<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
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
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No 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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(4) Date Filed:
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Notes:
<PAGE>
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 18, 1999, 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/ Norman W. Gayle, III
--------------------------------
Norman W. Gayle, III
President and Chief Executive
Officer
Birmingham, Alabama
April 23, 1999
<PAGE>
--------------------------------
Notice of Annual Meeting of Stockholders
to be Held May 18, 1999
-------------------------------
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 18, 1999, at 10:00 A.M., local time, for the following
purposes:
(1) To elect two persons to serve as Class III directors for a three-year
term beginning May 18, 1999.
(2) To consider and act upon a proposal to ratify the appointment of
PricewaterhouseCoopers 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 April 5, 1999 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 23, 1999
<PAGE>
PROXY STATEMENT FOR THE ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD MAY 18, 1999
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 18, 1999, at 10:00
A.M., local time, and at any adjournment of such meeting. Norman W. Gayle, III
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
23, 1999.
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 5, 1999 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 5, 1999, there were 18,686,322 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.
A stockholder may abstain or withhold his vote (collectively, "abstentions")
with respect to each item submitted for stockholder approval. Abstentions 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 will not affect such election.
Generally, a broker is entitled to vote shares held in "street name" on
routine matters without instructions from the beneficial owner. On the other
hand, a broker may not be entitled vote shares held in "street name" on
certain non-routine items absent customer instructions (known as a "broker
nonvote"). If a broker votes on any proposal submitted for stockholder
approval, even if he may not vote on all proposals, then all shares so voted
will be counted as present for purposes of determining the existence of a
quorum, and the broker nonvotes, if any, will be treated as having not voted
in favor of the relevant proposal. Generally, there can be no "broker
nonvotes" in the election of directors, because the election of directors is a
matter for which a broker may exercise its discretion.
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, 1998.
<TABLE>
<CAPTION>
Name and Address Number of Shares Percent of Class
---------------- ---------------- ----------------
<S> <C> <C>
Torchmark Corporation(1) 4,450,000 23.9%
2001 Third Avenue South
Birmingham, Alabama 35233
</TABLE>
- --------
(1) Based on Amendment No. 4 to Schedule 13D filed by Torchmark Corporation,
dated December 29, 1998. 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.
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. 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.
At its meeting on July 27, 1998, the Board of Directors voted to elect
Norman W. Gayle, III as a Class III director to fill the vacancy created by
the resignation of Robert Y. Huffman, and voted to increase the number of
directors to ten and elect James E. Tait as a Class III director, in each case
for a term to expire at the annual meeting to be held in 1999. Subsequent to
that meeting, C.B. Hudson resigned as a Class I director, Norman L. Rosenthal
resigned as a Class II director and R.K. Richey resigned as a Class III
director. At its meeting held March 23, 1999, the Board of Directors
determined to reduce the number of directors to seven. Also at that meeting,
the Board of Directors elected Jarvis W. Palmer to serve as a Class I director
to fill the vacancy created by the resignation of C.B. Hudson (with a term
expiring at the annual meeting in 2000), effective upon the expiration of his
term as a Class III director at the annual meeting to be held May 18, 1999.
The Board of Directors proposes the election of Norman W. Gayle, III and
James E. Tait as Class III directors, to hold office for a term of three
years, expiring at the close of the annual meeting of stockholders to be held
in 2002 and until their successors are elected and qualified. The current
terms of office of Messrs. Gayle and Tait expire at the close of the annual
meeting of stockholders for 1999. The term of office of each of the other five
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 53) has been a director of the Company since 1993.
His term expires in 2000 (Class I). Principal occupation: Partner in the law
firm of Balch & Bingham LLP since prior to 1993.
Ehney A. Camp, III (age 56) has been a director of the Company since 1993.
His term expires in 2001 (Class II). 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.
Norman W. Gayle, III, (age 45) has been a director of the Company since
1998. His term expires in 1999 (Class III). Principal occupation: President
and Chief Executive Officer of the Company since 1998. Executive Vice
President and Chief Operating Officer of the Company from 1995 to 1998;
Executive Vice President of the Company from 1994 to 1995; Senior Vice
President of Carvill America, Inc., Atlanta, Georgia, from 1989 to 1994.
Robert A. Hershbarger (age 66) has been a director of the Company since
1993. His term expires in 2000 (Class I). Principal occupation: Professor of
Finance and Economics at Mississippi State University since 1987.
Clifford F. Palmer (age 50) has been a director of the Company since 1993.
His term expires in 2001 (Class II). Principal occupation: Insurance
Consultant with Pilgrim Managers Limited since 1997. From 1979 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.
2
<PAGE>
Jarvis W. Palmer (age 66) has been a director of the Company since 1993. His
term expires in 2000 (upon effectiveness of his election as a Class II
director, which election shall become effective at the expiration of his term
as a Class III director in 1999). Principal occupation: Insurance Consultant
since 1994.
James E. Tait (age 49) has been a director of the Company since 1998. His
term expires in 1999 (Class III). Principal occupation: Executive Vice
President and Chief Financial Officer of the Company since 1998; President,
Tait Advisory Services, LLC, 1996-present; President of Inex Insurance
Exchange, 1996-present; Partner, Coopers & Lybrand, 1971-1996.
Profiles of Executive Officers Who Are Not Directors
The following table shows certain information concerning each person deemed
to be an executive officer of the Company on December 31, 1998, except Norman
W. Gayle, III and James E. Tait, who also serve as a directors. Each executive
officer and key employee 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>
Donald W. Thornton 52 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.
Charles M. Angell 52 Senior Vice President--Insurance Operations of Vesta Fire
Insurance Corporation since 1995; Vice President of Commercial
Insurance Operations of Amerisure Companies from 1989 to 1995.
Robert K. Cooney 35 Senior Vice President--Reinsurance Assumed of Vesta Fire
Insurance Corporation since 1997; Vice President of Reinsurance
Assumed of Vesta Fire Insurance Corporation from 1993 to 1997.
Brian R. Meredith 33 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.
William P. Cronin 39 Senior Vice President and Controller since 1998; Vice President,
Audit and Regulatory Affairs of Tait Advisory Services, LLC,
1997-present; Senior Manager, Ernst & Young, LLP, 1993-1997.
</TABLE>
3
<PAGE>
Stock Ownership of Management
The following table shows certain information about stock ownership of the
directors, director nominees, each of the executive officers named in the
Summary Compensation Table herein, and all directors and executive officers as
a group, as of December 31, 1998.
<TABLE>
<CAPTION>
Company Common Stock
or Options Beneficially
Owned as of December 31, 1998
-----------------------------
Name Directly Indirectly Percent of Class(1)
- ---- --------------- --------------- -------------------
<S> <C> <C> <C>
Charles M. Angell....... 4,334(2) 0 *
Walter M. Beale, Jr..... 30,529(3) 0 *
Ehney A. Camp, III...... 29,429(4) 0 *
Norman W. Gayle, III.... 102,190(5) 0 *
Robert A. Hershbarger... 16,427(6) 0 *
Robert Y. Huffman 50,399(7) 16,000(7)(8) *
(resigned 5/31/98)......
Brian R. Meredith....... 37,438(9) 0 *
Clifford F. Palmer...... 39,779(10) 0 *
Jarvis W. Palmer........ 35,029(11) 3,000(12) *
James E. Tait........... 30,000(13) 0 *
Donald W. Thornton...... 124,637(14) 0 *
All Directors, Nominees
and Executive Officers
as a group (11
persons):............... 452,232 3,000 2.4%
</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.
(2) Consists of 4,334 shares of restricted stock granted under the Company's
Long Term Incentive 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 9,000 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, 9,000 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 27,298 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 9,000 shares subject to the
exercise of options granted pursuant to the Company's Non-Employee
Director Stock Plan.
(7) To the best of the Company's knowledge, based on an Amended Form 4 filed
by Mr. Huffman on July 17, 1998.
(8) These shares are held by Mr. Huffman's spouse either directly or as
custodian for her grandchild.
(9) Includes 33,237 shares subject to the exercise of options and 4,001
shares of restricted stock granted under the Company's Long Term
Incentive Plan.
4
<PAGE>
(10) 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, 9,000 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 9,000 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 30,000 shares of restricted stock granted under the Company's
Long Term Incentive Plan.
(14) Consists of 105,128 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 1998, the Board of Directors met 13 times. In 1998, 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 Audit
Committee, a Compensation Committee, and an Underwriting Committee. In
accordance with New York Stock Exchange Policy, no member of the Audit
Committee is or will be an officer or employee of the Company or any of its
subsidiaries.
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 standing Audit Committee are Messrs. Robert A. Hershbarger
and Jarvis W. Palmer. The Audit Committee met 5 times in 1998.
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 standing
Compensation Committee are Messrs. Ehney A. Camp, III, Jarvis W. Palmer and
Clifford F. Palmer. The Compensation Committee met 4 times in 1998.
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 standing
Underwriting Committee are Messrs. Walter M. Beale, Jr., Robert A. Hershbarger
and Clifford F. Palmer. The Underwriting Committee met 1 time in 1998.
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 such reports, or
representations by officers and directors that no annual reports on Form 5 for
the 1998 fiscal year were required to be filed, the Company believes that
Section 16(a) filing requirements applicable to its officers and directors
were complied with during fiscal year 1998, except that R. K. Richey did not
report two sales which occurred in December of 1998 on a Form 4 originally
filed on January 8, 1999 to report a separate transaction. An amendment to
this Form 4 was filed on January 29, 1999 to report a sale of 4,300 shares
held directly by Mr. Richey which occurred on December 10, 1998 and the sale
of 2,320 shares held indirectly by Mr. Richey for the benefit of his
grandchildren which occurred on December 28, 1998.
5
<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 1996, 1997
and 1998 for services rendered to the Company and its subsidiaries during such
years by each person who served as Chief Executive Officer during 1998 and the
four other most highly compensated executive officers serving at the end of
1998.
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 1998 311,538 --0-- --0-- --0-- --0-- 65,725 9,825(4)
Chief Executive Officer 1997 575,000 575,000 --0-- 316,659 47,916 130,550 5,900(4)
until June 1, 1998 1996 475,000 475,000 --0-- 250,927 45,418 130,550 4,750(4)
Norman W. Gayle, III 1998 438,269 --0-- --0-- --0-- --0-- 181,022 6,998(5)
Chief Executive Officer 1997 365,000 365,000 --0-- 126,629 30,803 181,022 5,480(5)
since June 1, 1998 1996 300,000 300,000 --0-- 133,344 28,685 181,022 5,596(5)
James E. Tait 1998 212,019 --0-- --0-- 286,800 45,000 --0-- 6,797(6)
Executive Vice President
and
Chief Financial Officer
since July 1998
Donald W. Thornton 1998 234,423 --0-- --0-- --0-- --0-- 40,610 7,440(7)
Senior Vice President-- 1997 210,000 210,000 --0-- 73,344 17,113 40,610 5,170(7)
General Counsel and
Secretary 1996 200,000 200,000 --0-- 66,672 19,124 40,610 4,750(7)
Charles M. Angell 1998 208,942 --0-- --0-- --0-- 10,000 --0-- 6,581(8)
Senior Vice President-- 1997 195,000 195,000 --0-- 64,640 --0-- --0-- 5,140(8)
Insurance Operations of
Vesta 1996 195,000 120,000 --0-- 49,667 --0-- --0-- 3,908(8)
Fire Insurance
Corporation
Brian R. Meredith, 1998 203,845 --0 -- --0-- --0-- --0-- --0-- 6,429(9)
Senior Vice President-- 1997 195,000 195,000 --0-- 55,659 --0-- --0-- 3,692(9)
Finance and Treasurer 1996 190,000 90,000 --0-- 46,655 --0-- --0-- 4,750(9)
</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, 1998:
<TABLE>
<CAPTION>
Number of Shares Market Value on 12/31/98
---------------- ------------------------
<S> <C> <C>
Robert Y. Huffman --0-- $ --0--
Norman W. Gayle, III 71,152 426,912
James E. Tait 30,000 180,000
Donald W. Thornton 19,489 116,934
Charles M. Angell 4,334 26,004
Brian R. Meredith 4,001 24,006
</TABLE>
6
<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) Consists of the payment by the Company of premiums under the Company's
group term life insurance plan of $479 in 1998 and $1,150 in 1997, and
contributions by the Company under the Company's 401(k) plan of $9,346 in
1998, $4,750 in 1997 and $4,750 in 1996.
(5) Consists of the payment by the Company of premiums under the Company's
group term life insurance plan of $860 in 1998, $730 in 1997 and $846 in
1996, and contributions by the Company under the Company's 401(k) plan of
$6,138 in 1998, $4,750 in 1997 and $4,750 in 1996.
(6) Consists of the payment by the Company of premiums under the Company's
group term life insurance plan of $437 in 1998, and contributions by the
Company under the Company's 401(k) plan of $6,360 in 1998.
(7) Consists of the payment by the Company of premiums under the Company's
group term life insurance plan of $460 in 1998 and $420 in 1997, and
contributions by the Company under the Company's 401(k) plan of $6,980 in
1998, $4,750 in 1997 and $4,750 in 1996.
(8) Consists of the payment by the Company of premiums under the Company's
group term life insurance plan of $410 in 1998, $390 in 1997 and $983 in
1996, and contributions by the Company under the Company's 401(k) plan of
$6,171 in 1998, $4,750 in 1997 and $2,925 in 1996.
(9) Consists of the payment by the Company of premiums under the Company's
group term life insurance plan of $400 in 1998 and $398 in 1997, and
contributions by the Company under the Company's 401(k) plan of $6,029 in
1998, $3,294 in 1997 and $4,750 in 1996.
Stock Options
Prior to the completion of the Company's initial public offering, the
Company's stockholders approved the Long Term Incentive Plan (the "Incentive
Plan"), which provides for grants to the Company's executive officers of
restricted stock, stock options, stock appreciation rights, and deferred stock
awards. The Incentive Plan is administered by the Compensation Committee of
the Board of Directors. The Company's stockholders approved certain amendments
to the Incentive Plan, effective May 16, 1995, including an amendment to
increase the shares of the Company's common stock available for awards under
the Incentive Plan from 1,091,400 shares to 2,221,998 shares.
7
<PAGE>
The following table reflects certain information concerning grants of
options to purchase the Company's common stock that were made by the Company
during 1998 to the executive officers of the Company named in the Summary
Compensation Table above.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential
Realizable Pre-
Tax Value
at Assumed Annual
Rates of Stock Price
Appreciation
Individual Grants for Option Term
------------------------------------------------- --------------------
Number of % of Total
Securities Options Exercise
Underlying Granted to or Base
Options Employees Price Expiration
Name Granted (#)(1) In Fiscal Year ($/Sh) Date 5% ($)(2) 10% ($)(2)
---- -------------- -------------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert Y. Huffman....... --0-- N/A N/A N/A N/A N/A
Norman W. Gayle, III.... --0-- N/A N/A N/A N/A N/A
James E. Tait........... 45,000 58% 9.56 8-26-08 270,165 685,628
Donald W. Thornton...... --0-- N/A N/A N/A N/A N/A
Charles M. Angell....... 10,000 13% 9.56 8-26-08 60,037 152,362
Brian R. Meredith....... --0-- N/A N/A N/A N/A N/A
</TABLE>
- --------
(1) All options granted during 1998 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 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....... 202,230 776,989 --0-- --0-- --0-- --0--
Norman W. Gayle, III.... --0-- --0-- 27,288 68,776 --0-- --0--
James E. Tait........... --0-- --0-- --0-- 45,000 --0-- --0--
Donald W. Thornton...... --0-- --0-- 105,148 41,809 --0-- --0--
Charles M. Angell....... --0-- --0-- --0-- 10,000 --0-- --0--
Brian R. Meredith....... --0-- --0-- 33,237 --0-- --0-- --0--
</TABLE>
8
<PAGE>
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 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, 1998, the Company had recorded a total
of $1,392,741 as a liability on its balance sheet to cover projected benefits
under the Retirement Plan. Assuming Messrs. Gayle, Tait, Thornton, Angell and
Meredith retire from the Company after reaching normal retirement age and
assuming their 1998 salary levels remain the same, they will be entitled under
the Retirement Plan to receive $860,000, $1,050,000, $460,000,$410,000 and
$400,000, respectively, upon their retirement. Mr. Huffman's resignation on
May 31, 1998 did not entitle him to receive any benefits under the Retirement
Plan.
Severance Agreements
During 1998, the Company entered into letter agreements (the "Agreements")
with Messrs. Gayle, Tait, Thornton and Angell which provide a special
severance benefit of a lump sum cash payment if, at any time prior to August
1, 1999, either of the following events occurs: (a) a change of control of the
Company occurs and, as a result thereof, such executive officer's employment
is actually or constructively terminated for any reason or (b) such executive
officer's employment is actually or constructively terminated for any reason
other than (i) his decision, (ii) death or disability or (iii) for cause. The
benefits payable under these Agreements are equal to the executive officer's
1998 base salary (which is reflected in the Summary Compensation Table herein)
which would be payable over the following number of weeks: Gayle - 78; Tait -
104; Thornton - 52; and Angell - 78. These Agreements automatically terminate
if the executive officer's employment continues after August 1, 1999.
Payments to Directors
For 1998, 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
9
<PAGE>
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 1998, 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 at total of 153,500 shares of Common
Stock. Pursuant to these restricted stock agreements, Messrs. Huffman and
Thornton purchased 45,993 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 and Thornton during 1998 was
$276,257, $784,683 and $85,935, respectively, and the outstanding balance
under these loans as of December 31, 1998 was $-0-, $664,464 and $69,560,
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 1998, 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 $65,725;
to Mr. Gayle in the amount of $181,022; 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") during 1998 were 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 1998, 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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Jarvis W. Palmer, a director of the Company and a member of the Compensation
Committee whose term expires at the annual meeting, owns ninety-eight percent
(98%) of Birmingham Insurance Co., Inc.
10
<PAGE>
("Birmingham Insurance"). In 1996, Birmingham Insurance ceded $(66,246) in
gross premiums to the Company, for which the Company paid ceding commissions
to Birmingham Insurance of $(20,099). In 1997 and 1998, 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 subsidiaries. Of the
gross premiums written by the Company's insurance subsidiaries in 1996, 1997
and 1998, $399,83, $500,811 and $623,621, respectively, were attributable to
insurance contracts sold by Caribou, for which the Company paid commissions to
Caribou of $74,323, $96,104 and $118,796, 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 a portion of 1996. The Company ceded $1,838,864 of gross premiums
written to Lloyd's Syndicate 314 in 1996, for which it paid ceding commissions
to the Company of $463,993.
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 115,774 square feet of space.
During 1998, the Company paid $1,155,000 in rent under this Office Lease,
$717,875 in 1997 and $595,916 during 1996.
On September 13, 1993, the Company and Waddell & Reed Asset Management
Company, a former subsidiary of Torchmark which was spun off during 1998
("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 based on the amount of the Company's average
assets under management, as determined by the following formula: 1/4 of 1% on
the first $25 million of the Company's average assets under management, 1/5 of
1% of the next $25 million, 3/20 of 1% of the next $150 million, 1/10 of 1% of
the next $200 million and 1/20 of 1% in excess of $400 million. During 1998,
the Company paid $578,171 in total fees to WRAMCO pursuant to the Investment
Services Agreement, $393,686 in 1997 and $409,252 in 1996.
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 fees were for $862,000 for 1998,
$1,353,246 for 1997 and $1,702,000 for 1996. This agreement was terminated
effective April 30, 1995, and these products are no longer marketed through
Liberty National agents. However, Liberty National continued to service the
existing business until September of 1998, at which time Vesta Fire assumed
the servicing of this business.
During 1998, the Company engaged Tait Advisory Services, L.L.C., an
affiliate of James E. Tait, to perform advisory services to the Company on
financial and accounting matters, for which the Company paid approximately
$60,500. This engagement terminated upon the appointment of Mr. Tait as
Executive Vice President and Chief Financial Officer of the Company in July of
1998.
During 1996, 1997 and 1998, 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 three 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.
11
<PAGE>
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 1998, including
the salaries of Mr. Huffman and Mr. Gayle as Chief Executive Officer of the
Company, were 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 1998, the Compensation
Committee did not approve the payment of any cash bonuses to executive
officers of the Company under the Cash Bonus Plan.
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 1998, the Company granted options to purchase a total of 77,500 shares of
the Company's common stock under the Incentive Plan to 4 employees of the
Company, including grants to Messrs. Tait and Angell of options to purchase
45,000 and 10,000 shares, respectively. In 1998, the Company also granted a
restricted stock award under the Incentive Plan to Mr. Tait, covering 30,000
shares.
The awards granted to the Company's executive officers in 1998 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.
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 does not anticipate that any cash compensation paid to its executive
officers in the foreseeable future will exceed the dollar limitations of such
provisions. Should annual compensation of any executive officer exceed
$1,000,000, the
12
<PAGE>
Compensation Committee will evaluate the advisability of structuring such
compensation as qualified performance based compensation within the meaning of
Section 162(m). In this respect, the Compensation Committee believes that any
compensation attributable to the grant of stock options pursuant to the
Incentive Plan, which must be granted with an exercise price at least equal to
the fair market value of the underlying stock on the date of the grant, will
be excepted from the limitations on deductibility imposed by Section 162(m).
Compensation Committee
Ehney A. Camp, III
Clifford F. Palmer
Jarvis W. Palmer
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 December 31, 1993.
VTA S&P 500 S&P Property/Casualty
--- ------- ---------------------
11/11/93 100 100 100
12/31/93 0.0204 102.04 0.0058 100.58 -0.0226 97.74
12/31/94 0.1664 116.64 0.0186 101.86 0.0247 102.47
12/31/95 1.14035 214.04 0.3946 139.46 0.3908 139.08
12/31/96 0.9288 192.88 0.7096 170.96 0.6988 169.88
12/31/97 2.6411 364.11 1.2736 227.36 1.4271 242.71
12/31/98 -0.6046 39.54 1.9162 291.62 1.2067 220.67
[Performance Graph Appears Here]
13
<PAGE>
CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
During 1998, the Board of Directors of the Company adopted a resolution
authorizing the Chairman of the Audit Committee, in his discretion, (i) to
dismiss KPMG Peat Marwick LLP ("KPMG") as the Company's independent
accountants, effective upon management's notification of KPMG of such
dismissal and (ii) concurrently with such dismissal, to engage
PricewaterhouseCoopers LLP ("PwC") as the Company's independent accountants
for the fiscal year ending December 31, 1998.
On December 18, 1998, the Company notified KPMG of the dismissal. Also on
December 18, 1998, the Company engaged PwC as the Company's independent
accountants, subject to PwC's normal client acceptance procedures. This
process was completed and PwC's engagement commenced on January 26, 1999.
During the two most recent fiscal years, and during the subsequent interim
period preceding the decision to change independent accountants, neither the
Company nor anyone on its behalf consulted PwC regarding either the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Company's financial statements, and neither a written report nor oral
advice was provided to the Company by PwC with respect to any such
consultation.
KPMG audited the Company's annual consolidated financial statements as of
and for each of the fiscal years ended December 31, 1993, 1994, 1995, 1996 and
1997 (the "Historical Financial Statements"). KPMG's auditors reports on these
Historical Financial Statements did not contain any adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope, or accounting principles. However, in connection with the
Company's decision to restate the Historical Financial Statements in June,
1998, KPMG advised the Company that it could no longer be associated with
these Historical Financial Statements. The Company subsequently issued
restated financial statements as of and for the fiscal years ended December
31, 1996 and 1997 (the "Restated Financial Statements"), which were filed with
the Securities and Exchange Commission as a current report on Form 8-K on
August 20, 1998. KPMG issued an auditors report on the Restated Financial
Statements which did not contain any adverse opinion or disclaimer of opinion
and were not qualified or modified as to uncertainty, audit scope, or
accounting principles.
By a current report on Form 8-K filed on December 28, 1998 in connection
with KPMG's dismissal, the Company reported that during the Company's two most
recent fiscal years, and in the subsequent interim period, there had been no
disagreements between the Company's management and KPMG on any matters of
accounting principles or practices, financial statement disclosure, or
auditing scope and procedures which, if not resolved to the satisfaction of
KPMG, would have caused KPMG to make reference to the matter in an auditors
report. However, KPMG subsequently clarified its view that certain issues
regarding the financial presentation set forth in the Company's Form 10-Q
filed with the Securities and Exchange Commission on November 16, 1998
constituted reportable disagreements. Accordingly, the Company amended its
Form 8-K on January 12, 1999 to reflect these unresolved issues as reportable
disagreements and filed copies of letters from KPMG summarizing these
unresolved issues as Exhibits 16.1 and 16.2 to that amendment. The Audit
Committee discussed these matters with KPMG and authorized KPMG to respond
fully to the inquiries of PwC concerning these matters. The Company did not
consult PwC, prior to its engagement as the Company's successor auditors,
regarding such matters.
As noted above, KPMG audited the Company's consolidated financial statements
for the period ended December 31, 1997, which audit was completed March 27,
1998, except as to Note B, which is as of August 19, 1998. By letter dated
December 3, 1998, KPMG informed the Audit Committee of the Company's Board of
Directors that, in connection with said audit and their reviews of the 1998
quarterly financial statements, it had noted certain matters involving
internal controls that it considered to be reportable conditions under
applicable auditors' reporting standards.
14
<PAGE>
PROPOSAL NUMBER 2
APPROVAL OF AUDITORS
A proposal to approve the appointment of the firm of PricewaterhouseCoopers
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, 1999, will be presented to the stockholders at the annual
meeting. The audit committee of the Board recommends the appointment of
PricewaterhouseCoopers LLP. A representative of PricewaterhouseCoopers 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 PricewaterhouseCoopers
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
As of March 8, 1999, the Company had not received notice of any matters to
be presented at the annual 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, Norman W. Gayle, III 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 2000, the proposal must be received by the Company at its home
office, 3760 River Run Drive, Birmingham, Alabama 35243, on or before December
19, 1999.
A stockholder of the Corporation may wish to have a proposal presented at
the annual meeting of shareholders to be held in 2000, but not to have such
proposal included in the Corporation's proxy statement and form of proxy
relating to that meeting. If notice of any such proposal is not received by
the Corporation at the address appearing on the first page of this proxy
statement by March 8, 2000, then the Company will not address the proposal in
its proxy statement relating to that meeting, and all proxies solicited and
received by the Company will be deemed to have conferred discretionary
authority to vote on any such proposal.
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.
15
<PAGE>
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 1998, as filed with the Securities and Exchange Commission, and
the Company's financial statements and notes thereto, accompanies this Proxy
Statement. 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
16
<PAGE>
VESTA INSURANCE GROUP, INC.
This Proxy Is Solicited on behalf of the Board of Directors
for the Annual Meeting of Stockholders
to be held on May 18, 1999
P The undersigned hereby constitutes and appoints Norman W. Gayle III and
Donald W. Thornton, or either of them with full power of substitution in
R each, proxies to vote all shares of Common Stock of Vesta Insurance
Group, Inc. (the "Company") which the undersigned may be entitled to
O vote at the Annual Meeting of Stockholders to be held at The Harbert
Center, 2019 Fourth Avenue North, Birmingham, Alabama 35203, on
X Tuesday, May 18, 1999, and at all adjournments or postponements thereof
as follows:
Y
Election of Directors, Nominees:
For Class III, to serve until the 2002 Annual Meeting
Norman W. Gayle III and James E. Tait
Ratification of the appointment of the firm of
PricewaterhouseCoopers LLP as the principal independent
accountants of the Company.
| 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
-----------
- --------------------------------------------------------------------------------
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 [_] [_] [_]
Officers appointment of the
(See Reverse) firm of PricewaterhouseCoopers
For, except vote withheld LLP as the principal independent
from the following nominee(s) accountants of the Company.
- -----------------------------
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
