8-K

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): May 19, 2005

Affirmative Insurance Holdings, Inc.
__________________________________________
(Exact name of registrant as specified in its charter)

Delaware	000-50795	75-2770432
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)
4450 Sojourn Drive, Suite 500, Addison, Texas		75001
_________________________________ (Address of principal executive offices)		___________ (Zip Code)

Registrant’s telephone number, including area code: 972-728-6300

Not Applicable
______________________________________________
Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

On May 19, 2005, Affirmative Insurance Holdings, Inc. (the "Company") entered into a definitive agreement to repurchase 2,000,000 shares of Company common stock currently held by Vesta Insurance Group, Inc. ("Vesta"), at a price of $14.00 per share (the "Agreement"). As of March 4, 2005, Vesta and its subsidiary, Vesta Fire Insurance Corporation, beneficially owned a total of 7,218,228 shares of Company common stock, which amounted to 42.8% of the outstanding common stock. After the repurchase, Vesta will beneficially own approximately 35.1% of the Company’s common stock. The Agreement also provides for Vesta’s withdrawal of its previously announced demand that Affirmative register approximately 3,000,000 shares of its common stock.

The foregoing summary description of the Agreement is qualified in its entirety by reference to the actual terms of the Agreement, a copy of which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.

Item 7.01. Regulation FD Disclosure.

On May 19, 2005, the Company issued a press release regarding its execution of a definitive agreement to purchase Company common stock from Vesta. A copy of the press release is attached hereto as Exhibit 99.1.

The information furnished in this item, including the exhibit, shall not be deemed to be incorporated by reference into any of the Company’s filings with the Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, except as shall be expressly set forth by specific reference in any such filing, and shall not be deemed to be "filed" with the SEC under the Securities Exchange Act of 1934.

Item 9.01. Financial Statements and Exhibits.

(c) Exhibits.

10.1 Stock Purchase Agreement dated as of May 19, 2005 by and between Affirmative Insurance Holdings, Inc. and Vesta Insurance Group, Inc.
99.1 Press release dated May 19, 2005

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Affirmative Insurance Holdings, Inc.
May 25, 2005	By:	Timothy A. Bienek
		Name: Timothy A. Bienek
		Title: Executive Vice President and Chief Financial Officer

Exhibit Index

Exhibit No.	Description
10.1	Stock Purchase Agreement dated as of May 19, 2005 by and between Affirmative Insurance Holdings, Inc. and Vesta Insurance Group, Inc.
99.1	Press release dated May 19, 2005

EX-10.1

STOCK PURCHASE AGREEMENT

THIS STOCK PURCHASE AGREEMENT (this “Agreement’) dated as of May 19, 2005 between Affirmative Insurance Holdings, Inc., a Delaware corporation (“Buyer” or “Company”), and Vesta Insurance Group, Inc., a Delaware corporation (“Seller”).

W I T N E S S E T H:

WHEREAS, the Seller owns 2,000,000 shares of Buyer’s common stock (the “Shares”); and

WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, the Shares in exchange for the payment by Buyer to Seller of the Purchase Price (as defined herein), all in accordance with the terms and conditions set forth below;

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements set forth herein, Buyer and Seller hereby agree as follows:

ARTICLE I

PURCHASE OF SHARES

Section 1.01. Purchase and Sale. Upon the terms and subject to the conditions of this Agreement, at the Closing (as defined herein), Seller shall sell, transfer, assign, convey and deliver to Buyer, and Buyer shall purchase from Seller, the Shares.

Section 1.02. Purchase Price. The aggregate purchase price for the Shares shall be Twenty-Eight Million Dollars ($28,000,000) (the “Purchase Price”), based on a purchase price of $14.00 per share.

ARTICLE II

CLOSING

Section 2.01. Closing Date. The closing (the “Closing”) of the purchase and sale of the Shares contemplated by this Agreement shall occur no later than Friday, June 10, 2005 (the “Closing Date”), or on such other date as shall be mutually agreed to between the parties.

Section 2.02. Deliveries by Seller. On the Closing Date, Seller shall deliver the Shares to Buyer duly endorsed in blank or accompanied by a properly executed stock power or in such other manner as Buyer and Seller mutually agree. Seller shall execute and deliver such further instruments and take such further actions as may be reasonably requested by Buyer to carry out the intent and purposes of this Agreement.

Section 2.03. Deliveries by Buyer. On the Closing Date, Buyer shall deliver to Seller the Purchase Price by wire transfer to an account of Seller designated by Seller. Buyer shall execute and deliver such instruments and take such further actions as may be reasonably requested by Seller to carry out the intent and purposes of this Agreement.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

Seller hereby makes the following representations and warranties to Buyer, which representations and warranties shall survive the Closing. Such representations and warranties are true at and as of the date of this Agreement and shall be true at and as of the Closing Date as though each such representation and warranty were made by Seller at and as of the Closing Date, and the consummation of the Closing by Seller shall constitute a certification by Seller to such effect.

Section 3.01. Title to Shares. Seller is the sole record and beneficial owner of the Shares, and the delivery of the Shares to Buyer pursuant to this Agreement will transfer and convey good and valid title thereto to Buyer, free and clear of all liens, claims and encumbrances.

Section 3.02. Authority and Enforceability. Seller has the requisite right, power, authority and capacity to execute and deliver this Agreement and to sell and deliver the Shares to Buyer. This Agreement has been duly executed and delivered by Seller and is the legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, except as the same may be limited by bankruptcy, insolvency or other laws relating to or affecting the enforcement of creditors’ rights generally and the effect of general principles of equity.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer hereby makes the following representations and warranties to Seller, which representations and warranties shall survive the Closing. Such representations and warranties are true at and as of the date of this Agreement and shall be true at and as of the Closing Date as though each such representation and warranty were made by Buyer at and as of the Closing Date, and the consummation of the Closing by Buyer shall constitute a certification by Buyer to such effect.

Section 4.01. Authority and Enforceability. Buyer has the requisite corporate power and authority to execute and deliver this Agreement and to deliver the Purchase Price. This Agreement has been duly authorized, executed and delivered by Buyer and is the legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except as the same may be limited by bankruptcy, insolvency or other laws relating to or affecting the enforcement of creditors’ rights generally and the effect of general principles of equity.

ARTICLE V

Section 5.01 Withdrawal of Demand. Effective upon the Closing, Seller’s demand, delivered March 22, 2005, that Buyer register 3,000,000 shares of its common stock pursuant to the Registration Rights Agreement between Buyer and Seller (the “Registration Rights Agreement”), shall be deemed withdrawn without any further action by Buyer or Seller.

Section 5.02 No Further Demands. Subject to Closing, Seller will not issue any additional demands under the Registration Rights Agreement until July 9, 2005.

ARTICLE VI

MISCELLANEOUS

Section 6.01. Successors and Assigns. This Agreement shall be binding upon, an shall inure to the benefit of, the parties hereto and their respective successors and assigns.

Section 6.02. Headings. The Article and Section headings in this Agreement are for convenience of reference only and shall not define or limit the provisions hereof.

Section 6.03. Governing Law. This Agreement shall be governed by and construed, interpreted and enforced in accordance with the laws of the State of Delaware without giving effect to the provisions, policies or principles thereof relating to choice or conflict of laws.

Section 6.04. Counterparts. This Agreement may be executed in counterparts, each of which when so executed shall be deemed an original and all of which shall constitute one and the same instrument.

<remainder of page intentionally left blank>

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

VESTA INSURANCE GROUP, INC.

By
Name: /s/ Norman W. Gayle III
Norman W. Gayle III

Title: President and CEO

AFFIRMATIVE INSURANCE HOLDINGS, INC.

By
Name: /s/ David B. Snyder
David B. Snyder

Title: Vice President

News Release

Contact: Stewart Yee

Investor Relations

Affirmative Insurance Holdings, Inc.
(972) 728-2117

AFFIRMATIVE INSURANCE HOLDINGS, INC. ANNOUNCES DEFINITIVE AGREEMENT TO BUY AFFIRMATIVE COMMON STOCK
FROM VESTA

ADDISON, Texas (May 19, 2005) – Affirmative Insurance Holdings, Inc. (Nasdaq: AFFM) announced today that it has signed a definitive agreement to purchase 2.0 million shares of Affirmative Insurance Holdings, Inc. (“Affirmative” or the “Company”) common stock currently held by Vesta Insurance Group, Inc. (“Vesta”), at a price of $14.00 per share. The Company expects the transaction to close on or about June 1, 2005, and intends to fund the purchase with a combination of cash on hand and additional debt.

In addition, the terms of the definitive agreement included Vesta’s withdrawal of its March 22, 2005 demand that Affirmative register approximately 3.0 million shares of its common stock. Pursuant to the terms of its original Registration Rights Agreement with Vesta dated July of 2004, the Company is planning to file a shelf registration statement with the Securities and Exchange Commission during the third quarter of 2005 to register the remaining shares of Affirmative held by Vesta.

“In light of the current competitive environment, we took this opportunity to prudently manage our capital structure and repurchase our shares at what we view as a very attractive price,” said Thomas E. Mangold, chief executive officer of Affirmative Insurance Holdings, Inc. “Our financial leverage following the transaction will remain at a level that will allow us to support our growth and pursue additional acquisition opportunities. This transaction is accretive to earnings per share and we believe creates long-term value for our shareholders. The withdrawal of the demand registration allows our management team to more fully focus on the business opportunities in front of us.”

ABOUT AFFIRMATIVE INSURANCE HOLDINGS, INC.
Headquartered in Addison, Texas, Affirmative Insurance Holdings, Inc., is a producer and provider of personal non-standard automobile insurance policies to individual consumers in highly targeted geographic markets. Affirmative currently offers products and services in 11 states, including Texas, Illinois, California and Florida.

Forward-Looking Statements Disclosure
Certain information in this news release and other statements or materials are not historical facts but are forward-looking statements relating to such matters as: assumed future results of the Company’s business; financial condition; liquidity; results of operations; plans; and objectives. In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, the Company provides the following cautionary remarks regarding important factors which, among others, could cause the Company’s actual results and experience to differ materially from the anticipated results or other expectations expressed in the Company’s forward-looking statements. The risks and uncertainties that may affect the operations, performance, results of the Company’s business, and the other matters referred to above include, but are not limited to: general volatility of the non-standard personal automobile and reinsurance markets; the market price of our common stock; changes in business strategy; severe weather conditions; availability, terms and deployment of capital; the degree and nature of competitor product and pricing activity; changes in the non-standard personal automobile insurance industry, interest rates or the general economy; identification and integration of potential acquisitions; claims experience; availability of qualified personnel; and the loss of one or more members of the Company’s management team.

# # #