Exhibit 10.1

SETTLEMENT AND STANDSTILL AGREEMENT

        This AGREEMENT, dated as of November 17, 2005 (this “Agreement”), is by
and between Vesta Insurance Group, Inc., a Delaware corporation (“Vesta”), and
the entities listed on Schedule A hereto (collectively, the “Newcastle Group”
and together with Vesta the “Parties” and each a “Party”).

        WHEREAS, the Newcastle Group is the beneficial owner of 3,050,700 shares
of common stock, par value $0.01 per share, of Vesta (the “Newcastle Held
Shares”); and

        WHEREAS, the Vesta Board currently has nine (9) seats (including an
existing vacancy in Class I, (the “Existing Class I Vacancy”)), which are
divided into three (3) classes, each having three (3) seats. Class I has two (2)
directors, whose terms expire in 2006, and one (1) vacancy (“Class I”); Class II
has three (3) directors, whose terms expire in 2007 (“Class II”); and Class III
has three (3) directors, whose terms expire in 2005 (“Class III”);

        WHEREAS, there is currently scheduled for November 17, 2005, the annual
meeting of Vesta stockholders (the “2005 Annual Meeting”) to consider, among
other things, the election of three (3) individuals to the Board of Directors of
Vesta (the “Vesta Board”);

        WHEREAS, by letter dated September 28, 2005, Newcastle Partners, L.P.
(“Newcastle Partners”) purported to provide notice to Vesta of its intention to
nominate James C. Epstein, Mark J. Morrison and Steven J. Pully for election as
directors of Vesta at the 2005 Annual Meeting (the “Stockholder Nominations”);

        WHEREAS, the Newcastle Group has filed a preliminary proxy statement (as
amended, the “Newcastle Proxy Statement”) with the Securities and Exchange
Commission (the “SEC”) signaling its intention to solicit proxies in connection
with (1) the Stockholder Nominations and (2) a purported stockholder proposal
recommending to the Vesta Board that Newcastle be reimbursed for all expenses it
incurs in connection with its solicitation of proxies for the 2005 Annual
Meeting (the “Newcastle Proposal”);

        WHEREAS, on September 20, 2005, Vesta publicly announced that the Vesta
Board had nominated for re-election Tambra L.G. Bailie, Norman W. Gayle III and
Michael J. Gough (collectively, the “Vesta Nominees”), each to serve as Class
III directors through Vesta’s annual meeting of stockholders to be held in 2008;

        WHEREAS, subject to and based upon the understanding contained in this
Agreement, Newcastle Partners intends hereby to withdraw the Stockholder
Nominations and refrain from (1) soliciting proxies in connection with the 2005
Annual Meeting and (2) contesting the election of the Vesta Nominees at the 2005
Annual Meeting;

        WHEREAS, a dispute has arisen between Vesta and the Newcastle Group
regarding Florida Statute Section 628.461, which dispute has resulted in (1)
litigation pending in the United States District Court for the Middle District
of Florida, Tampa Division, captioned Vesta Insurance Group, Inc. v. Newcastle
Partners, L.P., Case No. 8:05-CV-1680-T-27MSS (the “Florida Litigation”); and
(2) an administrative proceeding before the State of Florida Office of Insurance
Regulation (the “FOIR”), captioned In the Matter of: Acquisition of Shares of
Vesta Insurance Group, Inc., by Newcastle Partners, L.P., Case. No. 82685-05
(the “FOIR Proceeding”);

        WHEREAS, the Parties have determined that the interests of the Parties
and the stockholders of Vesta would best be served by avoiding the further
expense and disruption that could be expected to result from the Florida
Litigation, the FOIR Proceeding and a contested election; and

        WHEREAS, the Parties intend to provide hereby for, among other matters,
(1) the full support from all parties of the Vesta Nominees in the election to
take place at the 2005 Annual Meeting; and (2) following the 2005 Annual
meeting, (a) the enlargement of the Vesta Board from nine (9) to ten (10) seats
creating a new directorship in Class III; and (b) the appointment of Mark J.
Morrison and Mark E. Schwarz, as Class III directors, to the Vesta Board (the
final product of (1) and (2) being the “New Vesta Board Composition”).
Furthermore, Vesta and the Newcastle Group desire to otherwise resolve all
matters between them, including those matters at issue in or with respect to the
Stockholder Nominations, the Florida Litigation, and the FOIR Proceeding.

        NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties hereto hereby agree as
follows:

SECTION 1. Representations.

(a)  

Representations and Warranties of Vesta. Vesta hereby represents and warrants to
the Newcastle Group that this Agreement has been duly authorized, executed and
delivered by Vesta, and is a valid and binding obligation of Vesta, enforceable
against Vesta in accordance with its terms.

(b)  

Representations and Warranties of the Newcastle Group. Each member of the
Newcastle Group hereby represents and warrants to Vesta that:

(i)  

this Agreement has been duly authorized, executed and delivered by each member
of the Newcastle Group, and is a valid and binding obligation of each member of
the Newcastle Group, enforceable against each member of the Newcastle Group in
accordance with its terms;

(ii)  

except for the Newcastle Held Shares, which are beneficially owned solely by the
members of the Newcastle Group as indicated in their Schedule 13D filed with the
SEC, as amended, no Affiliate or Associate (as such terms are hereinafter
defined) of any member of the Newcastle Group may be deemed the “beneficial
owner” (as such term is hereinafter defined) of any shares of the Common Stock,
par value $0.01, of Vesta (“Vesta Common Stock”) (including any direct or
indirect rights, options or agreements to acquire Vesta Common Stock) or has any
rights, options or agreements to acquire or vote, any other Vesta Common Stock;
and

(iii)  

all of the information contained in the preliminary proxy statement amendment,
filed by the Newcastle Group, with the SEC, on October 17, 2005, is true,
accurate, complete and in all material respects not misleading.

(c)  

Certain Definitions. For purposes of this Agreement: the terms “Affiliate” and
“Associate” shall have the respective meanings set forth in Rule 12b-2
promulgated by the SEC under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”); the terms “beneficial owner” and “beneficially own” shall
have the same meanings as set forth in Rule 13d-3 promulgated by the SEC under
the Exchange Act, except that a person shall also be deemed to be the beneficial
owner of all Vesta Common Stock that such person has the right to acquire
pursuant to the exercise of any rights in connection with any securities or any
agreement, regardless of when such rights may be exercised and whether they are
conditional; and the terms “person” or “persons” shall mean any individual,
corporation (including not-for-profit), general or limited partnership, limited
liability or unlimited liability company, joint venture, estate, trust,
association, organization or other entity of any kind or nature.

SECTION 2. Directors.

(a)  

New Vesta Board Composition. In order to achieve New Vesta Board Composition,
the Newcastle Group and Vesta agree that within three (3) business days
following election of the Vesta Nominees at the 2005 Annual Meeting, the Parties
will effect the following steps: (1) the Vesta Board will increase the size of
the Vesta Board from nine (9) to ten (10) members; (2) Norman W. Gayle III will
resign as a Class III director; (3) the Vesta Board will appoint Norman W. Gayle
III to fill the Existing Class I Vacancy on the Vesta Board; and (4) the Vesta
Board will appoint Mark J. Morrison and Mark E. Schwarz to fill two (2)
resulting vacancies in Class III.

SECTION 3. 2005 Annual Meeting.

(a)     The Election of the Vesta Nominees. The Newcastle Group shall cause all
shares of the Newcastle Held Shares and any other Vesta Common Stock
beneficially owned by the members of the Newcastle Group, and/or their
respective Affiliates or Associates, as of the record date for the 2005 Annual
Meeting, to be present for quorum purposes and to be voted in favor of the Vesta
Nominees at the 2005 Annual Meeting.

(b)     The Reimbursement Proposal. At the 2005 Annual Meeting, the Chairman of
the 2005 Annual Meeting will submit, for stockholder approval, a proposal
recommending to the Vesta Board that Newcastle Partners be reimbursed for up to
$400,000 of the expenses it has incurred in connection with its solicitation of
proxies for the 2005 Annual Meeting (the “Reimbursement Proposal”). Both Norman
W. Gayle, III and Donald W. Thornton agree to abstain from voting their shares
of Vesta Common Stock, whether held directly or indirectly, on the Reimbursement
Proposal and shall not authorize any other person to vote on the Reimbursement
Proposal.

SECTION 4. Acquisition of and Disposition of Stock.

(a)  

Limits on Acquisition and Disposition of Stock. Each member of the Newcastle
Group covenants and agrees that, from and after the date of this Agreement and
until the expiration of the Standstill Period, as defined below, neither it nor
any of its Affiliates or Associates will, without the prior written consent of
Vesta specifically expressed in a vote adopted by the Vesta Board, directly or
indirectly:

(i)  

purchase, cause to be purchased, or otherwise acquire or agree to acquire, or
become or agree to become the beneficial owner of any securities issued by
Vesta, including any Vesta Common Stock and any securities convertible into or
exchangeable for Vesta Common Stock or any other equity securities of Vesta if
such purchases would result in the Newcastle Group (together with any Affiliates
or Associates of any member of the Newcastle Group) owning more than nine and
five-tenths percent (9.5%) of the issued and outstanding Vesta Common Stock;

(ii)  

sell, cause to be sold, or otherwise dispose of or agree to dispose of, or
divest itself of beneficial ownership of or agree to divest itself of beneficial
ownership of, any securities issued by Vesta, including any Vesta Common Stock
and any securities convertible into or exchangeable for Vesta Common Stock or
any other equity securities of Vesta except as follows: The Newcastle Group
members may sell any or all of the Newcastle Held Shares in brokerage
transactions involving 100,000 or fewer shares if, in the reasonable belief of
the Newcastle Group, such shares are not being accumulated by a single purchaser
or group of purchasers acting together, provided, however, that during the
Standstill Period the aggregate number of shares of Vesta Common Stock sold by
the Newcastle Group shall not exceed one percent (1%) of the outstanding Vesta
Common Stock per calendar week.

(b)     Equal Treatment. Subject to the terms of this Section 4, if, during the
Standstill Period, Vesta should seek to raise capital through a pro rata
offering to all holders of Vesta Common stock of rights to purchase additional
shares of Vesta Common Stock, the Newcastle Group will be permitted to
participate in such rights offering on the same terms as other holders of Vesta
Common Stock. Notwithstanding the forgoing, nothing contained in this Agreement
will (A) affect the operation of the Rights Agreement between Vesta and First
Chicago Trust Company as Rights Agent, dated June 15, 2000, as amended (the
“Rights Plan”); or (b) permit the Newcastle Group to participate in any offering
of rights or other Vesta securities in connection with the Rights Plan from
which the Newcastle Group would have otherwise been excluded.

(c)  

If at any time before the 2008 Vesta stockholders meeting, the Newcastle Group’s
ownership of Vesta Common Stock falls below five percent (5%) of the issued and
outstanding Vesta Common Stock as a result of any sales of Vesta Common Stock by
any member of the Newcastle Group (as opposed to as a result of any offering of
Vesta securities by Vesta including, but not limited to, any stock dividend),
Mark J. Morrison and Mark E. Schwarz shall immediately resign from the Vesta
Board.

SECTION 5. Expenses

        If the Reimbursement Proposal is approved by a majority of shares voted
on the Reimbursement Proposal (abstentions shall not be deemed to count for the
purposes of this calculation), then within ten (10) business days following
Vesta’s receipt of (1) a final report confirming the approval of the
Reimbursement Proposal from the inspectors of the election for the 2005 Annual
Meeting (employees of IVS Associates Inc.) or (2) a reasonably satisfactory
documentation of the expenses described in this Section 5 from the Newcastle
Group, whichever is received later, Vesta will reimburse the Newcastle Group for
its reasonable out-of-pocket fees and expenses incurred (a) in performing the
actions required under this Agreement and (b) through the date of the execution
this Agreement, in connection with its activities relating to the 2005 Annual
Meeting relating to: (1) the nomination or election of directors, the
solicitation of proxies and any acts or filings in connection therewith; (2) the
litigation before the Delaware Court of Chancery captioned Newcastle Partners,
L.P. v. Vesta Insurance Group, Inc., C.A. No. 1485N; and (3) the negotiation and
execution of this Agreement, provided such reimbursement shall not exceed
$400,000 in the aggregate. Notwithstanding anything in this Agreement to the
contrary, Vesta shall not reimburse the Newcastle Group for any expenses
incurred in connection with the FOIR Proceeding or the Florida Litigation or any
appeals associated with either of those two actions.

SECTION 6. Standstill Arrangements.

(a)  

Each member of the Newcastle Group agrees that, during the five (5) months
following the date of this Agreement (the “Standstill Period”), neither it nor
any of its Affiliates or Associates will, without the prior written consent of
Vesta, directly or indirectly, solicit, request, advise, assist or encourage
others to:

(i)  

form, join in or in any other way participate in a “partnership, limited
partnership, syndicate or other group” (other than the Newcastle Group) within
the meaning of Section 13(d)(3) of the Exchange Act with respect to any shares
of Vesta Common Stock or deposit any shares of Vesta Common Stock in a voting
trust or similar arrangement or subject any shares of Vesta Common Stock to any
voting agreement or pooling arrangement, other than pursuant to this Agreement;

(ii)  

solicit proxies or written consents of stockholders with respect to Vesta Common
Stock under any circumstances, or make, or in any way participate in, any
“solicitation” of any “proxy” to vote any shares of Vesta Common Stock, or
become a “participant” in any contested solicitation with respect to Vesta (as
such terms are defined or used in Rule 14a-1 and Item 4 of Schedule 14A under
the Exchange Act), or seek to advise or influence any person with respect to the
voting, holding or disposition of any shares of Vesta Common Stock;

(iii)  

seek to call, or to request the call of, a meeting of the stockholders of Vesta,
or seek to make, or make, a stockholder proposal at any meeting of the
stockholders of Vesta or make a request for a list of Vesta’s stockholders;

(iv)  

commence or announce any intention to commence any tender offer for any shares
of Vesta Common Stock, or file with or send to the SEC a Schedule 13D or any
amendments to any Schedule 13D under the Exchange Act with respect to Vesta
Common Stock to reflect changes to the disclosures set forth therein and
exhibits filed therewith, except (A) for an amendment to the Schedule 13D filed
with the SEC by the Newcastle Group with respect to the Newcastle Held Shares
(the “Current Schedule 13D”) to reflect this Agreement, provided that the
Newcastle Group shall, prior to the filing of any such amendment with the SEC,
provide Vesta with a copy of such amendment as it is proposed to be so filed and
a reasonable opportunity to review and comment thereon, and (B) to the extent
such amendment is filed solely to report one or a combination of other actions
(if any) permitted by this Agreement or authorized by Vesta in writing prior to
the filling of the amendment. In addition, the Newcastle Group may file a
Schedule 13D to comply with amendments after the date hereof to Section 13(d) of
the Exchange Act, to the rules promulgated thereunder, or to the SEC’s
interpretation of either of the foregoing (it being understood that nothing
contained in this Section 6(a)(iv) shall be deemed to permit any action or
disclosure that is otherwise prohibited by this Agreement). Such permitted
amendments shall be referred to as the “Permitted Schedule 13D Amendments.” In
no case shall Item 4 of the Current Schedule 13D be amended, except as otherwise
permitted by this Section 6(a)(iv);

(v)  

take any action or form any intention which would require an amendment to the
Current Schedule 13D (other than amendments containing only Permitted Schedule
13D Amendments);

(vi)  

make a proposal or bid with respect to, or announce any intention or desire to
make, or publicly make or disclose, cause to be made or disclosed publicly, any
proposal or bid with respect to, the acquisition of any substantial portion of
the assets of Vesta or of all or any portion of the outstanding Vesta Common
Stock, or any merger, consolidation, other business combination, restructuring,
recapitalization, liquidation or other extraordinary transaction involving
Vesta;

(vii)  

act alone or in concert with others to seek control or influence in any manner
the management, the Vesta Board (including the composition thereof) or the
business, operation or affairs of Vesta; provided, however, that nothing
contained herein shall prohibit Mark J. Morrison and Mark E. Schwarz from
exercising their duties and obligations as directors of Vesta; or

(viii)  

publicly disclose, or cause or facilitate the public disclosure (including by
disclosure to any journalist or other representative of media) of, any request,
or otherwise seek (in any manner that would require public disclosure by any
member of the Newcastle Group or its Affiliates or Associates), to obtain any
waiver or consent under, or any amendment of, any provision of this Agreement.

(b)  

The 2006 Annual Meeting. Nothing in this Section 6 shall limit the actions of
any member of the Newcastle Group from nominating directors for election at or
submitting shareholder proposals for consideration at the 2006 Annual Meeting of
Vesta’s stockholders or soliciting proxies or written consents of stockholders
with respect to Vesta Common Stock, or making, or in any way participating in
any “solicitation” of any “proxy” to vote any shares of Vesta Common Stock, or
becoming a “participant” in any contested solicitation with respect to Vesta (as
such terms are defined or used in Rule 14a-1 and Item 4 of Schedule 14A under
the Exchange Act), or seeking to advise or influence any person with respect to
the voting, holding or disposition of any shares of Vesta Common Stock relating
to the 2006 annual meeting of Vesta’s stockholders.

SECTION 7. Withdrawal Stockholder Nomination and Proposal.

        Upon the execution of this Agreement, the Newcastle Group hereby
withdraws the Stockholder Nominations and the Newcastle Proposal and shall
immediately cease all efforts, direct or indirect, in furtherance of either the
Stockholder Nominations or the Newcastle Proposal and any related solicitation
and shall not vote, deliver or otherwise use any proxies heretofore obtained to
the extent such proxies constitute votes against any of the 2005 Nominees at the
2005 Annual Meeting.

SECTION 8. The Conduct Agreement.

        The Parties agree that the provisions of this Agreement shall supersede
and replace any provision of the Agreement Relating to the Meeting of
Stockholders of Vesta Insurance Group, Inc. by and among the parties dated
November 16, 2005 (the “Conduct Agreement”) that conflicts or overlaps in anyway
with any provision of this agreement. Without limiting the generality of the
forgoing, specifically (a) Section 3(f) of the Conduct Agreement shall be
disregarded and deemed to be deleted; (b) and references to the “Reimbursement
Proposal” in the Conduct Agreement shall be deemed to refer to the Reimbursement
Proposal as defined in this Agreement as opposed to the “Reimbursement Proposal”
as defined in the Conduct Agreement; and (c) the form of ballot attached to the
Conduct Agreement is hereby amended and restated in the form attached hereto as
Exhibit A.

SECTION 9. Press Releases and Other Public Statements.

        During the Standstill Period, Vesta and the Newcastle Group agree as
follows:

(a)  

Each member of the Newcastle Group agrees, subject to the requirements of
applicable federal securities laws, to provide to Vesta an opportunity to review
and comment on any press release, public filing or letter to Vesta’s
stockholders containing statements about Vesta, prior to its public release.

(b)  

Promptly after the execution of this Agreement, the Parties shall issue a press
release in the form attached hereto as Exhibit B.

SECTION 10. Florida Litigation and FOIR Proceeding.

        Upon the execution of this Agreement:

(a)  

The Parties will execute and promptly file with the United States District Court
for the Middle District of Florida, Tampa Division, the Notice of Settlement and
Joint Stipulation for Dismissal with Prejudice, in the forms attached hereto as
Exhibit C; and

(b)  

Vesta shall take no further actions to challenge the preliminary determination
or final order issued in the FOIR Proceedings and Vesta shall remove its
objection to the current result of the FOIR Proceeding. The Newcastle Group
shall be entitled, in its sole discretion, to challenge the proposed fine.

SECTION 11. Policy and Procedures.

        At such time as Mark J. Morrison and Mark E. Schwarz shall become
directors of Vesta in accordance with the terms of this Agreement, they shall
agree in writing to be bound by the terms and conditions of Vesta’s policies and
procedures applicable to the Vesta Board including its insider trading policy.
Any grant of options by Vesta as a result of Mark J. Morrison and Mark E.
Schwarz becoming a director of Vesta shall not be deemed to cause the Newcastle
Group to violate the provisions of Section 6 of this Agreement.

SECTION 12. Confidentiality.

        Each member of the Newcastle Group (each, a “Recipient”) acknowledges
the confidential and proprietary nature of the Confidential Information (as
defined below), agrees to hold and keep the Confidential Information
confidential as provided in this Agreement and otherwise agrees to each and
every restriction and obligation in this Agreement. As used in this Agreement,
the term “Confidential Information” means and includes any and all of the
information concerning the business and affairs of Vesta that may hereafter be
disclosed to Recipient by Vesta or by the directors, officers, employees,
agents, consultants, advisors or other representatives, including legal counsel,
accountants and financial advisors (“Representatives”) of Vesta. To the extent
that any Confidential Information may include materials subject to the
attorney-client privilege, Vesta is not waiving and will not be deemed to have
waived or diminished its attorney work-product protections, attorney-client
privileges or similar protections and privileges as a result of disclosing any
Confidential Information (including Confidential Information related to pending
or threatened litigation) to Recipient. Recipient agrees that the Confidential
Information (a) will be kept confidential by Recipient and Recipient’s
Representatives and (b) without limiting the foregoing, will not be disclosed by
Recipient (except to such person’s Representatives to the extent permitted by,
and in accordance with, this Agreement) or by Recipient’s Representatives to any
person except with the specific prior written consent of Vesta or except as
expressly otherwise permitted by this Agreement. It is understood that Recipient
may disclose Confidential Information only to those of Recipient’s
Representatives who are informed by Recipient of the confidential nature of the
Confidential Information and the obligations of this Agreement.

        Confidential Information shall not include information which (a) is
publicly known at the time of disclosure through no breach of this Agreement or
other wrongful act of the Recipient; or (b) was approved for release by
Recipient by written authorization of Vesta.

        If Recipient or any of Recipient’s Representatives becomes legally
compelled (by oral questions, interrogatories, requests for information or
documents, subpoena, civil or criminal investigative demand or similar process)
to make any disclosure that is prohibited or otherwise constrained by this
Agreement, Recipient or such Representative, as the case may be, will provide
Vesta with notice, as promptly as practicable in light of the circumstances, of
such legal proceedings so that Vesta at its sole expense may seek an appropriate
protective order or other appropriate relief or waive compliance with the
provisions of this Agreement. In the absence of a protective order or
Recipient’s receiving such a waiver from Vesta, Recipient or its Representative
is permitted to disclose that portion (and only that portion) of the
Confidential Information that Recipient or the Representative is legally
compelled to disclose; provided, however, that Recipient and Recipient’s
Representatives must use reasonable efforts to obtain reliable assurance that
confidential treatment will be accorded by any person to whom any Confidential
Information is so disclosed.

        Each Recipient acknowledges that it and its Representatives are (i)
aware that the United States securities laws prohibit any person who has
material, non-public information concerning a company from purchasing or selling
securities of such company or from communicating such information to any other
person under circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell such securities, and (ii) familiar with the
Exchange Act, and that it and its Representatives will neither use, nor cause
any third party to use, any Confidential Information in contravention of such
Exchange Act.

        Upon the request of Vesta, immediately after either Vesta’s 2008 annual
meeting of stockholders or the resignation of Mark J. Morrison and Mark E.
Schwarz from the Vesta Board, whichever occurs sooner, (i) Recipient (A) shall
promptly deliver to Vesta all documents or other materials disclosed by Vesta or
any Vesta’s Representative to Recipient or Recipient’s Representatives
constituting Confidential Information, together with all copies and summaries
thereof in the possession or under the control of Recipient or Recipient’s
Representatives, and (B) will destroy materials generated by Recipient or
Recipient’s Representatives that include or refer to any part of the
Confidential Information, without retaining a copy of any such material, or (ii)
alternatively, if Vesta requests or consents to Recipient’s request, Recipient
will destroy all documents or other matters constituting Confidential
Information in the possession or under the control of Recipient or Recipient’s
Representatives. Any such destruction pursuant to the foregoing must be
certified by an authorized officer of Recipient in writing to Vesta.

SECTION 13. General Release.

(a)  

Each member of the Newcastle Group, on its own behalf and on behalf of its
Affiliates, Associates, successors, assigns, heirs, beneficiaries, attorneys,
partners, limited partners, employees and agents (as applicable) (collectively,
the “Newcastle Releasors”), hereby releases and discharges Vesta, and its
respective directors, officers and employees (the “Vesta Releasees”) from any
and all charges, complaints, claims, liabilities, obligations, promises,
agreements, controversies, damages, actions, causes of action, suits, rights,
demands, costs, losses, debts and expenses, known or unknown (collectively,
“Claims”), which the Newcastle Releasors may have had or may now have, own, or
hold, or claim to have, own, or hold against the Vesta Releasees up to the date
of this Agreement. The Newcastle Releasors specifically waive any rights under
any statute, regulation or rule which purports to limit the right of persons to
release or waive unknown Claims. Each of the Newcastle Releasors represents and
warrants hereby that, with the exception of the complaint filed by the Newcastle
Group in the Delaware Court of Chancery on July 7, 2005 to compel Vesta to hold
an annual meeting, it has not filed any complaints or charges asserting any
Claims against any of the Vesta Releasees with any local, state or federal
agency or court, or assigned any such Claim to any other person. Each of the
Newcastle Releasors agrees never to sue any of the Vesta Releasees or cause any
of the Vesta Releasees to be sued regarding any matter within the scope of this
General Release. If any of the Newcastle Releasors violates this General Release
by suing any Vesta Releasee or causing any Vesta Releasee to be sued, the
undersigned Newcastle Releasors agree to pay all reasonable costs and expenses
of defending against the suit incurred by the Vesta Releasees, including
reasonable attorneys’ fees.

(b)  

Vesta, on its own behalf and on behalf of its Affiliates, Associates,
successors, assigns, heirs, beneficiaries, attorneys, partners, limited
partners, employees and agents (as applicable) (collectively, the “Vesta
Releasors”), hereby releases and discharges each of the Newcastle Group, and its
respective directors, officers and employees (the “Newcastle Releasees”) from
any and all Claims which the Vesta Releasors may have had or may now have, own,
or hold, or claim to have, own, or hold against the Newcastle Releasees up to
the date of this Agreement. The Vesta Releasors specifically waive any rights
under any statute, regulation or rule which purports to limit the right of
persons to release or waive unknown Claims. Each of the Vesta Releasors
represents and warrants hereby that, with the exception of in connection with
the Florida Litigation and the FOIR Proceeding, it has not filed any complaints
or charges asserting any Claims against any of the Newcastle Releasees with any
local, state or federal agency or court, or assigned any such Claim to any other
person. Each of the Vesta Releasors agrees never to sue any of the Newcastle
Releasees or cause any of the Newcastle Releasees to be sued regarding any
matter within the scope of this General Release. If any of the Vesta Releasors
violates this General Release by suing any Newcastle Releasee or causing any
Newcastle Releasee to be sued, the undersigned Vesta Releasors agree to pay all
reasonable costs and expenses of defending against the suit incurred by the
Newcastle Releasees, including reasonable attorneys’ fees.

(c)  

Each of the undersigned Newcastle Releasors and Vesta Releasors acknowledges
that it has read the contents of the foregoing applicable General Release, that
it has had the opportunity to review such General Release with counsel of its
choice, that it understands the same and that it has given such General Release
as its own free act and deed.

(d)  

Notwithstanding anything contained in this Section 13 to the contrary, this
Section 13 shall not apply to any Claim arising out of a breach of the
obligations contained in this Agreement.

SECTION 14. Remedies.

(a)  

Each Party hereto hereby acknowledges and agrees that irreparable harm would
occur in the event any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the Parties shall be entitled to specific relief
hereunder, including, without limitation, an injunction or injunctions to
prevent and enjoin breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof in any state or federal court in
the State of Delaware, in addition to any other remedy to which they may be
entitled at law or in equity. Any requirements for the securing or posting of
any bond with such remedy are hereby waived.

(b)  

The Parties hereto agree that any actions, suits or proceedings arising out of
or relating to this Agreement or the transactions contemplated hereby shall be
brought solely and exclusively in the courts of the State of Delaware and/or the
courts of the United States of America located in the State of Delaware (and the
Parties agree not to commence any action, suit or proceeding relating thereto
except in such courts), and further agree that service of any process, summons,
notice or document by U.S. registered mail to the respective addresses set forth
in Section 17 hereof shall be effective service of process for any such action,
suit or proceeding brought against any Party in any such court. The Parties
irrevocably and unconditionally waive any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the transactions
contemplated hereby, in the courts of the State of Delaware or the United States
of America located in the State of Delaware, and hereby further irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any
such action, suit or proceeding brought in any such court has been brought in
any inconvenient forum.

SECTION 15. Assignment.

        No member of the Newcastle Group may make any assignment of any of its
or his rights under this Agreement, by operation of law or otherwise, without
the prior written consent of Vesta.

SECTION 16. Entire Agreement.

        This Agreement contains the entire understanding of the Parties with
respect to the subject matter hereof and may be amended only by an agreement in
writing executed by the parties hereto.

SECTION 17. Notices.

        All notices, consents, requests, instructions, approvals and other
communications provided for herein and all legal process in regard hereto
(“Notices”) shall be validly given, made or served, if such Notices are in
writing and delivered by (i) U.S. registered mail, return receipt requested;
(ii) a nationally reputable overnight courier; (iii) facsimile; or (iv) hand
delivery to:

if to Vesta:   Vesta Insurance Group, Inc.     3760 River Run Drive   
Birmingham, Alabama 35243    Attention: Don Thornton, Esq.    Fax: (205)
970-7022       with a copy to:  Balch & Bingham LLP    1901 Sixth Avenue North 
  Suite 2600    Birmingham, Alabama 35203    Attention: James F. Hughey, Esq.   
Fax: (205) 488-5834       if to the Newcastle Group:  Newcastle Partners, L.P. 
  300 Crescent Court, Suite 1110    Dallas, Texas 75201    Attention: Mark E.
Schwarz    Fax: (214) 661-7475       with a copy to:  Olshan Grundman Frome
Rosenzweig & Wolosky LLP    Park Avenue Tower    65 East 55th Street    New
York, New York 10022    Attention: Steven Wolosky, Esq.    Fax: (212) 451-2222 

SECTION 18. Law Governing.

        This Agreement shall be governed by and construed and enforced in
accordance with the laws of the Delaware, without regard to any conflict of laws
provisions thereof.

SECTION 19. Counterparts.

        This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

SECTION 20. No Presumption.

        Each of the undersigned Parties hereby acknowledges that the undersigned
Parties fully negotiated the terms of this Agreement, that each such Party had
an equal opportunity to influence the drafting of the language contained in this
Agreement and that there shall be no presumption against any such Party on the
ground that such Party was responsible for preparing this Agreement or any part
hereof.

SECTION 21. Enforceability.

        If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated. It is hereby stipulated and declared to be the
intention of the Parties that the Parties would have executed the remaining
terms, provisions, covenants and restrictions without including any of such
which may be hereafter declared invalid, void or unenforceable. In addition, the
Parties agree to use their best efforts to agree upon and substitute a valid and
enforceable term, provision, covenant or restriction for any such that is held
invalid, void or unenforceable by a court of competent jurisdiction.

SECTION 22. No Admission.

        Nothing contained herein shall constitute an admission by any Party
hereto of liability or wrongdoing.

SECTION 23. Survival of Representations.

        All representations and warranties made by the Parties in this Agreement
or pursuant hereto shall survive the execution of this Agreement.

        IN WITNESS WHEREOF, each of the Parties hereto has executed this
Agreement, or caused the same to be executed by its duly authorized
representative, as of the date first above written.

Vesta Insurance Group, Inc.

By:  /s/ Norman W. Gayle, III
        ——————————————
Name: Norman W. Gayle, III
Title:   Chief Exeuctive Officer, Director ;

Newcastle Partners, L.P.

By: Newcastle Capital Management, as general partner

By:  /s/ Mark E. Schwarz
        ——————————————
Name: Mark E. Schwarz
Title::   CEO

Newcastle Capital Management L.P.

By:  /s/ Mark E. Schwarz
        ——————————————
Name: Mark E. Schwarz
Title::   CEO

Newcastle Capital Group, L.L.C.

By:  /s/ Mark E. Schwarz
        ——————————————
Name: Mark E. Schwarz
Title::   CEO

By:  /s/ Mark E. Schwarz
        ——————————————
Mark E. Schwarz, individually

By:  /s/ Mark J. Morrison
        ——————————————
Mark J. Morrisoin, individually

By:  /s/ James C. Epstein
        ——————————————
James C. Epstein, individually

By:  /s/ Steven J. Pully
        ——————————————
Steven J. Pully, individually

--------------------------------------------------------------------------------

SCHEDULE A

Newcastle Partners, L.P.
Newcastle Capital Management, L.P.
Newcastle Capital Group, L.L.C.
Mark E. Schwarz
Mark J. Morrison
James C. Epstein
Steven J. Pully