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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 3
SCHEDULE 14D-9
Solicitation/Recommendation Statement Pursuant to
Section 14(d)(4) of the Securities Exchange Act of 1934
GUARANTY NATIONAL CORPORATION
(Name of Subject Company)
GUARANTY NATIONAL CORPORATION
(Name of Person(s) Filing Statement)
Common Stock, par value $1.00 per share
(Title of Class of Securities)
401192109
(CUSIP Number of Class of Securities)
Michael L. Pautler
Senior Vice President - Finance
Guaranty National Corporation
9800 South Meridian Boulevard
Englewood, Colorado 80112
(303) 754-8400
(Name, address and telephone number of person authorized
to receive notice and communications on behalf of the
person(s) filing statement)
Copy to:
Hardin Holmes, Esq.
Ireland, Stapleton, Pryor & Pascoe, P.C.
1675 Broadway, 26th Floor
Denver, Colorado 80202
(303) 623-2700
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This Statement amends the Schedule 14D-9 of Guaranty National
Corporation dated May 22, 1996, as previously amended by Amendment No. 1 dated
June 1, 1996, and Amendment No. 2 dated June 7, 1996 (the "Schedule 14D-9"), by
incorporating by reference herein the information set forth in Exhibits 15, 16,
17 and 18 hereto. This Statement also amends Items 3, 4 and 9 of the Schedule
14D-9 by adding the information set forth below. Except as otherwise indicated
herein, the Schedule 14D-9, as amended, remains unchanged in all respects.
Capitalized terms not otherwise defined herein are defined as set forth in the
Schedule 14D-9.
Item 3. IDENTITY AND BACKGROUND
(b) The portion of Item 3(b) of the Schedule 14D-9 entitled
"Background of the Offer; Appointment of the Special Committee" is amended and
supplemented as follows:
Between June 10, 1996 and June 17, 1996, counsel for the Company
discussed with counsel for Orion the possibility of making changes to the Offer
that would allow the Special Committee's financial advisor to render an opinion
that the Offer was fair, from a financial point of view, and permit the Special
Committee to recommend to the Company's Board of Directors that the Company
recommend to its shareholders the acceptance of the Offer.
On June 11, 1996, the Company announced that the Board meeting called
for that day to consider and act upon an amendment of the Company's Shareholder
Rights Plan to eliminate the exemption for Orion had been scheduled for Monday,
June 17, 1996.
On June 17, 1996, the Company announced that, due to travel schedule
conflicts, the Board meeting called for that day had been rescheduled for June
18, 1996.
Item 4. THE SOLICITATION OR RECOMMENDATION
The following information is added to Item 4 of the Schedule 14D-9:
On June 18, 1996, prior to the Board meeting, the Special Committee
(with Tucker Hart Adams absent) held a telephonic meeting at which the
Committee's counsel provided information about revisions to the Offer (the
"Revised Offer") which had been proposed at the end of the previous day. These
included an increase in the Offer price from $17.50 to $18.50 per share;
conditioning the Offer on its acceptance by a majority of the non-Orion shares;
and documenting through an amendment to Orion's existing shareholder agreement
with the Company the restrictions on future sales and purchases of shares by
Orion and the Company which are set forth on pages 3-4 of Amendment No. 1 to the
Company's Schedule 14D-9 dated June 1, 1996.
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Salomon Brothers then presented information updating its earlier
analyses (set forth at pages 5-11 of Amendment No. 2 to the Company's Schedule
14D-9 dated June 7, 1996) to reflect the Revised Offer and rendered an oral
opinion, subsequently confirmed in writing, indicating that Salomon considers
the Revised Offer to be fair, from a financial point of view, to the non-Orion
shareholders. The Special Committee unanimously determined to recommend to the
Board of Directors that the Company recommend acceptance of the Revised Offer by
the Company's shareholders.
In reaching its determination, the Special Committee considered a
number of factors, including without limitation, the following:
(I) the increased Offer price of $18.50 per share, and the fact that
it represents a premium of $2.66, or 17%, over the average closing price of
$15.84 per share during the twelve months prior to the Offer and a premium of
$2.38, or 14.7%, over the price of $16 1/8 per share at which the Shares were
trading immediately prior to the Offer;
(II) the opinion of the Special Committee's financial advisor that the
Revised Offer is fair, from a financial point of view, to the non-Orion
shareholders, and the analyses of various factors considered by the financial
advisor in reaching its opinion, including those disclosed in Amendment No. 2 to
the Schedule 14D-9;
(III) the Special Committee's familiarity with the Company's business,
financial condition, results of operations, current business strategy and
prospects, and the beneficial relationship between the Company and Orion over
the past twelve years;
(IV) the protections for holders of shares not tendered or accepted in
the Offer which are to be incorporated into the Shareholder Agreement among the
Company and Orion and its subsidiaries if Orion succeeds in purchasing 4,600,000
shares pursuant to the Revised Offer;
(V) the fact that Orion currently beneficially owns approximately
49.5% of the outstanding shares and has stated that it has no interest in
selling its Shares;
(VI) the likelihood that the Shares will continue to be traded on the
New York Stock Exchange and that the Company will remain a reporting company
under the Securities Exchange Act of 1934, as amended; and
(VII) the fact that shareholders who wish to retain a long-term
interest in the Company may do so by not tendering their Shares.
Immediately following the meeting of the Special Committee, a
telephonic meeting of the Board was held to consider the report and
recommendation of the Special Committee. The Board of Directors (with Ms. Adams
and Mr. Shepard absent and Messrs. Gruber, Hollen and
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Sanborn abstaining) unanimously voted to have the Company recommend to its
shareholders acceptance of the Revised Offer.
Subsequent to the Board meeting on June 18, 1996: Orion filed
Amendment No. 4 to its Schedule 14D-1 reflecting the Revised Offer and extending
its expiration date to July 1, 1996; Salomon Brothers delivered to the Special
Committee its opinion in the form attached as Exhibit 17 hereto; and the Company
and Orion entered into the amendment of the Shareholder Agreement in the form
attached as Exhibit 18 hereto.
Item 9. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 15 - Letter to Shareholders, dated June 19, 1996
Exhibit 16 - Press release issued on June 18, 1996 (not included in
copies mailed to shareholders)
Exhibit 17 - Opinion of Salomon Brothers Inc dated June 18, 1996.
Exhibit 18 - Amendment dated June 18, 1996 to the Shareholder Agreement
by and among Guaranty National Corporation, Orion Capital
Corporation and certain subsidiaries of Orion Capital
Corporation, as listed therein (not included in copies
mailed to shareholders)
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: June 19, 1996
GUARANTY NATIONAL CORPORATION
By: /s/ Michael L. Pautler
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Michael L. Pautler, Senior Vice President -
Finance and Treasurer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Description
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<S> <C>
Exhibit 15 - Letter to Shareholders, dated June 19, 1996
Exhibit 16 - Press release issued on June 18, 1996
Exhibit 17 - Opinion of Salomon Brothers Inc dated June 18, 1996
Exhibit 18 - Amendment dated June 18, 1996 to the Shareholder Agreement by and
among Guaranty National Corporation, Orion Capital Corporation and
certain subsidiaries of Orion Capital Corporation, as listed
therein (not included in copies mailed to shareholders)
</TABLE>
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EXHIBIT 15
GUARANTY NATIONAL CORPORATION
9800 SOUTH MERIDIAN BOULEVARD
ENGLEWOOD, COLORADO 80112
June 19, 1996
Dear Shareholder:
Pursuant to the recommendation of its Special Committee, the Board of
Directors of Guaranty National Corporation recommends acceptance of the amended
tender offer of Orion Capital Corporation and its subsidiaries ("Orion") for up
to 4,600,000 shares of GNC's stock. The Special Committee's recommendation was
based in part upon the opinion of its financial advisor that the amended offer
is fair, from a financial point of view, to the non-Orion shareholders. The
enclosed Amendment No. 3 to Schedule 14D-9 includes additional information with
respect to the Special Committee's recommendation as well as a copy of the
opinion of its financial advisor.
You are encouraged to read these materials carefully before making your own
determination as to whether to tender some or all of your Shares.
Sincerely,
Roger B. Ware
President and Chief Executive Officer
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EXHIBIT 16
June 18, 1996
FOR IMMEDIATE RELEASE
Contact: Mike Pautler
Senior Vice President of Finance
(303) 754-8701, or
Sharon McDougall
Director of Communications
(303) 754-8717
For: Guaranty National Corporation (NYSE: GNC)
GUARANTY NATIONAL CORPORATION
RECOMMENDS ACCEPTANCE OF THE TENDER OFFER
(Englewood, Colorado) - Guaranty National Corporation ("GNC") announced today
that, pursuant to the recommendation of its Special Committee, its Board of
Directors has recommended acceptance of an amended tender offer of Orion Capital
Corporation and its subsidiaries ("Orion") for up to 4,600,000 shares of GNC's
stock. The Special Committee has been informed that Orion will amend its tender
offer on June 18, 1996, to (1) increase the price from $17.50 to $18.50 per
share, (2) condition the offer upon its acceptance with respect to a not less
than 3,776,000 shares, and (3) confirm Orion's prior undertaking that, if at
least 4,600,000 shares are purchased pursuant to the tender offer, the existing
Shareholder Agreement dated November 7, 1991 between Orion and GNC will be
amended to incorporate certain restrictions on the purchase or sale by Orion and
the repurchase of shares by GNC which were set forth on pp. 3-4 of Amendment No.
1 to GNC's Schedule 14D-9, dated June 1, 1996. In addition, Orion extended the
expiration date of the tender offer until Monday, July 1, 1996.
Before making its recommendation, the Special Committee received a report from
its financial advisors, Salomon Brothers Inc, updating the previous analyses and
other information which Salomon Brothers had furnished to the Special Committee,
and the opinion of Salomon Brothers that the offer, as amended, was fair, from a
financial point of view, to GNC's non-Orion shareholders. GNC expects to mail to
its shareholders this week an amendment to its Schedule 14D-9 which will set
forth in more detail information concerning its recommendation.
Through its subsidiaries, Guaranty National writes specialty commercial and
private passenger automobile insurance, as well as collateral protection and
other commercial coverages. The Company is a leading provider of nonstandard
personal automobile insurance written through independent agents. A.M. Best
Company rates Guaranty National Insurance Company and its subsidiaries "A
(Excellent)" and Viking Insurance Company of Wisconsin and its affiliate "A-
(Excellent)". The Company's common stock is traded on the New York Stock
Exchange under the symbol GNC.
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EXHIBIT 17
June 18, 1996
Special Committee of the Board of Directors
Guaranty National Corporation
9800 South Meridian Boulevard
Englewood, CO 80112
Ladies and Gentlemen:
Orion Capital Corporation and certain affiliates (collectively, "Orion") have
revised their pending tender offer and are now offering to purchase up to
4,600,000 shares of common stock, par value $1.00 per share (the "Common
Stock"), of Guaranty National Corporation ("GNC" or the "Company") not owned by
Orion at a price of $18.50 per share net to the seller in cash (the "Revised
Orion Offer"). We understand that consummation of the Revised Orion Offer will
be conditioned upon the tender of a majority of the shares of Common Stock not
owned by Orion (the "Minimum Condition"). We also understand that Orion has
agreed to amend its existing Shareholder Agreement with the Company to provide,
under certain circumstances, certain restrictions on its ability to engage in
certain transactions involving the Company or the shares of Common Stock
following consummation of the Revised Orion Offer (the "Back-End Protections").
The terms of the Revised Orion Offer, including the increased price, the Minimum
Condition and the Back-End Protections, will be more fully set forth in an
Amendment (the "Amendment") to the Schedule 14D-1, dated May 8, 1996, as
previously amended (the "Schedule 14D-1"), filed by Orion with the Securities
and Exchange Commission. The Revised Orion Offer, collectively with the
resulting minority ownership of Common Stock, is referred to herein as the
"Revised Orion Proposal." You have asked for our opinion as investment bankers
as to the fairness of the Revised Orion Proposal, from a financial point of
view, to the holders of Common Stock other than Orion (the "Non-Orion
Stockholders").
As you are aware, we have acted as financial advisor to the Special Committee of
the Board of Directors of the Company in connection with its review of the
Revised Orion Proposal and will receive a fee for our services, including a
substantial fee in the event certain transactions are consummated. In addition,
in the ordinary course of our business, we may actively trade the debt and
equity securities of both the Company and Orion for our own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
In connection with rendering our opinion, we have reviewed and analyzed material
bearing upon the financial and operating conditions and prospects of the Company
including, among other things, the following: (i) the Schedule 14D-1; (ii)
certain publicly available information concerning GNC, including the Annual
Reports on Form 10-K of GNC for the years ended
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December 31, 1995 and December 31, 1994, and the Quarterly Report on Form 10-Q
of GNC for the quarter ended March 31, 1996; (iii) certain internal information
of the Company, primarily financial in nature (including projections, forecasts
and analyses prepared by or on behalf of the Company's management), concerning
the business, assets, liabilities, operations and prospects of the Company
furnished to us by the Company for purposes of our analysis, including the
unaudited financial statements of GNC for the four month period ended April 30,
1996 prepared by the Company; (iv) statutory financial information of GNC's
insurance subsidiaries for the years ended December 31, 1995 and December 31,
1994 and for the three-month period ended March 31, 1996; (v) certain publicly
available information concerning the trading of, and the trading market for, the
Common Stock; (vi) certain publicly available information with respect to
certain publicly traded companies that we believe to be comparable to the
Company and the trading markets for certain of such other companies' securities;
(vii) certain publicly available information concerning the nature and terms of
certain other acquisition transactions and certain transactions involving the
acquisition of minority interests by controlling stockholders that we consider
relevant to our inquiry; (viii) the financial terms of the Revised Orion
Proposal; and (ix) a draft, dated June 17, 1996, of the amendment to the
Shareholder Agreement to be executed to implement the Back-End Protections.
According to the Schedule 14D-1, Orion has no present intention to seek a merger
or other business combination with the Company to acquire the remaining shares.
We have also met with certain officers and employees of the Company to discuss
matters we believe relevant to our inquiry including the past and current
business operations, financial condition and prospects of the Company.
In our review and analysis and in arriving at our opinion, we have assumed and
relied upon the accuracy and completeness of all of the financial and other
information provided to us or publicly available and have neither attempted
independently to verify nor assumed any responsibility for verifying any of such
information. With respect to financial projections and forecasts, we have
assumed that they were reasonably prepared and reflect the best currently
available estimates and judgment of the Company's management as to the future
financial performance of the Company and we express no view with respect to such
projections or forecasts or the assumptions on which they are based. We have
not made or obtained or assumed any responsibility for making or obtaining any
independent evaluations or appraisals of any of the Company's assets, properties
or facilities, nor have we been furnished with any such evaluations or
appraisals. We have assumed that the Revised Orion Offer, as disclosed in the
Amendment, will not incorporate any changes to the pending tender offer by Orion
other than the increase in the price offered, the inclusion of the Minimum
Condition and the agreement with respect to, and disclosure of, the Back-End
Protections and that the definitive amendment to the Shareholder Agreement will
not, when it is executed, contain any terms or provisions that differ
substantially from those contained in the draft we reviewed.
In conducting our analysis and arriving at our opinion as expressed herein, we
have considered such financial and other factors as we have deemed appropriate
under the circumstances including, among others, the following: (i) the
historical and current financial position and results of operations of the
Company; (ii) the business prospects of the Company; (iii) the
<PAGE>
historical and current market for the Common Stock and for the equity securities
of certain other companies that we believe to be comparable to the Company; and
(iv) the nature and terms of certain other acquisition transactions and
acquisitions of minority interests by controlling shareholders that we believe
to be relevant. We have taken into consideration the current ownership of Orion
of approximately 49.5% of the outstanding Common Stock and the fact that Orion
has stated that it does not intend to sell such Common Stock. We have also taken
into account our assessment of general economic, market and financial conditions
as well as our experience in connection with similar transactions and securities
valuation generally. Our Opinion necessarily is based upon conditions as they
exist and can be evaluated on the date hereof and we assume no responsibility to
update or revise our opinion based upon circumstances or events occurring after
the date hereof. Our opinion is for the sole benefit of the Special Committee in
its consideration of the Revised Orion Proposal and is, in any event, limited to
the fairness, from a financial point of view, of the Revised Orion Proposal to
the Non-Orion Stockholders and does not constitute a recommendation to any Non-
Orion Stockholder as to whether such holder should tender shares of Common Stock
in the Revised Orion Offer.
Based upon and subject to the foregoing, it is our opinion as investment bankers
that as of the date hereof, the Revised Orion Proposal is fair, from a financial
point of view, to the Non-Orion Stockholders.
Very truly yours,
/s/ Salomon Brothers Inc
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EXHIBIT 18
AMENDMENT TO SHAREHOLDER AGREEMENT
This Amendment is made as of June 18, 1996 (the "Amendment") by and
among Guaranty National Corporation, a Colorado corporation ("Guaranty"), Orion
Capital Corporation, a Delaware corporation ("Orion") and certain of Orion's
wholly-owned subsidiaries, as listed on the signature page hereof (the
"Subsidiaries"); this Amendment further revises that certain Shareholder
Agreement dated as of November 7, 1991 by and among Guaranty, Orion and certain
subsidiaries of Orion named therein. (The November 7, 1991 Shareholder
Agreement, as previously amended on February 2, 1994 and March 2, 1995, is
herein referred to as the "Shareholder Agreement.") Terms defined in the
Shareholder Agreement and not otherwise defined herein shall have the meanings
ascribed to such terms in the Shareholder Agreement.
WHEREAS, Orion and the Subsidiaries currently own approximately 49.5%
of the outstanding Guaranty Common Stock, including certain shares received in
1995 on conversion of Guaranty's 7.85% Subordinated Notes due July 1, 2003 (the
"7.85% Notes"); and
WHEREAS, Orion and certain of the Subsidiaries have made a tender
offer to purchase up to 4,600,000 additional shares of Guaranty Common Stock;
and
WHEREAS, Guaranty, Orion and the Subsidiaries have determined that it
would be in their mutual best interests further to amend the Shareholder
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, and subject to the terms and conditions hereinafter
set forth, Guaranty, Orion and the Subsidiaries agree to further amend the
Shareholder Agreement, as follows:
Two additional subsidiaries of Orion, EBI Indemnity Company and
SecurityRe, Inc., are hereby added as signatories to this Shareholder Agreement
inasmuch as such companies currently hold shares of outstanding Guaranty Common
Stock, which shares were received on conversion of the 7.85% Notes.
Subject to at least 4,600,000 shares of outstanding Guaranty Common
Stock having been validly tendered, accepted for payment and paid for pursuant
to the tender offer, then, effective upon the closing of the purchase of such
shares, the Section entitled "Miscellaneous" shall be amended by adding a new
Subsection 3.10 to the Shareholder Agreement, as follows:
3.10 Further Agreements
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(viii) Orion and the Subsidiaries will not purchase, prior to July 1,
1999, additional shares of Guaranty Common Stock (if after giving effect to such
purchase they would own more than 81% of the outstanding Guaranty Common Stock)
other than pursuant to an offer made for all shares of outstanding Guaranty
Common Stock not held by them, which offer is conditioned upon the acceptance
thereof by at least a majority of the shares of Guaranty Common Stock then
outstanding and not held by Orion and the Subsidiaries.
(ix) If an offer is made to holders of shares of outstanding
Guaranty Common Stock, as described in subparagraph (a) above, prior to July 1,
1999, Orion and the Subsidiaries will offer a purchase price involving
consideration equal to at least $18.50 per share.
(x) Orion and the Subsidiaries will support the adoption of a
policy by the Board of Directors of Guaranty that any repurchase of shares of
outstanding Guaranty Common Stock by Guaranty prior to July 1, 1999 should be
approved by a majority of those members of the Board of Directors who are
independent of and not employed by any of Orion or the Subsidiaries.
(xi) If, at any time during the five-year period following July 1,
1996, Orion and the Subsidiaries should wish to sell as a block 90% or more of
the aggregate number of shares then owned by them, or propose a merger or
consolidation involving Guaranty, they will not do so unless 1) in the case of a
sale of 90% or more of the aggregate number of shares owned by Orion and the
Subsidiaries, the purchaser of such shares undertakes to offer to purchase all
other shares of Guaranty Common Stock outstanding for consideration of
substantially equivalent value to that offered to Orion and the Subsidiaries or
2) in the case of a merger or consolidation, all shares are exchanged for
substantially equivalent value.
All other terms of the Shareholder Agreement shall continue in full
force and effect.
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement as of the day and year set forth in the heading hereof.
GUARANTY NATIONAL CORPORATION
By:/s/ Arthur J. Mastera
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Arthur J. Mastera
Senior Vice President
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ORION CAPITAL CORPORATION
By:/s/ Alan R. Gruber
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Alan R. Gruber
Chairman of the Board and
Chief Executive Officer
THE CONNECTICUT INDEMNITY COMPANY
CONNECTICUT SPECIALTY INSURANCE
COMPANY
DESIGN PROFESSIONALS INSURANCE
COMPANY
EBI INDEMNITY COMPANY
EMPLOYEE BENEFITS INSURANCE COMPANY
THE FIRE & CASUALTY INSURANCE
COMPANY OF CONNECTICUT
SECURITY INSURANCE COMPANY OF
HARTFORD
SECURITY REINSURANCE COMPANY
By:/s/ Alan R. Gruber
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Alan R. Gruber
Chairman
SECURITYRE, INC.
By:/s/ Raymond J. Schuyler
-----------------------------
Raymond J. Schuyler
Senior Vice President
-Investments
