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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
(AMENDMENT NO. 2)
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
GRYPHON HOLDINGS INC.
(Name of Subject Company)
GRYPHON HOLDINGS INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, $.01 PAR VALUE
(Title of Class of Securities)
400515 10 2
(CUSIP Number of Class of Securities)
Stephen A. Crane
Chief Executive Officer and President
Gryphon Holdings Inc.
30 Wall Street
New York, New York 10005-2201
(212) 825-1200
(Name, address and telephone number of person authorized to receive notice and
communications on behalf of the person(s) filing statement)
Copies to:
Robert M. Coffee John T. O'Connor, Esq.
Senior Vice President, Milbank, Tweed, Hadley & McCloy
General Counsel and Secretary One Chase Manhattan Plaza
Gryphon Holdings Inc. New York, New York 10005-2201
30 Wall Street (212) 530-5000
New York, New York 10005-2201
(212) 825-1200
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This Amendment No. 2 amends and supplements the Solicitation/
Recommendation Statement on Schedule 14D-9, dated November 3, 1998, as amended
(the "Schedule 14D-9"), filed by Gryphon Holdings Inc., a Delaware corporation
(the "Company"), relating to the tender offer disclosed in the Schedule 14D-1,
dated October 20, 1998, as amended (the "Schedule 14D-1") of Markel
Corporation, a Virginia corporation ("Markel"), and its wholly-owned
subsidiary, MG Acquisition Corp., a Delaware corporation ("MG" and, together
with Markel, the "Bidder"), to purchase all the outstanding shares of common
stock, $.01 par value, of the Company, including the associated Rights.
Capitalized terms used and not defined herein shall have the meanings set forth
in the Schedule 14D-9.
Item 2. Tender Offer of the Bidder.
Item 2 is hereby amended and supplemented by inserting the following at
the end thereof:
On November 17, 1998, the Offer was amended by the Bidder to increase the
cash purchase price for the outstanding Shares from $18.00 to $19.00 per Share
(the "Amended Offer"). The Amended Offer includes a new condition which subjects
the Offer to the satisfactory completion by Markel of a due diligence review of
the Company. A complete description of the Amended Offer is contained in the
Bidder's amendment to the Schedule 14D-1, dated November 17, 1998.
Item 7. Certain Negotiations and Transactions by the Subject Company.
Item 7(a) is hereby amended and supplemented by inserting the following at
the end thereof:
On November 17, 1998, the Company entered into a letter agreement with
Markel (the "Markel Confidentiality Agreement"). The Markel Confidentiality
Agreement provides that Markel will complete a due diligence review of the
Company as promptly as possible and the Company will provide information and
cooperate with Markel to enable Markel to complete such a review. Markel further
agreed to announce the Amended Offer. The special committee of the Board of
Directors of the Company (the "Special Committee") agreed that upon completion
of Markel's due diligence review of the Company, the Special Committee will
recommend to the Board of Directors that the Board of Directors and the
Company's shareholders accept the Amended Offer, subject to there being no
higher offers to purchase the Company outstanding at that time. A copy of the
Markel Confidentiality Agreement is filed as Exhibit 9 hereto and is
incorporated herein by reference. The foregoing description is qualified in its
entirety by reference to the text of the Markel Confidentiality Agreement.
Item 9. Material to be Filed as Exhibits.
Item 9 is hereby amended and supplemented by inserting the following at
the end thereof:
Exhibit 9 Letter Agreement, dated November 17, 1998, between the Company
and Markel Corporation.
Exhibit 10 Press Release issued by the Company on November 17, 1998.
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2
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: November 17, 1998
GRYPHON HOLDINGS INC.
By: /s/ Stephen A. Crane
----------------------------------------
Name: Stephen A. Crane
Title: President and Chief Executive
Officer
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November 17, 1998
Markel Corporation
4551 Cox Road
Glen Allen, Virginia 23060-3382
Attention: Mr. Steven A. Markel
Vice-Chairman
Gentlemen:
In connection with your consideration of a possible negotiated transaction
by you or one or more of your affiliates involving Gryphon Holdings Inc. (the
"Company") (a "Transaction"), the Company, Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ"), acting as the Company's exclusive financial
advisor in connection with the proposed Transaction, and their respective
advisors and agents are prepared to make available to you certain information
which is non-public, confidential or proprietary in nature ("Evaluation
Material").
By execution of this letter agreement (the "Agreement"), you agree to
treat all Evaluation Material confidentially and to observe the terms and
conditions set forth herein. For purposes of this Agreement, Evaluation Material
shall include all information, regardless of the form in which it is
communicated or maintained (whether prepared by the Company, DLJ or otherwise,
and whether written or oral, provided after the date of this Agreement, or
specifically identified as "confidential") that contains or otherwise reflects
information concerning the Company that you or your Representatives (as defined
below) may be provided by or on behalf of the Company or DLJ in the course of
your evaluation of a possible Transaction. The term "Evaluation Material" shall
also include all reports, analyses, notes or other information that are based
on, contain or reflect any Evaluation Material ("Notes"). The term "Evaluation
Material" does not include those portions of the Evaluation Material that (i)
become generally available to the public other than as a result of a disclosure
by you or any of your Representatives, (ii) were available to you on a
non-confidential basis prior to the disclosure of such Evaluation Material to
you pursuant to this Agreement, provided that the source of such information was
not known by you or any of your Representatives, after reasonable investigation,
to be bound by a confidentiality agreement with or other contractual, legal or
fiduciary obligation of confidentiality to the Company or any of its affiliates
with respect to such material or (iii) become available to you on a
non-confidential basis from a source other than the Company or its agents,
advisors or representatives provided that the source of such information was not
known by you or any of your Representatives, after reasonable investigation, to
be bound by a confidentiality agreement with or other contractual, legal or
fiduciary obligation of confidentiality to the Company or any of its affiliates
with respect to such material.
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Mr. Steven A. Markel
Markel Corporation
Page 2 November 17, 1998
You agree that you will not use the Evaluation Material for any purpose
other than determining whether you wish to enter into a Transaction. Except as
may be required by law, you agree not to disclose or allow disclosure to others
of any Evaluation Material; except that, you may disclose Evaluation Material to
your directors, officers, employees, partners, affiliates, agents, advisors or
representatives (hereinafter, "Representatives"), to the extent necessary to
permit such Representatives to assist you in making the determination referred
to in the prior sentence, provided, however, that you shall require each such
Representative to be bound by the terms of this Agreement to the same extent as
if they were parties hereto and you shall be responsible for any breach of this
Agreement by any of your Representatives.
You agree that for a period of 18 months from the date of the signing of
this Agreement you and your affiliates will not knowingly, as a result of
knowledge or information obtained from the Evaluation Material or otherwise in
connection with a possible Transaction: (i) divert or attempt to divert any
business or customer of the Company or any of its affiliates; nor (ii) employ or
attempt to employ or divert an employee of the Company or any of its affiliates.
Although the Company and DLJ have endeavored to include in the Evaluation
Material information known to them which they believe to be relevant for the
purpose of your investigation, you understand and agree that, except as may be
set forth in a definitive agreement, none of the Company, DLJ or any of their
affiliates, agents, advisors or representatives (i) has made or makes any
representation or warranty, expressed or implied, as to the accuracy or
completeness of the Evaluation Material or (ii) shall have any liability
whatsoever to you or your Representatives relating to or resulting from the use
of the Evaluation Material or any errors therein or omissions therefrom.
In the event that you or anyone to whom you transmit any Evaluation
Material in accordance with this Agreement are requested or required (by
deposition, interrogatories, requests for information or documents in legal
proceedings, subpoenas, civil investigative demand or similar process), in
connection with any proceeding, to disclose any Evaluation Material, you will
give the Company prompt written notice of such request or requirement so that
the Company may seek an appropriate protective order or other remedy and/or
waive compliance with the provisions of this Agreement, and you will cooperate
with the Company to obtain such protective order. In the event that such
protective order or other remedy is not obtained or the Company waives
compliance with the relevant provisions of this Agreement, you (or such other
persons to whom such request is directed) will furnish only that portion of the
Evaluation Material which, in the opinion of your counsel, is legally required
to be disclosed and, upon the Company's request, and at the Company's expense,
use reasonable efforts to obtain assurances that confidential treatment will be
accorded to such information.
If you decide that you do not wish to proceed with a Transaction, you will
promptly notify DLJ of that decision. In that case, or if the Company shall
elect at any time to terminate further access by you to the Evaluation Material
for any reason, you will, within two business days, redeliver to us all copies
of the Evaluation Material, destroy all Notes and deliver to DLJ and the Company
a certificate executed by one of your duly authorized officers indicating that
the requirements of this sentence have been satisfied in full. Notwithstanding
the return or destruction of Evaluation Material and Notes, you and your
Representatives will continue to be bound by your obligations of confidentiality
and other obligations hereunder.
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Mr. Steven A. Markel
Markel Corporation
Page 3 November 17, 1998
The Company acknowledges the tender offer, disclosed in the Schedule
14D-1, dated October 20, 1998, of Markel Corporation ("Markel") and its
wholly-owned subsidiary MG Acquisition Corp. ("MG"), to purchase all of the
outstanding shares of common stock of the Company (the "Shares") at a price of
$18.00 per share net to the seller in cash on the terms and subject to the
conditions set forth in Markel's and MG's Offer to Purchase, dated October 20,
1998, as amended from time to time (the "Offer to Purchase") and the related
Letter of Transmittal (which together, and as they may be amended from time to
time, constitute the "Offer"). In exchange for the Company's agreements
contained herein you agree (i) to publicly announce an amendment to your Offer
to increase the Offer to $19.00 per share net to the seller in cash subject to
your completion of due diligence and (ii) you will use all reasonable efforts to
complete such due diligence as promptly as possible but in any event within 5
days of the date of this letter agreement. The Company agrees that it and its
advisors will (i) use all reasonable efforts to provide information and
otherwise cooperate with you to enable you to complete due diligence as promptly
as possible but in any event within 5 days of the date of this letter agreement
and (ii) commence good faith negotiation of transaction terms. The Company and
the Special Committee acknowledge and agree that you may publicly disclose that
the Special Committee has agreed that upon completion of your due diligence it
will recommend to the Board of Directors of the Company that the Board and the
Company's shareholders accept an offer of $19.00 per share net to the seller in
cash, subject to their being no higher offers to purchase the Company
outstanding at that time. You agree that, prior to December 31, 1998, unless
such shall have been specifically approved and authorized by resolution of the
Board of Directors of the Company, you shall not, and you shall cause MG and any
other affiliate of Markel not to, accept for purchase any Shares under or
pursuant to the Offer.
You agree that, for a period of six (6) months from the date of this
agreement, unless such shall have been specifically invited in writing by the
Board of Directors of the Company (or a Committee thereof), neither you nor any
of your Representatives will in any manner, directly or indirectly, other than
pursuant to the Offer and in accordance with the provisions of the preceding
paragraph, (a) effect or seek, offer or propose (whether publicly or otherwise)
to effect, or cause or participate in or in any way assist any other person to
effect or seek, offer or propose (whether publicly or otherwise) to effect or
participate in, (i) any acquisition of any securities (or beneficial ownership
thereof) or assets of the Company or any of its subsidiaries; (ii) any tender or
exchange offer or merger or other business combination involving the Company or
any of its subsidiaries; (iii) any recapitalization, restructuring, liquidation,
dissolution or other extraordinary transaction with respect to the Company or
any of its subsidiaries (each of the events described in the foregoing clauses
(i), (ii) and (iii) being referred to as an "Alternative Transaction"); or (iv)
any "solicitation" of "proxies" (as such terms are used in the proxy rules of
the Securities and Exchange Commission) or consents to vote, or seek to advise
or influence any person with respect to the voting of, any voting securities of
the Company, (b) form, join or in any way participate in a "group" (as defined
under the Securities Exchange Act of 1934, as amended), (c) otherwise act, alone
or in concert with others, to seek to control or influence the management, Board
of Directors or policies of the Company, (d) take any action which might force
the Company to make a public announcement regarding any of the types of matters
set forth in (a) above, or (e) enter into any discussions or arrangements with
or advise, assist or encourage, any third party with respect to any of the
foregoing, or disclose any intention, plan or arrangement inconsistent with the
foregoing. You also agree during any such period not to request the Company (or
its directors, officers, employees or agents), directly or indirectly, to amend
or waive any provision of this paragraph (including this sentence). If
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Mr. Steven A. Markel
Markel Corporation
Page 4 November 17, 1998
at any time during the period set forth in the first sentence of this paragraph
you are approached by any third party concerning your or such third party's
participation in any of the activities described in (a), (b) or (c) above, you
will promptly inform the Company of the nature of such contact and the parties
thereto.
Notwithstanding anything to the contrary in the two preceding paragraphs,
the Company hereby agrees that, (A) in the event the Company enters into or
announces an Alternative Transaction with any party other than you or one of
your affiliates, the provisions of the two preceding paragraphs shall not
prohibit you from making an offer to purchase all of the outstanding Shares of
the Company for a purchase price per share greater than 105% of the per share
consideration being offered in the Alternative Transaction and (B) in the event
the Company does not accept your offer of $19 per share in cash upon completion
of your due diligence or in the event the Company has not announced or entered
into a Transaction by December 31, 1998, nothing contained herein shall preclude
you from pursuing the Offer on such terms and conditions as you deem
appropriate. In addition, notwithstanding anything to the contrary in the
preceding two paragraphs, the Company agrees that the provisions in the
preceding two paragraphs shall not prohibit you from making such offer or other
response as you deem appropriate in response to an Alternative Transaction which
is not proposed or solicited by the Company.
You understand that except as expressly set forth in this Agreement (i)
the Company and DLJ shall conduct the process for a possible Transaction as they
in their sole discretion shall determine (including, without limitation,
negotiating with any prospective buyer and entering into definitive agreements
without prior notice to you or any other person), (ii) any procedures relating
to such a Transaction may be changed at any time without notice to you or any
other person, (iii) the Company shall have the right to reject or accept any
potential buyer, proposal or offer, for any reason whatsoever, in its sole
discretion, and (iv) neither you nor any of your Representatives shall have any
claims whatsoever against the Company or DLJ or any of their respective
directors, officers, stockholders, owners, affiliates or agents arising out of
or relating to such a Transaction (other than those against the parties to a
definitive agreement with you in accordance with the terms thereof). You and the
Company agree that unless and until a definitive agreement between the Company
and you with respect to any Transaction has been executed and delivered, neither
the Company nor you will be under any legal obligation of any kind whatsoever
with respect to such a Transaction except in the case of this Agreement, for the
matters specifically agreed to herein.
It is further understood and agreed that DLJ will arrange for appropriate
contacts for due diligence purposes. It is also understood and agreed that all
(i) communications regarding a possible Transaction, (ii) requests for
additional information, (iii) requests for facility tours or management meetings
and (iv) discussions or questions regarding procedures, will be submitted or
directed exclusively to DLJ and/or Mr. Robert M. Baylis (the chairman of the
Special Committee of the Board of Directors that has been established in
connection with a possible Transaction), and that none of you or your
Representatives who are aware of the Evaluation Material and/or the possibility
of a Transaction will initiate or cause to be initiated any communication with
any director, officer or employee of the Company (other than Mr. Baylis)
concerning the Evaluation Material or a Transaction.
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Mr. Steven A. Markel
Markel Corporation
Page 5 November 17, 1998
Each of you and the Company agree that money damages would not be a
sufficient remedy for any breach of this Agreement by the parties or their
Representatives, that in addition to all other remedies the non-breaching party
shall be entitled to specific performance and injunctive or other equitable
relief as a remedy for any such breach or threatened breach, and that the
breaching party shall not oppose the granting of such relief, and the breaching
party further agrees to waive, and to use its best efforts to cause its
Representatives to waive, any requirement for the securing or posting of any
bond in connection with such remedy. Such remedy shall not be deemed to be the
exclusive remedy for a breach of this Agreement, but shall be in addition to all
other remedies available for all damages, costs and damages, costs and expenses
(including reasonable attorneys' fees) incurred in this regard. In the event of
litigation relating to this letter agreement, if a court of competent
jurisdiction determines that a party or any of its Representatives have breached
this letter agreement, such party shall be liable and pay to the other the
reasonable legal fees incurred in connection with such litigation, including any
appeal therefrom.
The Company reserves the right to assign its rights, powers and privileges
under this letter agreement (including, without limitation, the right to enforce
the terms of this letter agreement) to any person who enters into a Transaction.
This Agreement shall be binding on the respective successors and assigns of the
parties hereto and shall inure to the benefit of and be enforceable by the
respective successors in interest and assigns of the parties hereto.
All modifications of, waivers of and amendments to this Agreement or any
part hereof must be in writing signed on behalf of you and the Company or by you
and DLJ, as agent for the Company. You acknowledge that the Company is intended
to be benefited by this Agreement and that the Company shall be entitled, either
alone or together with DLJ, to enforce this Agreement and to obtain for itself
the benefit of any remedies that may be available for the breach hereof.
It is further understood and agreed that no failure or delay by the
Company in exercising any right, power or privilege under this Agreement shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise of any right, power or privilege
hereunder.
You hereby irrevocably and unconditionally submit to the exclusive
jurisdiction of any State or Federal court sitting in either New York City or
Wilmington, Delaware over any suit, action or proceeding arising out of or
relating to this letter. You hereby agree that service of any process, summons,
notice or document by U.S. registered mail addressed to you shall be effective
service of process for any action, suit or proceeding brought against you in any
such court. You hereby irrevocably and unconditionally waive any objection to
the laying of venue of any such suit, action or proceeding brought in any such
court and any claim that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum. You agree that a final judgment
in any such suit, action or proceeding brought in any such court shall be
conclusive and binding upon you and may be enforced in any other courts to whose
jurisdiction you are or may be subject, by suit upon such judgment or in any
other manner provided by law.
Any notice, request, demand, or other communication required or permitted
to be made under this Agreement shall be in writing and shall be delivered
personally or shall be sent by facsimile transmission. Any such notice shall be
deemed given when so delivered personally or sent
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Mr. Steven A. Markel
Markel Corporation
Page 6 November 17, 1998
by facsimile transmission (and confirmed to have been received) to the address
set forth below (or to any other address subsequently furnished in writing by
any party hereto, as the case may be, in accordance with this paragraph), if to
you, to 4551 Cox Road, Glen Allen, Virginia 23060-3382; if to the Company to 30
Wall Street, New York, New York 10005-2201.
In the event that any provision or portion of this letter is determined to
be invalid or unenforceable for any reason, in whole or in part, the remaining
provisions of this letter shall be unaffected thereby and shall remain in full
force and effect to the fullest extent permitted by applicable law. The parties
hereto shall endeavor in good faith negotiations to replace any invalid or
unenforceable provision, the effect of which comes as close as possible to that
of the invalid or unenforceable provision.
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Mr. Steven A. Markel
Markel Corporation
Page 7 November 17, 1998
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York applicable to contracts made,
executed and delivered and performed wholly within the State of New York,
without regard to the conflicts of laws principles thereof.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original but all of which shall constitute the same
agreement.
If you are in agreement with the foregoing, please so indicate by signing,
dating and returning one copy of this Agreement, which will constitute our
agreement with respect to the matters set forth herein.
Very truly yours,
GRYPHON HOLDINGS INC.
By:
_________________________________
Scott Huntsman
Vice President
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
as Exclusive Agent
Agreed and Accepted:
MARKEL CORPORATION
By:____________________________
Title:_________________________
Date:__________________________
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GRYPHON ENTERS INTO CONFIDENTIALITY
AGREEMENT WITH MARKEL
New York, New York, November 17, 1998 -- Gryphon Holdings Inc. announced today
that it has entered into a confidentiality agreement with Markel Corporation
and will provide information and cooperate with Markel to enable Markel to
complete a due diligence review of the Company as promptly as possible.
Markel announced today that it is raising its current $18.00 per share all-cash
offer for all of Gryphon's common stock to $19.00 per share in cash. The $19.00
offer is subject to satisfactory completion of the due diligence review. The
Special Committee of the Board of Directors of the Company has agreed that upon
completion of Markel's due diligence review, the Special Committee will
recommend acceptance of Markel's $19.00 offer by the Board and the Company's
shareholders, subject to there being no higher offers to purchase the Company
outstanding at that time. The parties will immediately commence good faith
negotiation of transaction terms.
Gryphon Holdings operates through its main subsidiary, Gryphon Insurance Group,
as a specialty property and casualty underwriting organization. The Company's
wholly owned insurance subsidiaries are Associated International Insurance
Company, Calvert Insurance Company, and The First Reinsurance Company of
Hartford.
