<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Confidential, for Use of the Commission
[_]Preliminary Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[X]Definitive Proxy Statement
[_]Definitive Additional Materials
[_]Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
VESTA INSURANCE GROUP, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Payment of Filing Fee (Check the appropriate box):
[X]No Filing Fee Required.
[_]$500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1)Title of each class of securities to which transaction applies:
--------------------------------------------------------------------
(2)Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
--------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------
[_]Fee paid previously with preliminary materials.
[_]Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1)Amount Previously Paid:
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(2)Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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- --------------------------------------------------------------------------------
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<PAGE>
[LOGO OF VESTA APPEARS HERE]
To the Stockholders of
Vesta Insurance Group, Inc.
You are invited to attend the annual meeting of stockholders of Vesta
Insurance Group, Inc. (the "Company") to be held at The Harbert Center, 2019
Fourth Avenue North, Birmingham, Alabama 35203 on Tuesday, May 20, 1997, at
10:00 A.M., local time.
Information concerning matters to be considered and acted upon at the
meeting is set forth in the accompanying Notice of Annual Meeting of
Stockholders and Proxy Statement, which you are urged to read.
It is important that your shares be voted at this meeting. Please read the
enclosed Notice of Annual Meeting and Proxy Statement so you will be informed
about business to come before the meeting. Please mark, sign, and return your
proxy. If you choose to attend the meeting, you may, of course, revoke your
proxy and personally vote your stock if you desire to do so.
Sincerely,
/s/ Robert Y. Huffman
------------------------------
Robert Y. Huffman
President and Chief Executive
Officer
Birmingham, Alabama
March 28, 1997
<PAGE>
----------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1997
----------------------------------------
To the Holders of Common Stock of
Vesta Insurance Group, Inc.
The annual meeting of stockholders of Vesta Insurance Group, Inc. will be
held at The Harbert Center, 2019 Fourth Avenue North, Birmingham, Alabama
35203 on Tuesday, May 20, 1997, at 10:00 A.M., local time, for the following
purposes:
(1) To elect three persons to serve as Class I directors for a three-year
term beginning May 20, 1997.
(2) To consider and act upon a proposal to ratify the appointment of KPMG
Peat Marwick LLP as independent auditors.
(3) To transact such other business as may properly come before the
meeting.
These matters are more fully discussed in the accompanying Proxy Statement.
The close of business on Monday, March 24, 1997 has been fixed as the date
for determining the stockholders who are entitled to notice of and to vote at
the annual meeting. All stockholders, whether or not they expect to attend the
annual meeting in person, are requested to mark, date, sign, and return the
enclosed form of proxy in the accompanying envelope. Your proxy may be revoked
at any time before it is voted.
The annual meeting for which this notice is given may be adjourned from time
to time without notice other than announcement at the annual meeting. Any
business for which notice of the annual meeting is hereby given may be
transacted at any such adjournment.
By Order of the Board of Directors
/s/ Donald W. Thornton
----------------------------------
Donald W. Thornton
Senior Vice President--
General Counsel and Secretary
Birmingham, Alabama
March 28, 1997
<PAGE>
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 20, 1997
SOLICITATION OF PROXIES
The Board of Directors of Vesta Insurance Group, Inc. (the "Company")
solicits your proxy in the form enclosed with this statement for use at the
annual meeting of stockholders to be held at The Harbert Center, 2019 Fourth
Avenue North, Birmingham, Alabama 35203 on Tuesday, May 20, 1997, at 10:00
A.M., local time, and at any adjournment of such meeting. Robert Y. Huffman
and Donald W. Thornton are named as proxies in the enclosed form of proxy and
have been designated as the directors' proxies by the Board of Directors. The
Company expects to mail this proxy material to stockholders on or about March
28, 1997.
When the enclosed form of proxy is returned, properly executed, and in time
for the meeting, the shares represented thereby will be voted at the meeting.
All proxies will be voted in accordance with the instructions set forth on the
form of proxy, but if proxies which are executed and returned do not specify a
vote on the proposals considered, the proxies will be voted FOR such
proposals. Any stockholder giving a proxy has the right to revoke it by giving
written notice of revocation to the Secretary of the Company (at 3760 River
Run Drive, Birmingham, Alabama 35243) at any time before the proxy is voted.
RECORD DATE AND VOTING STOCK
Each stockholder of record at the close of business on March 24, 1997 is
entitled to one vote for each share of common stock held on that date upon
each matter to be voted on by the stockholders at the meeting. At the close of
business on March 24, 1997, there were 18,587,165 shares of common capital
stock of the Company outstanding. There is no cumulative voting of the common
stock.
PRINCIPAL STOCKHOLDERS
The following table lists all persons known to be the beneficial owner of
more than five percent of the Company's outstanding common stock as of
December 31, 1996.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES
OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
------------------- ------------------ ----------------
<S> <C> <C>
Torchmark Corporation(1) 5,130,000 27.63%
2001 Third Avenue South
Birmingham, Alabama 35233
Jurika & Voyles, Inc.(2) 1,335,970 7.19%
1999 Harrison Street
Suite 700
Oakland, California 94612
Pilgrim Baxter & Associates, Ltd.(3) 1,423,612 7.67%
11255 Drummers Lane, Suite 300
Wayne, Pennsylvania 19087
</TABLE>
- --------
(1) Prior to the completion of the Company's initial public offering of common
stock on November 18, 1993, the Company was a wholly owned subsidiary of
Torchmark Corporation.
(2) Based on Amendment No. 2 to the Schedule 13G of Jurika & Voyles, Inc.,
dated February 13, 1997.
(3) Based on the Schedule 13G of Pilgrim Baxter & Associates, Ltd., dated
February 14, 1997.
1
<PAGE>
PROPOSAL NUMBER 1 ELECTION OF DIRECTORS
The Company's bylaws provide that the number of directors shall be not less
than two nor more than twelve, with the exact number to be fixed by the Board
of Directors. At its meeting held on May 21, 1996, the Board of Directors
voted to increase the number of directors from seven to nine and elected
Norman L. Rosenthal and Keith A. Tucker as directors to fill the vacancies
created as result of the increase in the size of the Board of Directors,
effective August 1, 1996. The directors of the Company are divided into three
classes and are elected to hold office for a three-year term and until their
successors are elected and qualified. The election of each class of directors
is staggered over each three-year period.
The Board of Directors proposes the election of Walter M. Beale, Jr., Robert
A. Hershbarger and Keith A. Tucker as directors, to hold office for a term of
three years, expiring at the close of the annual meeting of stockholders to be
held in 2000 and until their successors are elected and qualified. The current
terms of office of Messrs. Beale, Hershbarger and Tucker expire at the close
of the annual meeting of stockholders for 1997. The term of office of each of
the other six directors continues until the close of the annual meeting of
stockholders in the year shown in the biographical information below.
The election of each nominee requires the affirmative vote of the holders of
a plurality of the shares of the Company's common stock cast in the election
of directors. Votes that are withheld and shares held in street name that are
not voted in the election of directors will not be included in determining the
number of votes cast. Unless otherwise specified in the accompanying form of
proxy, it is intended that votes will be cast for the election of all of the
nominees as directors.
If any of the nominees becomes unavailable for election, which is not
anticipated, the directors' proxies will vote for the election of such other
person as the Board of Directors may recommend unless the Board reduces the
number of directors.
The Board recommends that the stockholders vote FOR the nominees.
PROFILES OF DIRECTORS AND NOMINEES
Walter M. Beale, Jr. (age 51) has been a director of the Company since 1993.
His term expires in 1997. Principal occupation: Partner in the law firm of
Balch & Bingham LLP.
Ehney A. Camp, III (age 54) has been a director of the Company since 1993.
His term expires in 1998. Principal occupation: Principal, Addison
Investments, L.L.C. (private investments) since 1996. Until 1996, Mr. Camp was
the President and Chief Executive Officer of Camp & Company, a mortgage
banking company located in Birmingham, Alabama.
Robert A. Hershbarger (age 64) has been a director of the Company since
1993. His term expires in 1997. Principal occupation: Professor of Finance and
Economics at Mississippi State University.
Robert Y. Huffman (age 49) has been a director of the Company since 1993.
His term expires in 1999. Principal occupation: President and Chief Executive
Officer of Vesta Insurance Group, Inc. since 1993; President and Chief
Executive Officer of Vesta Fire Insurance Corporation since 1984.
Clifford F. Palmer (age 48) has been a director of the Company since 1993.
His term expires in 1998. Principal occupation: Insurance Consultant with
Pilgrim Managers Limited since 1997. Prior to 1997, Mr. Palmer was the named
underwriter for Lloyd's Syndicate 314 and was a principal in the managing
agency, Ashley Palmer Syndicates Ltd.
Jarvis W. Palmer (age 64) has been a director of the Company since 1993. His
term expires in 1999. Principal occupation: Insurance Consultant.
R. K. Richey (age 70) has been a director of the Company since 1993. His
term expires in 1999. Principal occupation: Chairman and Chief Executive
Officer of Torchmark Corporation since 1986.
Norman L. Rosenthal (age 45) has been a director of the Company since 1996.
His term expires in 1998. Principal occupation: President, Norman L. Rosenthal
& Associates, Inc. (corporate management consulting) since 1996. Until 1996,
Mr. Rosenthal was a Managing Director of Morgan Stanley & Co. Incorporated.
Keith A. Tucker (age 52) has been a director of the Company since 1996. His
term expires in 1997. Principal occupation: Vice Chairman of Torchmark
Corporation since 1991.
2
<PAGE>
INFORMATION REGARDING DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
EXECUTIVE OFFICERS
The following table shows certain information concerning each person deemed
to be an executive officer of the Company, except Robert Y. Huffman, who also
serves as a director. Each executive officer is elected by the Board of
Directors of the Company annually and serves at the pleasure of the Board.
There are no arrangements or understandings between any executive officer and
any other person pursuant to which the officer was selected.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
NAME AGE FOR THE PAST FIVE YEARS
- ---- --- --------------------------------------------
<S> <C> <C>
Norman W. Gayle, III 43 Executive Vice President and Chief Operating Officer of the Com-
pany since 1995; Executive Vice President of the Company from
1994 to 1995; Senior Vice President of Carvill America, Inc.,
Atlanta, Georgia, from 1989 to 1994.
Stephen P. Leonard 49 Senior Vice President and Treasurer of the Company since 1995;
Senior Vice President and Chief Financial Officer of the Company
from 1993 to 1995; Senior Vice President and Chief Financial Of-
ficer of Vesta Fire Insurance Corporation from 1989 to 1993.
Donald W. Thornton 50 Senior Vice President--General Counsel and Secretary of the Com-
pany since 1995; Vice President--General Counsel and Secretary
of the Company from 1993 to 1994; Vice President--General Coun-
sel of Vesta Fire Insurance Corporation from 1991 to 1993; Vice
President--Claims of Vesta Fire Insurance Corporation from 1988
to 1991.
Barry A. Patrick 37 Senior Vice President--Administration and Assistant Treasurer of
the Company since 1995; Vice President--Administration and As-
sistant Treasurer of the Company from 1993 to 1995; Vice Presi-
dent and Controller of Vesta Fire Insurance Corporation from
1987 to 1993.
Brian R. Meredith 31 Vice President--Finance of the Company since 1994; Equity Re-
search Analyst with Morgan Stanley & Company, Inc. from 1990 to
1994.
Mary Beth Heibein 31 Controller--Principal Accounting Officer of the Company since
1996; Vice President and Chief Financial Officer of The Hawaiian
Insurance & Guaranty Company, Limited from 1995 to 1996; Per-
sonal Lines Underwriting Manager of Vesta Fire Insurance Corpo-
ration from 1994 to 1995; certified public accountant with KPMG
Peat Marwick LLP from 1991 to 1994.
</TABLE>
STOCK OWNERSHIP
The following table shows certain information about stock ownership of the
directors, director nominees, and executive officers of the Company as of
December 31, 1996.
<TABLE>
<CAPTION>
COMPANY COMMON STOCK
OR OPTIONS BENEFICIALLY
OWNED AS OF
DECEMBER 31, 1996
-----------------------------
NAME DIRECTLY INDIRECTLY PERCENT OF CLASS(1)
- ---- ------------ ------------ -------------------
<S> <C> <C> <C>
Walter M. Beale, Jr........ 22,694(2) *
Birmingham, Alabama
Ehney A. Camp, III......... 14,444(3) 5,150(4) *
Birmingham, Alabama
Norman W. Gayle, III....... 174,476(5) *
Birmingham, Alabama
Mary Beth Heibein.......... 418(7) *
Birmingham, Alabama
Robert A. Hershbarger...... 8,592(6) *
Starkville, Mississippi
Robert Y. Huffman.......... 470,967(8) 16,000(9) 2.55%
Birmingham, Alabama
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
COMPANY COMMON STOCK
OR OPTIONS BENEFICIALLY
OWNED AS OF
DECEMBER 31, 1996 PERCENT OF CLASS(2)
------------------------------ -------------------
NAME DIRECTLY INDIRECTLY
- ---- ------------- ------------
<S> <C> <C> <C>
Stephen P. Leonard...... 120,420(10) *
Birmingham, Alabama
Brian R. Meredith....... 36,434(11) *
Birmingham, Alabama
Clifford F. Palmer...... 22,944(12) 9,000(13) *
Surrey, U.K.
Jarvis W. Palmer........ 27,194(14) 3,000(15) *
Birmingham, Alabama
Barry A. Patrick........ 144,690(16) *
Birmingham, Alabama
R. K. Richey............ 21,944(17) *
Birmingham, Alabama
Norman L. Rosenthal..... 3,500 *
Philadelphia, Pennsylva-
nia
Donald W. Thornton...... 169,895(18) *
Birmingham, Alabama
Keith A. Tucker......... 2,500 *
Birminghan, Alabama
All Directors, Nominees 1,241,112 33,150 6.67%
and Executive Officers
as a group (15 persons):
</TABLE>
- --------
* Less than one percent
(1) Percentages are calculated assuming 18,568,083 shares of common stock of
the Company outstanding and the issuance of 549,087 shares subject to
exercisable stock options held by the Company's directors and officers.
(2) Includes 15,000 shares subject to the exercise of options received in
lieu of the payment of 1994 annual director fee, 3,000 shares subject to
the exercise of options granted pursuant to the Company's Long Term
Incentive Plan and 3,000 shares subject to the exercise of options
granted pursuant to the Company's Non-Employee Director Stock Plan.
(3) Consists of 7,500 shares subject to the exercise of options received in
lieu of the payment of fifty (50) percent of 1994 annual director fee,
3,000 shares subject to the exercise of options granted pursuant to the
Company's Long Term Incentive Plan and 3,000 shares subject to the
exercise of options granted pursuant to the Company's Non-Employee
Director Stock Plan.
(4) These shares are held in the name of Sterne, Agee & Leach, Inc.,
custodian for Ehney A. Camp, III Individual Retirement Account.
(5) Includes 102,761 shares subject to the exercise of options and 67,965
shares of restricted stock granted pursuant to the Company's Long Term
Incentive Plan.
(6) Includes 1,500 shares subject to the exercise of options received in lieu
of the payment of twenty (20) percent of 1994 annual director fee, 3,000
shares subject to the exercise of options granted pursuant to the
Company's Long Term Incentive Plan and 3,000 shares subject to the
exercise of options granted pursuant to the Company's Non-Employee
Director Stock Plan.
(7) Consists of 418 shares of restricted stock granted under the Company's
Long Term Incentive Plan.
(8) Includes 405,694 shares subject to the exercise of options and 60,773
shares of restricted stock granted pursuant to the Company's Long Term
Incentive Plan.
(9) These are shares held by Mr. Huffman's spouse.
(10) Consists of 97,670 shares subject to the exercise of options and 22,750
shares of restricted stock granted pursuant to the Company's Long Term
Incentive Plan.
4
<PAGE>
(11) Consists of 33,237 shares subject to the exercise of options and 2,997
shares of restricted stock granted under the Company's Long Term
Incentive Plan.
(12) Consists of 15,000 shares subject to the exercise of options received in
lieu of the payment of 1994 annual director fee, 3,000 shares subject to
the exercise of options granted pursuant to the Company's Long Term
Incentive Plan and 3,000 shares subject to the exercise of options
granted pursuant to the Company's Non-Employee Director Stock Plan.
(13) Consists of shares held by Corporation of Lloyd's, for the account of
Clifford F. Palmer.
(14) Includes 15,000 shares subject to the exercise of options received in
lieu of the payment of 1994 annual director fee, 3,000 shares subject to
the exercise of options granted pursuant to the Company's Long Term
Incentive Plan and 3,000 shares subject to the exercise of options
granted pursuant to the Company's Non-Employee Director Stock Plan.
(15) Consists of shares held by Birmingham Insurance Co., Inc., of which Mr.
Palmer is a 98% owner.
(16) Consists of 126,801 shares subject to the exercise of options and 17,889
shares of restricted stock granted pursuant to the Company's Long Term
Incentive Plan.
(17) Consists of 15,000 shares subject to the exercise of options received in
lieu of the payment of 1994 annual director fee, 3,000 shares subject to
the exercise of options granted pursuant to the Company's Long Term
Incentive Plan and 3,000 shares subject to the exercise of options
granted pursuant to the Company's Non-Employee Director Stock Plan.
(18) Consists of 151,729 shares subject to the exercise of options and 18,166
shares of restricted stock granted pursuant to the Company's Long Term
Incentive Plan.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During 1996, the Board of Directors met six times. In 1996, all of the
directors attended more than 75% of the meetings of the Board and the
committees on which they served.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors (the "Board") has established an Executive
Committee, an Audit Committee, a Compensation Committee and an Underwriting
Committee. Except for R.K. Richey, who serves as the Company's Chairman, no
member of the Audit Committee or Compensation Committee is or will be an
officer or employee of the Company or any of its subsidiaries. The Company
does not have a Nominating Committee.
The Executive Committee possesses all the powers and authority of the
Company's Board between the meetings of the full Board, except as limited by
applicable law. The members of the Executive Committee are Messrs. Huffman,
Richey and Jarvis W. Palmer. The Executive Committee met three times in 1996.
The duties of the Audit Committee are to recommend to the Board the
selection of independent certified public accountants to audit annually the
books and records of the Company, to review the activities and the reports of
the independent certified public accountants, and to report the results of
such review to the Board. The Audit Committee also monitors the activities of
the Company's audit staff and the adequacy of the Company's internal controls.
The members of the Audit Committee are Messrs. Jarvis W. Palmer, Camp and
Hershbarger. The Audit Committee met twice in 1996.
The duties of the Compensation Committee are to make recommendations and
reports to the Board with respect to the salaries, bonuses and other
compensation to be paid to the Company's officers and to administer all plans
relating to the compensation of such officers. The members of the Compensation
Committee are Messrs. Camp, Clifford F. Palmer, Jarvis W. Palmer and,
effective January 27, 1997, R.K. Richey. The Compensation Committee met four
times in 1996.
5
<PAGE>
At its meeting held on January 27, 1997, the Board of Directors established
the Underwriting Committee. The duties of the Underwriting Committee are to
review the underwriting policies and results of the Company's insurance
subsidiaries and to report the results of such review to the Board of
Directors. The members of the Underwriting Committee are Messrs. Beale,
Hershbarger, Clifford F. Palmer and Rosenthal. The Underwriting Committee did
not meet in 1996.
STOCK OWNERSHIP REPORTING BY DIRECTORS AND OFFICERS
Section 16(a) of the Securities Exchange Act of 1934 requires that executive
officers and directors of the Company file reports of stock ownership and
changes in ownership with the Securities and Exchange Commission (the "SEC")
on Form 3 (initial statement of ownership), Form 4 (monthly report), and Form
5 (annual report). Based solely upon a review of copies of such reports or
representations that no annual reports on Form 5 for the 1996 fiscal year were
required to be filed by officers or directors, the Company believes that
Section 16(a) filing requirements applicable to its officers and directors
were complied with during fiscal year 1996.
COMPENSATION AND OTHER TRANSACTIONS WITH
EXECUTIVE OFFICERS AND DIRECTORS
SUMMARY COMPENSATION INFORMATION
The following table sets forth certain information regarding compensation
paid by the Company and its subsidiaries during the fiscal years 1994, 1995
and 1996 for services rendered to the Company and its subsidiaries during such
years by the Company's chief executive officer and the four other most highly
compensated executive officers for the year ended December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------------- --------------------------------
AWARDS PAYOUTS
--------------------- ----------
RESTRICTED
OTHER STOCK SECURITIES
ANNUAL AWARD(S) UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS(1) COMPENSATION (2) OPTIONS PAYOUTS(3) COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
(A) (B) (C) (D) (E) (F) (G) (H) (I)
- ------------------------ ---- ------- -------- ------------ ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert Y. Huffman 1996 475,000 -- -- 250,027 45,418 130,550 4,750(5)
President and CEO 1995 337,500(4) 375,000 -- 183,420 159,546 131,317 4,500(5)
1994 240,072(6) 300,000 -- -- -- 118,215 4,500(5)
Norman W. Gayle, III 1996 300,000 -- -- 133,344 28,685 181,022 5,596(8)
Executive Vice 1995 225,000(7) 250,000 -- 100,045 74,076 181,022 4,500(8)
President and Chief 1994 92,308(9) 130,000(10) 55,250(11) -- -- 45,256 1,500(8)
Operating Officer
Donald W. Thornton 1996 200,000 -- -- 66,672 19,124 40,610 6,360(13)
Senior Vice 1995 135,000(12) 150,000 -- 46,697 53,418 40,849 4,050(13)
President--General 1994 100,051(14) 125,000 -- -- -- 36,773 3,000(13)
Counsel and Secretary
Barry A. Patrick 1996 190,000 -- -- 62,656 18,167 40,610 4,750(16)
Senior Vice President-- 1995 130,000(15) 140,000 -- 42,684 41,414 40,849 3,900(16)
Administration 1994 92,441(17) 105,000 -- -- -- 36,773 2,772(16)
and Assistant Treasurer
Charles M. Angell 1996 195,000 -- -- 49,667 -- -- 3,908(18)
Senior Vice President -- 1995 131,250(19) 85,000 54,336(20) 42,684 -- -- --
Insurance Operations of
Vesta Fire Insurance
Corporation
</TABLE>
- --------
(1) Consists of payments under the Company's Cash Bonus Plan.
(2) Messrs. Huffman, Thornton and Patrick purchased shares of restricted
stock during 1993 and Mr. Gayle purchased shares of restricted stock
during 1994 pursuant to Restricted Stock Agreements with the Company and
have executed promissory notes in favor of the Company for the repayment
of the purchase price of such restricted stock.
(3) Consists of payments with respect to the repayment of loans made to
enable certain executive officers to purchase restricted stock of the
Company.
6
<PAGE>
(4) Reflects an election by Mr. Huffman to receive non-qualified stock
options in lieu of $37,500 in salary for 1995.
(5) Consists of contributions by the Company under the Company's 401(k) plan
of $4,750 in 1996, $4,500 in 1995 and $4,500 in 1994.
(6) Reflects an election by Mr. Huffman to receive non-qualified stock
options in 1993 in lieu of $60,000 in salary for 1994.
(7) Reflects an election by Mr. Gayle to receive non-qualified stock options
in lieu of $25,000 in salary for 1995.
(8) Consists of the payment by the Company in 1996 of $846 of premiums under
the Company's group term life insurance plan and contributions by the
Company under the Company's 401(k) plan of $4,750 in 1996, $4,500 in 1995
and $1,500 in 1994.
(9) Consists of approximately six months of base salary for Mr. Gayle who
joined the Company as Executive Vice President, effective July 18, 1994.
(10) Consists of a bonus of $100,000 paid under the Company's Cash Bonus Plan
and a relocation bonus of $30,000.
(11) Consists of the reimbursement of real estate fees, commissions and
expenses paid in connection with Mr. Gayle's relocation to Birmingham,
Alabama.
(12) Reflects an election by Mr. Thornton to receive non-qualified stock
options in lieu of $15,000 in salary for 1995.
(13) Consists of the payment by the Company in 1996 of $1,610 of premiums
under the Company's group term life insurance plan and contributions by
the Company under the Company's 401(k) plan of $4,750 in 1996, $4,050 in
1995 and $3,000 in 1994.
(14) Reflects an election by Mr. Thornton to receive non-qualified stock
options in 1993 in lieu of $25,000 in salary for 1994.
(15) Reflects an election by Mr. Patrick to receive non-qualified stock
options in lieu of $10,000 in salary for 1995.
(16) Consists of contributions by the Company under the Company's 401(k) plan
of $4,750 in 1996, $3,900 in 1995 and $2,772 in 1994.
(17) Reflects an election by Mr. Patrick to receive non-qualified stock
options in 1993 in lieu of $12,600 in salary for 1994.
(18) Consists of the payment by the Company of $983 of premiums under the
Company's group term life insurance plan and a contribution of $2,925 by
the Company under the Company's 401(k) plan for 1996.
(19) Consists of approximately seven months of base salary for Mr. Angell, who
joined Vesta Fire Insurance Corporation in May of 1995.
(20) Consists of reimbursement of real estate fees, commissions and expenses
paid in connection with Mr. Angell's relocation to Birmingham, Alabama.
STOCK OPTIONS
Prior to the completion of the Company's initial public offering, the
Company's stockholders approved the Long Term Incentive Plan (the "Incentive
Plan"), which provides for grants to the Company's executive officers of
restricted stock, stock options, stock appreciation rights, and deferred stock
awards. The Incentive Plan is administered by the Compensation Committee of
the Board of Directors. The Company's stockholders approved certain amendments
to the Incentive Plan, effective May 16, 1995, including an amendment to
increase the shares of the Company's common stock available for awards under
the Incentive Plan from 1,091,400 shares to 2,221,998 shares.
7
<PAGE>
The following table reflects certain information concerning grants of
options to purchase the Company's common stock that were made by the Company
during 1996 to the executive officers of the Company named in the Summary
Compensation Table above.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
PRE-TAX VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
----------------------------------------------------- ------------------------
PERCENT OF
NO OF SECURITIES TOTAL OPTIONS EXERCISE
UNDERLYING OPTIONS GRANTED TO OR BASE
GRANTED(1) EMPLOYEES IN PRICE EXPIRATION
NAME (#) FISCAL YEAR ($/SHARE) DATE 5%($)(2) 10%($)(2)
(A) (B) (C) (D) (E) (F) (G)
- ------------------ ------------------ ------------- --------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert Y. Huffman 45,418(3) 40.8 31.375 12-10-06 896,168 2,271,067
Norman W. Gayle,
III 28,685(3) 25.7 31.375 12-10-06 566,000 1,434,355
Donald W. Thornton 19,124(3) 17.2 31.375 12-10-06 377,346 956,270
Barry A. Patrick 18,167(3) 16.3 31.375 12-10-06 358,463 908,417
Charles M. Angell 0 -- -- -- -- --
</TABLE>
- --------
(1) All options granted during 1996 are non-qualified stock options which
have a ten year term, and all such options have an exercise price equal
to the closing price of the Company's common stock on the grant date.
(2) The dollar amounts shown are based on certain assumed rates of
appreciation and the assumption that the options will not be exercised
until the end of the expiration periods applicable to the options. Actual
realizable values, if any, on stock option exercises and common stock
holdings are dependent on the future performance of the Company's common
stock and overall stock market conditions. There can be no assurance that
the amounts reflected will be achieved.
(3) These options were granted on December 10, 1996, pursuant to the
Incentive Plan, and become exercisable with respect to 50% of the shares
two years after the grant date and with respect to the remaining 50% of
the shares three years after the grant date.
8
<PAGE>
The following table presents certain information with respect to the value
of options held by the executive officers of the Company named in the Summary
Compensation Table above.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
(E)
(D) VALUE OF UNEXERCISED
(C) NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
(B) VALUE OPTIONS AT YEAR-END(#) AT FISCAL YEAR-END ($)
(A) SHARES ACQUIRED REALIZED ------------------------- -------------------------
NAME ON EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert Y. Huffman 45,000 785,248 186,615 219,079 2,484,447 $2,017,778
Norman W. Gayle, III 0 0 37,500 65,261 309,375 315,342
Donald W. Thornton 0 0 79,802 71,927 1,076,663 627,534
Barry A. Patrick 0 0 60,335 66,466 824,642 528,272
Charles M. Angell 0 0 0 0 0 0
</TABLE>
POST RETIREMENT BENEFITS PLAN
The J. Gordon Gaines, Inc. Post Retirement Benefits Plan (the "Retirement
Plan") is an unfunded deferred compensation plan for certain key officers of
J. Gordon Gaines, Inc. The Retirement Plan is administered by the Executive
Committee of J. Gordon Gaines, Inc., and the Executive Committee is authorized
to determine eligibility for participation in the Retirement Plan. Under the
Retirement Plan, upon normal retirement, which is defined for purposes of the
Retirement Plan as retirement for participants who either are age 65 or older
or who have completed not less than 20 years of continuous service, a
participant will be entitled to receive an amount equal to twice the
participant's current annual base salary. Upon early retirement, which is
defined for purposes of the Retirement Plan as retirement for participants
between the ages of 60 and 65 who have completed not less than ten years of
service with the Company and its affiliates, a participant will be entitled to
receive the amount which has been accrued as a liability on the Company's
balance sheet as of the most recent fiscal year with respect to such
participant.
To qualify for benefits under the Retirement Plan, a participant must
continue as an employee until age 60. No benefits will be paid if employment
is terminated earlier, regardless of the reason, except if a participant's
employment is terminated by the Company for reasons other than "cause," or by
the participant for a "stated good reason," within two years after a "change
of control" of the Company (as those terms are defined in the Retirement
Plan). In that case, the participant will be entitled to receive the amount
which has been accrued as a liability on the Company's balance sheet as of the
most recent fiscal year with respect to such participant. In addition, if
there is a change of control during the period in which a participant would be
eligible for early retirement under the Retirement Plan, any benefits payable
to such participant under the Retirement Plan upon early retirement will
become fully vested.
Each year the Company records as a liability on its balance sheet an amount
(based on an established formula) which will be sufficient, together with
amounts recorded as a liability for previous years, to cover the payment of
the projected benefit amounts for each participant upon such participant's
normal retirement. As of December 31, 1996, the Company had recorded a total
of $700,034 as a liability on its balance sheet to cover projected benefits
under the Retirement Plan. Assuming Messrs. Huffman, Gayle, Thornton, Patrick
and Angell retire from the Company after reaching normal retirement age and
assuming their 1996 salary levels remain the same, they will be entitled under
the Retirement Plan to receive $950,000, $600,000, $400,000, $380,000 and
$390,000, respectively, upon their retirement.
PAYMENTS TO DIRECTORS
For 1996, directors who were not executive officers or employees of the
Company received an annual retainer fee of $20,000, payable in equal quarterly
installments, plus a fee of $1,000 for each attended board meeting and
committee meeting. They did not receive fees for the execution of written
consents in lieu of board meetings and committee meetings. Beginning January
1, 1997, directors who are not executive officers or employees of the Company
will receive an annual retainer fee of $28,000, payable in equal quarterly
installments, but will no longer receive fees for attending board meetings or
committee meetings. Directors also receive an allowance for their travel and
lodging expenses if they do not live in the area where the meeting is held.
9
<PAGE>
At the annual meeting of stockholders of the Company held on May 16, 1995,
the stockholders approved the Company's Non-Employee Director Stock Plan (the
"Director Plan"). Under the Director Plan, on the first trading day of each
calendar year, each non-employee director will be granted a nonqualified stock
option to purchase 3,000 shares of the Company's common stock at a purchase
price equal to the fair market value per share of the common stock on such
grant date. Each option granted under the Director Plan is exercisable for a
period of ten years beginning on the date of its grant. An option may not be
exercised during the first six months after grant, except in the event of the
death or disability of the director. An aggregate of 180,000 shares of Company
common stock is reserved for issuance under the Director Plan, subject to
adjustment for changes in the Company's capital structure.
In addition, the Director Plan provides that each eligible director may
elect, pursuant to an advance written election, to receive shares of the
Company's common stock ("Restricted Stock") in lieu of part or all of such
director's annual director fee. The number of shares of Restricted Stock which
an eligible director will be entitled to receive will be equal to the dollar
amount of director fees which such director has elected not to receive,
divided by seventy-five percent (75%) of the fair market value of the
Company's common stock on the date on which such fees would otherwise become
payable. Shares of Restricted Stock may not be sold, transferred, pledged or
assigned for a period of two years following the effective date of the
issuance thereof. Directors electing to receive Restricted Stock will be
entitled, with respect to such shares, to all rights of a stockholder,
including the right to vote and to receive dividends on the shares. However,
certificates for the shares of Restricted Stock shall be delivered only after
the period of forfeiture has expired. For 1996, all eligible directors elected
to receive Restricted Stock in lieu of all of their annual director fee.
INDEBTEDNESS OF DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
On September 13, 1993, the Company entered into separate restricted stock
agreements with each of the executive officers of the Company pursuant to
which it sold to such executive officers a total of 153,500 shares of Common
Stock. Pursuant to these restricted stock agreements, Messrs. Huffman,
Leonard, Patrick and Thornton purchased 45,993 shares, 21,462 shares, 14,307
shares, and 14,307 shares, respectively, for a purchase price of $10.26 per
share. On July 18, 1994, the Company entered into a restricted stock agreement
with Mr. Gayle pursuant to which it sold to Mr. Gayle 60,000 shares of Common
Stock (together with shares sold to the other executive officers, the
"Restricted Shares") for a purchase price of $18.92 per share. Each of these
executive officers has executed a promissory note in favor of the Company
representing the obligation to repay a loan from the Company for the purchase
price of each of their Restricted Shares, and the Restricted Shares are being
held by the Company as security for the repayment of such promissory notes.
The largest aggregate amount of indebtedness under the loans to each of
Messrs. Huffman, Gayle, Leonard, Patrick and Thornton during 1996 was
$373,697, $1,007,201, $174,380, $116,246 and $116,246, respectively, and the
outstanding balance under these loans as of December 31, 1996 was $326,240,
$898,827, $152,236, $101,483 and $101,483, respectively. The promissory notes
have a term of nine years and bear interest at a rate of 5.22% per annum. All
dividends payable on the Restricted Shares have been assigned to the Company
to be applied toward the repayment of the promissory notes.
The Company intends to pay cash bonuses each year in amounts sufficient,
after the payment of taxes due with respect to such bonus, to reduce the
promissory notes by the amount of the purchase price for the Restricted Shares
which vests in that year, so long as the executive officer remains in the
employ of the Company. The Restricted Shares may not be sold or otherwise
disposed of by the executive officers prior to the repayment in full of their
promissory note or the termination of their employment. In 1996, the Company
paid bonuses to reduce the amount of indebtedness of the executive officers to
the Company in the following amounts: to Mr. Huffman in the amount of
$130,550; to Mr. Gayle in the amount of $181,022; to Mr. Leonard in the amount
of $60,919; to Mr. Patrick in the amount of $40,610; and to Mr. Thornton in
the amount of $40,610.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Company's Board of
Directors (the "Compensation Committee") are Ehney A. Camp, III, Clifford F.
Palmer, Jarvis W. Palmer and R.K. Richey. No present or former executive
officer of the Company or its subsidiaries serves as a member of the
Compensation Committee. During
10
<PAGE>
1996, there were no interlocking relationships between any executive officers
of the Company and any entity whose directors or executive officers serve on
the Company's Board of Directors and/or Compensation Committee, except as
described below.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Jarvis W. Palmer, a director of the Company and a member of the Compensation
Committee, owns ninety-eight percent (98%) of Birmingham Insurance Co., Inc.
("Birmingham Insurance"). In 1994, Birmingham Insurance ceded $496,548 in
gross premiums to the Company, in 1995, it ceded $545,170 in gross premiums to
the Company and in 1996, it ceded $(66,246) in gross premiums to the Company,
for which the Company paid ceding commissions to Birmingham Insurance of
$123,642, $118,546, and $(20,099), respectively.
Mr. Palmer is also a fifty-one percent (51%) owner of the Caribou Insurance
Agency, Inc. ("Caribou"), an independent insurance agency which represents,
among others, one or more of the Company's insurance subsidiaries. Of the
gross premiums written by the Company in 1994, 1995, and 1996, $466,948,
$448,593 and $399,837 respectively, were attributable to insurance contracts
sold by Caribou, for which the Company paid commissions to Caribou of $85,788,
$83,045 and $74,323, respectively.
Clifford F. Palmer, a director of the Company and a member of the
Compensation Committee, was, during 1996, the named underwriter for Lloyd's
Syndicate 314. The Company ceded $720,995 of gross premiums written to Lloyd's
Syndicate 314 in 1994, $1,430,756 in 1995, and $1,838,864 in 1996, for which
it paid ceding commissions to the Company of $125,699, $223,732, and $463,993
respectively.
The Company currently leases its offices at 3760 River Run Drive in
Birmingham, Alabama from Torchmark Development Corporation, a wholly owned
subsidiary of Torchmark, pursuant to an Office Lease. Under this Office Lease,
the Company leased approximately 45,091 square feet of space. During 1996, the
Company paid $565,916 in rent under this Office Lease.
On September 13, 1993, the Company and Waddell & Reed Asset Management
Company, a wholly owned subsidiary of Torchmark ("WRAMCO"), entered into an
Investment Services Agreement pursuant to which WRAMCO provides investment
advice and services to the Company and its subsidiaries in connection with the
management of their respective portfolios. WRAMCO receives an annual fee equal
to 3/10 of 1% on the first $25 million of the Company's average assets under
management, 1/4 of 1% of the next $25 million of average assets under
management, and 1/5 of 1% of the Company's average assets under management
over $50 million. During 1996, the Company paid $409,252 in fees to WRAMCO
pursuant to the Investment Services Agreement.
On September 13, 1993, Vesta Fire Insurance Corporation, a wholly owned
subsidiary of the Company ("Vesta Fire"), and Liberty National Life Insurance
Company ("Liberty National"), a wholly owned subsidiary of Torchmark, entered
into a Marketing and Administrative Services Agreement, pursuant to which
Vesta Fire marketed certain of its industrial fire insurance products through
agents of Liberty National. Under this agreement, Liberty National pays to
Vesta Fire an amount equal to all premiums collected by Liberty National after
deducting all expenses incurred by Liberty National which are directly
attributable to the industrial fire insurance products and after deducting a
fee for administrative services. Such fee for 1996 was $1,702,000. This
agreement was terminated effective April 30, 1995, and these products are no
longer marketed through Liberty National agents. However, Liberty National
continues to service the existing business.
During 1996, the law firm of Balch & Bingham LLP, of which Walter M. Beale,
Jr., a director of the Company, is a partner, rendered various legal services
to the Company and certain of its subsidiaries.
11
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee is comprised of four non-employee directors,
including R. K. Richey who was elected to serve on the Compensation Committee
at the Board of Directors meeting held on January 27, 1997. The primary
function of the Compensation Committee is to make recommendations and reports
to the Board of Directors with respect to salaries, bonuses and other
compensation to be paid to the Company's officers with a base salary of more
than $150,000 annually and to administer all plans relating to the
compensation of such officers.
The Company's total compensation structure is comprised of annual base
salary, annual cash bonus payments under the Company's Cash Bonus Plan, and
long term equity based compensation granted pursuant to the Incentive Plan.
The Company's overall compensation program has been designed to attract and
retain key executives and to provide appropriate incentives to these
executives to maximize the Company's long term financial results for the
benefit of the stockholders. A significant portion of the executive
compensation package is comprised of equity based compensation in order to
align the interests of management with those of the stockholders. Individual
compensation levels are based not only upon the relative success of the
Company, but also upon the duties and responsibilities assumed by each
officer, the performance of their individual business units, their attainment
of individual and business unit goals, and their participation and
contribution to specific Company projects.
The salary levels for the Company's executive officers for 1996, including
the salary of Mr. Huffman as Chief Executive Officer of the Company, are based
upon the salary levels paid by other similarly situated property and casualty
insurance and reinsurance companies, as well as upon individual performance
and responsibility. According to a compensation survey performed by a third
party consultant engaged on behalf of the Compensation Committee, the base
salary levels approved by the Compensation Committee are comparable with the
average salary levels of similarly situated property and casualty insurers and
reinsurers.
The Company's Cash Bonus Plan is designed to provide short-term incentive
compensation to the Company's executive officers based upon pre-established
performance goals for both the Company and each executive officer. Bonuses
under the Cash Bonus Plan are paid out of a bonus fund, the amount of which is
based on a percentage of the Company's net income from operations. The actual
amount to be contributed to the bonus fund each year is based upon the
Company's profitability, which is measured by comparing the Company's GAAP
combined ratio (the generally accepted industry measure) for the year with a
benchmark ratio. The Compensation Committee determines the amounts of annual
bonus awards for each executive officer granted under the Cash Bonus Plan up
to 100% of the executive officer's annual salary. In 1996, the Compensation
Committee approved the payment of cash bonuses to executive officers of the
Company under the Cash Bonus Plan, which bonuses could not be paid until 1997.
Such bonuses ranged from 0% of annual base salary to 100% of annual base
salary and were based upon the standards described above, with particular
emphasis on individual contribution to the success of the Company during 1996
and on the performance of those aspects of the Company's business for which
each executive officer has responsibility. The bonus amounts were based upon
the recommendation of Mr. Huffman to the Compensation Committee.
The Incentive Plan provides for grants to the Company's executive officers
of restricted stock, stock options, stock appreciation rights, and deferred
stock awards. The payment of equity based compensation to the Company's
executive officers under the Incentive Plan is designed to focus their
attention on the enhancement of stockholder value.
In December of 1996, the Company granted options to purchase a total of
111,394 shares of the Company's common stock under the Incentive Plan to four
employees of the Company, including grants to Messrs. Huffman, Gayle, Thornton
and Patrick of options to purchase 45,418, 28,685, 19,124, and 18,167 shares,
respectively. In 1996, the Company also granted restricted stock awards under
the Incentive Plan to Messrs. Huffman, Gayle, Thornton, Patrick and Angell,
covering 7,969, 4,250, 2,125, 1,997 and 1,583 shares, respectively.
12
<PAGE>
The awards granted to the Company's executive officers in 1996 represent the
Compensation Committee's continued emphasis on incentive based compensation
and are intended to provide further incentives to these individuals to sustain
the Company's growth and success and to further align their interests of the
Company's stockholders. The size of the awards to individual executive
officers was determined by the Compensation Committee and approved by the
Board of Directors based upon a subjective assessment of each executive
officer's performance and individual contribution to the Company, his position
and level of responsibility, and other factors.
In evaluating the compensation of Mr. Huffman, the Company's President and
Chief Executive Officer, the Compensation Committee considered not only the
salaries of chief executive officers of other property and casualty insurance
and reinsurance companies, but also the continued success of the Company since
becoming a publicly-held company in 1993, including the record profitability
of the Company in 1996. Moreover, the Compensation Committee recognizes the
importance of Mr. Huffman's influence on the continued financial growth and
success of the Company in the future. The Compensation Committee believes that
compensation under the various plans, both for Mr. Huffman and for the other
executive officers, brings the total potential compensation to appropriate
levels relative to their levels of responsibility and relative to their
positions in the property and casualty insurance industry.
The Compensation Committee is aware of the provisions of Section 162(m) of
the Internal Revenue Code and the related regulations of the Internal Revenue
Service ("Section 162(m)") which restrict deductibility of executive
compensation paid to any of the five most highly compensated executive
officers at the end of any fiscal year to the extent such compensation exceeds
$1,000,000 in any year and does not qualify as performance based compensation
as defined by Section 162(m). The Compensation Committee anticipates that all
cash compensation paid to its executive officers, with the possible exception
of Mr. Huffman, in the foreseeable future will qualify for deductibility
because none of these executive's compensation is expected to exceed the
dollar limitations of such provisions, and the Compensation Committee believes
that all compensation related to the grant of stock options pursuant to the
Incentive Plan will qualify as performance based compensation under Section
162(m) of the Code and will, therefore, qualify for deductibility. Because
certain of the members of the Compensation Committee currently are not
"outside directors" within the meaning of Section 162(m), no compensation,
other than compensation related to the grant of stock options pursuant to the
Incentive Plan, can qualify as performance based compensation under Section
162(m), and, to the extent that such compensation is in excess of the
$1,000,000 limitation, such compensation would not qualify for deductibility.
Because none of the executive officers, with the possible exception of Mr.
Huffman, are expected to have compensation in excess of the Section 162(m)
limitation, the Compensation Committee does not believe that the failure of
certain members thereof to qualify as "outside directors" is significant. As a
result, the Compensation Committee has not yet adopted a formal policy with
respect to the qualification of executive compensation for deductibility under
Section 162(m). However, the Compensation Committee will continue to evaluate
the advisability of qualifying the deductibility of such compensation in the
future.
Compensation Committee
Ehney A. Camp, III
Clifford F. Palmer
Jarvis W. Palmer
R. K. Richey
13
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return
(including the reinvestment of dividends) on the common stock of the Company
with that of the Standard & Poor's 500 Stock Index and the Standard & Poor's
Property/Casualty Index. The comparison for the period assumes that $100 was
invested in each index on November 11, 1993, which is the date the Company's
stock was first traded on the New York Stock Exchange.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG VESTA INSURANCE GROUP, INC.,
STANDARD & POOR'S 500 INDEX AND STANDARD AND POOR'S PROPERTY/CASUALTY
INSURANCE INDEX
[GRAPH APPEARS HERE]
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN AMONG VESTA INSURANCE
GROUP, INC., STANDARD AND POOR'S INDEX AND STANDARD AND POOR'S
PROPERTY/CASUALTY INSURANCE INDEX
<CAPTION> Vesta The S&P The S&P Insurance
Measurement period Insurance 500 (Property/Casualty)
(Fiscal Year Covered) Group, Inc. Index Index
- --------------------- ----------- -------- -------------------
<S> <C> <C> <C>
Measurement PT -
11/11/93 $ 100 $ 100 $ 100
FYE 12/31/93 $ 100 $ 101 $ 98
FYE 12/31/94 $ 114 $ 99 $ 100
FYE 12/31/95 $ 218 $ 133 $ 133
FYE 12/31/96 $ 188 $ 160 $ 160
</TABLE>
PROPOSAL NUMBER 2
APPROVAL OF AUDITORS
A proposal to approve the appointment of the firm of KPMG Peat Marwick LLP
as the principal independent accountants of the Company to audit the financial
statements of the Company and its subsidiaries for the year ending December
31, 1997, will be presented to the stockholders at the annual meeting. The
audit committee of the Board recommends the appointment of KPMG Peat Marwick
LLP, which has served as the principal independent accountants for the Company
since 1993. A representative of KPMG Peat Marwick LLP is expected to be
present at the meeting to answer appropriate questions. They will have the
opportunity to make a statement if they desire, although they have informed us
they do not plan to make a statement.
14
<PAGE>
If the stockholders do not approve the appointment of KPMG Peat Marwick LLP,
the selection of independent auditors will be reconsidered by the Board of
Directors.
The Board recommends that stockholders vote FOR the proposal.
OTHER BUSINESS
The directors know of no other matters to be brought before the meeting
other than as described in this Proxy Statement. However, if any other proper
matters are brought before the meeting, the persons named in the enclosed
proxy, or in the event no person is named, Robert Y. Huffman and Donald W.
Thornton, will vote in accordance with their best judgment on such matters.
MISCELLANEOUS INFORMATION
PROPOSALS OF STOCKHOLDERS
In order for a proposal by a stockholder of the Company to be eligible to be
included in the proxy statement and proxy form for the annual meeting of
stockholders in 1998, the proposal must be received by the Company at its home
office, 3760 River Run Drive, Birmingham, Alabama 35243, on or before November
28, 1997.
GENERAL
The cost of this solicitation of proxies will be borne by the Company. In
addition to solicitation by mail, directors, officers and other employees of
the Company may solicit proxies personally or by telephone or other means of
communication. The Company will request certain banking institutions,
brokerage firms, custodians, trustees, nominees, and fiduciaries to forward
solicitation material to the beneficial owners of shares of the Company held
of record by such persons, and the Company will reimburse reasonable
forwarding expenses.
The Company has provided to its stockholders the Annual Report of the
Company for 1996, which includes a copy of the Company's Annual Report on Form
10-K for the year ended December 31, 1996, as filed with the Securities and
Exchange Commission, and the Company's financial statements and schedules
thereto. Upon request and payment of the cost of reproduction, the exhibits to
the Form 10-K will be furnished. Such written request should be directed to
the Company at its address stated herein.
By Order of the Board of Directors
/s/ Donald W. Thornton
-----------------------------------
Donald W. Thornton
Senior Vice President--General
Counsel and Secretary
15
<PAGE>
VESTA INSURANCE GROUP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
P FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 1997
R
The undersigned hereby constitutes and appoints Robert Y. Huffman and
O Donald W. Thornton, or either of them with full power of substitution in
each, proxies to vote all shares of Common Stock of Vesta Insurance Group,
X Inc. which the undersigned may be entitled to vote at the Annual Meeting of
Stockholders to be held at The Harbert Center, 2019 Fourth Avenue North,
Y Birmingham, Alabama 35203, on Tuesday, May 20, 1997, and at all
adjournments or postponements thereof as follows:
ELECTION OF DIRECTORS, NOMINEES:
Walter M. Beale, Jr., Robert A. Hershbarger and Keith A. Tucker
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES
(SEE REVERSE SIDE), BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXY
COMMITTEE CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
(Continued, and to be Signed, on Reverse Side)
-------------
SEE REVERSE
SIDE
-------------
FOLD AND DETACH HERE
<PAGE>
[X] PLEASE MARK YOUR | 6648
VOTES AS IN THIS |
EXAMPLE. ---------
IF NO PREFERENCE IS INDICATED, THIS PROXY WILL BE VOTED "FOR" THE NOMINEES AND
"FOR" PROPOSAL #2.
In accordance with their best judgment the proxies are authorized to vote upon
such other matters as may properly come before the meeting.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of 2. Ratification of the
Directors [ ] [ ] selection of KPMG [ ] [ ] [ ]
(See Reverse) Peat Marwick LLP
as auditors.
For, except vote withheld from the following nominee(s):
- ---------------------------------------------------------
IMPORTANT: Please sign exactly as your
name appears hereon. If shares are
held by more than one owner, each must
sign. Executors, administrators,
trustees, guardians, and others signing
in a representative capacity should
give their full titles.
---------------------------------------
---------------------------------------
SIGNATURE(S) DATE
FOLD AND DETACH HERE
