size of the Board from
nine members to ten members, (ii) Norman W. Gayle III will resign as a Class III
director of the Board, (iii) the Board will appoint Norman W. Gayle III to fill
the vacancy in Class I of the Board, and (iv) the Board will appoint Mark J.
Morrison and Mark E. Schwarz to fill two resulting vacancies in Class III of the
Board. The Reporting Persons agreed that during the five months following the
date of the Settlement Agreement (the "Standstill Period"), they will not,
without the prior written consent of the Issuer, directly or indirectly, (i)
purchase, cause to be purchased, or otherwise acquire or agree to acquire, or
become or agree to become the beneficial owner of any shares of Common Stock and
any securities convertible into shares of Common Stock if such purchases would
result in the Reporting Persons owning more than 9.5% of the issued and
outstanding Common Stock of the Issuer or (ii) sell, cause to be sold, or
otherwise dispose of or agree to dispose of, or divest themselves of beneficial
ownership of or agree to divest themselves of beneficial ownership of, any
securities issued by the Issuer, including any Common Stock and any securities
convertible into or exchangeable for Common Stock or any other equity securities
of the Issuer, except that the Reporting Persons may sell any or all of the
shares of Common Stock beneficially owned by the Reporting Persons in brokerage
transactions involving 100,000 or fewer shares if, in the reasonable belief of
----------------------- ----------------------
CUSIP No. 925391104 13D Page 10 of 28 Pages
----------------------- ----------------------
the Reporting Persons, such shares are not being accumulated by a single
purchaser or group of purchasers acting together, provided, however, that during
the Standstill Period the aggregate number of shares of Common Stock sold by the
Reporting Persons shall not exceed 1% of the outstanding Common Stock per
calendar week. During the Standstill Period, the Reporting Persons are also
restricted from taking specified actions with respect to their investment in the
Issuer as set forth in further detail in the Settlement Agreement; provided,
however, that there is no limitation on the Reporting Persons' ability to take
action with respect to the Issuer's 2006 annual meeting of stockholders,
including, but not limited to, nominating directors for election or submitting
stockholder proposals for consideration at the Issuer's 2006 annual meeting of
stockholders or soliciting proxies or written consents of stockholders with
respect to the Issuer's Common Stock relating to the 2006 annual meeting of
stockholders. In connection with the Settlement Agreement, the Chairman of the
Annual Meeting submitted a proposal, for stockholder approval, recommending that
NP be reimbursed for up to $400,000 of the expenses it has incurred in
connection with its solicitation of proxies for the Annual Meeting. Upon
execution of the Settlement Agreement, the Parties agreed that they would
execute and promptly file with the United States District Court for the Middle
District of Florida, Tampa Division, a Notice of Settlement and Joint
Stipulation for Dismissal with Prejudice and that the Issuer shall take no
further actions to challenge the preliminary determination or final order issued
in the State of Florida Office of Insurance Regulation proceedings and the
Issuer shall remove its objection to the current result of such proceedings. The
Settlement Agreement also includes a mutual release of claims between the
Reporting Persons and the Issuer. In accordance with the Settlement Agreement,
the Parties issued on November 17, 2005 a press release announcing the execution
of the Settlement Agreement, the form of which is attached hereto as Exhibit 7
and is incorporated herein by reference.
Item 6 is hereby amended to add the following:
Reference is made to the Settlement Agreement defined and
described in Item 4.
Item 7 is hereby amended to add the following exhibits:
6. Settlement and Standstill Agreement by and between Vesta
Insurance Group, Inc., Newcastle Partners, L.P., Newcastle
Capital Management, L.P., Newcastle Capital Group, L.L.C.,
Mark E. Schwarz, Mark J. Morrison, James C. Epstein and
Steven J. Pully, dated November 17, 2005.
7. Press release, dated November 17, 2005.
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CUSIP No. 925391104 13D Page 11 of 28 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: November 21, 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 28 Pages
----------------------- ----------------------
EXHIBIT INDEX
Exhibit 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
(previously filed). --
6. Settlement and Standstill Agreement by and between Vesta
Insurance Group, Inc., Newcastle Partners, L.P., Newcastle
Capital Management, L.P., Newcastle Capital Group,
L.L.C., Mark E. Schwarz, Mark J. Morrison, James C.
Epstein and Steven J. Pully, dated November 17, 2005. 13 to 27
7. Press release, dated November 17, 2005. 28
----------------------- ----------------------
CUSIP No. 925391104 13D Page 13 of 28 Pages
----------------------- ----------------------
SETTLEMENT AND STANDSTILL AGREEMENT
This AGREEMENT, dated as of November 17, 2005 (this "AGREEMENT"), is by
and between Vesta Insurance Group, Inc., a Delaware corporation ("VESTA"), and
the entities listed on SCHEDULE A hereto (collectively, the "NEWCASTLE GROUP"
and together with Vesta the "PARTIES" and each a "PARTY").
WHEREAS, the Newcastle Group is the beneficial owner of 3,050,700
shares of common stock, par value $0.01 per share, of Vesta (the "NEWCASTLE HELD
SHARES"); and
WHEREAS, the Vesta Board currently has nine (9) seats (including an
existing vacancy in Class I, (the "EXISTING CLASS I VACANCY")), which are
divided into three (3) classes, each having three (3) seats. Class I has two (2)
directors, whose terms expire in 2006, and one (1) vacancy ("CLASS I"); Class II
has three (3) directors, whose terms expire in 2007 ("CLASS II"); and Class III
has three (3) directors, whose terms expire in 2005 ("CLASS III");
WHEREAS, there is currently scheduled for November 17, 2005, the annual
meeting of Vesta stockholders (the "2005 ANNUAL MEETING") to consider, among
other things, the election of three (3) individuals to the Board of Directors of
Vesta (the "VESTA Board");
WHEREAS, by letter dated September 28, 2005, Newcastle Partners, L.P.
("NEWCASTLE PARTNERS") purported to provide notice to Vesta of its intention to
nominate James C. Epstein, Mark J. Morrison and Steven J. Pully for election as
directors of Vesta at the 2005 Annual Meeting (the "STOCKHOLDER NOMINATIONS");
WHEREAS, the Newcastle Group has filed a preliminary proxy statement
(as amended, the "NEWCASTLE PROXY STATEMENT") with the Securities and Exchange
Commission (the "SEC") signaling its intention to solicit proxies in connection
with (1) the Stockholder Nominations and (2) a purported stockholder proposal
recommending to the Vesta Board that Newcastle be reimbursed for all expenses it
incurs in connection with its solicitation of proxies for the 2005 Annual
Meeting (the "NEWCASTLE PROPOSAL");
WHEREAS, on September 20, 2005, Vesta publicly announced that the Vesta
Board had nominated for re-election Tambra L.G. Bailie, Norman W. Gayle III and
Michael J. Gough (collectively, the "VESTA NOMINEES"), each to serve as Class
III directors through Vesta's annual meeting of stockholders to be held in 2008;
WHEREAS, subject to and based upon the understanding contained in this
Agreement, Newcastle Partners intends hereby to withdraw the Stockholder
Nominations and refrain from (1) soliciting proxies in connection with the 2005
Annual Meeting and (2) contesting the election of the Vesta Nominees at the 2005
Annual Meeting;
WHEREAS, a dispute has arisen between Vesta and the Newcastle Group
regarding Florida Statute Section 628.461, which dispute has resulted in (1)
litigation pending in the United States District Court for the Middle District
of Florida, Tampa Division, captioned VESTA INSURANCE GROUP, INC. V. NEWCASTLE
PARTNERS, L.P., Case No. 8:05-CV-1680-T-27MSS (the "FLORIDA LITIGATION"); and
----------------------- ----------------------
CUSIP No. 925391104 13D Page 14 of 28 Pages
----------------------- ----------------------
(2) an administrative proceeding before the State of Florida Office of Insurance
Regulation (the "FOIR"), captioned IN THE MATTER OF: ACQUISITION OF SHARES OF
VESTA INSURANCE GROUP, INC., BY NEWCASTLE PARTNERS, L.P., Case. No. 82685-05
(the "FOIR PROCEEDING");
WHEREAS, the Parties have determined that the interests of the Parties
and the stockholders of Vesta would best be served by avoiding the further
expense and disruption that could be expected to result from the Florida
Litigation, the FOIR Proceeding and a contested election; and
WHEREAS, the Parties intend to provide hereby for, among other matters,
(1) the full support from all parties of the Vesta Nominees in the election to
take place at the 2005 Annual Meeting; and (2) following the 2005 Annual
meeting, (a) the enlargement of the Vesta Board from nine (9) to ten (10) seats
creating a new directorship in Class III; and (b) the appointment of Mark J.
Morrison and Mark E. Schwarz, as Class III directors, to the Vesta Board (the
final product of (1) and (2) being the "NEW VESTA BOARD COMPOSITION").
Furthermore, Vesta and the Newcastle Group desire to otherwise resolve all
matters between them, including those matters at issue in or with respect to the
Stockholder Nominations, the Florida Litigation, and the FOIR Proceeding.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties hereto hereby agree as
follows:
SECTION 1. REPRESENTATIONS.
(a) REPRESENTATIONS AND WARRANTIES OF VESTA. Vesta hereby
represents and warrants to the Newcastle Group that this Agreement has been duly
authorized, executed and delivered by Vesta, and is a valid and binding
obligation of Vesta, enforceable against Vesta in accordance with its terms.
(b) REPRESENTATIONS AND WARRANTIES OF THE NEWCASTLE GROUP. Each
member of the Newcastle Group hereby represents and warrants to Vesta that:
(i) this Agreement has been duly authorized, executed and
delivered by each member of the Newcastle Group, and is a valid and
binding obligation of each member of the Newcastle Group, enforceable
against each member of the Newcastle Group in accordance with its
terms;
(ii) except for the Newcastle Held Shares, which are
beneficially owned solely by the members of the Newcastle Group as
indicated in their Schedule 13D filed with the SEC, as amended, no
Affiliate or Associate (as such terms are hereinafter defined) of any
member of the Newcastle Group may be deemed the "beneficial owner" (as
such term is hereinafter defined) of any shares of the Common Stock,
par value $0.01, of Vesta ("VESTA COMMON STOCK") (including any direct
or indirect rights, options or agreements to acquire Vesta Common
----------------------- ----------------------
CUSIP No. 925391104 13D Page 15 of 28 Pages
----------------------- ----------------------
Stock) or has any rights, options or agreements to acquire or vote, any
other Vesta Common Stock; and
(iii) all of the information contained in the preliminary
proxy statement amendment, filed by the Newcastle Group, with the SEC,
on October 17, 2005, is true, accurate, complete and in all material
respects not misleading.
(c) CERTAIN DEFINITIONS. For purposes of this Agreement: the terms
"AFFILIATE" and "ASSOCIATE" shall have the respective meanings set forth in Rule
12b-2 promulgated by the SEC under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"); the terms "BENEFICIAL OWNER" and "BENEFICIALLY
OWN" shall have the same meanings as set forth in Rule 13d-3 promulgated by the
SEC under the Exchange Act, except that a person shall also be deemed to be the
beneficial owner of all Vesta Common Stock that such person has the right to
acquire pursuant to the exercise of any rights in connection with any securities
or any agreement, regardless of when such rights may be exercised and whether
they are conditional; and the terms "PERSON" or "PERSONS" shall mean any
individual, corporation (including not-for-profit), general or limited
partnership, limited liability or unlimited liability company, joint venture,
estate, trust, association, organization or other entity of any kind or nature.
SECTION 2. DIRECTORS.
(a) NEW VESTA BOARD COMPOSITION. In order to achieve New Vesta
Board Composition, the Newcastle Group and Vesta agree that within three (3)
business days following election of the Vesta Nominees at the 2005 Annual
Meeting, the Parties will effect the following steps: (1) the Vesta Board will
increase the size of the Vesta Board from nine (9) to ten (10) members; (2)
Norman W. Gayle III will resign as a Class III director; (3) the Vesta Board
will appoint Norman W. Gayle III to fill the Existing Class I Vacancy on the
Vesta Board; and (4) the Vesta Board will appoint Mark J. Morrison and Mark E.
Schwarz to fill two (2) resulting vacancies in Class III.
SECTION 3. 2005 ANNUAL MEETING.
(a) THE ELECTION OF THE VESTA NOMINEES. The Newcastle Group shall
cause all shares of the Newcastle Held Shares and any other Vesta Common Stock
beneficially owned by the members of the Newcastle Group, and/or their
respective Affiliates or Associates, as of the record date for the 2005 Annual
Meeting, to be present for quorum purposes and to be voted in favor of the Vesta
Nominees at the 2005 Annual Meeting.
(b) THE REIMBURSEMENT PROPOSAL. At the 2005 Annual Meeting, the
Chairman of the 2005 Annual Meeting will submit, for stockholder approval, a
proposal recommending to the Vesta Board that Newcastle Partners be reimbursed
for up to $400,000 of the expenses it has incurred in connection with its
solicitation of proxies for the 2005 Annual Meeting (the "REIMBURSEMENT
PROPOSAL"). Both Norman W. Gayle, III and Donald W. Thornton agree to abstain
from voting their shares of Vesta Common Stock, whether held directly or
indirectly, on the Reimbursement Proposal and shall not authorize any other
person to vote on the Reimbursement Proposal.
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CUSIP No. 925391104 13D Page 16 of 28 Pages
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SECTION 4. ACQUISITION OF AND DISPOSITION OF STOCK.
(a) LIMITS ON ACQUISITION AND DISPOSITION OF STOCK. Each member of
the Newcastle Group covenants and agrees that, from and after the date of this
Agreement and until the expiration of the Standstill Period, as defined below,
neither it nor any of its Affiliates or Associates will, without the prior
written consent of Vesta specifically expressed in a vote adopted by the Vesta
Board, directly or indirectly:
(i) purchase, cause to be purchased, or otherwise acquire
or agree to acquire, or become or agree to become the beneficial owner
of any securities issued by Vesta, including any Vesta Common Stock and
any securities convertible into or exchangeable for Vesta Common Stock
or any other equity securities of Vesta if such purchases would result
in the Newcastle Group (together with any Affiliates or Associates of
any member of the Newcastle Group) owning more than nine and
five-tenths percent (9.5%) of the issued and outstanding Vesta Common
Stock;
(ii) sell, cause to be sold, or otherwise dispose of or
agree to dispose of, or divest itself of beneficial ownership of or
agree to divest itself of beneficial ownership of, any securities
issued by Vesta, including any Vesta Common Stock and any securities
convertible into or exchangeable for Vesta Common Stock or any other
equity securities of Vesta except as follows: The Newcastle Group
members may sell any or all of the Newcastle Held Shares in brokerage
transactions involving 100,000 or fewer shares if, in the reasonable
belief of the Newcastle Group, such shares are not being accumulated by
a single purchaser or group of purchasers acting together, provided,
however, that during the Standstill Period the aggregate number of
shares of Vesta Common Stock sold by the Newcastle Group shall not
exceed one percent (1%) of the outstanding Vesta Common Stock per
calendar week.
(b) EQUAL TREATMENT. Subject to the terms of this SECTION 4, if,
during the Standstill Period, Vesta should seek to raise capital through a PRO
RATA offering to all holders of Vesta Common stock of rights to purchase
additional shares of Vesta Common Stock, the Newcastle Group will be permitted
to participate in such rights offering on the same terms as other holders of
Vesta Common Stock. Notwithstanding the forgoing, nothing contained in this
Agreement will (A) affect the operation of the Rights Agreement between Vesta
and First Chicago Trust Company as Rights Agent, dated June 15, 2000, as amended
(the "RIGHTS PLAN"); or (b) permit the Newcastle Group to participate in any
offering of rights or other Vesta securities in connection with the Rights Plan
from which the Newcastle Group would have otherwise been excluded.
(c) If at any time before the 2008 Vesta stockholders meeting, the
Newcastle Group's ownership of Vesta Common Stock falls below five percent (5%)
of the issued and outstanding Vesta Common Stock as a result of any sales of
Vesta Common Stock by any member of the Newcastle Group (as opposed to as a
result of any offering of Vesta securities by Vesta including, but not limited
to, any stock dividend), Mark J. Morrison and Mark E. Schwarz shall immediately
resign from the Vesta Board.
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CUSIP No. 925391104 13D Page 17 of 28 Pages
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SECTION 5. EXPENSES
If the Reimbursement Proposal is approved by a majority of shares voted
on the Reimbursement Proposal (abstentions shall not be deemed to count for the
purposes of this calculation), then within ten (10) business days following
Vesta's receipt of (1) a final report confirming the approval of the
Reimbursement Proposal from the inspectors of the election for the 2005 Annual
Meeting (employees of IVS Associates Inc.) or (2) a reasonably satisfactory
documentation of the expenses described in this SECTION 5 from the Newcastle
Group, whichever is received later, Vesta will reimburse the Newcastle Group for
its reasonable out-of-pocket fees and expenses incurred (a) in performing the
actions required under this Agreement and (b) through the date of the execution
this Agreement, in connection with its activities relating to the 2005 Annual
Meeting relating to: (1) the nomination or election of directors, the
solicitation of proxies and any acts or filings in connection therewith; (2) the
litigation before the Delaware Court of Chancery captioned NEWCASTLE PARTNERS,
L.P. V. VESTA INSURANCE GROUP, INC., C.A. No. 1485N; and (3) the negotiation and
execution of this Agreement, provided such reimbursement shall not exceed
$400,000 in the aggregate. Notwithstanding anything in this Agreement to the
contrary, Vesta shall not reimburse the Newcastle Group for any expenses
incurred in connection with the FOIR Proceeding or the Florida Litigation or any
appeals associated with either of those two actions.
SECTION 6. STANDSTILL ARRANGEMENTS.
(a) Each member of the Newcastle Group agrees that, during the
five (5) months following the date of this Agreement (the "STANDSTILL PERIOD"),
neither it nor any of its Affiliates or Associates will, without the prior
written consent of Vesta, directly or indirectly, solicit, request, advise,
assist or encourage others to:
(i) form, join in or in any other way participate in a
"partnership, limited partnership, syndicate or other group" (other
than the Newcastle Group) within the meaning of Section 13(d)(3) of the
Exchange Act with respect to any shares of Vesta Common Stock or
deposit any shares of Vesta Common Stock in a voting trust or similar
arrangement or subject any shares of Vesta Common Stock to any voting
agreement or pooling arrangement, other than pursuant to this
Agreement;
(ii) solicit proxies or written consents of stockholders
with respect to Vesta Common Stock under any circumstances, or make, or
in any way participate in, any "solicitation" of any "proxy" to vote
any shares of Vesta Common Stock, or become a "participant" in any
contested solicitation with respect to Vesta (as such terms are defined
or used in Rule 14a-1 and Item 4 of Schedule 14A under the Exchange
Act), or seek to advise or influence any person with respect to the
voting, holding or disposition of any shares of Vesta Common Stock;
(iii) seek to call, or to request the call of, a meeting of
the stockholders of Vesta, or seek to make, or make, a stockholder
proposal at any meeting of the stockholders of Vesta or make a request
for a list of Vesta's stockholders;
(iv) commence or announce any intention to commence any
tender offer for any shares of Vesta Common Stock, or file with or send
to the SEC a Schedule 13D or any amendments to any Schedule 13D under
the Exchange Act with respect to Vesta Common Stock to reflect changes
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CUSIP No. 925391104 13D Page 18 of 28 Pages
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to the disclosures set forth therein and exhibits filed therewith,
except (A) for an amendment to the Schedule 13D filed with the SEC by
the Newcastle Group with respect to the Newcastle Held Shares (the
"CURRENT SCHEDULE 13D") to reflect this Agreement, provided that the
Newcastle Group shall, prior to the filing of any such amendment with
the SEC, provide Vesta with a copy of such amendment as it is proposed
to be so filed and a reasonable opportunity to review and comment
thereon, and (B) to the extent such amendment is filed solely to report
one or a combination of other actions (if any) permitted by this
Agreement or authorized by Vesta in writing prior to the filling of the
amendment. In addition, the Newcastle Group may file a Schedule 13D to
comply with amendments after the date hereof to Section 13(d) of the
Exchange Act, to the rules promulgated thereunder, or to the SEC's
interpretation of either of the foregoing (it being understood that
nothing contained in this Section 6(a)(iv) shall be deemed to permit
any action or disclosure that is otherwise prohibited by this
Agreement). Such permitted amendments shall be referred to as the
"PERMITTED SCHEDULE 13D AMENDMENTS." In no case shall Item 4 of the
Current Schedule 13D be amended, except as otherwise permitted by this
Section 6(a)(iv);
(v) take any action or form any intention which would
require an amendment to the Current Schedule 13D (other than amendments
containing only Permitted Schedule 13D Amendments);
(vi) make a proposal or bid with respect to, or announce
any intention or desire to make, or publicly make or disclose, cause to
be made or disclosed publicly, any proposal or bid with respect to, the
acquisition of any substantial portion of the assets of Vesta or of all
or any portion of the outstanding Vesta Common Stock, or any merger,
consolidation, other business combination, restructuring,
recapitalization, liquidation or other extraordinary transaction
involving Vesta;
(vii) act alone or in concert with others to seek control
or influence in any manner the management, the Vesta Board (including
the composition thereof) or the business, operation or affairs of
Vesta; provided, however, that nothing contained herein shall prohibit
Mark J. Morrison and Mark E. Schwarz from exercising their duties and
obligations as directors of Vesta; or
(viii) publicly disclose, or cause or facilitate the public
disclosure (including by disclosure to any journalist or other
representative of media) of, any request, or otherwise seek (in any
manner that would require public disclosure by any member of the
Newcastle Group or its Affiliates or Associates), to obtain any waiver
or consent under, or any amendment of, any provision of this Agreement.
(b) THE 2006 ANNUAL MEETING. Nothing in this SECTION 6 shall limit
the actions of any member of the Newcastle Group from nominating directors for
election at or submitting shareholder proposals for consideration at the 2006
Annual Meeting of Vesta's stockholders or soliciting proxies or written consents
of stockholders with respect to Vesta Common Stock, or making, or in any way
participating in any "solicitation" of any "proxy" to vote any shares of Vesta
Common Stock, or becoming a "participant" in any contested solicitation with
respect to Vesta (as such terms are defined or used in Rule 14a-1 and Item 4 of
Schedule 14A under the Exchange Act), or seeking to advise or influence any
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CUSIP No. 925391104 13D Page 19 of 28 Pages
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person with respect to the voting, holding or disposition of any shares of Vesta
Common Stock relating to the 2006 annual meeting of Vesta's stockholders.
SECTION 7. WITHDRAWAL STOCKHOLDER NOMINATION AND PROPOSAL.
Upon the execution of this Agreement, the Newcastle Group hereby
withdraws the Stockholder Nominations and the Newcastle Proposal and shall
immediately cease all efforts, direct or indirect, in furtherance of either the
Stockholder Nominations or the Newcastle Proposal and any related solicitation
and shall not vote, deliver or otherwise use any proxies heretofore obtained to
the extent such proxies constitute votes against any of the 2005 Nominees at the
2005 Annual Meeting.
SECTION 8. THE CONDUCT AGREEMENT.
The Parties agree that the provisions of this Agreement shall supersede
and replace any provision of the Agreement Relating to the Meeting of
Stockholders of Vesta Insurance Group, Inc. by and among the parties dated
November 16, 2005 (the "CONDUCT AGREEMENT") that conflicts or overlaps in anyway
with any provision of this agreement. Without limiting the generality of the
forgoing, specifically (a) Section 3(f) of the Conduct Agreement shall be
disregarded and deemed to be deleted; (b) and references to the "Reimbursement
Proposal" in the Conduct Agreement shall be deemed to refer to the Reimbursement
Proposal as defined in this Agreement as opposed to the "Reimbursement Proposal"
as defined in the Conduct Agreement; and (c) the form of ballot attached to the
Conduct Agreement is hereby amended and restated in the form attached hereto as
EXHIBIT A.
SECTION 9. PRESS RELEASES AND OTHER PUBLIC STATEMENTS.
During the Standstill Period, Vesta and the Newcastle Group agree as
follows:
(a) Each member of the Newcastle Group agrees, subject to
the requirements of applicable federal securities laws, to provide to
Vesta an opportunity to review and comment on any press release, public
filing or letter to Vesta's stockholders containing statements about
Vesta, prior to its public release.
(b) Promptly after the execution of this Agreement, the
Parties shall issue a press release in the form attached hereto as
EXHIBIT B.
SECTION 10. FLORIDA LITIGATION AND FOIR PROCEEDING.
Upon the execution of this Agreement:
(a) The Parties will execute and promptly file with the
United States District Court for the Middle District of Florida, Tampa
Division, the Notice of Settlement and Joint Stipulation for Dismissal
with Prejudice, in the forms attached hereto as EXHIBIT C; and
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CUSIP No. 925391104 13D Page 20 of 28 Pages
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(b) Vesta shall take no further actions to challenge the
preliminary determination or final order issued in the FOIR Proceedings
and Vesta shall remove its objection to the current result of the FOIR
Proceeding. The Newcastle Group shall be entitled, in its sole
discretion, to challenge the proposed fine.
SECTION 11. POLICY AND PROCEDURES.
At such time as Mark J. Morrison and Mark E. Schwarz shall become
directors of Vesta in accordance with the terms of this Agreement, they shall
agree in writing to be bound by the terms and conditions of Vesta's policies and
procedures applicable to the Vesta Board including its insider trading policy.
Any grant of options by Vesta as a result of Mark J. Morrison and Mark E.
Schwarz becoming a director of Vesta shall not be deemed to cause the Newcastle
Group to violate the provisions of SECTION 6 of this Agreement.
SECTION 12. CONFIDENTIALITY.
Each member of the Newcastle Group (each, a "RECIPIENT") acknowledges
the confidential and proprietary nature of the Confidential Information (as
defined below), agrees to hold and keep the Confidential Information
confidential as provided in this Agreement and otherwise agrees to each and
every restriction and obligation in this Agreement. As used in this Agreement,
the term "CONFIDENTIAL INFORMATION" means and includes any and all of the
information concerning the business and affairs of Vesta that may hereafter be
disclosed to Recipient by Vesta or by the directors, officers, employees,
agents, consultants, advisors or other representatives, including legal counsel,
accountants and financial advisors ("REPRESENTATIVES") of Vesta. To the extent
that any Confidential Information may include materials subject to the
attorney-client privilege, Vesta is not waiving and will not be deemed to have
waived or diminished its attorney work-product protections, attorney-client
privileges or similar protections and privileges as a result of disclosing any
Confidential Information (including Confidential Information related to pending
or threatened litigation) to Recipient. Recipient agrees that the Confidential
Information (a) will be kept confidential by Recipient and Recipient's
Representatives and (b) without limiting the foregoing, will not be disclosed by
Recipient (except to such person's Representatives to the extent permitted by,
and in accordance with, this Agreement) or by Recipient's Representatives to any
person except with the specific prior written consent of Vesta or except as
expressly otherwise permitted by this Agreement. It is understood that Recipient
may disclose Confidential Information only to those of Recipient's
Representatives who are informed by Recipient of the confidential nature of the
Confidential Information and the obligations of this Agreement.
Confidential Information shall not include information which (a) is
publicly known at the time of disclosure through no breach of this Agreement or
other wrongful act of the Recipient; or (b) was approved for release by
Recipient by written authorization of Vesta.
If Recipient or any of Recipient's Representatives becomes legally
compelled (by oral questions, interrogatories, requests for information or
documents, subpoena, civil or criminal investigative demand or similar process)
to make any disclosure that is prohibited or otherwise constrained by this
Agreement, Recipient or such Representative, as the case may be, will provide
Vesta with notice, as promptly as practicable in light of the circumstances, of
such legal proceedings so that Vesta at its sole expense may seek an appropriate
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CUSIP No. 925391104 13D Page 21 of 28 Pages
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protective order or other appropriate relief or waive compliance with the
provisions of this Agreement. In the absence of a protective order or
Recipient's receiving such a waiver from Vesta, Recipient or its Representative
is permitted to disclose that portion (and only that portion) of the
Confidential Information that Recipient or the Representative is legally
compelled to disclose; provided, however, that Recipient and Recipient's
Representatives must use reasonable efforts to obtain reliable assurance that
confidential treatment will be accorded by any person to whom any Confidential
Information is so disclosed.
Each Recipient acknowledges that it and its Representatives are (i)
aware that the United States securities laws prohibit any person who has
material, non-public information concerning a company from purchasing or selling
securities of such company or from communicating such information to any other
person under circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell such securities, and (ii) familiar with the
Exchange Act, and that it and its Representatives will neither use, nor cause
any third party to use, any Confidential Information in contravention of such
Exchange Act.
Upon the request of Vesta, immediately after either Vesta's 2008 annual
meeting of stockholders or the resignation of Mark J. Morrison and Mark E.
Schwarz from the Vesta Board, whichever occurs sooner, (i) Recipient (A) shall
promptly deliver to Vesta all documents or other materials disclosed by Vesta or
any Vesta's Representative to Recipient or Recipient's Representatives
constituting Confidential Information, together with all copies and summaries
thereof in the possession or under the control of Recipient or Recipient's
Representatives, and (B) will destroy materials generated by Recipient or
Recipient's Representatives that include or refer to any part of the
Confidential Information, without retaining a copy of any such material, or (ii)
alternatively, if Vesta requests or consents to Recipient's request, Recipient
will destroy all documents or other matters constituting Confidential
Information in the possession or under the control of Recipient or Recipient's
Representatives. Any such destruction pursuant to the foregoing must be
certified by an authorized officer of Recipient in writing to Vesta.
SECTION 13. GENERAL RELEASE.
(a) Each member of the Newcastle Group, on its own behalf and on
behalf of its Affiliates, Associates, successors, assigns, heirs, beneficiaries,
attorneys, partners, limited partners, employees and agents (as applicable)
(collectively, the "NEWCASTLE RELEASORS"), hereby releases and discharges Vesta,
and its respective directors, officers and employees (the "VESTA RELEASEES")
from any and all charges, complaints, claims, liabilities, obligations,
promises, agreements, controversies, damages, actions, causes of action, suits,
rights, demands, costs, losses, debts and expenses, known or unknown
(collectively, "CLAIMS"), which the Newcastle Releasors may have had or may now
have, own, or hold, or claim to have, own, or hold against the Vesta Releasees
up to the date of this Agreement. The Newcastle Releasors specifically waive any
rights under any statute, regulation or rule which purports to limit the right
of persons to release or waive unknown Claims. Each of the Newcastle Releasors
represents and warrants hereby that, with the exception of the complaint filed
by the Newcastle Group in the Delaware Court of Chancery on July 7, 2005 to
compel Vesta to hold an annual meeting, it has not filed any complaints or
charges asserting any Claims against any of the Vesta Releasees with any local,
state or federal agency or court, or assigned any such Claim to any other
person. Each of the Newcastle Releasors agrees never to sue any of the Vesta
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CUSIP No. 925391104 13D Page 22 of 28 Pages
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Releasees or cause any of the Vesta Releasees to be sued regarding any matter
within the scope of this General Release. If any of the Newcastle Releasors
violates this General Release by suing any Vesta Releasee or causing any Vesta
Releasee to be sued, the undersigned Newcastle Releasors agree to pay all
reasonable costs and expenses of defending against the suit incurred by the
Vesta Releasees, including reasonable attorneys' fees.
(b) Vesta, on its own behalf and on behalf of its Affiliates,
Associates, successors, assigns, heirs, beneficiaries, attorneys, partners,
limited partners, employees and agents (as applicable) (collectively, the "VESTA
RELEASORS"), hereby releases and discharges each of the Newcastle Group, and its
respective directors, officers and employees (the "NEWCASTLE RELEASEES") from
any and all Claims which the Vesta Releasors may have had or may now have, own,
or hold, or claim to have, own, or hold against the Newcastle Releasees up to
the date of this Agreement. The Vesta Releasors specifically waive any rights
under any statute, regulation or rule which purports to limit the right of
persons to release or waive unknown Claims. Each of the Vesta Releasors
represents and warrants hereby that, with the exception of in connection with
the Florida Litigation and the FOIR Proceeding, it has not filed any complaints
or charges asserting any Claims against any of the Newcastle Releasees with any
local, state or federal agency or court, or assigned any such Claim to any other
person. Each of the Vesta Releasors agrees never to sue any of the Newcastle
Releasees or cause any of the Newcastle Releasees to be sued regarding any
matter within the scope of this General Release. If any of the Vesta Releasors
violates this General Release by suing any Newcastle Releasee or causing any
Newcastle Releasee to be sued, the undersigned Vesta Releasors agree to pay all
reasonable costs and expenses of defending against the suit incurred by the
Newcastle Releasees, including reasonable attorneys' fees.
(c) Each of the undersigned Newcastle Releasors and Vesta
Releasors acknowledges that it has read the contents of the foregoing applicable
General Release, that it has had the opportunity to review such General Release
with counsel of its choice, that it understands the same and that it has given
such General Release as its own free act and deed.
(d) Notwithstanding anything contained in this SECTION 13 to the
contrary, this SECTION 13 shall not apply to any Claim arising out of a breach
of the obligations contained in this Agreement.
SECTION 14. REMEDIES.
(a) Each Party hereto hereby acknowledges and agrees that
irreparable harm would occur in the event any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the Parties shall be entitled
to specific relief hereunder, including, without limitation, an injunction or
injunctions to prevent and enjoin breaches of the provisions of this Agreement
and to enforce specifically the terms and provisions hereof in any state or
federal court in the State of Delaware, in addition to any other remedy to which
they may be entitled at law or in equity. Any requirements for the securing or
posting of any bond with such remedy are hereby waived.
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CUSIP No. 925391104 13D Page 23 of 28 Pages
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(b) The Parties hereto agree that any actions, suits or
proceedings arising out of or relating to this Agreement or the transactions
contemplated hereby shall be brought solely and exclusively in the courts of the
State of Delaware and/or the courts of the United States of America located in
the State of Delaware (and the Parties agree not to commence any action, suit or
proceeding relating thereto except in such courts), and further agree that
service of any process, summons, notice or document by U.S. registered mail to
the respective addresses set forth in SECTION 17 hereof shall be effective
service of process for any such action, suit or proceeding brought against any
Party in any such court. The Parties irrevocably and unconditionally waive any
objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement or the transactions contemplated hereby, in the courts of the
State of Delaware or the United States of America located in the State of
Delaware, and hereby further irrevocably and unconditionally waive and agree not
to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in any inconvenient forum.
SECTION 15. ASSIGNMENT.
No member of the Newcastle Group may make any assignment of any of its
or his rights under this Agreement, by operation of law or otherwise, without
the prior written consent of Vesta.
SECTION 16. ENTIRE AGREEMENT.
This Agreement contains the entire understanding of the Parties with
respect to the subject matter hereof and may be amended only by an agreement in
writing executed by the parties hereto.
SECTION 17. NOTICES.
All notices, consents, requests, instructions, approvals and other
communications provided for herein and all legal process in regard hereto
("NOTICES") shall be validly given, made or served, if such Notices are in
writing and delivered by (i) U.S. registered mail, return receipt requested;
(ii) a nationally reputable overnight courier; (iii) facsimile; or (iv) hand
delivery to:
if to Vesta: Vesta Insurance Group, Inc.
3760 River Run Drive
Birmingham, Alabama 35243
Attention: Don Thornton, Esq.
Fax: (205) 970-7022
with a copy to: Balch & Bingham LLP
1901 Sixth Avenue North
Suite 2600
Birmingham, Alabama 35203
Attention: James F. Hughey, Esq.
Fax: (205) 488-5834
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CUSIP No. 925391104 13D Page 24 of 28 Pages
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if to the Newcastle Group: Newcastle Partners, L.P.
300 Crescent Court, Suite 1110
Dallas, Texas 75201
Attention: Mark E. Schwarz
Fax: (214) 661-7475
with a copy to: Olshan Grundman Frome Rosenzweig
& Wolosky LLP
Park Avenue Tower
65 East 55th Street
New York, New York 10022
Attention: Steven Wolosky, Esq.
Fax: (212) 451-2222
SECTION 18. LAW GOVERNING.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the Delaware, without regard to any conflict of laws
provisions thereof.
SECTION 19. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
SECTION 20. NO PRESUMPTION.
Each of the undersigned Parties hereby acknowledges that the
undersigned Parties fully negotiated the terms of this Agreement, that each such
Party had an equal opportunity to influence the drafting of the language
contained in this Agreement and that there shall be no presumption against any
such Party on the ground that such Party was responsible for preparing this
Agreement or any part hereof.
SECTION 21. ENFORCEABILITY.
If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated. It is hereby stipulated and declared to be the
intention of the Parties that the Parties would have executed the remaining
terms, provisions, covenants and restrictions without including any of such
which may be hereafter declared invalid, void or unenforceable. In addition, the
Parties agree to use their best efforts to agree upon and substitute a valid and
enforceable term, provision, covenant or restriction for any such that is held
invalid, void or unenforceable by a court of competent jurisdiction.
SECTION 22. NO ADMISSION.
Nothing contained herein shall constitute an admission by any Party
hereto of liability or wrongdoing.
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SECTION 23. SURVIVAL OF REPRESENTATIONS.
All representations and warranties made by the Parties in this
Agreement or pursuant hereto shall survive the execution of this Agreement.
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CUSIP No. 925391104 13D Page 26 of 28 Pages
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IN WITNESS WHEREOF, each of the Parties hereto has executed this
Agreement, or caused the same to be executed by its duly authorized
representative, as of the date first above written.
VESTA INSURANCE GROUP, INC.
By: /s/ Norman W. Gayle, III
----------------------------------------
Name: Norman W. Gayle, III
Title: Chief Executive Officer, Director
NEWCASTLE PARTNERS, L.P.
By: Newcastle Capital Management, as general
partner
By: /s/ Mark E. Schwarz
----------------------------------------
Name: Mark E. Schwarz
Title: Chief Executive Officer
NEWCASTLE CAPITAL MANAGEMENT, L.P.
By: /s/ Mark E. Schwarz
----------------------------------------
Name: Mark E. Schwarz
Title: Chief Executive Officer
NEWCASTLE CAPITAL GROUP, L.L.C.
By: /s/ Mark E. Schwarz
----------------------------------------
Name: Mark E. Schwarz
Title: Chief Executive Officer
/s/ Mark E. Schwarz
--------------------------------------------
Mark E. Schwarz, individually
/s/ Mark J. Morrison
--------------------------------------------
Mark J. Morrison, individually
/s/ James C. Epstein
--------------------------------------------
James C. Epstein, individually
/s/ Steven J. Pully
--------------------------------------------
Steven J. Pully, individually
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CUSIP No. 925391104 13D Page 27 of 28 Pages
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SCHEDULE A
----------
Newcastle Partners, L.P.
Newcastle Capital Management, L.P.
Newcastle Capital Group, L.L.C.
Mark E. Schwarz
Mark J. Morrison
James C. Epstein
Steven J. Pully
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CUSIP No. 925391104 13D Page 28 of 28 Pages
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FOR IMMEDIATE RELEASE Contact: Charles R. Lambert
Vice President - Investor Relations
(205) 970-7030
CLAMBERT@VESTA.COM
VESTA INSURANCE NAMES NEW DIRECTORS
BIRMINGHAM, ALA., - NOVEMBER 17, 2005 - Vesta Insurance Group, Inc.
(NYSE: VTA) announced that it has reached a settlement with Newcastle Partners,
L.P. concerning today's annual meeting of stockholders.
Newcastle has agreed to withdraw its nominees for election at today's
meeting, and to vote in favor of the Company's nominees: Tambra L.G. Bailie,
Norman W. Gayle III and Michael J. Gough. In connection with the settlement,
Vesta's Board of Directors resolved to expand its number of directors to ten and
to create a fourth Class III directorship. There is currently a vacant Class I
directorship.
As part of the settlement, Mr. Gayle has agreed to resign as a Class
III director following his reelection, and the Board has agreed to appoint Mr.
Gayle to fill the vacant Class I directorship, with a term to expire at the
annual meeting to be held in 2006. Mr. Gayle thus will stand for re-election at
the next annual meeting of stockholders. The Board also has agreed to appoint
Mark J. Morrison and Mark E. Schwarz to fill the vacant Class III directorships
created by Mr. Gayle's resignation and the expansion of the number of
directorships in Class III from three to four, with terms to expire at the
annual meeting of stockholders to be held in 2008.
In connection with this settlement, Vesta's Board of Directors has
agreed to follow the recommendation of the Company's stockholders with respect
to Newcastle's proposal that it be reimbursed for $400,000 in expenses incurred
in relation to matters involving the conduct of this meeting. This proposal will
be put to a vote by the Company's stockholders at today's meeting.
ABOUT VESTA INSURANCE GROUP, INC.
Vesta, headquartered in Birmingham, Ala., is a holding company for a
group of insurance companies that primarily offer property insurance in targeted
states.
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