<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
[X] Definitive Proxy Statement Rule 14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)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.
[_] 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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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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Notes:
<PAGE>
[LOGO OR 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 19, 1998, 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
April 17, 1998
<PAGE>
----------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 19, 1998
----------------------------------------
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 19, 1998, 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 19, 1998.
(2) To authorize the amendment of the Company's Restated Certificate of
Incorporation to increase the authorized shares of the Company's common
stock, par value $.01 per share, from 32,000,000 shares to 100,000,000
shares.
(3) To consider and act upon a proposal to ratify the appointment of KPMG
Peat Marwick LLP as independent auditors.
(4) 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 April 6, 1998 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
April 17, 1998
<PAGE>
PROXY STATEMENT FOR THE ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD MAY 19, 1998
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 19, 1998, 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 April
17, 1998.
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 April 6, 1998 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 April 6, 1998, there were 18,452,279 shares of common capital
stock of the Company outstanding. There is no cumulative voting of the common
stock.
VOTE REQUIRED
At the meeting, a majority of the shares entitled to vote, represented in
person or by proxy, shall constitute a quorum for the transaction of business.
Assuming the presence of a quorum, directors shall be elected at the meeting
by a plurality of the votes cast, whether in person or by proxy. The amendment
to the Company's Restated Certificate of Incorporation (the "Restated
Certificate") will require a majority of all outstanding shares of the
Company's common stock (regardless of whether such shares are represented at
the meeting in person or by proxy) to be voted in favor of the amendment.
Shares may sometimes be voted on certain matters but not others. A
stockholder may abstain or withhold his vote (collectively, "abstentions")
with respect to each item submitted for stockholder approval. In addition,
brokers and other nominees may not be entitled vote shares held in "street
name" on certain non-routine items absent customer instructions (known as a
"broker nonvote"). Shares represented by proxies indicating abstentions and
broker nonvotes, if any, will be counted as present for purposes of
determining the existence of a quorum but will be counted as not voting in
favor of the relevant proposal. Since the election of directors is determined
by the votes cast at the meeting, abstentions and broker nonvotes, if any,
will not affect such election. However, since the proposal to amend the
Restated Certificate will require the affirmative vote of a majority of all
shares outstanding, and not just those represented at the meeting, abstentions
and broker nonvotes, if any, will have the effect of a vote against the
proposal.
1
<PAGE>
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, 1997.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF CLASS
---------------- ---------------- ----------------
<S> <C> <C>
Torchmark Corporation(1) 5,301,500 28.7%
2001 Third Avenue South
Birmingham, Alabama 35233
Jurika & Voyles, Inc.(2) 999,739 5.4%
1999 Harrison Street
Suite 700
Oakland, California 94612
Pilgrim Baxter & Associates, Ltd.(3) 978,450 5.3%
11255 Drummers Lane, Suite 300
Wayne, Pennsylvania 19087
Firstar Corporation(4) 955,700 5.2%
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
</TABLE>
- --------
(1) Based on a Form 5 filed by Torchmark Corporation for the year ended
December 31, 1997. 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. 3 to the Schedule 13G of Jurika & Voyles, Inc.,
dated February 6, 1998.
(3) Based on the Schedule 13G of Pilgrim Baxter & Associates, Ltd., dated
February 17, 1998.
(4) Based on the Schedule 13G of Firstar Corporation and its affiliate,
Firstar Investment Management and Research Company, L.L.C., dated February
17, 1998.
2
<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. The number of directors was set at nine in May 1996. At its
meeting on December 14, 1997, the Board of Directors voted to elect C.B.
Hudson as a director to fill the vacancy created by the resignation of Keith
A. Tucker as a director effective December 10, 1997. 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 Ehney A. Camp, III, Clifford
F. Palmer, and Norman L. Rosenthal 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 2001 and until their successors are elected and qualified. The current
terms of office of Messrs. Camp, Palmer and Rosenthal expire at the close of
the annual meeting of stockholders for 1998. 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.
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 52) has been a director of the Company since 1993.
His term expires in 2000. Principal occupation: Partner in the law firm of
Balch & Bingham LLP since prior to 1993.
Ehney A. Camp, III (age 55) 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. From 1975 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 65) has been a director of the Company since
1993. His term expires in 2000. Principal occupation: Professor of Finance and
Economics at Mississippi State University since 1987.
C.B. Hudson (age 52) has been a director of the Company since 1997. His term
expires in 2000. Principal occupation: Chairman and Chief Executive Officer of
Torchmark Corporation since 1998. From 1993 to 1998, Mr. Hudson served as
Chairman of Insurance Operations of Torchmark Corporation.
Robert Y. Huffman (age 50) 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 49) has been a director of the Company since 1993.
His term expires in 1998. Principal occupation: Insurance Consultant with
Pilgrim Managers Limited since 1997. From 1979 until 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 65) has been a director of the Company since 1993. His
term expires in 1999. Principal occupation: Insurance Consultant since 1994.
R. K. Richey (age 71) has been a director of the Company since 1993. His
term expires in 1999. Principal occupation: Chairman of the Executive
Committee of the Board of Directors of Torchmark Corporation; Chief Executive
Officer of Torchmark Corporation from 1986 to 1998.
3
<PAGE>
Norman L. Rosenthal (age 46) 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. From 1993
until 1996, Mr. Rosenthal was a Managing Director of Morgan Stanley & Co.
Incorporated.
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 on December 31, 1997, 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
---- --- --------------------------------------------
<C> <C> <S>
Norman W. Gayle, III 44 Executive Vice President and Chief Operating Officer
of the Company 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.
Donald W. Thornton 51 Senior Vice President--General Counsel and Secretary
of the Company since 1995; Vice President--General
Counsel and Secretary of the Company from 1993 to
1994; Vice President--General Counsel of Vesta Fire
Insurance Corporation from 1991 to 1993; Vice
President--Claims of Vesta Fire Insurance Corporation
from 1988 to 1991.
Barry A. Patrick 38 Senior Vice President--Administration and Assistant
Treasurer of the Company since 1995; Vice President--
Administration and Assistant Treasurer of the Company
from 1993 to 1995; Vice President and Controller of
Vesta Fire Insurance Corporation from 1987 to 1993.
Brian R. Meredith 32 Senior Vice President--Finance and Treasurer of the
Company since 1997; Vice President--Finance of the
Company from 1994 to 1997; Equity Research Analyst
with Morgan Stanley & Company, Inc. from 1990 to
1994.
Mary Beth Heibein 32 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; Personal
Lines Underwriting Manager of Vesta Fire Insurance
Corporation from 1994 to 1995; certified public
accountant with KPMG Peat Marwick LLP from 1991 to
1994.
</TABLE>
4
<PAGE>
STOCK OWNERSHIP
The following table shows certain information about stock ownership of the
directors, director nominees, the executive officers of the Company named in
the Summary Compensation Table herein, and all directors and executive
officers as a group, as of December 31, 1997.
<TABLE>
<CAPTION>
COMPANY COMMON STOCK
OR OPTIONS
BENEFICIALLY OWNED
AS OF
DECEMBER 31, 1997
------------------------
NAME DIRECTLY INDIRECTLY PERCENT OF CLASS(1)
- ---- --------- ---------- -------------------
<S> <C> <C> <C>
Charles M. Angell............... 4,334(2) *
Birmingham, Alabama
Walter M. Beale, Jr............. 26,898(3) *
Birmingham, Alabama
Ehney A. Camp, III.............. 25,798(4) *
Birmingham, Alabama
Norman W. Gayle, III............ 170,966(5) *
Birmingham, Alabama
Robert A. Hershbarger........... 12,796(6) *
Starkville, Mississippi
C.B. Hudson..................... -- 2,000(7) *
Birmingham, Alabama
Robert Y. Huffman............... 464,595(8) 16,000(9) 2.6%
Birmingham, Alabama
Clifford F. Palmer.............. 27,148(10) *
Surrey, U.K.
Jarvis W. Palmer................ 31,398(11) 3,000(12) *
Birmingham, Alabama
Barry A. Patrick................ 154,996(13) *
Birmingham, Alabama
R. K. Richey.................... 30,448(14) 2,320(15) *
Birmingham, Alabama
Norman L. Rosenthal............. 7,704(16) 200(17) *
Philadelphia, Pennsylvania
Donald W. Thornton.............. 166,446(18) *
Birmingham, Alabama
All Directors, Nominees and
Executive Officers as a group
(15 persons):................... 1,156,570 37,670 6.5%
</TABLE>
- --------
* Less than one percent
(1) A person is deemed to beneficially own securities which he or she has a
right to acquire within sixty (60) days (i.e., through the exercise of
options, warrants, rights or conversion privileges). Any securities which
are not outstanding but deemed to be beneficially owned by a person are
considered outstanding for the purpose of computing such person's
percentage ownership, but are not considered outstanding when computing
any other person's percentage ownership.
5
<PAGE>
(2) Includes 4,334 shares of restricted stock granted under the Company's
Long Term Incentives Plan.
(3) 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 6,000 shares subject to the exercise of options
granted pursuant to the Company's Non-Employee Director Stock Plan.
(4) 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, 6,000 shares subject to the exercise
of options granted pursuant to the Company's Non-Employee Director Stock
Plan, and 5,150 shares are held in the name of Sterne, Agee & Leach,
Inc., custodian for Ehney A. Camp, III Individual Retirement Account.
(5) Includes 96,064 shares subject to the exercise of options and 71,152
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 6,000 shares subject to the
exercise of options granted pursuant to the Company's Non-Employee
Director Stock Plan.
(7) Includes 1,000 shares held by each of Mr. Hudson's two sons, the
beneficial ownership of which is disclaimed.
(8) Includes 393,610 shares subject to the exercise of options and 66,485
shares of restricted stock granted pursuant to the Company's Long Term
Incentive Plan.
(9) These are shares held by Mr. Huffman's spouse either directly or as
custodian for her grandchild under the Alabama Uniform Transfer to Minors
Act.
(10) 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, 6,000 shares subject to the exercise of options granted
pursuant to the Company's Non- Employee Director Stock Plan, and 9,000
shares held by Corporation of Lloyd's, for the account of Clifford F.
Palmer.
(11) 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 6,000 shares subject to the exercise of options
granted pursuant to the Company's Non-Employee Director Stock Plan.
(12) Consists of shares held by Birmingham Insurance Co., Inc., of which Mr.
Palmer is a 98% owner.
(13) Consists of 135,604 shares subject to the exercise of options and 19,392
shares of restricted stock granted pursuant to the Company's Long Term
Incentive Plan.
(14) 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 6,000 shares subject to the exercise of options
granted pursuant to the Company's Non-Employee Director Stock Plan.
(15) These are shares held in trust for the benefit of Mr. Richey's children
and grandchildren.
(16) Consists of 3,000 shares subject to the exercise of options granted
pursuant to the Company's Non-Employee Director Stock Plan.
(17) These are shares held by Mr. Rosenthal as custodian for his daughter
under the Pennsylvania Uniform Transfer to Minors Act.
(18) Consists of 146,957 shares subject to the exercise of options and 19,489
shares of restricted stock granted pursuant to the Company's Long Term
Incentive Plan.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During 1997, the Board of Directors met six times. In 1997, all of the
directors attended more than 75% of the meetings of the Board and the
committees on which they served.
6
<PAGE>
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 Executive
Committee serves as the 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 1997.
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 once in 1997.
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 R. K.
Richey. The Compensation Committee met three times in 1997.
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 met two times in 1997.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 1997 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 1997.
7
<PAGE>
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 1995, 1996
and 1997 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, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION LONG TERM COMPENSATION
-------------------- ----------------------------------------------
AWARDS PAYOUTS
---------------------- ----------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS(1) COMPENSATION AWARD(S)(2) OPTIONS PAYOUTS(3) COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
------------------ ---- ------- -------- ------------ ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert Y. Huffman 1997 575,000 575,000 -- 316,659 47,916 130,550 5,900(5)
President and Chief 1996 475,000 475,000 -- 250,927 45,418 130,550 4,750(5)
Executive Officer 1995 337,500(4) 375,000 -- 183,420 159,546 131,317 4,500(5)
Norman W. Gayle, III 1997 365,000 365,000 -- 126,629 30,803 181,022 5,480(7)
Executive Vice 1996 300,000 300,000 -- 133,344 28,685 181,022 5,596(7)
President and Chief 1995 225,000(6) 250,000 -- 100,045 74,076 181,022 4,500(7)
Operating Officer
Donald W. Thornton 1997 210,000 210,000 -- 73,344 17,113 40,610 5,170(9)
Senior Vice 1996 200,000 200,000 -- 66,672 19,124 40,610 6,360(9)
President--General 1995 135,000(8) 150,000 -- 46,697 53,418 40,849 4,050(9)
Counsel and Secretary
Barry A. Patrick 1997 225,000 225,000 -- 83,323 18,253 40,610 5,200(11)
Senior Vice President-- 1996 190,000 190,000 -- 62,656 18,167 40,610 4,750(11)
Administration 1995 130,000(10) 140,000 -- 42,684 41,414 40,849 3,900(11)
and Assistant Treasurer
Charles M. Angell 1997 195,000 195,000 -- 64,640 -- -- 5,140(14)
Senior Vice President-- 1996 195,000 120,000 -- 49,667 -- -- 3,908(14)
Insurance Operations of 1995 131,250(12) 85,000 54,336(13) 42,684 -- -- --
Vesta Fire Insurance
Corporation
</TABLE>
- --------
(1) Consists of payments under the Company's Cash Bonus Plan. The bonus
amounts shown in this column were paid based on performance rendered
during the years indicated, but the bonuses were paid during the fiscal
years immediately following the years indicated.
(2) No part of the restricted stock awards reflected above will vest in under
three years from the date of the grant. Dividends will be paid on the
restricted stock prior to vesting. The value of the restricted stock
awards shown above reflects the number of shares awarded during the year
indicated multiplied by the closing market price of the Company's
unrestricted common stock on the date of the award. The following table
shows the aggregate number and value of all shares of restricted stock
held by the persons identified in the table above as of December 31,
1997:
<TABLE>
<CAPTION>
NUMBER OF SHARES MARKET VALUE ON 12/31/97
---------------- ------------------------
<S> <C> <C>
Robert Y. Huffman 66,485 $3,947,547
Norman W. Gayle, III 71,152 4,224,650
Donald W. Thornton 19,489 1,157,159
Barry A. Patrick 19,392 1,151,400
Charles M. Angell 4,334 257,331
</TABLE>
8
<PAGE>
(3) Consists of payments with respect to the repayment of loans made to
enable certain executive officers to purchase restricted stock of the
Company.
(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 the payment by the Company in 1997 of $1,150 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 1997, $4,750 in
1996, and $4,500 in 1995.
(6) Reflects an election by Mr. Gayle to receive non-qualified stock options
in lieu of $25,000 in salary for 1995.
(7) Consists of the payment by the Company in 1997 of $730 and 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
1997, $4,750 in 1996, and $4,500 in 1995.
(8) Reflects an election by Mr. Thornton to receive non-qualified stock
options in lieu of $15,000 in salary for 1995.
(9) Consists of the payment by the Company in 1997 of $420 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 1997, $4,750 in
1996, and $4,050 in 1995.
(10) Reflects an election by Mr. Patrick to receive non-qualified stock
options in lieu of $10,000 in salary for 1995.
(11) Consists of the payment by the Company in 1997 of $450 of premiums under
the Company's group term life insurance plan and consists of
contributions by the Company under the Company's 401(k) plan of $4,750 in
1997, $4,750 in 1996, and $3,900 in 1995.
(12) Consists of approximately seven months of base salary for Mr. Angell, who
joined Vesta Fire Insurance Corporation in May of 1995.
(13) Consists of reimbursement of real estate fees, commissions and expenses
paid in connection with Mr. Angell's relocation to Birmingham, Alabama.
(14) Consists of the payment by the Company in 1997 of $390 and in 1996 of
$983 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
1997 and $2,925 in 1996.
STOCK OPTIONS
Prior to the completion of the Company's initial public offering, the
Company's stockholders approved the Long Term Incentive Plan (the "Incentive
Plan"), which provides for grants to the Company's executive officers of
restricted stock, stock options, stock appreciation rights, and deferred stock
awards. The Incentive Plan is administered by the Compensation Committee of
the Board of Directors. The Company's stockholders approved certain amendments
to the Incentive Plan, effective May 16, 1995, including an amendment to
increase the shares of the Company's common stock available for awards under
the Incentive Plan from 1,091,400 shares to 2,221,998 shares.
9
<PAGE>
The following table reflects certain information concerning grants of
options to purchase the Company's common stock that were made by the Company
during 1997 to the executive officers of the Company named in the Summary
Compensation Table above.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
PRE-TAX VALUE
AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
----------------------------------------------------- ---------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES OR BASE EXPIRATION
NAME GRANTED (#)(1) IN FISCAL YEAR PRICE ($/SH) DATE 5% ($)(2) 10% ($)(2)
---- -------------- -------------- ------------ ---------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Robert Y. Huffman....... 47,916 42 55.44 12-2-07 1,670,635 4,233,718
Norman W. Gayle, III.... 30,803 27 55.44 12-2-07 1,073,975 2,721,663
Donald W. Thornton...... 17,113 15 55.44 12-2-07 596,660 1,512,055
Barry A. Patrick........ 18,253 16 55.44 12-2-07 636,408 1,612,782
Charles M. Angell....... 0 0 0 0 0 0
</TABLE>
- --------
(1) All options granted during 1997 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. These
options were granted on December 2, 1998, 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.
(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.
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>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT YEAR-END (#) AT FISCAL YEAR-END ($)
SHARES ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert Y. Huffman....... 60,000 1,925,940 227,730 165,880 9,312,176 4,075,530
Norman W. Gayle, III.... 37,500 836,470 9,000 87,064 367,875 1,895,985
Donald W. Thornton...... 21,885 995,318 89,689 57,267 3,715,230 1,369,135
Barry A. Patrick........ 9,450 234,300 80,926 54,677 3,369,524 1,242,205
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 officers and other key
employees of J. Gordon Gaines, Inc. The Retirement Plan is
10
<PAGE>
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 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 or have completed not less than 20 years
of continuous service. 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, 1997, the Company had recorded a total
of $1,050,415 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 1997 salary levels remain the same, they will be entitled under
the Retirement Plan to receive $1,150,000, $730,000, $420,000, $450,000 and
$390,000, respectively, upon their retirement.
PAYMENTS TO DIRECTORS
For 1997, directors who are not executive officers or employees of the
Company received an annual retainer fee of $28,000, payable in equal quarterly
installments. They did not receive fees for the execution of written consents
in lieu of board meetings and attending board 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.
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
11
<PAGE>
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 1997, 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, Patrick
and Thornton purchased 45,993 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, Patrick and
Thornton during 1997 was $326,240, $898,827, $101,483, and $101,483,
respectively, and the outstanding balance under these loans as of December 31,
1997 was $276,258, $784,683, $85,935, and $85,935, 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 1997, 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. 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 officer of the
Company or its subsidiaries serves as a member of the Compensation Committee.
During 1997, there are 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 1995, Birmingham Insurance 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 $118,546 and $(20,099), respectively. In 1997,
Birmingham Insurance did not cede any premiums to or receive any commissions
from the Company.
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
12
<PAGE>
subsidiaries. Of the gross premiums written by the Company in 1995, 1996 and
1997, $448,593, $399,837 and $500,811, respectively, were attributable to
insurance contracts sold by Caribou, for which the Company paid commissions to
Caribou of $83,045, $74,323 and $96,104, respectively.
Clifford F. Palmer, a director of the Company and a member of the
Compensation Committee, was the named underwriter for Lloyd's Syndicate 314
during 1995 and a portion of 1996. The Company ceded $1,430,756 of gross
premiums written to Lloyd's Syndicate 314 in 1995 and $1,838,864 in 1996, for
which it paid ceding commissions to the Company of $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 currently leases approximately 62,563 square feet of space. During
1997, the Company paid $717,875 in rent under this Office Lease, $595,916
during 1996, and $494,218 during 1995.
On September 13, 1993, the Company and Waddell & Reed Asset Management
Company, a 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 1997, the Company paid $393,686 in total fees to WRAMCO pursuant to the
Investment Services Agreement, $409,252 in 1996, and $221,844 in 1995.
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 markets 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 1997 was $1,353,246, $1,702,000
for 1996, and $2,305,000 for 1995. 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 1995, 1996 and 1997, 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.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee is comprised of four non-employee directors. 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
13
<PAGE>
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 1997, 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, which determination may be
guided in part by Mr. Huffman's recommendations. In 1997, 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 1998.
Such bonuses ranged up 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 1997 and on the performance of those
aspects of the Company's business for which each executive officer has
responsibility.
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 1997, the Company granted options to purchase a total of
114,085 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 47,916, 30,803, 17,113, and 18,253 shares,
respectively. In 1997, the Company also granted restricted stock awards under
the Incentive Plan to Messrs. Huffman, Gayle, Thornton, Patrick and Angell,
covering 5,712, 3,187, 1,323, 1,503 and 1,166 shares, respectively.
The awards granted to the Company's executive officers in 1997 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 1997. 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
14
<PAGE>
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 the CEO and the four highest paid executive officers
other than the CEO 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 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 for deductibility.
Because a member of the Compensation Committee is not an "outside director"
within the meaning of Section 162(m), no compensation in excess of the
$1,000,000 limitation, whether performance based or not, can qualify for
deductibility. Because none of the executive officers, with the 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 a
member to qualify as an "outside director" is significant. As a result, the
Compensation Committee has not determined to qualify the Company's executive
compensation program 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
15
<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]
Date Vesta Insurance Group Standard & Poor's 500 S & P Prop/Cas Index
- ---- --------------------- --------------------- --------------------
Nov 11, 93 100 100 100
Dec 31, 93 100 100.18 98.03
Dec 31, 94 114.6 102.475 105.966
Dec 31, 95 219.95 105.106 143.008
Dec 31, 96 190.84 172.39 174.171
Dec 31, 97 362.07 229.456 247.861
16
<PAGE>
PROPOSAL NUMBER 2
AMENDMENT TO RESTATED CERTIFICATE TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF THE COMPANY'S COMMON STOCK
The Company is presently authorized to issue 32,000,000 shares of common
stock, of which 18,452,279 were issued and outstanding as of April 6, 1998,
and 5,000,000 shares of preferred stock, of which 0 shares were issued and
outstanding as of April 6, 1998. The Company's Board of Directors has adopted
and recommended for stockholder approval a proposed amendment to Article 4 of
the Restated Certificate which, if approved, would increase the authorized
shares of the Company's common stock, par value $.01 per share (the "Common
Stock") from 32,000,000 shares to 100,000,000 shares.
On the Record Date, the number of shares of Common Stock which were
authorized but not issued (or reserved for issuance) totaled approximately
11,000,000. The additional authorized shares of Common Stock will be available
for issuance by the Company's Board of Directors from time to time, without
further action or authorization by the stockholders (except as required by law
or by a national stock exchange). The Board of Directors could make a
determination to issue such shares in connection with, among other things, (i)
possible future acquisitions, (ii) the declaration of a stock split or stock
dividend, (iii) the raising of additional capital funds through offerings of
shares of Common Stock or of equity or debt securities convertible into or
exchangeable for Common Stock and (iv) the Company's various employee benefit
plans, incentive compensation plans and dividend reinvestment plan.
The existence or issuance of authorized but unissued shares of Common Stock
could, under certain circumstances, have an anti-takeover effect. Although the
authorization of additional shares of Common Stock would have no immediate
effect upon existing stockholders, the subsequent issuance of such additional
authorized shares to persons other than existing stockholders could reduce the
percentage interest of existing stockholders, thereby diluting the voting
power of a person seeking to acquire the Company. Such effect, however, is not
the purpose of the proposed increased authorization and the Board of Directors
has no present intention of issuing additional shares of Common Stock for that
purpose.
If the amendment is approved, as soon as practicable after the meeting, the
Company will file with the Delaware Secretary of State's Office Articles of
Amendment to the Restated Certificate which will provide that Article IV,
Section (A) of the Restated Certificate shall be revised to read as follows:
"(A) Authorized Stock. The total number of shares of stock which
the Corporation shall have the authority to issue is
105,000,000, consisting of (i) 100,000,000 shares of common
stock, par value $.01 per share (hereinafter referred to as
"Common Stock") and (ii) 5,000,000 shares of preferred stock,
par value $.01 per share (hereinafter referred to as "Preferred
Stock").
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE PROPOSED AMENDMENT
TO THE RESTATED CERTIFICATE.
17
<PAGE>
PROPOSAL NUMBER 3
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, 1998, 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.
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 1999, the proposal must be received by the Company at its home
office, 3760 River Run Drive, Birmingham, Alabama 35243, on or before January
19, 1999.
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 1997, which includes a copy of the Company's Annual Report on Form
10-K for the year ended December 31, 1997, 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.
/s/ Donald W. Thornton
Donald W. Thornton
Senior Vice President--
General Counsel and Secretary
18
<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 19, 1998
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. (the "Company") which the undersigned may be entitled to vote at the
Annual Meeting of Stockholders to be held at The Harbert Center, 2019
Y Fourth Avenue North, Birmingham, Alabama 35203, on Tuesday, May 19, 1998,
and at all adjournments or postponements thereof as follows:
ELECTION OF DIRECTORS, NOMINEES:
Ehney A. Camp, III, Clifford F. Palmer and Norman L. Rosenthal
APPROVAL OF AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE AUTHORIZED SHARES OF THE COMPANY'S COMMON
STOCK, PAR VALUE $.01 PER SHARE, FROM 32,000,000 SHARES TO 100,000,000.
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 PROXIES
CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
(Continued, and to be Signed, on Reverse Side)
-------------
SEE REVERSE
SIDE
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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" PROPOSALS #2 AND #3.
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
1. Election of
Directors [ ] [ ]
(See Reverse)
For, except vote withheld from the following nominee(s):
- ---------------------------------------------------------
2. Approval of Amendment to the FOR AGAINST ABSTAIN
Company's Restated Certificate
of Incorporation (see reverse) [ ] [ ] [ ]
3. Ratification of the FOR AGAINST ABSTAIN
selection of KPMG
Peat Marwick LLP [ ] [ ] [ ]
as auditors.
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.
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SIGNATURE(S) DATE
FOLD AND DETACH HERE
