SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
(AMENDMENT NO. 4)
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
<PAGE>
This Amendment No. 4 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 25, 1998, the Bidder announced that it is continuing its
$19.00 per Share all-cash Offer for the outstanding Shares. Thereafter, the
Bidder filed with the Securities and Exchange Commission a supplement to the
Offer to Purchase, dated December 3, 1998 (the "Supplement"). In connection
therewith, the Company, Markel and MG have entered into an Agreement and Plan of
Merger, dated as of November 25, 1998 (the "Merger Agreement"), as described in
Item 3(b) below.
Item 3. Identity and Background
Item 3(b) is hereby amended and supplemented by inserting the following
prior to the last paragraph therein:
The Merger Agreement provides that, following the consummation of the
Offer and the satisfaction or waiver of certain conditions, MG will be merged
with and into the Company (the "Merger"), with the Company continuing as the
surviving corporation. In the Merger, each outstanding Share (other than Shares
held by the Company or any subsidiary of the Company, Markel or any wholly-owned
subsidiary of Markel, which Shares will be cancelled, and other than Shares, if
any, held by shareholders who perfect any appraisal rights they may have under
the Delaware General Corporation Law) will, by virtue of the Merger and without
any action by the holder thereof, be converted into the right to receive $19.00
per Share. The description of the terms of the Merger Agreement contained in the
Supplement under the heading "Purpose of the Offer and the Merger; Plans for the
Company; Certain Considerations--The Merger Agreement" are incorporated herein
by reference.
Item 4. The Recommendation.
Item 4 is hereby amended by deleting the text thereunder and inserting
in its place the following:
(a) Recommendation of the Board of Directors.
At a meeting held on November 24, 1998, the Board, by unanimous vote
(i) determined that the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger, are fair to, and in the best
interests of, the holders of Shares, (ii) approved and adopted the Merger
Agreement, the Offer and the transactions contemplated thereby, (iii)
recommended that the shareholders of the Company accept the Offer and, if
required by the Delaware General Corporation Law, vote in favor of the Merger,
(iv) approved an amendment to the Rights Agreement, which is described under
Item 8(b) below, and (v) exempted the Offer, the Merger, the Merger Agreement
and the transactions contemplated thereby from the provisions of Section 203 of
the Delaware General Corporation Law. ACCORDINGLY, THE BOARD RECOMMENDS THAT THE
SHAREHOLDERS OF THE COMPANY TENDER THEIR SHARES PURSUANT TO THE OFFER. A copy of
a letter to the shareholders of the Company communicating the Board's
recommendation is filed herewith as Exhibit 13.
<PAGE>
(b) Reasons for the Recommendation.
In reaching the determination and recommendation set forth in paragraph
(a) above, the Board considered numerous factors including, without limitation,
the following:
(i) The historical and recent market prices of the Common Stock and the
fact that the cash offer price of $19.00 per Share provided for in the Offer
represents a premium of 24% over the average trading prices of the Common Stock
for the 60-day period prior to Markel's first public announcement of an offer to
acquire the Company on September 1, 1998.
(ii) Presentations by the Company's management relating to the
Company's financial condition and future prospects.
(iii) Presentations by Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ") and the written opinion of DLJ delivered on November 24,
1998 that, as of such date and based upon its review and analysis and subject to
the limitations set forth therein, the $19.00 per Share cash consideration to be
received by the holders of Shares in the Offer and the Merger, taken together,
is fair to such holders from a financial point of view. A copy of the written
opinion of DLJ, which sets forth the procedures followed, matters considered,
assumptions made and limitations of the review undertaken by DLJ in rendering
its opinion, is attached as Exhibit 14 hereto and is incorporated herein by
reference. Shareholders are urged to read carefully the opinion of DLJ in its
entirety.
(iv) The terms and conditions of the Merger Agreement and, in
particular, the fact that the Company retained the ability to accept a superior
offer, subject to paying a $5 million termination fee plus expenses, and that
Markel has the ability to terminate the Offer and the Merger Agreement only in a
limited number of customary circumstances.
(v) The fact that the Offer and the Merger are structured as a cash
tender offer for all of the outstanding Shares, which permits all the holders of
Shares to participate on the same basis.
(vi) The Board's familiarity with the business, assets, financial
condition, results of operations and current business strategy and future
prospects of the Company, the nature of the industry in which the Company
operates and the Company's competitive position in such industry, and its belief
that the price per Share offered in the Offer and the Merger reflects the values
inherent in the Company.
(vii) The fact that no satisfactory indications of interest to acquire
the Company on more attractive terms were forthcoming at this time after the
Company contacted several potential purchasers.
(viii) Markel's ability to finance the acquisition and the absence of
any financing condition in the Offer and the Merger Agreement.
In view of the variety of factors considered in connection with its
evaluation of the Merger Agreement, the Board did not find it practicable to,
and did not, quantify or otherwise assign relative weights to the specific
factors considered in reaching its determination. In addition, individual
members of the Board may have given different weights to different factors.
<PAGE>
Item 6. Recent Transactions and Intent with Respect to Securities.
Item 6(b) hereby amended by deleting the paragraph thereunder and
inserting in its place the following:
To the best of the Company's knowledge, each of the Company's directors
and executive officers currently intends to tender to the Bidder all Shares
which are held of record or beneficially owned by such persons.
Item 8. Additional Information to be Furnished.
Reference is hereby made to the Offer to Purchase and the related
Letter of Transmittal, which are attached as Exhibits 15 and 16 hereto,
respectively, and are incorporated herein by reference.
See the Information Statement pursuant to Section 14(f) of the Exchange
Act and Rule 14f-1 thereunder, a copy of which is attached as Annex A to this
Schedule 14D-9.
Item 8(a) (Delaware Litigation) is hereby amended and supplemented by
inserting at the end thereof:
On November 25, 1998, the Delaware Litigation was dismissed with
prejudice.
Item 8(b) (The Rights Agreement) is hereby amended and supplemented by
inserting at the end thereof:
On November 25, 1998, in connection with the execution of the Merger
Agreement, the Company and the Rights Agent entered into the Third Amendment
(the "Third Amendment") to the Rights Agreement. The Third Amendment provides,
among other things, that (a) neither the Merger Agreement nor the consummation
of the transactions contemplated thereby, will cause (i) Markel, MG or any of
their affiliates or associates to have beneficial ownership of any Shares solely
as a result of any such event, (ii) Markel, MG or any of their affiliates or
associates to be deemed an "Acquiring Person" under the Rights Agreement or
(iii) the Shares Acquisition Date or the Distribution Date under the Rights
Agreement to occur upon any such event, and (b) the Rights will expire
immediately prior to (i) the acceptance for payment of and payment for Shares
pursuant to the Offer or (ii) the Effective Time (as defined in the Merger
Agreement) of the Merger.
Item 8(c) (Delaware Takeover Statute) is hereby amended and
supplemented by inserting at the end thereof:
At the November 24, 1998 Board meeting, the Board adopted a resolution
approving, solely for the purposes of Section 203, and exempting from the
provisions of Section 203, each of the Offer, the Merger and the Merger
Agreement.
Item 8(d)(i) (Hart-Scott-Rodino Antitrust Improvements Act of 1976) is
hereby amended and supplemented by inserting at the end thereof:
<PAGE>
On November 3, 1998, the Company received notice from the Federal Trade
Commission (the "FTC") that the FTC had granted early termination of the waiting
period under the HSR Act.
Item 8(d)(ii)(Insurance Commission Filings) is hereby amended and
supplemented by inserting at the end thereof:
The Company and Markel have agreed to cooperate with each other and use
all commercially reasonable efforts to obtain as promptly as practicable the
required approvals by the relevant Insurance Commissions in California,
Connecticut and Pennsylvania.
Item 9. Material to be Filed as Exhibits.
Item 9 is hereby amended and supplemented by inserting the following at
the end thereof:
Exhibit 13 Letter to Shareholders, dated December 3, 1998.*
Exhibit 14 Opinion of Donaldson, Lufkin & Jenrette Securities Corporation,
dated November 24, 1998.*
Exhibit 15 Supplement to the Offer to Purchase dated December 3, 1998.*
Exhibit 16 Revised Letter of Transmittal.*
Exhibit 17 Third Amendment to the Rights Agreement, dated as of November 25,
1988 between the Company and State Street Bank and Trust Company,
as Rights Agent.
- ------------------------
* Included in copies of the Schedule 14D-9 mailed to shareholders.
<PAGE>
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: December 3, 1998
GRYPHON HOLDINGS INC.
By: /s/ Stephen A. Crane
-------------------------------------
Name: Stephen A. Crane
Title: President and Chief Executive Officer
<PAGE>
ANNEX A
GRYPHON HOLDINGS INC.
30 Wall Street
New York, New York 10005-2201
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14f-1 THEREUNDER
This Information Statement is being mailed on or about
December 3, 1998 as part of the Solicitation/Recommendation Statement on the
Schedule 14D-9 ("Schedule 14D-9") of Gryphon Holidngs Inc. (the "Company") to
the holders of record of shares of Common Stock, par value $.01 per share, of
the Company (the "Common Stock", and together with the associated Junior
Participating Cumulative Preferred Stock Purchase Rights, the "Shares"). You are
receiving this Information Statement in connection with the possible election of
persons designated by Markel Corporation, a Virginia corporation ("Markel"), to
at least a majority of the seats on the Board of Directors of the Company (the
"Board").
On November 25, 1998, the Company, Markel and MG Acquisition
Corp., a Delaware corporation and a wholly-owned subsidiary of Markel ("MG" and,
together with Markel, the "Bidder"), entered into an Agreement and Plan of
Merger (the "Merger Agreement") in accordance with the terms and subject to the
conditions of which (i) Bidder will continue its tender offer (the "Offer") for
all of the issued and outstanding Shares at a price of $19.00 per Share, net to
the seller in cash and (ii) following the consummation of the Offer and the
satisfaction or waiver of other conditions set forth in the Merger Agreement, MG
will be merged with and into the Company (the "Merger"), with MG as the
surviving corporation.
The Merger Agreement requires that the Company use its best
efforts, at the Bidder's request, to take all lawful action necessary to cause
the Bidder's designees to be elected to the Board of Directors of the Company
under the circumstances described in the Merger Agreement. See "Board of
Directors and Executive Officers--Right to Designate Directors; the Bidder's
Designees" below.
You are urged to read this Information Statement carefully.
You are not, however, required to take any action. Capitalized terms used herein
and not otherwise defined herein shall have the meaning set forth in the
Schedule 14D-9.
The Offer is scheduled to expire at 12:00 midnight, New York
City time, on December 18, 1998, unless the Offer is extended or is terminated
under the terms of the Merger Agreement.
The information contained in this Information Statement
concerning Markel, MG and the Bidder's Designees (as hereinafter defined) has
been furnished to the Company by Markel and MG, and the Company assumes no
responsibility for the accuracy or completeness of such information.
<PAGE>
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
General
As of September 30, 1998, 6,740,229 shares of Common Stock and 14,444
shares of Series A 4.0% Cumulative Convertible Preferred Stock (the "Convertible
Preferred Stock") were outstanding. Each share of Common Stock that is
outstanding on any applicable record date for any matter to be acted on by
Shareholders is entitled to one vote. Each share of Convertible Preferred Stock
that is outstanding on any applicable record date for any matter to be acted on
by Shareholders is entitled to one vote for each share of Common Stock that
would be issuable upon conversion of such share of Convertible Preferred Stock.
As of December 3, 1998, each share of Convertible Preferred Stock would be
entitled to approximately 45 votes.
The Company's By-Laws provide for a Board of Directors that shall not
be less than 3 nor more than 15 in number as determined from time to time by the
Board of Directors. The By-Laws provide that the Board of Directors shall be
divided into three classes, as nearly equal in number as the total number of
Directors constituting the entire Board of Directors permits, with the term of
office of one class expiring each year. The number of Directors is presently set
at ten.
Right to Designate Directors; the Bidder's Designees
The Merger Agreement provides that, subject to compliance with
applicable law, promptly upon the purchase by the Bidder of Shares pursuant to
the Offer, and from time to time thereafter, the Bidder shall be entitled to
designate such number of directors ("Bidder Designees"), rounded up to the next
whole number, on the Board as shall give the Bidder representation on the Board
equal to the product of the total number of directors on the Board (giving
effect to the directors elected pursuant to this sentence) multiplied by the
percentage that the aggregate number of Shares beneficially owned by the Bidder
or any affiliate of the Bidder following such purchase bears to the total number
of Shares then outstanding, and the Company shall, at such time, promptly take
all actions necessary to cause Bidder's designees to be elected as directors of
the Company, including increasing the size of the Board or securing the
resignations of incumbent directors or both. At such times, the Company shall
use its best efforts to cause persons designated by the Bidder to constitute the
same percentage as is on the Board of Directors of each committee of the Board,
to the extent permitted by applicable law.
It is expected that the Bidder Designees may assume office at
any time following the purchase by the Bidder of Shares pursuant to the Offer,
which purchase may not be earlier than December 18, 1998, and that, upon
assuming office, the Bidder Designees will thereafter constitute at least a
majority of the Board.
Bidder Designees
Any director or executive officer of Markel or MG listed in Schedule I
to the Schedule 14D-1, dated October 20, 1998, of the Bidder (the "Schedule
14D-1") may be designated by the Bidder as a Bidder Designee and such Schedule I
is incorporated herein by reference. The information with respect to the Bidder
Designees has been designated by the Bidder for inclusion herein.
Directors and Executive Officers of the Company
The following table provides information regarding the Directors and
Executive Officers of the Company as of December 3, 1998.
<PAGE>
Name Age Position
Stephen A. Crane 53 President, Chief Executive Officer and Director
Hadley C. Ford 63 Chairman of the Board and Director
Robert M. Coffee 53 Senior Vice President, General Counsel & Secretary
Robert P. Cuthbert 51 Senior Vice President & Chief Financial Officer
Robert M. Baylis 60 Director
John K. Castle 57 Director
Franklin L. Damon 54 Director
John A. Dore 47 Director
Robert R. Douglass 67 Director
David H. Elliott 57 Director
Richard W. Hanselman 71 Director
George L. Yeager 65 Director
The Class I Directors, Messrs. Baylis, Castle and Ford, were last elected
for a term that expires at the Annual Meeting of Shareholders in 2000; the Class
II Directors, Messrs. Elliott, Crane and Yeager, were last elected for a term
that expires at the Annual Meeting of Shareholders in 2001; and the Class III
Directors, Messrs. Hanselman, Damon, Dore and Douglass, were last elected for a
term that expires at the Annual Meeting of Shareholders in 1999. At each Annual
Meeting of Shareholders, successors to the Directors whose term expires at that
Annual Meeting will be elected for a three-year term.
Biographical Information for Directors and Executive Officers
Set forth below are the names, positions and offices held with the
Company, and a brief account of the business experience during the past five
years, of each executive officer and member of the Board of Directors of the
Company.
Mr. Crane has served as President, Chief Executive Officer and a Director
of the Company since September 1993. From April 1993 until December 1993, Mr.
Crane served as Chairman, Strategic Development Group -- North America of Willis
Corroon Corporation, a subsidiary of Willis Corroon Group plc. From November
1989 until March 1993, Mr. Crane was President and Chief Executive Officer of G.
L. Hodson & Son, Inc., a reinsurance intermediary and a subsidiary of Willis
Corroon Corporation.
Mr. Coffee has served as Senior Vice President, General Counsel and
Secretary of the Company since November 1994. From July 1990 until November
1994, Mr. Coffee served as Vice President, Secretary and Assistant General
Counsel of Willis Corroon Corporation.
Mr. Cuthbert, a certified public accountant, has served as Senior Vice
President and Chief Financial Officer of the Company since March 1994. From
April 1993 to March 1994, Mr. Cuthbert served as Senior Vice President and Chief
Financial Officer of Coregis Group, Inc., a specialty commercial insurer, and as
a Director of Mt. Airy Insurance Company, California Insurance Company and
Coregis Indemnity Company, all of which are subsidiaries of Coregis Group, Inc.
From January 1992 to May 1992, Mr. Cuthbert served as Senior Vice President and
Chief Financial Officer of Poe & Associates, Inc., an insurance intermediary.
From November 1989 to December 1991, Mr. Cuthbert served as First Vice
President, Chief Financial Officer and Investor Relations Officer of Willis
Corroon Corporation.
Mr. Baylis has served as a Class I Director of the Company since March
1996. Mr. Baylis retired as Vice Chairman of CS First Boston Corporation in
January 1996 after 33 years of service. Mr. Baylis served as Chairman and Chief
Executive Officer of CS First Boston Pacific from March 1993 until August 1994,
and as Vice Chairman of The First Boston Corporation ("First Boston") from March
1992 until March 1993. Prior to March 1992, Mr. Baylis was responsible for all
investment banking and merger and acquisition activities for First Boston's
financial institution clients. Mr. Baylis has served as a Director of New York
Life Insurance Company since January 1997, as a Director of Host Marriott Corp.,
a hotel real estate company, since May 1996, and as a Director of Covance Inc.,
a contract research organization, since January 1997.
Mr. Castle has served as a Class I Director of the Company since August
1998. Since 1987, Mr. Castle has been Chairman of Castle Harlan, Inc., a private
merchant bank in New York City. Immediatley prior to forming Castle Harlan,
Inc., Mr. Castle was President and Chief Executive Officer and a Director of
Donaldson Lufkin & Jenrette, Inc., one of the nation's leading investment
banking firms. Mr. Castle is a Director of Sealed Air Corporation, Morton's
Restaurant Group, Inc., Commemorative Brands, Inc., Universal Compression, Inc.
and a Managing Director of Statia Terminals Group, N.V.
<PAGE>
Mr. Damon has served as a Class III Director of the Company since
September 1993. Mr. Damon has been engaged in the practice of law in the
insurance regulatory field for more than twenty years. From March 1991 to
January 1994 he served as of counsel to the law firm of Sullivan, Roche &
Johnson. Since 1986, Mr. Damon has served as Chairman of the Lawyers
Professional Liability Insurance Committee of the Los Angeles County Bar
Association, and he is presently Special Counsel to the Los Angeles County Bar
Association.
Mr. Dore has served as Executive Vice President and a Class III Director
of the Company since August 1998. From October 1990 to July 1998, Mr. Dore
served as President, Chief Executive Officer and Director of Financial
Institutions Insurance Group, Ltd. and its successor, Dearborn Risk Management,
Inc. Mr. Dore continues to serve as a Director of Dearborn Risk Management, Inc.
and its principal subsidiary.
Mr. Douglass has served as a Class III Director of the Company since
September 1993. Since December 1993, Mr. Douglass has served as of counsel to
the law firm of Milbank, Tweed, Hadley & McCloy. From 1985 until 1993, Mr.
Douglass served as Vice Chairman and as a Director of The Chase Manhattan
Corporation and its principal subsidiary, The Chase Manhattan Bank, N.A.
(collectively, "Chase Manhattan"), which he joined in 1976. Mr. Douglass served
as Senior Customer Planning and Development Officer of Chase Manhattan from 1990
until 1993. Mr. Douglass served as a Director of Home Holdings Inc. from 1993 to
1995. Mr. Douglass has served as a Director of HRE Properties, a real estate
investment trust, since January 1992 and as Chairman of the Board of Cedel since
May 1994.
Mr. Elliott has served as a Class II Director of the Company since April
1994. Mr. Elliott has served as Chairman of MBIA, Inc. and its operating
company, MBIA Insurance Corporation, (collectively, "MBIA") since January 1994,
as Chief Executive Officer of MBIA since January 1992 and as a Director of MBIA
since March 1988. Mr. Elliott served as President of MBIA from January 1987
through December 1994 and as Chief Operating Officer of MBIA from January 1987
to December 1991. Mr. Elliott has served as a Director of Orion Capital
Corporation since March 1998.
Mr. Ford has served as the Chairman of the Board and as a Class I Director
of the Company since September 1993. Mr. Ford is an independent management
consultant who has also served as a Senior Advisor to the insurance industry
practice of Andersen Consulting since October 1992. From 1965 to 1992, Mr. Ford
was employed by BoozAllen & Hamilton, most recently as a Director and Senior
Vice President in charge of the firm's insurance industry practice. Mr. Ford has
served as a Director of U.S. Homecare Inc. since 1994.
Mr. Hanselman has served as a Director of the Company since September
1993. Mr. Hanselman has served as a Director of Arvin Industries, Inc., an
automotive supplier, since 1983, as a Director of Becton Dickenson & Co., a
medical and diagnostic equipment manufacturer, since 1981, as a Director of
Bradford Funds Inc., a money market fund, since 1987, and as a Director of the
Foundation Health Systems Inc., a health maintenance organization, since 1990.
Mr. Yeager has served as a Class II Director of the Company since October
1993. Mr. Yeager was Senior Vice President and Chief Underwriting Officer for
the Crum and Forster Insurance Companies from 1986 to 1992. Mr. Yeager was a
Director of United States Fire Insurance Company, North River Insurance Company,
Westchester Fire Insurance Company, International Insurance Company and
Constitution Reinsurance Company, all of which were subsidiaries of Crum and
Forster Insurance Companies. Mr. Yeager served from 1994 to 1997 as a Director
of American E&S, a subsidiary of Acordia, Inc. Mr. Yeager also served on the
Board of Governors for the National Council of Compensation Insurance from 1988
to 1992. He served as a Director of Insurance Services Office from 1990 to 1992,
as a Director of American Nuclear Institute from 1990 to 1992, and as a Director
of Industrial Risk Insurance from 1991 to 1992.
<PAGE>
Except for certain severance agreements and indemnification agreements,
none of the executive officers has an agreement relating to the terms of his
employment with the Company. See "Certain Relationships and Related
Transactions."
Mr. Damon represents the Company from time to time in connection with
certain insurance regulatory matters, primarily in the State of California. For
such services, Mr. Damon received $37,226 and $51,875 for 1997 and 1996,
respectively.
Mr Douglass currently serves as of counsel to the law firm of Milbank,
Tweed, Hadley & McCloy. Milbank, Tweed, Hadley & McCloy currently represents the
Company in connection with certain legal matters, including in connection with
the Offer and the Merger.
All of the executive officers and Directors of the Company are citizens of
the United States of America. There are no material proceedings to which any
Director or executive officer or any associate of any such Director or executive
officer is a party adverse to the Company or any of its subsidiaries or has a
material interest adverse to the Company or any of its subsidiaries.
Board of Directors
The Board of Directors has the responsibility for establishing broad
corporate policies and for the overall affairs of the Company. Members of the
Board are kept informed of the Company's business by various reports provided to
them by management, as well as by operating and financial reports made at Board
and Committee meetings by the President and other executive officers of the
Company.
Committees of the Board
The Board has established an Audit Committee, a Compensation Committee,
an Executive Committee, a Governance Committee and an Investment Committee. The
Audit Committee reviews the services provided by the Company's independent
public accountants, consults with such accountants on audits and proposed audits
and reviews the need for internal auditing procedures and the adequacy of
internal controls. The Compensation Committee establishes and reviews the
overall compensation policy of the Company, determines the specific terms and
conditions of employment of senior executives of the Company and oversees the
employee benefit programs of the Company. See "Report of the Compensation
Committee." The Executive Committee, during the interim between meetings of the
Board, has been delegated certain authority of the Board. The Governance
Committee reviews and makes recommendations to the Board regarding: (i) the role
and effectiveness of the Board and its Committees, (ii) criteria for membership
on the Board and (iii) individual candidates for membership on the Board. The
Governance Committee also seeks potential nominees for Board membership in
various ways and will consider suggestions submitted by Shareholders. Such
suggestions, together with appropriate biographical information, should be
submitted to the Secretary of the Company. The Investment Committee determines
the Company's investment policy and reviews the performance of the Company's
investment managers. In addition to the foregoing committees, the Board has
established from time to time additional committees to assist it with special
projects. During 1997, the Board established an Ad Hoc Committee in connection
with the negotiation of the pending acquisition of First Re and certain other
subsidiaries of Dearborn. During 1998, the Board established a Special Committee
in connection with the Offer and the Merger.
The Audit Committee consists of Messrs. Damon, Douglass, Elliott
(Chairman) and Yeager. The Compensation Committee consists of Messrs. Douglass
(Chairman), Ford, Hanselman and Castle. The Executive Committee consists of
Messrs. Crane (Chairman) and Ford. The Governance Committee consists of Messrs.
Crane, Douglass, Ford (Chairman) and Hanselman. The Investment Committee
consists of Messrs. Baylis, Crane, Elliott and Hanselman (Chairman). The Ad Hoc
Committee consisted of Messrs. Baylis (Chairman), Douglass, Ford and Elliott.
The Special Committee consisted of Messrs. Baylis (Chairman), Douglass and
Elliott.
<PAGE>
Attendance of Directors
During 1997, the Board of Directors held five meetings; the Ad Hoc
Committee held one meeting; the Audit Committee held four meetings; the
Compensation Committee held five meetings; the Executive Committee held no
meetings; the Governance Committee held no meetings and the Investment Committee
held four meetings. All directors attended 100% of the meetings of the Board and
the committees on which they served.
COMPENSATION OF DIRECTORS
Directors of the Company who are employees of the Company or its
affiliates receive no directors' fees. Non-employee Directors are paid an annual
retainer of $20,000, plus $1,000 per day for attendance at each Board of
Directors meeting and for attendance at meetings of committees of the Board of
Directors occurring on days other than days of Board meetings. The Chairmen of
the Audit Committee, the Compensation Committee and the Investment Committee
receive an annual fee of $3,000 for serving in such capacity. The Chairman of
the Board receives, effective as of January 1, 1996, an additional annual
retainer of $20,000 for services rendered in such capacity. The chairman of the
Special Committee, Mr. Baylis, received a one-time fee of $20,000 and the other
members of the Ad Hoc Committee, Messrs. Douglass and Elliott, received a
one-time fee of $10,000 each, in November 1998, for serving in such capacities.
Non-employee Directors receive $500 for each meeting of the Board of Directors,
and each meeting of its committees occurring on days other than days of Board
meetings, in which they participate by telephone. In addition, all Directors are
reimbursed for their reasonable travel expenses incurred in attending these
meetings.
Under the terms of the 1995 Non-Employee Director Stock Option Plan
(the "Directors' Plan"), each Director of the Company who is not an employee of
the Company or its affiliates is entitled to the grant, on the later of (i) May
12, 1995 or (ii) the date on which such Director is first elected to the Board,
of an initial option to purchase 10,000 shares of Common Stock. Options under
the Directors' Plan are granted at the fair market value of such shares on the
date of grant and become exercisable in four equal annual installments
commencing on the day immediately preceding the second anniversary of the date
of grant. Options remain outstanding for ten years from the date of grant,
unless terminated earlier in the event of death, disability, retirement or other
circumstances detailed in the Directors' Plan. On the fifth anniversary of the
date of the initial grant, and continuing on each subsequent anniversary of such
date during a Director's tenure on the Board, such Director will be granted an
option to purchase an additional 2,000 shares of Common Stock or such lesser
proportionate amount as then remains available for grant. An aggregate of
100,000 shares of Common Stock have been authorized for issuance upon the
exercise of options under the terms of the Directors' Plan.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee is responsible for the establishment and
review of the overall compensation policy of the Company, the general oversight
of the employee benefits plans maintained by the Company and the specific terms
and conditions of employment of senior executives of the Company.
It is the overall policy of the Compensation Committee to align the
interests of management with those of the Shareholders by making a significant
portion of executive compensation depend upon the Company's performance. The
Company's compensation programs emphasize the following basic principles:
Compensation should be linked to the creation of value for
Shareholders, and executives should be encouraged to acquire ownership in the
Company;
<PAGE>
Compensation programs should be designed to attract, motivate and
retain executives with the requisite skills to effectively pursue the Company's
strategic objectives; and Compensation programs should reward individual
performance through an appropriate balance of base salary, annual bonus awards
and long-term equity incentives.
Compensation Program
The Company's executive compensation program consists of three major
components: base salary, annual bonus awards and long- term equity incentives.
Each of these components supports the Company's overall compensation policy,
which relates pay to performance.
Base Salary
Amounts paid in base salary, including periodic increases, are
determined primarily by the scope of the executive's responsibilities, his
performance and the salaries offered within the industry for comparable
positions. In connection with its overall evaluation of the foregoing factors,
the Compensation Committee draws upon its members' general knowledge of
compensation practices within the insurance and financial services industries
and periodically reviews compensation data regarding other insurance companies,
including a peer group of comparably sized property and casualty insurance
companies established by the Compensation Committee specifically for this
purpose.
Annual Bonus Awards
Annual bonus awards earned by executives are based upon their
achievement of performance objectives established by the Compensation Committee
at the beginning of each fiscal year that link potential bonus awards to the
enhancement of Company earnings and overall profitability. The Compensation
Committee believes that the use of predetermined performance objectives provides
an excellent link between the value created for Shareholders and the incentives
paid to executives.
Long-Term Equity Incentives
Certain executives of the Company may earn equity-based incentive
awards, the ultimate value of which is related to the long-term performance of
the Company's Common Stock. Long-term equity incentives may take the form of
stock options or restricted stock.
Stock options have been the principal vehicle of the Company for the
payment of long-term incentive compensation. Stock options granted to executives
under the Company's 1993 Stock Option Plan provide incentives to executives by
giving them a strong economic interest in building value for Shareholders. Stock
options become exercisable in annual installments commencing two years after the
date of grant, and the exercise price of each option is the fair market value of
the Company's Common Stock on the date of grant. As a result, executives benefit
from options only through a rise over time in the market value of the underlying
shares.
Restricted stock also motivates executives by providing incentives tied
to Shareholder value. Restricted stock granted to executives under the Company's
Restricted Stock Plan is subject to restrictions on its transfer that lapse in
annual installments commencing two years following the date of grant.
Accordingly, the ultimate value of restricted stock awards is linked to the
performance of the Company's Common Stock over an extended period.
Long-term equity incentives are granted by the Compensation Committee
based upon an executive's position and his or her ability to contribute to the
future performance of the Company. The Compensation Committee is responsible for
determining the form and terms of all such awards.
<PAGE>
Compensation of the Chief Executive Officer
The overall compensation of the Chief Executive Officer (the "CEO")
reflects the Compensation Committee's evaluation of (i) the Company's
performance as measured by operating, financial and strategic objectives, viewed
from both a short-term and a long- term perspective, (ii) the CEO's individual
performance in pursuing the foregoing objectives and (iii) the compensation paid
to chief executive officers of other companies of similar size and complexity in
the insurance and financial services industries.
Mr. Crane's base salary for 1997 was $330,000. The Compensation
Committee determined this figure based upon a review of the compensation paid to
CEOs of other insurance companies, including a peer group of comparably sized
property and casualty insurance companies established by the Compensation
Committee specifically for this purpose. The Compensation Committee considered
the Company's overall performance as measured by operating, financial and
strategic objectives established in connection with annual bonus awards for 1997
and determined that no such awards would be granted to any of the executive
officers of the Company for 1997. The Committee also determined that no
additional long-term incentive awards would be granted during 1997 to the
executive officers of the Company.
Internal Revenue Code Section 162(m)
Section 162 (m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally disallows a tax deduction to public companies for
compensation over $1 million paid to the CEO or to any of the other highly
compensated executive officers named in the Company's annual proxy statement.
Qualifying "performance-based compensation" and compensation paid pursuant to
plans or agreements adopted or entered into prior to a company's initial public
offering of securities or subsequently approved by its shareholders will not be
subject to the foregoing deduction limitation, if certain requirements are met.
The Compensation Committee believes that the compensation to be paid in 1998 to
any of the Company's executive officers will not exceed the foregoing deduction
limitation.
The Company has established and maintains compensation programs that
align the interests of management with those of the Shareholders and that comply
with the principles set forth in this report. The Compensation Committee intends
to take appropriate actions consistent with such principles to avoid the
unnecessary loss of future deductions under Section 162(m) of the Code.
COMPENSATION COMMITTEE
John K. Castle
Robert R. Douglass, Chairman
Hadley C. Ford
Richard W. Hanselman
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee is a former or current
executive officer or employee of the Company or any of its subsidiaries, nor
does any executive officer of the Company serve as an officer, director or
member of a compensation committee of any entity, one of whose executive
officers or directors is a director of the Company.
EXECUTIVE COMPENSATION
The following information relates to the annual and long- term
compensation paid by the Company and its subsidiaries in connection with the
three fiscal years ending December 31, 1997, 1996 and 1995 to the Chief
Executive Officer of the Company and the three other executive officers of the
Company whose earnings exceeded $100,000 for the fiscal year ended December 31,
1997.
<PAGE>
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
Securities
Underlying All Other
Name and Principal Position Year Salary Bonus Options Compensation(3)
<S> <C> <C> <C> <C> <C>
Stephen A. Crane 1997 $330,000 $ 0 0 $18,768
President &
Chief Executive Officer 1996 330,000 0 25,000 18,794
1995 300,000 300,000 0 18,880
John F. Iannucci (1) 1997 257,500 0 0 19,932
Executive Vice President 1996 245,000 0 20,000 19,890
1995 235,000 263,313(2) 0 19,440
Robert M. Coffee 1997 148,750 0 0 14,948
Senior Vice President & 1996 140,000 0 5,000 14,077
General Counsel 1995 132,500 32,500 0 10,263
Robert P. Cuthbert 1997 193,833 0 0 14,831
Senior Vice President & 1996 188,000 0 5,000 14,940
Chief Financial Officer 1995 180,000 108,000 0 11,686
</TABLE>
- ---------------------
(1) Mr. Iannucci resigned on December 31, 1997 as an officer
and Director of the Company and its subsidiaries.
(2) In accordance with the terms of the Annual Incentive Plan
for Key Employees of Gryphon Holdings Inc. and its
Subsidiaries, the portion of the bonus payable to Mr.
Iannucci for 1995 that exceeded his base salary for 1995 was
paid to him in shares of Common Stock. Accordingly, Mr.
Iannucci received 1,500 shares of Common Stock based upon
the fair market value of the shares on March 4, 1996, the
date of the award. These shares, which are not subject to
forfeiture, may not be sold or otherwise transferred by Mr.
Iannucci pending the lapse of a restriction on their
transfer. This restriction will lapse with respect to 25%
of the shares on the second anniversary of the date of the
award and with respect to an additional 25% of the shares on
each of the next three anniversaries of such date. Pending
the lapse of this restriction, Mr. Iannucci enjoys all other
rights of a Shareholder of the Company with respect to such
shares.
(3) These amounts for 1997, 1996 and 1995, respectively,
represent (i) premiums paid by the Company for term life
insurance policies as follows: Mr. Crane $1,440, $1,440 and
$1,440; Mr. Coffee $991, $1,207 and $881; Mr. Cuthbert
$839, $870 and $766; Mr. Iannucci $1,440, $1,320 and $864;
(ii) contributions by the Company under the Gryphon Holdings
401(k) & Profit Sharing Plan as follows: Mr. Crane $13,992,
$14,070 and $14,076; Mr. Coffee $13,957, $12,870 and
$9,382; Mr. Cuthbert $13,992, $14,070 and $10,920; and Mr.
Iannucci $13,992, $14,070 and $14,076; and (iii) the value
attributed to the use of a Company automobile as follows:
Mr. Crane $3,336, $3,364 and $3,364; and, Mr. Iannucci
$4,500, $4,500 and $4,500.
<PAGE>
During the Company's last fiscal year ending December 31, 1997, no
options, stock appreciation rights or other long term incentive awards were
granted to, or exercised by, any of the persons named in the Summary
Compensation Table. The following table sets forth for each person named in the
Summary Compensation Table the specified information with respect to all options
outstanding on December 31, 1997.
FISCAL YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Fiscal Options at Fiscal
Year-End Year-End(1)
Name Exercisable Unexercisable Exercisable Unexercisable
Stephen A. Crane 56,250 43,750 $210,938 $70,313
John F. Iannucci 37,500 32,500 140,625 46,875
Robert M. Coffee 7,500 7,500 24,825 24,825
Robert P. Cuthbert 15,000 15,000 34,650 34,650
- ---------------------
(1) Based on $16.75 per share, which was the closing price of the Common Stock
on NASDAQ on December 31, 1997.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Ownership of Common Stock by Management
The following table sets forth as of December 2, 1998 information
concerning the ownership of Common Stock by each Director, by each executive
officer named in the Summary Compensation Table and by all executive officers
and Directors of the Company as a group, together with their respective
percentage ownership of the outstanding Common Stock.
MANAGEMENT OWNERSHIP OF COMMON STOCK
<TABLE>
<CAPTION>
Shares of Shares upon exercise Percent of
Name of Beneficial Owner Common Stock of Stock Options(1) Total(2) Class
<S> <C> <C> <C> <C>
Stephen A. Crane 82,664 81,250 163,914 2.4%
Robert M. Coffee 6,403 12,500 18,903 *
Robert P. Cuthbert 20,909 23,750 44,659 *
Robert M. Baylis 10,000 2,500 12,500 *
John K. Castle (3) 643,672 0 643,672 8.72%
Franklin L. Damon 3,500 5,000 8,500 *
John A. Dore 9,000 0 9,000 *
Robert R. Douglass 5,000 5,000 10,000 *
David H. Elliott 2,000 5,000 7,000 *
Hadley C. Ford 12,000 5,000 17,000 *
Richard W. Hanselman 3,000 5,000 8,000 *
George L. Yeager 1,000 5,000 6,000 *
All Directors and
Executive Officers as
a Group (12 persons) 799,148 150,000 949,148 13.78%
</TABLE>
* less than 1%.
<PAGE>
- ----------------------
(1) Represents beneficial ownership of shares that may be acquired by the
exercise of stock options which are currently exercisable or exercisable
within sixty days.
(2) The amounts of Common Stock and stock options beneficially owned are
reported on the basis of regulations of the Securities and Exchange
Commission governing the determination of beneficial ownership of
securities.
(3) Represents beneficial ownership of shares of Common Stock that may be
acquired upon conversion of 14,444 shares of Convertible Preferred
Stock owned by Mr. Castle and affiliates of Mr.Castle, which shares
of Convertible Preferred Stock represent 100% of the outstanding
Convertible Preferred Stock.
Except as otherwise noted above, the Company believes the beneficial
holders listed above have sole voting and investment power regarding the shares
of Common Stock shown as being beneficially owned by them.
Principal Holders of Common Stock
The following table indicates the only persons known by the Company to be
beneficial owners of more than five percent of the outstanding Common Stock as
of December 2, 1998. In addition, 14,444 shares of Convertible Preferred
Stock are currently outstanding, all of which are held by affiliates of Castle
Harlan, Inc. The Company has no other class of equity securities outstanding.
BENEFICIAL OWNERS OF GREATER THAN
FIVE PERCENT OF COMMON STOCK
Amount and Nature of Percent
Name of Beneficial Owner Beneficial Ownership of Class
Markel Corporation 791,250 (1) 11.74%
4551 Cox Road
Glen Allen, VA 23060-3382
Pioneering Management Corporation 660,000 (2) 9.79%
60 State Street
Boston, MA 02109
John K. Castle 643,672 (3) 8.72%
Dearborn Risk Management, Inc.
Castle Harlan Partners II, L.P.
Castle Harlan, Inc.
150 East 58th Street 37th Floor
New York, New York 10155
Dimensional Fund Advisors Inc. 437,200 (4) 6.49%
1299 Ocean Avenue
Santa Monica, CA 90401
Oppenheimer Capital 429,100 (5) 6.37%
Oppenheimer Tower
World Financial Center
New York, NY 10281
Capital Guardian Trust Company 407,100 (6) 6.04%
333 South Hope Street
Los Angeles, CA 90071
Royce & Associates, Inc. 401,500 (7) 5.96%
1414 Avenue of the Americas
New York, NY 10019
<PAGE>
(1) Based upon information obtained from a Schedule 13D, dated October 1, 1998,
which was filed with the Securities and Exchange Commission by Markel
Corporation ("Markel"). The Schedule 13D reported that Markel beneficially owned
791,250 shares of Common Stock. Markel had sole dispositive and voting power
with respect to such shares.
(2) Based upon information obtained from a Schedule 13G, dated January 21, 1998,
which was filed with the Securities and Exchange Commission by Pioneering
Management Corporation ("Pioneering"). The Schedule 13G reported that Pioneering
owned 660,000 shares of Common Stock. Pioneering had sole voting power and
shared dispositive power with respect to these shares.
(3) Based upon information obtained from a Schedule 13G, dated July 13, 1998,
which was filed with the Securities and Exchange Commission by John K. Castle,
Dearborn Risk Management, Inc., Castle Harlan Partners II, L.P., and Castle
Harlan, Inc (together, the "Castle Affiliates"). The Schedule 13G reported that
the Castle Affiliates beneficially owned 643,672 shares of Common Stock
(representing 14,444 shares of Convertible Preferred Stock, each of which is
convertible into 44.563278 shares of Common Stock). The Castle Affiliates had
shared dispositive and voting power with respect to such shares.
(4) Based upon information obtained from a Schedule 13G, dated February 9, 1998,
which was filed with the Securities and Exchange Commission by Dimensional Fund
Advisors Inc. ("Dimensional"). The Schedule 13G reported that Dimensional, a
registered investment adviser, beneficially owned 473,200 shares of Common Stock
which were held in portfolios of DFA Investment Dimensions Group Inc., a
registered open-end investment company, or in various other investment vehicles
managed by Dimensional. Dimensional had sole dispositive and voting power with
respect to such shares.
(5) Based upon information obtained from a Schedule 13G, dated February 27,1998,
which was filed with the Securities and Exchange Commission by Oppenheimer
Capital ("Oppenheimer"). The Schedule 13G reported that Oppenheimer, a
registered investment adviser, beneficially owned 429,100 shares of Common
Stock. Oppenheimer had sole dispositive and voting power with respect to such
shares.
(6) Based upon information obtained from a Schedule 13G, dated July 9, 1998,
which was filed with the Securities and Exchange Commission by Capital Guardian
Trust Company. The Schedule 13G reported that Capital Guardian Trust Company
beneficially owned 407,100 shares of Common Stock in connection with its serving
as the investment manager of various institutional accounts. Capital Guardian
Trust Company had sole dispositive and voting power with respect to such shares.
(7) Based upon information obtained from a Schedule 13G, dated February 14,
1998, which was filed with the Securities and Exchange Commission by Royce &
Associates, Inc. and Charles M. Royce, the controlling person of Royce &
Associates, Inc. The Schedule 13G reported that Royce & Associates, Inc.
beneficially owned 401,500 shares of Common Stock. Charles M. Royce owned no
shares of Common Stock independent of Royce & Associates, Inc. Royce &
Associates, Inc. held sole voting and dispositive power with respect to such
shares.
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Severance Agreements
The Company has entered into severance agreements with each of Messrs.
Crane, Cuthbert and Dore, under which each is entitled to between 6 months
and 12 months of salary continuation payments, as determined by the Board, in
the event that he is terminated without "cause" or for disability, or resigns as
a result of constructive termination. Under the terms of these agreements, as
well as a similar severance agreement between the Company and Mr. Coffee, in the
event that a person acquires more than 20% of the Company's outstanding voting
securities, and within 24 months thereafter the executive is terminated without
"cause" or for disability or the executive suffers a constructive termination,
as defined in such agreements, the executive is entitled to a lump sum payment
equal to 36 months of his then current salary.
Indemnification Agreements
The Company's Certificate of Incorporation provides for the
indemnification of the Company's officers and Directors to the fullest extent
permitted by the Delaware General Corporation Law (the "DGCL") in connection
with services provided by such individuals to or on behalf of the Company. As
permitted by the Certificate of Incorporation and the DGCL, the Company has
entered into indemnification agreements with each of its executive officers and
Directors that detail the procedures by which such individuals will be entitled
to indemnification in the event they become involved in any proceeding in
connection with such services.
Acquisition of First Re
On February 9,1998, the Company entered into a stock purchase agreement
with Dearborn to buy all of the issued and outstanding shares (the "Dearborn
Shares") of capital stock of certain subsidiaries of Dearborn, including First
Re. In connection with the purchase of the Dearborn Shares, the Company agreed
to elect John K. Castle, the Chairman of Castle Harlan, Inc., as a Class I
Director of the Company to serve until the Annual Meeting of the Shareholders in
2000, at which time the Board of Directors has agreed to recommend a person
nominated by Castle Harlan, Inc. (the "Castle Harlan Nominee") to the
Shareholders of the Company for election as a Class I Director. At each
subsequent Annual Meeting of Shareholders of the Company at which the term of
the Castle Harlan Nominee is to expire or a vacancy caused by the cessation of
service of the Castle Harlan Nominee is to be filled, the Board of Directors has
agreed to recommend a replacement Castle Harlan Nominee to Shareholders of the
Company for election as a Class I Director and has agreed to use all reasonable
efforts to cause the election of such nominee to the Board of Directors. The
foregoing arrangement is subject to termination in various circumstances
outlined in an agreement between the Company, Dearborn and Castle Harlan
Partners II, L.P., a shareholder of Dearborn. In a separate agreement with John
A. Dore, the President and Chief Executive Officer of First Re, the Company has
agreed to elect Mr. Dore to the Board of Directors of the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, Directors and persons who own more than ten
percent of a registered class of the Company's equity securities (collectively,
the "Reporting Persons") to file reports of ownership and changes in ownership
on Forms 3, 4 and 5 (collectively, the "Forms") with the Securities and Exchange
Commission (the "SEC"). These Reporting Persons are required pursuant to SEC
regulations to furnish the Company with copies of all Forms they file with the
SEC. Based solely on the Company's review of the copies of the Forms it has
received and written representations from certain Reporting Persons, the Company
believes that all transactions by Reporting Persons relating to ownership and
changes in ownership of equity securities of the Company during the fiscal year
1997 have been duly reported to the SEC pursuant to the aforementioned Forms.
[GRYPHON LOGO]
December 3, 1998
Dear Shareholders:
We are pleased to inform you that Gryphon Holdings Inc.
entered into a definitive merger agreement with Markel Corporation, pursuant to
which Markel agreed to continue its cash tender offer at the increased purchase
price of $19.00 per share for all of the outstanding shares of common stock of
Gryphon. Following the successful completion of the tender offer, in accordance
with the terms of the merger agreement, a subsidiary of Markel will merge with
and into Gryphon and Gryphon will become wholly-owned by Markel. Each share of
Gryphon common stock not purchased in the tender offer will be converted in the
merger into the right to receive the cash amount paid in the tender offer.
We have carefully evaluated, with the assistance of our
advisors, the proposed merger, as well as other options available to us,
including remaining independent. Your Board of Directors unanimously has
determined that the merger agreement and the transactions contemplated thereby,
including the tender offer and the merger, are fair to, and in the best
interests of, Gryphon shareholders and has approved and adopted the merger
agreement, the offer and the transactions contemplated thereby. THE BOARD
RECOMMENDS THAT SHAREHOLDERS ACCEPT MARKEL'S TENDER OFFER AND TENDER THEIR
SHARES PURSUANT TO THE TENDER OFFER AND, IF REQUIRED, APPROVE AND ADOPT THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
In arriving at its recommendation, the Board of Directors gave
careful consideration to a number of factors which are described in the attached
amendment to Gryphon's Schedule 14D-9, including, among other things, the
opinion of Donaldson, Lufkin & Jenrette Securities Corporation that the $19.00
per share cash consideration to be received by Gryphon shareholders in the
tender offer and merger is fair from a financial point of view to Gryphon
shareholders. The attached amendment to the Schedule 14D-9 describes the
decision of your Board.
In addition to the attached Schedule 14D-9, enclosed is the
Supplement to Markel's Offer to Purchase, dated December 3, 1998, together with
related materials, including a Letter of Transmittal, to be used for tendering
your shares of common stock. These documents set forth the terms and conditions
of the tender offer and the merger and provide instructions as to how to tender
your shares. We urge you to read the enclosed materials carefully.
Your Directors thank you for your support.
On behalf of the Board of Directors,
Hadley C. Ford Stephen A. Crane
Chairman of the Board Director, President and
Chief Executive Officer
November 24, 1998
Board of Directors
Gryphon Holdings Inc.
30 Wall Street
New York, NY 10003
Members of the Board:
You have requested our opinion as to the fairness from a financial point
of view to the stockholders of Gryphon Holdings Inc. ("Gryphon" or the
"Company") of the consideration to be offered to such stockholders pursuant to
the terms of the Agreement and Plan of Merger, to be dated as of November 25,
1998 (the "Agreement"), by and among Markel Corporation ("Parent"), MG
Acquisition Corp. ("Sub"), and Gryphon.
We understand that the Agreement provides for, among other things, (i) the
tender offer (the "Tender Offer") by Parent for any and all outstanding shares
of the Company's common stock, par value $0.01 per share (the "Common Stock"),
including the associated preferred stock purchase rights, at a price of $19.00
per share in cash and (ii) the subsequent merger (the "Merger" and, together
with the Tender Offer, the "Transaction") of Sub with and into Gryphon, pursuant
to which the shares of Common Stock not tendered in the Tender Offer, subject to
certain exceptions, would be converted into the right to receive $19.00 per
share in cash. The terms and conditions of the Transaction are set forth in more
detail in the Agreement.
In arriving at our opinion, we have reviewed the draft of the Agreement
that we received on November 24, 1998. We also have reviewed financial and other
information that was publicly available or furnished to us by the Company
including information provided during discussions with management. Included in
the information provided during discussions with management were certain
financial projections of the Company for the period beginning September 30, 1998
and ending December 31, 2003 prepared by the management of the Company. In
addition, we have considered various discussions with third parties with respect
to such third parties' potential interest in an acquisition of all or part of
the Company or other strategic transaction involving the Company. We have
compared certain financial and securities data of the Company with various other
companies whose securities are traded in public markets, reviewed the historical
stock prices and trading volumes of the Common Stock, reviewed prices and
premiums paid in certain other business combinations and conducted such other
financial studies, analyses and investigations as we deemed appropriate for
purposes of this opinion.
<PAGE>
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
us from public sources, that was provided to us by the Company or its
representatives, or that was otherwise reviewed by us. With respect to the
financial projections supplied to us, we have assumed that they have been
reasonably prepared on the basis reflecting the best currently available
estimates and judgments of the management of the Company as to the future
operating and financial performance of the Company. We have not assumed any
responsibility for making an independent evaluation of any assets or liabilities
of the Company or for making any independent verification of any of the
information reviewed by us.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. We have not been requested to opine as to, and
our opinion does not in any manner address, the underlying business decision by
the Company to proceed with or effect the Transaction.
This opinion is for the use and benefit of the Board of Directors of the
Company. This opinion is not intended to be and does not constitute a
recommendation to any stockholder of the Company as to whether to tender any
shares of Common Stock into the Tender Offer.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of
its investment banking services, is regularly engaged in the valuation of
businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. DLJ has
performed investment banking and other services for the Company in the past and
has been compensated for such services. DLJ has performed investment banking and
other services for Markel in the past and has been compensated for such
services. In January 1997, DLJ underwrote $150 million of Capital Securities for
Markel and received usual and customary underwriters compensation for its
services.
Based upon the foregoing and such other factors as we deem relevant, we
are of the opinion that, as of the date hereof, the consideration to be offered
to the stockholders of the Company in the Transaction is fair to such
stockholders from a financial point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:/s/ Douglas V. Brown
_______________________
Douglas V. Brown
Managing Director
SUPPLEMENT TO THE OFFER TO PURCHASE DATED DECEMBER 3, 1998
MG ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
MARKEL CORPORATION
HAS INCREASED THE PRICE OF ITS
OFFER TO PURCHASE
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
GRYPHON HOLDINGS INC.
TO
$19.00 NET PER COMMON SHARE
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON FRIDAY, DECEMBER 18, 1998, UNLESS THE OFFER IS
EXTENDED.
THE BOARD OF DIRECTORS OF GRYPHON HOLDINGS INC. (THE "COMPANY") HAS
UNANIMOUSLY DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE
BEST INTERESTS, OF THE COMPANY'S SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT
THE SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER AND, IF REQUIRED, VOTE IN
FAVOR OF THE MERGER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT
NUMBER OF COMMON SHARES (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE
RIGHTS) WHICH, TOGETHER WITH SHARES OWNED BY MARKEL CORPORATION ("PARENT") AND
MG ACQUISITION CORP., A WHOLLY-OWNED SUBSIDIARY OF PARENT ("PURCHASER"),
CONSTITUTE AT LEAST 51% OF THE COMMON SHARES OF THE COMPANY OUTSTANDING ON A
FULLY DILUTED BASIS ON THE DATE OF PURCHASE, AND (2) PARENT AND PURCHASER
HAVING OBTAINED ALL INSURANCE REGULATORY APPROVALS NECESSARY FOR THEIR
ACQUISITION OF CONTROL OVER THE COMPANY AND ITS INSURANCE SUBSIDIARIES ON TERMS
AND CONDITIONS REASONABLY SATISFACTORY TO PURCHASER, IN ITS GOOD FAITH
DETERMINATION. SEE THE INTRODUCTION AND SECTION 8 OF THIS SUPPLEMENT.
THE OFFER IS NOT CONDITIONED UPON PURCHASER OBTAINING FINANCING.
IMPORTANT
Any shareholder desiring to tender all or any portion of such
shareholder's Common Shares should either (i) complete and sign one of the
Letters of Transmittal (or a facsimile thereof) in accordance with the
instructions in the Letters of Transmittal, have such shareholder's signature
thereon guaranteed if required by Instruction 1 to the Letters of Transmittal,
mail or deliver one of the Letters of Transmittal (or such facsimile thereof)
and any other required documents to the Depositary (as defined herein) and
either deliver the certificates for such Common Shares to the Depositary along
with the Letters of Transmittal (or a facsimile thereof) or deliver such Common
Shares pursuant to the procedures for book-entry transfers set forth in Section
3 of the Offer to Purchase prior to the expiration of the Offer or (ii) request
such shareholder's broker, dealer, commercial bank, trust company or other
nominee to effect the transaction for such shareholder. A shareholder having
Common Shares registered in the name of a broker, dealer, commercial bank,
trust company or other nominee must contact such broker, dealer, commercial
bank, trust company or other nominee if such shareholder desires to tender such
Common Shares.
Any shareholder who desires to tender Common Shares and whose certificates
for such shares are not immediately available, or who cannot comply with the
procedures for book-entry transfers described in the Offer to Purchase as
supplemented by Section 2 of this Supplement on a timely basis, may tender such
Common Shares by following the procedures for guaranteed delivery set forth in
Section 3 of the Offer to Purchase as supplemented by Section 2 of this
Supplement.
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
set forth on the back cover of this Supplement. Additional copies of the Offer
to Purchase, this Supplement, the revised Letter of Transmittal or other tender
offer materials may be obtained from the Information Agent.
---------------
The Dealer Manager for the Offer is:
[COCHRAN, CARONIA SECURITIES LLC LOGO]
December 3, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
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<S> <C>
INTRODUCTION ............................................................................. 1
1. Terms of the Offer; Expiration Date ............................................ 2
2. Procedures for Tendering Common Shares ......................................... 2
3. Price Range of Shares; Dividends ............................................... 3
4. Certain Information Concerning the Company ..................................... 3
5. Source and Amount of Funds ..................................................... 4
6. Background of the Offer; Contacts with the Company ............................. 4
7. Purpose of the Offer and the Merger; Plans for the Company; Certain
Considerations................................................................ 5
8. Conditions of the Offer ........................................................ 11
9. Certain Legal Matters; Regulatory Approvals; Certain Litigation ................ 13
10. Miscellaneous ................................................................. 13
</TABLE>
<PAGE>
TO THE HOLDERS OF COMMON STOCK OF GRYPHON HOLDINGS INC.:
INTRODUCTION
The following information amends and supplements the Offer to Purchase
dated October 20, 1998 (the "Offer to Purchase") of MG Acquisition Corp.
("Purchaser"), a Delaware corporation and a wholly owned subsidiary of Markel
Corporation, a Virginia corporation ("Parent"), pursuant to which Purchaser is
offering to purchase all outstanding shares of common stock, par value $0.01
per share (the "Common Shares"), of Gryphon Holdings Inc., a Delaware
corporation (the "Company"), including the associated Junior Participating
Cumulative Preferred Stock Purchase Rights (including any successors thereto,
the "Rights") issued pursuant to the Rights Agreement, dated as of June 5,
1995, as amended as of July 28, 1998, October 22, 1998 and November 25, 1998,
between the Company and State Street Bank and Trust Company, as Rights Agent
(as such agreement may be further amended and including any successor
agreement, the "Rights Agreement"), at a price of $19.00 per Common Share, net
to the seller in cash, without interest thereon (the "Offer Price"), upon the
terms and subject to the conditions set forth in the Offer to Purchase, this
Supplement and the revised Letter of Transmittal (which, as amended from time
to time, together constitute the "Offer").
This Supplement should be read in conjunction with the Offer to Purchase.
Except as set forth in this Supplement and the revised Letter of Transmittal,
the terms and conditions previously set forth in the Offer to Purchase and the
Letter of Transmittal previously mailed to shareholders, remain applicable in
all respects to the Offer. Terms used but not defined herein have the meaning
set forth in the Offer to Purchase.
On November 24, 1998, the Board of Directors of the Company (the "Company
Board") approved the Agreement and Plan of Merger, dated as of November 25,
1998, by and among Parent, Purchaser and the Company (the "Merger Agreement").
Thereafter, Parent, Purchaser and the Company entered into the Merger
Agreement, which provides, among other things, for (i) the continuation of the
Offer at an Offer Price of $19.00 per Common Share and the modification of the
conditions of the Offer, as described in Section 8 hereof, and (ii) following
the consummation of the Offer, the merger of Purchaser with and into the
Company with the Company continuing as the surviving corporation (the
"Merger"). Pursuant to the Merger, each Common Share then outstanding at the
effective time of the Merger (other than Common Shares owned by Parent or
Purchaser, the Company or any subsidiary of the Company and Dissenting Shares
(as defined in the Merger Agreement)) will, by virtue of the Merger and without
any action by the holder thereof, be converted into the right to receive $19.00
per Common Share, net to the shareholder in cash, without interest thereon (the
"Merger Consideration"), upon surrender of the certificate formerly
representing such Common Shares (a "Certificate").
According to the Company's Solicitation/Recommendation Statement on
Schedule 14D-9 (Amendment No. 4) (the "Schedule 14D-9") filed on December 3,
1998 with the Securities and Exchange Commission (the "SEC"), the Company Board
unanimously determined that the transactions contemplated by the Merger
Agreement, including the Offer and the Merger, are fair to, and in the best
interests, of the Company's shareholders.
The Offer is being amended and supplemented pursuant to the terms of the
Merger Agreement. For a more detailed description of the Merger Agreement, see
Section 7 of this Supplement.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT THE
OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS, OF THE COMPANY'S
SHAREHOLDERS AND RECOMMENDS THAT THE SHAREHOLDERS OF THE COMPANY ACCEPT THE
OFFER AND, IF REQUIRED, VOTE IN FAVOR OF THE MERGER.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), financial
advisor to the Company, has delivered its written opinion to the Company Board
that the consideration to be received by the holders of Common Shares pursuant
to each of the Offer and the Merger is fair to such holders from a financial
point of view. A copy of the opinion of DLJ is attached as an exhibit to the
Schedule 14D-9. Shareholders are urged to read such opinion in its entirety for
a description of the procedures followed, assumptions and qualifications made,
matters considered and limitations on the review undertaken by DLJ.
Because the Company Board approved, on November 24, 1998, the terms of the
Merger Agreement, the provisions of Section 203 of the Delaware Corporation Law
relating to Business Combinations with Interested Stockholders have been
rendered inapplicable to the Merger. Accordingly, the Offer is no longer
subject to the Affiliated Transaction Condition.
The Company Board approved, on November 24, 1998, an amendment to the
Rights Agreement providing, in effect, that the Rights are inapplicable to the
Offer and the Merger. See Section 7 of this Supplement. Accordingly, the Offer
is no longer subject to the Rights Condition.
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THE OFFER REMAINS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING
VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE
OFFER THAT NUMBER OF COMMON SHARES (INCLUDING THE ASSOCIATED RIGHTS) WHICH,
TOGETHER WITH SHARES OWNED BY PARENT AND PURCHASER, CONSTITUTE AT LEAST 51% OF
THE COMMON SHARES OF THE COMPANY OUTSTANDING ON A FULLY DILUTED BASIS ON THE
DATE OF PURCHASE, AND (2) PARENT AND PURCHASER HAVING OBTAINED ALL INSURANCE
REGULATORY APPROVALS NECESSARY FOR THEIR ACQUISITION OF CONTROL OF THE COMPANY
AND ITS INSURANCE SUBSIDIARIES ON TERMS AND CONDITIONS REASONABLY SATISFACTORY
TO PURCHASER, IN ITS GOOD FAITH DETERMINATION. SECTION 8 OF THIS SUPPLEMENT.
THE OFFER IS NOT CONDITIONED UPON PURCHASER OBTAINING FINANCING.
According to information included in the Form 10-Q of Gryphon Holdings
Inc. for the quarter ended September 30, 1998, as filed with the Securities and
Exchange Commission (the "SEC") on November 16, 1998 (the "Company Form 10-Q")
there were 6,740,229 Common Shares outstanding as of September 30, 1998.
According to information included within Forms S-8 of Gryphon Holdings Inc.
filed with the SEC through February 20, 1998, and within the footnotes to the
financial statements of Gryphon Holdings Inc. included within the Form 10-K of
Gryphon Holdings Inc. for the year ended December 31, 1997, there were 790,075
Common Shares subject to issuance pursuant to various stock option and
incentive plans of the Company (the "Incentive Shares") as of December 31, 1997
(the most recent date such information is available to Purchaser). In addition,
according to the Form 8-K/A of Gryphon Holdings Inc. dated September 28, 1998,
as of that date, 688,077 Common Shares were reserved for issuance pursuant to
the conversion of the 14,440 issued and outstanding Preferred Shares which the
Company had issued as partial consideration for the acquisitions reported by
the Company in such Form 8-K/A. The Company also reported in that Form 8-K/A
the existence of an earnout payment (the "Earnout Payment") relating to those
acquisitions which could be comprised of either cash or additional Preferred
Shares.
Based on the foregoing without giving effect to the indeterminate number
of Preferred Shares (and upon conversion, of Common Shares) which may be issued
pursuant to the Earnout Payment, Purchaser believes there are approximately
6,740,229 Common Shares outstanding on a fully diluted basis. The Purchaser
believes that approximately 3,437,517 Common Shares represent at least 51% of
the Common Shares of the Company. Parent and Purchaser currently own an
aggregate of 791,250 Common Shares, which were acquired in open-market
transactions. Accordingly, Purchaser believes that the Minimum Condition would
be satisfied if an aggregate of 2,646,267 Common Shares are validly tendered
and not properly withdrawn pursuant to the Offer.
THE OFFER TO PURCHASE, THIS SUPPLEMENT AND THE REVISED LETTER OF
TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE
ANY DECISION IS MADE WITH RESPECT TO THE OFFER.
1. TERMS OF THE OFFER; EXPIRATION DATE.
The discussion set forth in Section 1 of the Offer to Purchase is hereby
amended and supplemented as follows:
The term "Expiration Date" has been amended to mean 12:00 Midnight, New
York City time, on December 18, 1998, unless and until Purchaser, in its sole
discretion, but subject to the terms of the Merger Agreement, shall have
extended the period of time during which the Offer is open, in which event the
term "Expiration Date" shall refer to the latest time and date at which the
Offer, as so extended by Purchaser, shall expire.
It is Parent's and Purchaser's current expectation that the required
approvals by the relevant Insurance Commissions in California and Pennsylvania
will occur by December 31, 1998. The hearing required under the Connecticut
Insurance Code is not expected to occur until January 1999. Since the Offer
remains conditional upon the satisfaction of the Insurance Regulatory
Condition, the Purchaser is likely to extend the Expiration Date to a date
after the Connecticut hearing.
2. PROCEDURES FOR TENDERING COMMON SHARES.
The discussion set forth in Section 3 of the Offer to Purchase is hereby
amended and supplemented as follows:
The revised Letter of Transmittal and the revised Notice of Guaranteed
Delivery distributed with this Supplement may be used to tender Common Shares.
Tendering shareholders may also continue to use the Letter of Transmittal and
Notice of Guaranteed Delivery previously distributed with the Offer to Purchase
to tender Common Shares.
SHAREHOLDERS WHO HAVE PREVIOUSLY VALIDLY TENDERED COMMON SHARES PURSUANT
TO THE OFFER AND NOT PROPERLY WITHDRAWN SUCH COMMON SHARES HAVE VALIDLY
TENDERED
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<PAGE>
SUCH COMMON SHARES FOR PURPOSES OF THE OFFER, AS AMENDED, AND NEED NOT TAKE ANY
FURTHER ACTION IN ORDER TO RECEIVE THE PRICE OF $19.00 PER COMMON SHARE
PURSUANT TO THE OFFER.
3. PRICE RANGE OF SHARES; DIVIDENDS.
The discussion set forth in Section 6 of the Offer to Purchase is hereby
amended and supplemented as follows:
According to published financial sources, the high and low sales prices
per Common Share on the Nasdaq NM for the Fourth Quarter of 1998 (through
December 2, 1998) were $14.00 and $18 7/8 respectively. On November 24, 1998,
the last full trading day prior to the announcement of the Merger Agreement,
the last reported closing price on the Nasdaq NM was $18.00 per Common Share.
Shareholders are urged to obtain a current market quotation for the Common
Shares.
4. CERTAIN INFORMATION CONCERNING THE COMPANY
The discussion set forth in Section 8 of the Offer to Purchase is hereby
amended and supplemented as follows:
Set forth below is certain selected consolidated financial information
relating to the Company and its subsidiaries which has been excerpted or
derived from the financial statements contained in the Company's 1997 Form
10-K, the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1998 (the "September, 1998 Form 10-Q"), and other documents filed
by the Company with the SEC. More comprehensive financial information
(including pro forma financial data giving effect to the Company's acquisition
of all the issued and outstanding shares of capital stock of The First
Reinsurance Company of Hartford, Oakley Underwriting Agency, and F/I Insurance
Agency, Incorporated, as reported in the Company Form 8-K). is included in, and
the financial information that follows is qualified in its entirety by
reference to, the Company's 1997 Form 10-K, the September, 1998 10-Q and such
other documents filed by the Company with the SEC. The Company Form 10-K, the
September, 1998 10-Q and such other documents may be examined at and copies may
be obtained from the offices of the SEC or the NASDAQ Stock Market in the
manner set forth in Section 8 of the Offer to Purchase.
3
<PAGE>
SUMMARY FINANCIAL INFORMATION FOR THE COMPANY
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
AT OR FOR THE NINE
AT OR FOR THE YEAR ENDING MONTHS ENDING
DECEMBER 31, SEPTEMBER 30,
----------------------------------------- -----------------------
1995 1996 1997 1997 1998
------------- ------------- ------------- ------------ ----------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Total Revenue ................................. $ 102,885 $ 106,644 $ 128,474 $ 93,054 $ 88,603
Net Income .................................... 12,925 6,163 8,794 8,035 (5,865)
Earnings Per Share (basic) .................... 1.69 0.93 1.32 1.20 (0.87)
BALANCE SHEET DATA
Total Investments ............................. 261,265 280,471 280,810 275,907 386,537
Total Assets .................................. 530,989 526,984 538,985 559,451 747,997
Unpaid Losses and Loss Adjustment Expense ..... 308,886 309,259 328,911 343,782 448,636
Total Liabilities ............................. 437,767 431,848 434,476 455,189 632,321
Total Stockholders' Equity .................... 93,222 95,136 104,509 104,262 115,676
</TABLE>
5. SOURCE AND AMOUNT OF FUNDS.
The discussion set forth in Section 10 of the Offer to Purchase is hereby
amended and supplemented as follows:
Purchaser estimates that the total amount of funds now required to
purchase Common Shares pursuant to the Offer (as described in this Supplement)
and to pay all related costs and expenses will be approximately $122 million.
Purchaser plans to obtain all funds needed for the Offer through a capital
contribution from Parent. Parent plans to obtain such funds entirely from
existing cash accounts and the Credit Facility. At December 3, 1998, Parent had
$250 million of available borrowings under the Credit Facility.
6. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY.
The discussion set forth in Section 11 of the Offer to Purchase is hereby
amended and supplemented as follows:
On October 30, 1998, Steven A. Markel, Vice Chairman of Parent, sent a
letter to the Company Board indicating Parent was willing to discuss raising
the $18.00 per Common Share offer price if it had access to information
justifying an increase in price. In its Schedule 14D-9 filed November 4, 1998
(the "Original Schedule 14D-9") the Company reported that the Company Board
voted to recommend that its shareholders reject the original Offer. By
amendment to the Original Schedule 14D-9 filed November 6, 1998, the Company
reported that at the regularly scheduled meeting of the Company Board held on
November 5, 1998, the Company Board designated a Special Committee (the
"Special Committee") consisting of three directors for the purpose of
investigating, reviewing, evaluating and assessing the Company's strategic
alternatives that have arisen or may arise. On November 9, 1998, Mr. Markel
sent a letter to the Special Committee indicating, among other things, Parent's
willingness to discuss raising the $18.00 per Common Share offer price if
Parent had access to information justifying such an increase.
On November 13, 1998, Mr. Markel met with Robert M. Baylis, Chairman of
the Special Committee to explore the possibility of the Company and Parent
entering into a confidentiality agreement on terms satisfactory to both parties
and an increase in the $18.00 per Common Share offer price, subject to
satisfactory completion of Parent's due diligence. From November 13 through
November 17, 1998, representatives of Parent and the Company, together with
their legal counsel and financial advisors, had discussions concerning the
terms of the proposed confidentiality agreement and the amendment of the Offer
Price. On November 17, 1998, Parent and the Company executed a confidentiality
agreement and Parent announced that the Offer was amended to increase the Offer
Price from $18.00 per Common Share to $19.00 per Common Share, subject to
satisfactory completion of Parent's due diligence review. The Special Committee
agreed that upon completion of Parent's due diligence review of the Company,
the Special Committee would recommend to the Company Board that the Company
Board and the Company's shareholders accept the Offer at a $19.00 per Common
Share offer price, subject to there being no higher offers to purchase the
Company outstanding at that time.
From November 17 through November 24, representatives of Parent and the
Company, together with their legal counsel and financial advisors, held
discussions with respect to the negotiation of a definitive agreement.
On November 24, 1998, the Company Board unanimously approved the Merger
Agreement. Thereafter, Parent, Purchaser and the Company entered into the
Merger Agreement, which provides, among other things, for (i) the continuation
4
<PAGE>
of the Offer and the modification of the conditions of the Offer, as described
in Section 8 hereof, and (ii) following the consummation of the Offer, the
Merger. Pursuant to the Merger, each Common Share then outstanding at the
effective time of the Merger (other than Common Shares owned by Parent or
Purchaser, the Company or any subsidiary of the Company and Dissenting Shares
(as defined in the Merger Agreement)) will, by virtue of the Merger and without
any action by the holder thereof, be converted into the right to receive $19.00
per Common Share, net to the shareholder in cash, without interest thereon,
upon surrender of the Certificate.
7. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY; CERTAIN
CONSIDERATIONS.
The discussion set forth in Section 12 of the Offer to Purchase is hereby
amended and supplemented as follows:
THE MERGER AGREEMENT
Pursuant to the Merger Agreement and following the consummation of the
Offer, Parent, Purchaser and the Company have agreed to effect the Merger in
accordance with the provisions of the Merger Agreement on the third business
day (or such other time as the parties mutually agree) after the satisfaction
or waiver of certain conditions to the Merger. Set forth below is a description
of the material provisions of the Merger Agreement.
THE OFFER. In the Merger Agreement, the Purchaser has agreed, subject to
certain conditions, among other things, (a) to continue the Offer at an Offer
Price of $19.00 per Common Share, net to the seller in cash without interest,
and (b) to modify the conditions of the Offer to those set forth below under
Section 8. The Merger Agreement provides that, without the consent of the
Company, the Purchaser will not (a) reduce the number of Common Shares sought
in the Offer, (b) reduce the Offer Price, (c) change or add to the conditions
set forth below under Section 8, (d) except as provided in the next sentence,
extend the expiration date of the Offer, (e) change the form of consideration
payable in the Offer, (f) amend any other term of the Offer in any manner
adverse to the holders of the Common Shares or (g) waive the Minimum Condition.
Notwithstanding the foregoing, Purchaser may, without the consent of the
Company, (A) extend the Offer, if at the scheduled expiration date of the Offer
any of the conditions to the Purchaser's obligation to purchase the Common
Shares are not satisfied or waived, until such time as such conditions are
satisfied or waived (provided that the expiration date may not be extended
beyond June 30, 1999 without the consent of the Company), (B) extend the Offer
for any period required by any rule, regulation, interpretation or position of
the SEC or the staff thereof applicable to the Offer or (C) if all conditions
to Purchaser's obligation to purchase the Common Shares are satisfied or waived
but the number of Common Shares tendered together with Common Shares held by
Parent and its subsidiaries is less than 90% of the then outstanding number of
Common Shares (determined on a fully diluted basis for all outstanding
Preferred Shares, stock options and any other rights to acquire Common Shares),
extend the Offer for an aggregate period of not more than 20 business days
after the latest expiration date that would be permitted under clause (A) or
(B) of this sentence. Subject to the terms and conditions of the Offer and the
Merger Agreement, Parent and Purchaser have agreed to accept for payment, and
pay for, all Common Shares validly tendered and not withdrawn pursuant to the
Offer that Purchaser becomes obligated to accept for payment, and pay for,
pursuant to the Offer, as soon as practicable after the expiration of the
Offer.
THE MERGER. The Merger Agreement provides that, following the satisfaction
or waiver of the conditions set forth therein, Purchaser will be merged with
and into the Company, with the Company continuing as the surviving corporation
(the "Surviving Corporation"), and each Common Share (with associated Rights)
then outstanding (other than Common Shares owned by Parent or Purchaser, shares
owned by the Company or any of its subsidiaries and Dissenting Shares) will, by
virtue of the Merger and without any action by the holder thereof, be converted
into the right to receive $19.00 per Common Share, net to the shareholder in
cash, without interest thereon, upon the surrender of the certificate formerly
representing such shares.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains
representations and warranties by the Company with respect to, among other
things, the authority of the Company relative to the Merger Agreement, certain
SEC filings of the Company, the absence of certain changes or events, and the
inapplicability of state takeover statutes. The Merger Agreement also contains
representations and warranties of Parent and Purchaser with respect to, among
other things, their authority relative to the Merger Agreement and information
supplied in SEC filings in connection with the Offer or the Merger.
COVENANTS OF THE COMPANY. In the Merger Agreement, the Company has agreed
that, among other things, during the period from the date of the Merger
Agreement until the time persons nominated by Parent or Purchaser constitute a
majority of the Company Board, the Company and its subsidiaries will conduct
their respective businesses in the ordinary course and in a manner consistent
with past practice and will use good faith efforts to preserve intact their
business organizations, to keep available the services of their current
officers and key employees, preserve its relationships with insureds,
reinsurers,
5
<PAGE>
customers, suppliers, insurance brokers and agents, and others having
significant business dealings with them to the end that its goodwill and
ongoing businesses will not be impaired in any material respect at the
effective time of the Merger (the "Effective Time"), subject to the terms of
the Merger Agreement. Without limiting the generality of the foregoing, from
the date hereof until the time persons nominated by Parent or Purchaser
constitute a majority of the Company Board except, as otherwise expressly
contemplated by the Merger Agreement, the Company will not, and will not permit
any of its subsidiaries to, without the prior written consent of Parent: (a)
(i) declare, set aside or pay any dividends on, or make any other distributions
in respect of, any of its capital stock, other than dividends and distributions
by a direct or indirect wholly owned subsidiary of the Company to its parent,
(ii) split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or (iii) purchase, redeem or
otherwise acquire any shares of capital stock of the Company or any of its
subsidiaries or any other securities thereof or any rights, warrants or options
to acquire any such shares or other securities, except, in the case of clause
(iii), for (x) the acquisition of Common Shares from holders of stock options
in full or partial payment of the exercise price payable by such holder or tax
liability arising in connection therewith, upon exercise of stock options
outstanding on the date of the Merger Agreement in accordance with their then
present terms and (y) the conversion of the Preferred Shares; (b) authorize for
issuance, issue, deliver, sell, pledge or otherwise encumber any shares of its
capital stock or the capital stock of any of its subsidiaries, any other voting
securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible
securities or any other securities or equity equivalents (including without
limitation stock appreciation rights), or contractual obligations valued or
measured by the value or market price of the Common Shares (other than the
issuance of Common Shares and associated Rights (and reservation of preferred
stock in connection with the Rights) upon the exercise of stock options
outstanding on the date of the Merger Agreement and in accordance with their
then present terms); (c) amend its Certificate of Incorporation, Bylaws or
other comparable charter or organizational documents; (d) acquire or agree to
acquire by merging or consolidating with, or by purchasing a substantial
portion of the stock or assets of, or by any other manner, any business or any
entity; (e) sell, lease, license, mortgage or otherwise encumber or subject to
any encumbrance or otherwise dispose of any of its properties or assets that
are material, individually or in the aggregate, to the Company and its
subsidiaries taken as a whole, except in the ordinary course of business
consistent with past practice; (f)(i) incur any indebtedness for borrowed money
or guarantee any such indebtedness of another person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities of the
Company or any of its subsidiaries, guarantee any debt securities of another
person, enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having the
economic effect of any of the foregoing, except for short-term borrowings
incurred in the ordinary course of business consistent with past practice, or
(ii) make any loans, advances or capital contributions to, or investments in,
any other person, other than to the Company or any direct or indirect wholly
owned subsidiary of the Company; (g) acquire or agree to acquire any assets
that are material, individually or in the aggregate, to the Company and its
subsidiaries taken as a whole, or make or agree to make any capital
expenditures except in the ordinary course of business consistent with past
practice; (h) pay, discharge or satisfy any claims (including claims of
shareholders), liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), except for the payment, discharge or
satisfaction, of (i) liabilities or obligations in the ordinary course of
business consistent with past practice or in accordance with their terms as in
effect on the date hereof or (ii) liabilities reflected or reserved against in,
or contemplated by, the most recent consolidated audited financial statements
(or the notes thereof) of the Company included in certain reports filed with
the SEC prior to the date of the Merger Agreement, or waive, release, grant, or
transfer any rights of material value or modify or change in any material
respect any existing license, lease, contract or other document, other than in
the ordinary course of business consistent with past practice; (i) except as
set forth in a letter dated the date of the Merger Agreement delivered to
Parent contemporaneously with the execution thereof, adopt or amend in any
material respect (except as may be required by law or by the Merger Agreement)
any bonus, profit sharing, compensation, stock option, pension, retirement,
deferred compensation, employment or other employee benefit plan, agreement,
trust, fund or other arrangement (including any Benefit Plan (as defined in the
Merger Agreement)) for the benefit or welfare of any employee, director or
former director or employee or increase the compensation or fringe benefits of
any director or employee or former director or employee; pay any benefit
(including any discretionary bonus) not required by any existing plan,
arrangement or agreement, grant any new or modified severance or termination
arrangement or increase or accelerate any benefits payable under its severance
or termination pay policies in effect on the date of the Merger Agreement,
other than any such increase or acceleration provided for under such policies
as in effect on the date of the Merger Agreement; (j) change any material
accounting principle used by it, except for such changes as may be required to
be implemented following the date of the Merger Agreement pursuant to generally
accepted accounting principles or rules and regulations of the SEC promulgated
following the date of the Merger Agreement; (k) take any action that would, or
is reasonably likely to, result in any of its representations and warranties in
the Merger Agreement
6
<PAGE>
becoming untrue, or in any of the conditions of Purchaser's obligation to
purchase Common Shares in the Offer or the conditions to the Merger not being
satisfied; (l) except in the ordinary course of business and consistent with
past practice, make any material tax election or settle or compromise any
material federal, state, local or foreign income tax liability; and (m)
authorize any of, or commit or agree to take any of, the foregoing actions.
PROHIBITION ON SOLICITATION. Pursuant to the Merger Agreement, the Company
has agreed that the Company and its officers, directors, employees,
representatives and agents will immediately cease any discussions or
negotiations with any parties that may be ongoing with respect to an
Acquisition Proposal (as defined below). From and after the date of the Merger
Agreement until the termination thereof, the Company has agreed it will not,
nor will it permit any of its subsidiaries to, authorize or permit any of its
officers, directors or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it or any of its
subsidiaries to, directly or indirectly, (i) solicit, initiate or knowingly
encourage (including by way of furnishing non-public information or
assistance), or knowingly take any other action to facilitate, any inquiries or
the making of any proposal which constitutes, or would reasonably be expected
to lead to, any Acquisition Proposal or (ii) participate in any discussions or
negotiations regarding any Acquisition Proposal. If, at any time the Company
Board determines in good faith, after receiving the advice of independent legal
counsel (who may be the Company's regularly engaged independent counsel), that
it is necessary to do so in the exercise of its fiduciary duties to the
Company's shareholders under applicable law, the Company may, in response to an
unsolicited Acquisition Proposal, and subject to compliance with certain
provisions of the Merger Agreement, (A) furnish information with respect to the
Company to any person pursuant to a confidentiality agreement in reasonably
customary form and (B) participate in discussions or negotiations regarding
such Acquisition Proposal. An, "Acquisition Proposal" means any inquiry,
proposal or offer (or any public announcement of a proposal, plan or intention
to do any of the foregoing or any agreement to engage in the foregoing) from
any person relating to any direct or indirect acquisition or purchase of 20% or
more of the assets of the Company or any of its subsidiaries or 20% or more of
any class of equity securities of the Company or any of its subsidiaries, any
tender offer or exchange offer that if consummated would result in any person
beneficially owning 20% or more of any class of equity securities of the
Company or any of its subsidiaries, any merger, consolidation, business
combination, sale of all or substantially all the assets, recapitalization,
liquidation, dissolution or similar transaction involving the Company or any of
its subsidiaries, other than the transactions contemplated by the Merger
Agreement, or any other transaction the consummation of which would reasonably
be expected to impede, interfere with, prevent or materially delay the Offer or
the Merger or which would reasonably be expected to dilute materially the
benefits to Parent of the transactions contemplated by the Merger Agreement.
The Company has agreed that neither the Company Board nor any committee
thereof will (i) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to Parent, the approval or recommendation by the Company Board
of the Merger Agreement, the Offer or the Merger, (ii) approve or recommend, or
propose to approve or recommend, any Acquisition Proposal or (iii) cause the
Company to enter into any agreement with respect to any Acquisition Proposal.
Notwithstanding the foregoing, in the event that the Company Board determines
in good faith, after receiving the advice of independent legal counsel (who may
be the Company's regularly engaged independent counsel), that it is necessary
to do so in the exercise of its fiduciary duties to the Company's shareholders
under applicable law, the Company Board may (subject to certain provisions of
the Merger Agreement) withdraw or modify its approval or recommendation of the
Merger Agreement, the Offer and the Merger, approve or recommend a Superior
Proposal (as defined below), cause the Company to enter into an agreement with
respect to a Superior Proposal or terminate the Merger Agreement, but in each
case only at a time that is after the twentieth business day following Parent's
receipt of written notice (a "Notice of Superior Proposal") advising Parent
that the Company Board has received a Superior Proposal, specifying the
material terms and conditions of such Superior Proposal and identifying the
person making such Superior Proposal. In addition, if the Company proposes to
enter into an agreement with respect to any Acquisition Proposal, it has agreed
concurrently with entering into such agreement to pay, or cause to be paid, to
Parent a termination fee of $5 million (the "Termination Fee") plus all
out-of-pocket fees and expenses incurred by Parent in connection with the
Offer, the Merger, the Merger Agreement and the transactions contemplated
thereby not to exceed $500,000 ("Parent's Expenses"). A "Superior Proposal"
means any bona fide Acquisition Proposal made by a third party to acquire,
directly or indirectly, for consideration consisting of cash and/or securities,
all of the Common Shares then outstanding or all or substantially all the
assets of the Company and otherwise on terms which the Company Board determines
in its good faith judgment (after receiving the advice of a financial advisor
of nationally recognized reputation) to be more favorable to the Company's
shareholders than the Offer and the Merger.
The Company has agreed in the Merger Agreement (i) to promptly advise
Parent orally and in writing of any request for information or of any
Acquisition Proposal, the material terms and conditions of such request or
Acquisition Proposal and the identity of the person making such request or
Acquisition Proposal, (ii) to receive from the Person an executed
confidentiality agreement on terms no less favorable to the Company than those
contained in the confidentiality agreement
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executed by Parent and (iii) to keep Parent promptly advised of all
developments which could reasonably be expected to culminate in the Company
Board withdrawing, modifying or amending its recommendation of the Offer, the
Merger and other transactions contemplated thereby.
Nothing in the Merger Agreement prohibits the Company from taking and
disclosing to its shareholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or from making any disclosure to the
Company's shareholders if, in the good faith judgment of the Company Board,
after consultation with independent legal counsel (who may be the Company's
regularly engaged independent counsel), failure so to disclose would be
inconsistent with its fiduciary duties to the Company's shareholders under
applicable law. So long as Parent and Purchaser are in compliance in all
material respects with their obligations under the Merger Agreement, neither
the Company nor the Company Board nor any committee thereof will, except as
permitted by the Merger Agreement, withdraw or modify, or propose to withdraw
or modify, its position with respect to the Merger Agreement, the Offer or the
Merger or approve or recommend, or propose to approve or recommend, an
Acquisition Proposal. The Company has agreed not to release any third party
from, or waive any provisions of, any confidentiality or standstill agreement
to which the Company is a party.
STOCKHOLDER APPROVAL; PREPARATION OF PROXY STATEMENT. The Merger Agreement
provides that as soon as practicable following the consummation of the Offer,
the Company will, at the direction of Parent, prepare and file with the SEC a
proxy statement or information statement, if required by applicable law. The
Company has agreed to use its commercially reasonable efforts to cause the
Proxy Statement to be mailed to its shareholders at the earliest practical
time.
Subject to the fiduciary obligations of the Company Board, as described
under "Prohibition on Solicitation" above, the Merger Agreement provides that
following the consummation of the Offer, the Company will, at the direction of
Parent, cause a meeting of its shareholders to be duly called and held as soon
as practicable and take all action necessary in accordance with applicable law
and its Articles of Incorporation and By-laws to convene a meeting of its
shareholders (the "Shareholders Meeting") to vote upon the approval and
adoption of the Merger Agreement and the Merger.
For a description of the short-form merger provisions of the DGCL, which,
under certain circumstances, if Parent and its subsidiaries following
consummation of the Offer own at least 90% of the Common Shares, could be
applicable to the Merger, see "Purpose of the Offer and the Merger; Plans for
the Company; Certain Considerations" in the Purchaser's Offer to Purchase.
INVESTIGATION OF BUSINESS AND PROPERTIES. The Merger Agreement provides
that, until the earlier of (i) the consummation of the Offer and (ii)
termination of the Merger Agreement, the Company will, and will cause its
subsidiaries to, afford Parent, any financial institution providing financing
to Parent, and their respective attorneys, accountants, financial advisors and
other representatives, reasonable access during regular business hours upon
reasonable notice, to make such reasonable inspection of the assets, business
and operations of the Company and its subsidiaries and to inspect and make
copies of all documents and information reasonably requested by Parent and
related to the operations and business of the Company and of its subsidiaries
and to meet with designated personnel of the Company and its subsidiaries
and/or their respective representatives. Any such access will be conducted in
such a manner as not to interfere unreasonably with the operation of the
business. The Company has agreed to instruct its personnel, accountants and
counsel to cooperate with Parent, and to provide such documents and information
as Parent and its representatives may reasonably request. Parent has agreed to
execute and deliver to such counsel and accountants such consents and waivers
as are customary in connection with providing such documents and information.
The Merger Agreement provides that the letter agreement dated November 17, 1998
between Parent and the Company (other than certain specified paragraphs
thereof) applies with respect to information furnished thereunder or under the
Merger Agreement.
EFFORTS TO CONSUMMATE. Subject to the terms and conditions of the Merger
Agreement, each of the parties has agreed to use its good faith efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate, as promptly as
practicable, the transactions contemplated by the Merger Agreement, including
the obtaining of all necessary consents, waivers, authorizations, orders and
approvals of third parties, whether private or governmental, required of it to
enable it to comply with the conditions precedent to consummating the
transactions contemplated by the Merger Agreement. Without limiting the
generality of the foregoing, each party has agreed to defend and cooperate with
each other party in defending any legal proceedings, whether judicial or
administrative and whether brought derivatively or on behalf of third parties,
challenging the Merger Agreement or the consummation of the transactions
contemplated thereby. No consideration for any such consent, waiver or
agreement necessary to the consummation of the transactions contemplated by the
Merger Agreement will be given or promised by the Company without the prior
written approval of Parent. Notwithstanding the foregoing, nothing contained in
the Merger Agreement requires (a) any party thereto or any of their respective
affiliates to sell, transfer, divest or otherwise dispose of any of its
respective business, assets or properties in connection with the Merger
Agreement or any of the transactions contemplated thereby, (b) Parent to
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enter into any agreement or other arrangement for the financing of the
transactions contemplated by the Merger Agreement on terms that are not
satisfactory to Parent, in its sole discretion or (c) any party thereto to
initiate any litigation, make any substantial payment or incur any material
economic burden (including as a result of any divestiture), except for payments
a party presently is contractually obligated to make, to obtain any consent,
waiver, authorization, order or approval.
CERTAIN LITIGATION. In the Merger Agreement, Parent and Purchaser agreed
to promptly dismiss litigation pending against the Company and its directors in
the Delaware Chancery Court. See Section 9 of this Supplement.
BOARD OF DIRECTORS. Promptly upon the acceptance for payment of, and
payment by Parent for, Common Shares pursuant to the Offer, and from time to
time thereafter, Parent is entitled to designate such number of directors on
the Company Board as will give Parent, subject to compliance with Section 14(f)
of the Exchange Act, representation on the Company Board equal to at least that
number of directors, rounded up to the next whole number, which is the
percentage of the total number of directors (giving effect to the directors
elected pursuant to this sentence) that (i) the number of Common Shares owned
by Parent and its affiliates bears to (ii) the total number of Common Shares
outstanding, and the Company has agreed, at such time, to promptly take all
action necessary to cause Parent's designees to be appointed or elected. In the
event that Parent's designees are elected to the Company Board, the Merger
Agreement provides that until the Effective Time the Company Board will have at
least two Independent Directors (as defined below); and, in such event, if the
number of Independent Directors is reduced below two for any reason whatsoever,
the remaining Independent Director will designate a person to fill such vacancy
who will be deemed to be an Independent Director for purposes of the Merger
Agreement or, if no Independent Directors then remain, the other directors will
designate two persons to fill such vacancies who may not be officers or
affiliates of the Company or any of its subsidiaries, or officers or affiliates
of Parent or any of its subsidiaries, and such persons will be deemed to be
Independent Directors for purposes of the Merger Agreement. The Company will
use its best efforts to cause persons designated by Parent to constitute the
same percentage as is on the Company Board of (i) each committee of the Company
Board, (ii) each board of directors of each domestic subsidiary of the Company
and (iii) each committee of each such other board of directors, in each case to
the extent permitted by law. Subject to applicable law, the Company has agreed
to take all action requested by Parent necessary to effect any such appointment
or election. Following the election of designees of Parent and prior to the
Effective Time, any amendment of the Merger Agreement or the Certificate of
Incorporation or Bylaws of the Company, any termination of the Merger Agreement
by the Company, any extension by the Company of the time for the performance of
any of the obligations or other acts of Parent or Purchaser or waiver of any of
the Company's rights under the Merger Agreement requires the concurrence of a
majority of the directors of the Company then in office who neither were
designated by Parent nor are employees of the Company or any of its
subsidiaries or, if there is just one such director, the concurrence of such
director (the "Independent Directors"). The Independent Directors will have the
authority to retain such counsel and other advisors at the expense of the
Company as are reasonably appropriate to the exercise of their duties in
connection with the Merger Agreement, subject to approval by the Company of the
terms of such retention, which approval will not be unreasonably withheld. In
addition, the Independent Directors will have the authority to institute any
action, on behalf of the Company, to enforce performance of the Merger
Agreement.
TREATMENT OF STOCK OPTIONS; CERTAIN BENEFITS. After the Effective Time,
holders of outstanding stock options under the Company's stock option plans
will be entitled to receive cash in an amount equal to (A) the product of the
number of Common Shares for which such stock option was exercisable immediately
prior to the Effective Time multiplied by $19.00 less (B) the aggregate
exercise price that would have been applicable to such stock option immediately
prior to the Effective Time had such stock option been exercised immediately
prior to the Effective Time.
The Merger Agreement provides that Parent will cause the Surviving
Corporation, for the period ending on December 31, 1999, either to provide
employee benefits under plans, programs and arrangements which, in the
aggregate, will provide benefits to the employees of the Surviving Corporation
which are no less favorable than those provided pursuant to the benefit plans
of the Company in effect at the date of the Merger Agreement (other than
stock-based plans) or to provide employees of the Surviving Corporation with
benefits, in the aggregate, that are comparable to those provided to similarly
situated employees of Parent and its subsidiaries. Nothing in the Merger
Agreement prevents the amendment or termination of any such benefit plan or
interferes with the Surviving Corporation's right or obligation to make such
changes as are necessary to conform with applicable law. Parent has agreed to
cause the Surviving Corporation to honor without modification all employee
severance plans (or policies) and employment and severance agreements of the
Company or any of its subsidiaries in existence on the date of the Merger
Agreement as such agreements are in effect on such date, but only to the extent
such plans (or policies) and employment and severance agreements are identified
in a letter dated the date of the Merger Agreement delivered to Parent
contemporaneously with the execution of the Merger Agreement. Nothing in the
Merger
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Agreement requires the continued employment of any person or prevents the
Surviving Corporation or any of its Subsidiaries from taking any action which
the Company or any of its subsidiaries could take if the Offer or Merger had
not been consummated.
INDEMNIFICATION AND INSURANCE. The Merger Agreement provides that all
rights to indemnification (including indemnification based in whole or in part
on, arising in whole or in part out of, or pertaining to the Merger Agreement
or the transactions contemplated thereby) by the Company now existing in favor
of each present and former director and officer of the Company (the
"Indemnified Parties") as provided in the Company's Certificate of
Incorporation or the Company's Bylaws, in each case as in effect on the date of
the Merger Agreement, or pursuant to any other agreements in effect on the date
of the Merger Agreement, survives the Merger and will continue in full force
and effect in accordance with their terms for a period of at least six years
from the Effective Time.
In addition, Parent has agreed to cause the Surviving Corporation to use
reasonable efforts to provide, for a period of six years after the Effective
Time, the Company's current directors and officers an insurance and
indemnification policy that provides coverage for events occurring at or prior
to the Effective Time (the "D &O Insurance") that is no less favorable in any
material respect than the Company's existing D&O Insurance policy or, if
substantially equivalent insurance coverage is unavailable, the best available
coverage. The Surviving Corporation is not required to pay an annual premium
for the D&O Insurance in excess of 150% of the annual premium currently paid by
the Company for such insurance, but in such case the Surviving Corporation will
purchase as much such coverage as possible for such amount.
UNDERWRITING; INVESTMENT PORTFOLIO. From the date of the Merger Agreement
through the time persons nominated by Parent or Purchaser constitute a majority
of the Company Board, the Company has agreed to cause each of its subsidiaries
not to change or alter its underwriting guidelines or criteria without the
prior written approval of Parent and will consider in good faith such changes
in its underwriting guidelines and criteria as Parent reasonably requests. From
the date of the Merger Agreement through the time persons nominated by Parent
or Purchaser constitute a majority of the Company Board, the Company has agreed
to cause each of its subsidiaries not to change its investment managers or
alter its investment guidelines or criteria without the prior written approval
of Parent and will make such changes in its investment managers and will
consider in good faith such changes in its investment guidelines and criteria
as Parent reasonably requests.
CONDITIONS TO THE MERGER. The respective obligation of each party to the
Merger Agreement to effect the Merger is subject to the satisfaction, prior to
the closing of the transactions contemplated by the Merger Agreement, of the
following conditions: (a) the Offer shall have been successfully completed; (b)
if required by applicable law, the Merger Agreement and the Merger shall have
been authorized and approved by the requisite affirmative vote of the
shareholders of the Company in accordance with applicable law; (c) no temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect; provided that
prior to invoking this condition the party seeking to invoke this condition
shall use its good faith efforts to have any such decree, ruling, injunction or
order vacated; and (d) other than the filing of the Certificate of Merger, all
approvals of governmental authorities required to consummate the transactions
contemplated by the Merger Agreement (including, without limitation, required
approvals from the insurance regulatory authorities of the States of
California, Connecticut and Pennsylvania) shall have been obtained and shall
remain in full force and effect and all statutory waiting periods in respect
thereof shall have expired.
TERMINATION. The Merger Agreement may be terminated at any time prior to
the closing whether before or after approval by the shareholders of the Company
and without further shareholder action (a) subject in the case of the Company
to the approval requirements described under "Board of Directors", by the
mutual written consent of the Company and Parent duly authorized by action of
their respective Board of Directors; (b) subject in the case of the Company to
the approval requirements described under "Board of Directors", by either
Parent or the Company upon notification to the non-terminating party by the
terminating party, if any court of competent jurisdiction or other competent
governmental authority has issued an order making illegal or otherwise
restricting, preventing or prohibiting the Merger and such order has become
final and nonappealable; (c) by Parent, if as a result of the failure of any of
the conditions to Parent's Obligation to purchase Common Shares in the Offer,
the Offer has terminated or expired in accordance with its terms without Parent
having accepted for payment any Common Shares pursuant to the Offer, unless any
such failure has been caused by or resulted from the failure of Parent or
Purchaser to comply with the terms of the Offer or any covenant or agreement of
either of them contained in the Merger Agreement; (d) by Parent prior to
acceptance for purchase of Common Shares pursuant to the Offer, if (A) the
Company Board has failed to approve and recommend, has withdrawn or modified in
a manner adverse to Parent, or, upon reasonable request of Parent, has failed
to reconfirm, its approval or recommendation of the Offer, the Merger or the
Merger Agreement, or has approved or recommended any Acquisition Proposal, (B)
the Company has entered into any agreement with respect to any Superior
Proposal in accordance with the applicable provisions of the Merger Agreement
or
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(C) the Company Board has resolved to take any of the foregoing actions; (e) by
the Company prior to purchase of Common Shares pursuant to the Offer, in
connection with entering into a definitive agreement in accordance with the
applicable provisions of the Merger Agreement, provided the Company (A) has
complied with all provisions of the Merger Agreement, including the notice
provisions therein and the payment of the Termination Fee and Parent's
Expenses, and certain provisions of the Merger Agreement on solicitations as
described in the second paragraph under "Prohibition on Solicitation" above,
and (B) has not breached in any material respect any other provisions of the
Merger Agreement on solicitation as described in the second paragraph under
"Prohibition on Solicitation" above; or (f) by the Company or Parent if
acceptance for payment of Common Shares pursuant to the Offer has not occurred
by 11:59 p.m., June 30, 1999; provided that the right to terminate the Merger
Agreement under clause (f) will not be available to any party whose failure to
fulfill any obligation under the Merger Agreement has been the cause of, or
resulted in, the failure of such purchase to occur on or before such date. The
passage of the period referred to in clause (f) of the preceding sentence will
be tolled for any part thereof during which any party to the Merger Agreement
is subject to a nonfinal order or other action restraining, enjoining or
otherwise prohibiting the purchase of Common Shares of the Company pursuant to
the Offer.
FEES AND EXPENSES. Except as otherwise provided in the Merger Agreement,
all costs, fees and expenses incurred in connection with the Merger Agreement
and the transactions contemplated thereby will be paid by the party incurring
such costs, fees and expenses, whether or not the Merger is consummated. If (i)
Parent terminates the Merger Agreement as described in clause (d) under
"Termination", or the Company terminates the Merger Agreement as described in
clause (e) under "Termination", the Company will pay, or cause to be paid, to
Parent the Termination Fee plus Parent's Expenses.
AMENDMENT. The Merger Agreement may be amended at any time by the parties
thereto. The Merger Agreement may be amended only by an instrument in writing
signed by each of the parties thereto.
RIGHTS AGREEMENT
THE RIGHTS. By an amendment, dated as of October 22, 1998, to the Rights
Agreement (the "Second Amendment"), the definitions of the terms "Acquiring
Person" and "Distribution Date" were modified by changing the ownership
threshold specified therein to 11.8% of the outstanding Common Shares. This new
ownership threshold is in excess of the percentage of the outstanding Common
Shares that is held by Parent and Purchaser.
Effective as of November 25, 1998, the Rights Agreement was further
amended (the "Third Amendment") to provide that notwithstanding any other
provisions contained in the Rights Agreement to the contrary, none of Parent,
Purchaser or any of their affiliates or associates will become an "Acquiring
Person,"nor will a Distribution Date with respect to the Rights occur, as a
result of (i) Parent and Purchaser entering into the Merger Agreement or the
performance of the transactions contemplated by or permitted under the Merger
Agreement or (ii) the making of the Offer or the acceptance of, or payment for,
Common Shares pursuant thereto. The Third Amendment also provides that the
Rights will expire upon the earlier of Purchaser's acceptance of and payment
for Common Shares pursuant to the Offer or immediately prior to the Effective
Time of the Merger. Based on the modifications to the Rights Agreement
contained in the Third Amendment, Purchaser believes that there will be no
distribution of the Rights as a result of the Offer or the Merger.
The foregoing summary of the amendments to the Rights Agreement does not
purport to be complete and is qualified in its entirety by reference to the
full text of the Second Amendment (filed as an exhibit to Amendment No. 3 to
the Company's Schedule 14D-9 dated November 3, 1998) and the Third Amendment
(filed as an exhibit to Amendment No. 4 to the Company's Schedule 14D-9 dated
December 3, 1998).
8. CONDITIONS OF THE OFFER.
The discussion set forth in Section 14 of the Offer to Purchase is hereby
amended and supplemented as follows:
Notwithstanding any other provisions of the Offer, and in addition to (and
not in limitation of) Parent's or Purchaser's rights to extend and amend the
Offer at any time pursuant to the terms of the Merger Agreement, Parent or
Purchaser shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act (relating to Parent's obligation to pay for or return tendered
Common Shares promptly after termination or withdrawal of the Offer), pay for,
and may delay the acceptance for payment of or, subject to the restriction
referred to above, the payment for, any tendered Common Shares, and may
terminate the Offer as to any Common Shares not then paid for, if, prior to the
expiration of the Offer (i) there shall not have been validly tendered and not
withdrawn such number of Common Shares (including Rights) which, together with
Common Shares owned by Parent, constitute at least 51% of the Common Shares
outstanding on a fully diluted basis on the date of purchase, (ii) Parent and
Purchaser have not obtained all insurance regulatory approvals necessary for
their acquisition of control over the Company and its Insurance Subsidiaries on
terms and conditions satisfactory to Parent, in its good faith determination;
provided, that no such
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approval shall contain any material limitations, requirements or conditions on
Parent, the Company or a Subsidiary or require Parent, the Company or a
Subsidiary to make any material payment to any party including in the case of
Parent, to the Company or, in the case of Parent or the Company, to any
Subsidiary (the "Insurance Regulatory Approval Condition"), (iii) the waiting
period under the HSR Act applicable to the purchase of Common Shares pursuant
to the Offer shall not have expired or been terminated, or (iv) at any time on
or after the date hereof and prior to the acceptance for payment of Common
Shares, any of the following events shall occur:
(a) the Company shall have breached or failed to perform in any material
respect its obligations, covenants or agreements under the Merger Agreement
and, with respect to any such failure that can be remedied, the failure
shall not have been remedied within five business days after Parent has
furnished the Company written notice of such failure, the representations
and warranties of the Company set forth in the Merger Agreement shall have
been false or inaccurate or incomplete in any material respect when made or
thereafter shall become and remain false or inaccurate or incomplete in any
material respect or Parent shall not have received evidence in form and
substance reasonably satisfactory to it of the actions taken by the Company
which cause the Company to be in compliance with the representations and
warranties contained in Section 3.5 of the Merger Agreement; provided that
a prospective material addition (but not an actual material addition) to
the Company's consolidated reserves for losses and loss adjustment expenses
based upon information provided by the Company or otherwise known to Parent
on or prior to the date of execution of the Merger Agreement shall not be
deemed to be a breach of the representations and warranties set forth in
Section 3.3 of the Merger Agreement.
(b) there shall have been instituted or pending any action, proceeding,
application or counterclaim before any Governmental Authority which (i)
challenges or seeks to challenge the acquisition by Parent or Purchaser or
any affiliate of either of them of the Common Shares, restrains, materially
delays or prohibits or seeks to restrain, materially delay or prohibit the
making of the Offer or the Merger or consummation of the transactions
contemplated by the Offer or the Merger, (ii) prohibits or limits or seeks
to prohibit or limit Parent's or Purchaser's ownership or operation of all
or any portion of their or the Company's business or assets (including
without limitation the business or assets of their respective affiliates
and subsidiaries) or to compel or seeks to compel Parent or Purchaser to
dispose of or hold separate all or any portion of their own or the
Company's business or assets (including without limitation the business or
assets of their respective affiliates and subsidiaries) or imposes or seeks
to impose any limitation on the ability of Parent, Purchaser or any
affiliate of either of them to conduct its own business or own such assets
as a result of the transactions contemplated by the Offer or the Merger,
(iii) makes or seeks to make the acceptance for payment, purchase of, or
payment for, some or all of the Common Shares pursuant to the Offer or the
Merger illegal or results in a material delay in, or restricts materially,
the ability of Parent or Purchaser, or renders Parent or Purchaser unable,
to accept for payment, purchase or pay for some or all of the Common Shares
or to consummate the Merger, (iv) imposes or seeks to impose material
limitations on the ability of Parent or Purchaser or any affiliate of
either of them effectively to acquire or hold or to exercise full rights of
ownership of the Common Shares, including, without limitation, the right to
vote the Common Shares purchased by them on an equal basis with all other
Common Shares on all matters properly presented to the shareholders of the
Company or (v) might reasonably be expected to have a Material Adverse
Effect (as defined in the Merger Agreement) on the Company;
(c) any statute, rule, regulation or order or injunction shall be
enacted, promulgated, entered, enforced or deemed or become applicable to
the Offer or the Merger which could reasonably be expected to result in any
of the consequences referred to in clauses (i) through (v) of paragraph (b)
above;
(d) any change, event or effect shall have occurred that, when taken
together with all other adverse changes, events or effects that have
occurred, has or is reasonably likely to have a Material Adverse Effect or
a Material Adverse Change (as defined in the Merger Agreement) with respect
to the Company and its Subsidiaries, taken as a whole;
(e) there shall have occurred (i) a declaration of a banking moratorium
or any suspension of payments in respect of banks in the United States
(whether or not mandatory), (ii) any limitation (whether or not mandatory)
by any governmental authority or agency on, or other event which limits the
extension of credit by banks or other lending institutions, (iii) a
commencement of a war, armed hostilities or other national or international
crisis directly or indirectly involving the United States which has a
material adverse effect on general economic conditions in the United States
or (iv) in the case of any of the foregoing existing at the time of the
commencement of the Offer, a material acceleration or worsening thereof;
(f) the Merger Agreement shall have been terminated in accordance with
its terms or the Offer shall have been terminated with the consent of the
Company; or
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(g) (i) the Company Board shall have failed to approve and recommend,
shall have withdrawn or modified in a manner adverse to Parent, or, upon
request of Parent, shall have failed to reconfirm, its approval or
recommendation of the Offer, the Merger or the Merger Agreement, or shall
have approved or recommended any Acquisition Proposal (as defined in the
Merger Agreement), (ii) the Company shall have entered into any definitive
agreement or agreement in principle with respect to any Acquisition
Proposal or (iii) the Company Board shall have resolved to take any of the
foregoing actions.
The foregoing conditions are for the sole benefit of Parent and Purchaser
and may be asserted by Parent and Purchaser in their good faith determination
(subject to the terms of the Merger Agreement) regardless of the circumstances
(including any action or omission by Parent or Subsidiary) giving rise to any
such conditions or may be waived by Parent or Purchaser in their good faith
determination (subject to the terms of the Merger Agreement) in whole or in
part at any time and from time to time. The failure by Parent or Purchaser at
any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right and each such right shall be deemed an ongoing right which
may be asserted at any time and from time to time.
9. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS; CERTAIN LITIGATION.
The discussion set forth in Section 15 of the Offer to Purchase is hereby
amended and supplemented as follows:
STATE INSURANCE APPROVAL. It is Parent's and Purchaser's current
expectation that the required approvals by the relevant Insurance Commissions
in California and Pennsylvania will occur by December 31, 1998. The
Pennsylvania Department of Insurance has set a hearing date of December 15,
1998 to review the Company's Form A filing with respect to the Offer. The
hearing required under the Connecticut Insurance Code is not expected to occur
until January 1999. Since the Offer remains conditional upon the satisfaction
of the Insurance Regulatory Condition, the Purchaser is likely to extend the
Expiration Date to a date after the Connecticut hearing.
ANTITRUST. Early termination of the waiting period under the HSR Act has
been granted.
THE DELAWARE LITIGATION. In the Merger Agreement, Parent and Purchaser
agreed to promptly dismiss litigation pending against the Company and its
directors in the Court of Chancery of the State of Delaware. On November 25,
1998, Parent and Purchaser voluntarily dismissed the pending litigation with
prejudice.
SECTION 203 OF THE DELAWARE CORPORATION LAW. Because the Company Board
approved, on November 24, 1998, the terms of the Merger Agreement, the
provisions of Section 203 of the Delaware Corporation Law relating to Business
Combinations with Interested Stockholders have been rendered inapplicable to
the Merger.
10. MISCELLANEOUS.
Parent and Purchaser have filed with the SEC the Schedule 14D-1, together
with exhibits, pursuant to Rule 14d-3 of the General Rules and Regulations
under the Exchange Act, furnishing certain additional information with respect
to the Offer. The Schedule 14D-1, and any amendments thereto, may be inspected
at, and copies may be obtained from, the same places and in the same manner as
set forth in Section 8 (except that they may not be available at the regional
offices of the SEC).
MG ACQUISITION CORP.
December 3, 1998
13
<PAGE>
Facsimile copies of one of the Letters of Transmittal, properly completed
and duly signed, will be accepted. The Letters of Transmittal, certificates for
the Common Shares and any other required documents should be sent by each
shareholder of the Company or his broker, dealer, commercial bank, trust
company or other nominee to the Depositary as follows:
THE DEPOSITARY FOR THE OFFER IS:
FIRST UNION NATIONAL BANK
FACSIMILE TRANSMISSION:
(704) 590-7628
CONFIRM BY TELEPHONE:
(704) 590-7408
<TABLE>
<S> <C> <C>
IF BY REGISTERED MAIL, CERTIFIED
IF BY FIRST CLASS MAIL MAIL OR OVERNIGHT DELIVERY IF BY HAND ONLY
First Union National Bank First Union National Bank First Union National Bank
1525 West W.T. Harris Blvd. 1525 West W.T. Harris Blvd. 5th Floor
Reorg. Department Reorg. Department 40 Broad Street
3c3-NC-1153 3c3-NC-1153 New York, NY 10004
Charlotte, NC 28288-1153 Charlotte, NC 28262
</TABLE>
Any questions or requests for assistance may be directed to the
Information Agent or the Dealer Manager at their respective telephone numbers
and locations listed below. Additional copies of the Offer to Purchase, this
Supplement, the revised Letter of Transmittal and the revised Notice of
Guaranteed Delivery may be obtained from the Information Agent at its address
and telephone numbers set forth below. Holders of Common Shares may also
contact their broker, dealer, commercial bank or trust company or other nominee
for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
[MACKENZIE PARTNERS, INC. LOGO]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
CALL TOLL FREE (800) 322-2885
THE DEALER MANAGER FOR THE OFFER IS:
[COCHRAN, CARONIA SECURITIES LLC LOGO]
1 South Wacker Drive
Chicago, Illinois 60606
(312) 425-9335
or
CALL TOLL FREE (800) 248-8163
14
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
GRYPHON HOLDINGS INC.
PURSUANT TO THE OFFER TO PURCHASE,
DATED OCTOBER 20, 1998
AND THE SUPPLEMENT
THERETO DATED
DECEMBER 3, 1998
BY
MG ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
MARKEL CORPORATION
THE OFFER, AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON FRIDAY, DECEMBER 18, 1998, UNLESS THE OFFER IS
EXTENDED.
THE DEPOSITARY FOR THE OFFER IS:
FIRST UNION NATIONAL BANK
FACSIMILE TRANSMISSION:
(704) 590-7628
CONFIRM BY TELEPHONE:
(704) 590-7408
<TABLE>
<S> <C> <C>
IF BY FIRST CLASS MAIL IF BY REGISTERED MAIL, CERTIFIED IF BY HAND ONLY
MAIL OR OVERNIGHT DELIVERY
First Union National Bank First Union National Bank First Union National Bank
1525 West W.T. Harris Blvd. 1525 West W.T. Harris Blvd. 5th Floor
Reorg. Department Reorg. Department 40 Broad Street
3c3-NC-1153 3c3-NC-1153 New York, NY 10004
Charlotte, NC 28288-1153 Charlotte, NC 28262
</TABLE>
DELIVERY OF THIS REVISED LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST
SIGN THIS REVISED LETTER OF TRANSMITTAL WHERE INDICATED BELOW AND COMPLETE THE
SUBSTITUTE FORM W-9 PROVIDED BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS REVISED LETTER OF TRANSMITTAL SHOULD BE
READ CAREFULLY BEFORE THIS REVISED LETTER OF TRANSMITTAL IS COMPLETED.
THIS REVISED LETTER OF TRANSMITTAL IS TO BE COMPLETED BY SHAREHOLDERS OF
GRYPHON HOLDINGS INC. EITHER IF CERTIFICATES EVIDENCING COMMON SHARES AND/OR
RIGHTS (EACH AS DEFINED BELOW) ARE TO BE FORWARDED HEREWITH, OR IF DELIVERY OF
COMMON SHARES AND/OR RIGHTS IS TO BE MADE BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT THE DEPOSITORY TRUST COMPANY (THE "BOOK-ENTRY TRANSFER
FACILITY") PURSUANT TO THE BOOK-ENTRY TRANSFER PROCEDURE DESCRIBED IN
"PROCEDURES FOR TENDERING COMMON SHARES" OF THE OFFER TO PURCHASE (AS DEFINED
BELOW). DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE
WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE
DELIVERY TO THE DEPOSITARY.
Shareholders who have previously tendered Common Shares pursuant to the
Offer using the previously circulated Letter of Transmittal or the Notice of
Guaranteed Delivery and who have not properly withdrawn such Common Shares for
the purposes of the Offer, as amended, need not take any further action.
Holders of Common Shares will be required to tender one Right for each
Common Share tendered to effect a valid tender of such Common Share. Until the
Distribution Date (as defined in the Offer to Purchase) has occurred, the
Rights are
1
<PAGE>
represented by and transferred with the Common Shares. Accordingly, if the
Distribution Date does not occur prior to the Expiration Date (as defined in
the Offer to Purchase), a tender of Common Shares will constitute a tender of
the associated Rights. If a Distribution Date has occurred, certificates
representing a number of Rights equal to the number of Common Shares being
tendered must be delivered to the Depositary in order for such Common Shares to
be validly tendered. If a Distribution Date has occurred, a tender of Common
Shares without Rights constitutes an agreement by the tendering shareholder to
deliver certificates representing a number of Rights equal to the number of
Common Shares tendered pursuant to the Offer (as defined in the Offer to
Purchase) to the Depositary within three Nasdaq National Market trading days
after the date such certificates are distributed. Purchaser reserves the right
to require that it receive such certificates prior to accepting Common Shares
for payment. Payment for Common Shares tendered and purchased pursuant to the
Offer to Purchase will be made only after timely receipt by the Depositary of,
among other things, such certificates, if such certificates have been
distributed to holders of Common Shares. Purchaser will not pay any additional
consideration for the Rights tendered pursuant to the Offer to Purchase.
Shareholders whose certificates for Common Shares and, if applicable,
Rights, are not immediately available or who cannot deliver such certificates
and all other documents required hereby to the Depositary prior to the
Expiration Date or who cannot complete the procedure for delivery by book-entry
transfer on a timely basis and who wish to tender their Common Shares and
Rights must do so pursuant to the guaranteed delivery procedure described in
"Procedures for Tendering Common Shares" of the Offer to Purchase. See
Instruction 2.
2
<PAGE>
[ ] CHECK HERE IF TENDERED COMMON SHARES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER TO THE DEPOSITARY'S ACCOUNT AT THE DEPOSITORY TRUST COMPANY AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution:
----------------------------------------------
If Delivered by Book-Entry Transfer to The Depository Trust Company:
Account Number:
-------------------------------------------------------------
Transaction Code Number:
----------------------------------------------------
[ ] CHECK HERE IF TENDERED RIGHTS ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
TO THE DEPOSITARY'S ACCOUNT AT THE DEPOSITORY TRUST COMPANY AND COMPLETE
THE FOLLOWING:
Name of Tendering Institution:
----------------------------------------------
If Delivered by Book-Entry Transfer to The Depository Trust Company:
Account Number:
-------------------------------------------------------------
Transaction Code Number:
----------------------------------------------------
[ ] CHECK HERE IF TENDERED COMMON SHARES ARE BEING TENDERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s):
--------------------------------------------
Window Ticket Number (if any):
----------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
-------------------------
Name of Institution which Guaranteed Delivery:
------------------------------
If Delivered by Book-Entry Transfer to The Depository Trust Company:
Account Number:
-------------------------------------------------------------
Transaction Code Number:
----------------------------------------------------
[ ] CHECK HERE IF TENDERED RIGHTS ARE BEING TENDERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s):
--------------------------------------------
Window Ticket Number (if any):
----------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
-------------------------
Name of Institution which Guaranteed Delivery:
------------------------------
If Delivered by Book-Entry Transfer to The Depository Trust Company:
Account Number:
-------------------------------------------------------------
Transaction Code Number:
----------------------------------------------------
3
<PAGE>
<TABLE>
<S> <C>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK)
</TABLE>
<TABLE>
<CAPTION>
DESCRIPTION OF COMMON SHARES TENDERED
<S> <C>
COMMON SHARE CERTIFICATE(S) TENDERED
(ATTACH ADDITIONAL LIST IF NECESSARY)
TOTAL NUMBER OF COMMON SHARES
CERTIFICATE NUMBER(S)* REPRESENTED BY CERTIFICATE(S) NUMBER OF COMMON SHARES TENDERED**
TOTAL COMMON SHARES ...............................................
* Need not be completed by shareholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Common Shares being delivered to the Depositary are being
tendered. See Instruction 4.
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK)
</TABLE>
<TABLE>
<CAPTION>
DESCRIPTION OF RIGHTS TENDERED
<S> <C>
RIGHTS CERTIFICATE(S) TENDERED*
(ATTACH ADDITIONAL LIST IF NECESSARY)
TOTAL NUMBER OF RIGHTS REPRESENTED
CERTIFICATE NUMBER(S)** BY CERTIFICATE(S) NUMBER OF RIGHTS TENDERED***
TOTAL RIGHTS ...................................................................
*If the tendered Rights are represented by separate Rights Certificates, provide the certificate numbers of such Rights
Certificates. Shareholders tendering Rights which are not represented by separate certificates will need to submit an
additional Letter of Transmittal if Rights Certificates are distributed.
**Need not be completed by shareholders tendering by book-entry transfer.
***Unless otherwise indicated, it will be assumed that all Rights being delivered to the Depositary are being tendered. See
Instruction 4.
</TABLE>
The names and addresses of the registered holders should be printed, if
not already printed above, exactly as they appear on the certificates
representing Common Shares and/or Rights tendered hereby. The certificates and
number of Common Shares and/or Rights that the undersigned wishes to tender
should be indicated in the appropriate boxes.
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE INSTRUCTIONS SET
FORTH IN THIS REVISED LETTER OF TRANSMITTAL CAREFULLY.
5
<PAGE>
LADIES AND GENTLEMEN:
The undersigned hereby tenders to MG Acquisition Corp., a Delaware
corporation ("Purchaser") and a wholly owned subsidiary of Markel Corporation,
a Virginia corporation, the above described shares of common stock, par value
$0.01 per share (the "Common Shares"), of Gryphon Holdings Inc., a Delaware
corporation (the "Company"), including the associated Junior Participating
Cumulative Preferred Stock Purchase Rights (including any successors thereto,
the "Rights") issued pursuant to the Rights Agreement, dated as of June 5,
1995, as amended as of July 28, 1998, October 22, 1998 and November 25, 1998,
between the Company and State Street Bank and Trust Company, as Rights Agent
(as such agreement may be further amended and including any successor
agreement, the "Rights Agreement"), pursuant to Purchaser's offer to purchase
all of the outstanding Common Shares, including the associated Rights, at a
price of $19.00 per Common Share, net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated October 20, 1998 (the "Offer to Purchase"), the Supplement
thereto, dated December 3, 1998 (the "Supplement") receipt of which is hereby
acknowledged, and in this revised Letter of Transmittal (which, as amended from
time to time, together constitute the "Offer"). Unless the context requires
otherwise, all references herein to the Common Shares shall include the
associated Rights, and all references to the Rights shall include the benefits
that may inure to the holders of the Rights pursuant to the Rights Agreement,
including the right to receive any payment due upon redemption of the Rights.
The undersigned understands that Purchaser reserves the right to transfer
or assign, in whole at any time, or in part from time to time, to one or more
of its affiliates, the right to purchase all or any portion of the Common
Shares and/or Rights tendered pursuant to the Offer, but any such transfer or
assignment will not relieve Purchaser of its obligations under the Offer and
will in no way prejudice the rights of tendering shareholders to receive
payment for Common Shares validly tendered and accepted for payment pursuant to
the Offer.
Subject to, and effective upon, acceptance for payment of the Common
Shares and Rights tendered herewith, in accordance with the terms of the Offer
(including, if the Offer is extended or amended, the terms and conditions of
any such extension or amendment), the undersigned hereby sells, assigns and
transfers to, or upon the order of, Purchaser all right, title and interest in
and to all the Common Shares and Rights that are being tendered hereby (and any
and all non-cash dividends, distributions, rights, other Common Shares or other
securities issued or issuable in respect thereof or declared, paid or
distributed in respect of such Common Shares on or after October 20, 1998
(collectively, "Distributions")), and irrevocably appoints the Depositary the
true and lawful agent and attorney-in-fact of the undersigned with respect to
such Common Shares, Rights and all Distributions, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to (i) deliver certificates for such Common Shares
(individually, a "Common Share Certificate"), Rights and all Distributions, or
transfer ownership of such Common Shares, Rights and all Distributions on the
account books maintained by the Book-Entry Transfer Facility, together, in
either case, with all accompanying evidence of transfer and authenticity to, or
upon the order of Purchaser, (ii) present such Common Shares, Rights and all
Distributions for transfer on the books of the Company and (iii) receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Common Shares, Rights and all Distributions, all in accordance with the terms
of the Offer.
If, on or after the date of the Offer to Purchase, the Company should
declare or pay any dividend on the Common Shares or make any distribution
(including, without limitation, the issuance of additional Common Shares
pursuant to a stock dividend or stock split, the issuance of other securities
or the issuance of rights for the purchase of any securities) with respect to
the Common Shares that is payable or distributable to shareholders of record on
a date prior to the transfer to the name of Purchaser or its nominee or
transferee on the Company's stock transfer records of the Common Shares
purchased pursuant to the Offer, then, subject to the provisions of Section 13
of the Offer to Purchase, (i) the purchase price per Common Share payable by
Purchaser pursuant to the Offer will be reduced by the amount of any such cash
dividend or cash distribution and (ii) any such non-cash dividend, distribution
or right to be received by the tendering shareholder will be received and held
by such tendering shareholder for the account of Purchaser and will be required
to be remitted promptly and transferred by each such tendering shareholder to
the Depositary for the account of Purchaser, accompanied by appropriate
documentation of transfer. Pending such remittance and subject to applicable
law, Purchaser will be entitled to all rights and privileges as owner of any
such non-cash dividend, distribution or right and may withhold the entire
purchase price or deduct from the purchase price the amount of value thereof,
as determined by Purchaser in its sole discretion.
By executing this revised Letter of Transmittal, the undersigned
irrevocably appoints Alan I. Kirshner, Anthony F. Markel and Steven A. Markel
as proxies of the undersigned, each with full power of substitution, to the
full extent of the undersigned's rights with respect to the Common Shares and
Rights tendered by the undersigned and accepted for payment by Purchaser (and
any and all Distributions). All such proxies shall be considered coupled with
an interest in the tendered Common Shares and Rights. This appointment will be
effective if, when, and only to the extent that Purchaser accepts such Common
Shares and Rights for payment pursuant to the Offer. Upon such acceptance for
payment, all prior proxies given
6
<PAGE>
by the undersigned with respect to such Common Shares, Rights, Distributions
and other securities will, without further action, be revoked, and no
subsequent proxies may be given. The individuals named above as proxies will,
with respect to the Common Shares, Rights, Distributions and other securities
for which the appointment is effective, be empowered to exercise all voting and
other rights of the undersigned as they in their sole discretion may deem
proper at any annual, special, adjourned or postponed meeting of Company
shareholders, by written consent or otherwise, and Purchaser reserves the right
to require that, in order for Common Shares, Rights, Distributions or other
securities to be deemed validly tendered, immediately upon Purchaser's
acceptance for payment of such Common Shares and Rights, Purchaser or
Purchaser's designee must be able to exercise full voting rights with respect
to such Common Shares and Rights.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Common Shares
and Rights tendered hereby and all Distributions, that the undersigned own(s)
the Common Shares and Rights tendered hereby within the meaning of Rule 14e-4
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), that such tender of Common Shares complies with Rule 14e-4
under the Exchange Act, and that, when such Common Shares and Rights are
accepted for payment by Purchaser, Purchaser will acquire good, marketable and
unencumbered title thereto and to all Distributions, free and clear of all
liens, restrictions, charges and encumbrances, and that none of such Common
Shares, Rights and Distributions will be subject to any adverse claim. The
undersigned, upon request, shall execute and deliver all additional documents
deemed by the Depositary or Purchaser to be necessary or desirable to complete
the sale, assignment and transfer of the Common Shares and Rights tendered
hereby and all Distributions. In addition, the undersigned shall remit and
transfer promptly to the Depositary for the account of Purchaser all
Distributions in respect of the Common Shares and Rights tendered hereby,
accompanied by appropriate documentation of transfer, and, pending such
remittance and transfer or appropriate assurance thereof, Purchaser shall be
entitled to all rights and privileges as owner of each such Distribution and
may withhold the entire purchase price of the Common Shares and Rights tendered
hereby or deduct from such purchase price the amount or value of such
Distribution as determined by Purchaser in its sole discretion.
No authority herein conferred or agreed to be conferred shall be affected
by, and all such authority shall survive, the death or incapacity of the
undersigned. All obligations of the undersigned hereunder shall be binding upon
the heirs, executors, personal and legal representatives, administrators,
trustees in bankruptcy, successors and assigns of the undersigned. Except as
stated in the Offer to Purchase, this tender is irrevocable.
The undersigned understands that tenders of Common Shares and Rights
pursuant to any one of the procedures described in "Procedures for Tendering
Common Shares" of the Offer to Purchase as supplemented by Section 2 of the
Supplement and in the Instructions hereto will constitute the undersigned's
acceptance of the terms and conditions of the Offer. Purchaser's acceptance for
payment of Common Shares and Rights tendered pursuant to the Offer will
constitute a binding agreement between the undersigned and Purchaser upon the
terms and subject to the conditions of the Offer. The undersigned recognizes
that under certain circumstances set forth in the Offer to Purchase and the
Supplement, Purchaser may not be required to accept for payment any of the
Common Shares and Rights tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions," please issue the check for the purchase price and/or return any
certificates evidencing Common Shares or Rights not tendered or accepted for
payment, in the name(s) of the registered holder(s) appearing above under
"Description of Common Shares Tendered." Similarly, unless otherwise indicated
in the box entitled "Special Delivery Instructions," please mail the check for
the purchase price and/or return any certificates evidencing Common Shares or
Rights not tendered or accepted for payment (and accompanying documents, as
appropriate) to the address(es) of the registered holder(s) appearing above
under "Description of Common Shares Tendered." In the event that the boxes
entitled "Special Payment Instructions" and "Special Delivery Instructions" are
both completed, please issue the check for the purchase price and/or return any
certificates for Common Shares or Rights not purchased or not tendered or
accepted for payment in the name(s) of, and mail such check and/or return such
certificates to, the person(s) so indicated. Unless otherwise indicated herein
in the box entitled "Special Payment Instructions," please credit any Common
Shares or Rights tendered hereby and delivered by book-entry transfer, but
which are not purchased, by crediting the account at the Book-Entry Transfer
Facility. The undersigned recognizes that Purchaser has no obligation, pursuant
to the Special Payment Instructions, to transfer any Common Shares or Rights
from the name of the registered holder(s) thereof if Purchaser does not accept
for payment any of the Common Shares or Rights tendered hereby.
7
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7 OF THIS REVISED
LETTER OF TRANSMITTAL)
To be completed ONLY if certificates for Common Shares and/or Rights not
tendered or not purchased and/or the check for the purchase price of Common
Shares and/or Rights purchased are to be issued in the name of someone other
than the undersigned, or if the Common Shares and/or Rights delivered by
book-entry transfer which are not purchased are to be returned by credit to an
account maintained at a Book-Entry Transfer Facility other than that designated
above.
Issue check and/or certificate(s) to:
Name
----------------------------------------------------------------------
(Please print)
Address
--------------------------------------------------------------------
(Include Zip Code)
--------------------------------------------------------------------------
(Tax Identification or Social Security Number)
(Also complete Substitute Form W-9 below)
[ ] Credit unpurchased Common Shares and/or Rights delivered by book-entry
transfer to The Depository Trust Company
---------------------------------------------------------------------------
(Account Number)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7 OF THIS REVISED
LETTER OF TRANSMITTAL)
To be completed ONLY if certificates for Common Shares and/or Rights not
tendered or not purchased and/or the check for the purchase price of Common
Shares and/or Rights purchased are to be sent to someone other than the
undersigned, or to the undersigned at an address other than that shown above.
Mail check and/or certificates to:
Name
----------------------------------------------------------------------
(Please Print)
Address
--------------------------------------------------------------------
(Include Zip Code)
--------------------------------------------------------------------------
(Tax Identification or Social Security Number)
(also complete Substitute Form W-9 below)
8
<PAGE>
PLEASE SIGN HERE
(Complete Substitute Form W-9 on Reverse)
SIGN
SIGN
HERE HERE
------------------------------------------------------------------
- -
------------------------------------------------------------------
(SIGNATURE(S) OF HOLDER(S))
Dated: ----------- , 19-
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
Common Share certificate(s) or on a security position listing or by
person(s) authorized to become registered holder(s) by certificates and
documents transmitted herewith. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, please provide
the following information. See Instruction 5).
Name(s):
-----------------------------------------------------------
(Please print)
Capacity (full title):
----------------------------------------------------
Address:
------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number:
------------------------------------------
Tax Identification or Social Security Number:
-----------------------------
------------------------------------------------------------------
(Complete Substitute Form W-9 on Reverse)
Guarantee of Signature(s)
(See instructions 1 and 5)
Authorized Signature:
---------------------------------------------------
Name:
-------------------------------------------------------------
(Please print)
Title:
--------------------------------------------------------------
Name of Firm:
--------------------------------------------------------
Address:
------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone
Number:
------------------------------------------
Dated: , 19-
----------
9
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this revised Letter of Transmittal must be guaranteed by a firm
which is a bank, broker, dealer, credit union, savings association or other
entity that is a member in good standing of the Securities Transfer Agents
Medallion Program (each, an "Eligible Institution"). No signature guarantee is
required on this revised Letter of Transmittal (a) if this revised Letter of
Transmittal is signed by the registered holder(s) (which term, for purposes of
this document, shall include any participant in a Book-Entry Transfer Facility
whose name appears on a security position listing as the owner of Common Shares
or Rights) of Common Shares and/or Rights tendered herewith, unless such
holder(s) has completed either the box entitled "Special Delivery Instructions"
or the box entitled "Special Payment Instructions" on the reverse hereof, or
(b) if such Common Shares or Rights are tendered for the account of an Eligible
Institution. See Instruction 5. If a certificate evidencing Common Shares
and/or Rights (a "Certificate") is registered in the name of a person other
than the signer of this revised Letter of Transmittal, or if payment is to be
made, or a Certificate not accepted for payment or not tendered is to be
returned, to a person other than the registered holder(s), then the Certificate
must be endorsed or accompanied by appropriate stock powers, in either case
signed exactly as the name(s) of the registered holder(s) appear(s) on the
Certificate, with the signature(s) on such Certificate or stock powers
guaranteed as described above. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND COMMON SHARE CERTIFICATES. This
revised Letter of Transmittal is to be used either if Certificates are to be
forwarded herewith or if Common Shares and/or Rights are to be delivered by
book-entry transfer pursuant to the procedure set forth in "Procedures for
Tendering Common Shares" of the Offer to Purchase. Certificates evidencing all
tendered Common Shares and/or Rights, or confirmation of a book-entry transfer
of such Common Shares and/or Rights, if such procedure is available, into the
Depositary's account at the Book-Entry Transfer Facility pursuant to the
procedures set forth in "Procedures for Tendering Common Shares" of the Offer
to Purchase, together with a properly completed and duly executed revised
Letter of Transmittal (or facsimile thereof) with any required signature
guarantees (or, in the case of a book-entry transfer, an Agent's Message, as
defined below) and any other documents required by this revised Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth on the reverse hereof prior to the Expiration Date (as defined in "Terms
of the Offer; Expiration Date" of the Offer to Purchase). If Certificates are
forwarded to the Depositary in multiple deliveries, a properly completed and
duly executed revised Letter of Transmittal must accompany each such delivery.
Shareholders whose Certificates are not immediately available, who cannot
deliver their Certificates and all other required documents to the Depositary
prior to the Expiration Date or who cannot complete the procedure for delivery
by book-entry transfer on a timely basis may tender their Common Shares or
Rights pursuant to the guaranteed delivery procedure described in "Procedures
for Tendering Common Shares" of the Offer to Purchase as supplemented by
Section 2 of the Supplement. Pursuant to such procedure: (i) such tender must
be made by or through an Eligible Institution; (ii) a properly completed and
duly executed Notice of Guaranteed Delivery, substantially in the form provided
by Purchaser herewith, must be received by the Depositary prior to the
Expiration Date; and (iii) in the case of a guarantee of Common Shares or
Rights, the Certificates, in proper form for transfer, or a confirmation of a
book-entry transfer of such Common Shares or Rights, if such procedure is
available, into the Depositary's account at the Book-Entry Transfer Facility,
together with a properly completed and duly executed revised Letter of
Transmittal (or manually signed facsimile thereof) with any required signature
guarantees (or, in the case of a book-entry transfer, an Agent's Message), and
any other documents required by this revised Letter of Transmittal, must be
received by the Depositary within three Nasdaq National Market trading days
after the date of execution of the Notice of Guaranteed Delivery, all as
described in "Procedures for Tendering Common Shares" of the Offer to Purchase.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by the Depositary and forming a part of the
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Common Shares or Rights, that such participant
has received and agrees to be bound by the terms of this revised Letter of
Transmittal and that Purchaser may enforce such agreement against the
participant.
THE METHOD OF DELIVERY OF THIS REVISED LETTER OF TRANSMITTAL, CERTIFICATES
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY
TRANSFER FACILITY, IS AT THE SOLE OPTION AND RISK OF THE TENDERING SHAREHOLDER,
AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
10
<PAGE>
No alternative, conditional or contingent tenders will be accepted and no
fractional Common Shares or Rights will be purchased. By execution of this
revised Letter of Transmittal (or a facsimile hereof), all tendering
shareholders waive any right to receive any notice of the acceptance of their
Common Shares or Rights for payment.
3. INADEQUATE SPACE. If the space provided herein under "Description of
Common Shares Tendered" is inadequate, the Certificate numbers, the number of
Common Shares or Rights evidenced by such Certificates and the number of Common
Shares or Rights tendered should be listed on a separate schedule and attached
hereto.
4. PARTIAL TENDERS. (Not applicable to shareholders who tender by
book-entry transfer.) If fewer than all the Common Shares or Rights evidenced
by any Certificate delivered to the Depositary herewith are to be tendered
hereby, fill in the number of Common Shares or Rights which are to be tendered
in the box entitled "Number of Common Shares Tendered." In such cases, new
Certificate(s) evidencing the remainder of the Common Shares or Rights that
were evidenced by the Certificates delivered to the Depositary herewith will be
sent to the person(s) signing this revised Letter of Transmittal, unless
otherwise provided in the box entitled "Special Delivery Instructions," as soon
as practicable after the expiration or termination of the Offer. All Common
Shares or Rights evidenced by Certificates delivered to the Depositary will be
deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this revised Letter of Transmittal is signed by the registered holder(s) of the
Common Shares or Rights tendered hereby, the signature(s) must correspond with
the name(s) as written on the face of the Certificate(s) evidencing such Common
Shares or Rights without alteration, enlargement or any other change
whatsoever.
If any Common Shares or Rights tendered hereby are owned of record by two
or more persons, all such persons must sign this revised Letter of Transmittal.
If any of the Common Shares or Rights tendered hereby are registered in
the names of different holders, it will be necessary to complete, sign and
submit as many separate Letters of Transmittal as there are different
registrations of such certificates.
If this revised Letter of Transmittal is signed by the registered
holder(s) of the Common Shares or Rights tendered hereby, no endorsements of
Certificates or separate stock powers are required, unless payment is to be
made to, or Certificates evidencing Common Shares or Rights not tendered or not
purchased are to be issued in the name of, a person other than the registered
holder(s), in which case, the Certificate(s) evidencing the Common Shares or
Rights tendered hereby must be endorsed or accompanied by appropriate stock
powers, in either case signed exactly as the name(s) of the registered
holder(s) appear(s) on such Certificate(s). Signatures on such Certificate(s)
and stock powers must be guaranteed by an Eligible Institution.
If this revised Letter of Transmittal is signed by a person other than the
registered holder(s) of the Common Shares or Rights tendered hereby, the Common
Share or Rights Certificate(s) evidencing the Common Shares or Rights tendered
hereby must be endorsed or accompanied by appropriate stock powers, in either
case signed exactly as the name(s) of the registered holder(s) appear(s) on
such Certificate(s). Signatures on such Certificate(s) and stock powers must be
guaranteed by an Eligible Institution.
If this revised Letter of Transmittal or any Certificate(s) or stock power
is signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or
representative capacity, such person should so indicate when signing, and
proper evidence satisfactory to Purchaser of such person's authority so to act
must be submitted.
6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction
6, Purchaser will pay all stock transfer taxes with respect to the sale and
transfer of any Common Shares or Rights to it or its order pursuant to the
Offer. If, however, payment of the purchase price of any Common Shares or
Rights purchased is to be made to, or Certificate(s) evidencing Common Shares
or Rights not tendered or not purchased are to be issued in the name of, a
person other than the registered holder(s), the amount of any stock transfer
taxes (whether imposed on the registered holder(s), such other person or
otherwise) payable on account of the transfer to such other person will be
deducted from the purchase price of such Common Shares or Rights purchased,
unless evidence satisfactory to Purchaser of the payment of such taxes, or
exemption therefrom, is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATE(S) EVIDENCING THE COMMON
SHARES TENDERED HEREBY.
11
<PAGE>
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price of any Common Shares or Rights tendered hereby is to be issued, or
Certificate(s) evidencing Common Shares or Rights not tendered or not purchased
are to be issued, in the name of a person other than the person(s) signing this
revised Letter of Transmittal or if such check or any such Certificate is to be
sent to someone other than the person(s) signing this revised Letter of
Transmittal or to the person(s) signing this revised Letter of Transmittal but
at an address other than that shown in the box entitled "Description of Common
Shares Tendered," the appropriate boxes on this revised Letter of Transmittal
must be completed. Shareholders tendering Common Shares or Rights by book-entry
transfer may request that Common Shares or Rights not purchased be credited to
such account maintained at the Book-Entry Transfer Facility as such shareholder
may designate in the box entitled "Special Payment Instructions" on the reverse
hereof. If no such instructions are given, all such Common Shares or Rights not
purchased will be returned by crediting the account at the Book-Entry Transfer
Facility from which such Common Shares or Rights were delivered.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance
may be directed to the Information Agent or the Dealer Manager at their
respective addresses or telephone numbers set forth below. Additional copies of
the Offer to Purchase, the Supplement, this revised Letter of Transmittal, the
Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 may be obtained from the
Information Agent or the Dealer Manager or from brokers, dealers, commercial
banks or trust companies.
9. SUBSTITUTE FORM W-9. Each tendering shareholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN") on the
Substitute Form W-9 which is provided under "Important Tax Information" below,
and to certify, under penalties of perjury, that such number is correct and
that such shareholder is not subject to backup withholding of federal income
tax. If a tendering shareholder has been notified by the Internal Revenue
Service that such shareholder is subject to backup withholding, such
shareholder must cross out item (2) of the Certification box of the Substitute
Form W-9, unless such shareholder has since been notified by the Internal
Revenue Service that such shareholder is no longer subject to backup
withholding. Failure to provide the information on the Substitute Form W-9 may
subject the tendering shareholder to 31% federal income tax withholding on the
payment of the purchase price of all Common Shares or Rights purchased from
such shareholder. If the tendering shareholder has not been issued a TIN and
has applied for one or intends to apply for one in the near future, such
shareholder should write "Applied For" in the space provided for the TIN in
Part I of the Substitute Form W-9, and sign and date the Substitute Form W-9.
If "Applied For" is written in Part I and the Depositary is not provided with a
TIN within 60 days, the Depositary will withhold 31% on all payments of the
purchase price to such shareholder until a TIN is provided to the Depositary.
10. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s)
representing Common Shares or Rights has been lost, destroyed or stolen, the
shareholder should promptly notify the Depositary. The shareholder will then be
instructed as to the steps that must be taken in order to replace the
certificate(s). This revised Letter of Transmittal and related documents cannot
be processed until the procedures for replacing lost or destroyed certificates
have been followed.
IMPORTANT: THIS REVISED LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF),
PROPERLY COMPLETED AND DULY EXECUTED, WITH ANY REQUIRED SIGNATURE GUARANTEES,
OR AN AGENT'S MESSAGE (TOGETHER WITH COMMON SHARE CERTIFICATES OR CONFIRMATION
OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A PROPERLY
COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY
THE DEPOSITARY PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO
PURCHASE).
IMPORTANT TAX INFORMATION
Under the federal income tax law, a shareholder whose tendered Common
Shares or Rights are accepted for payment is required by law to provide the
Depositary (as payer) with such shareholder's correct TIN on Substitute Form
W-9 below. If such shareholder is an individual, the TIN is such shareholder's
social security number. If the Depositary is not provided with the correct TIN,
the shareholder may be subject to a $50 penalty imposed by the Internal Revenue
Service. In addition, payments that are made to such shareholder with respect
to Common Shares or Rights purchased pursuant to the Offer may be subject to
backup withholding of 31%.
Certain shareholders (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, such individual must submit a statement, signed under
penalties of perjury, attesting to such individual's exempt status. Forms of
such statements can be obtained from the Depositary. See the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for additional instructions.
12
<PAGE>
If backup withholding applies with respect to a shareholder, the
Depositary is required to withhold 31% of any payments made to such
shareholder. Backup withholding is not an additional tax. Rather, the tax
liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a shareholder
with respect to Common Shares or Rights purchased pursuant to the Offer, the
shareholder is required to notify the Depositary of such shareholder's correct
TIN by completing the form below certifying (a) that the TIN provided on
Substitute Form W-9 is correct (or that such shareholder is awaiting a TIN),
and (b) that (i) such shareholder has not been notified by the Internal Revenue
Service that such shareholder is subject to backup withholding as a result of a
failure to report all interest or dividends or (ii) the Internal Revenue
Service has notified such shareholder that such shareholder is no longer
subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The shareholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Common
Shares or Rights tendered hereby. If the Common Shares or Rights are in more
than one name or are not in the name of the actual owner, consult the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for additional guidance on which number to report. If the tendering
shareholder has not been issued a TIN and has applied for a number or intends
to apply for a number in the near future, the shareholder should write "Applied
For" in the space provided for the TIN in Part I, and sign and date the
Substitute Form W-9. If "Applied For" is written in Part I and the Depositary
is not provided with a TIN within 60 days, the Depositary will withhold 31% of
all payments of the purchase price to such shareholder until a TIN is provided
to the Depositary.
13
<PAGE>
PAYER'S NAME: FIRST UNION NATIONAL BANK, DEPOSITARY
<TABLE>
<S> <C>
PART 1 -- PLEASE PROVIDE YOUR TIN IN Social Security Number
THE BOX AT RIGHT OR__________________________________
SUBSTITUTE AND CERTIFY BY SIGNING AND DATING Employer Identification Number
BELOW. (If awaiting TIN write "Applied For")
FORM W-9
Department of the Treasury
Internal Revenue Service
PART 2 -- For Payees Exempt from
Backup Withholding,
see the enclosed Guidelines and
complete as instructed
therein.
PAYER'S REQUEST FOR
TAXPAYER
IDENTIFICATION
NUMBER (TIN) CERTIFICATION -- UNDER PENALTIES OF
PERJURY, I CERTIFY
THAT:
(1) The number shown on this form is my correct Taxpayer Identification Number (or a
Taxpayer Identification Num- ber has not been issued to me and either (a) I have mailed or
delivered an application to receive a Taxpayer Identi- fication Number to the appropriate
Internal Revenue Service ("IRS") or Social Security Administration office or (b) I intend to
mail or deliver an application in the near future. I understand that if I do not provide a
Taxpayer Identi- fication Number within sixty (60) days, 31% of all reportable payments made
to me thereafter will be withheld until I provide a number), and
(2) I am not subject to backup withholding because (a) I am exempt from backup withholding,
(b) I have not been notified by the IRS that I am subject to backup withholding as a result
of failure to report all interest or dividends or (c) the IRS has notified me that I am no
longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the IRS that you are subject to backup
with- holding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that
you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup
withholding, do not cross out item (2). (Also see instructions in the enclosed Guidelines.)
SIGNATURE: DATE: , 19-
-------------------------------------- -----------------
NAME:
--------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDEN- TIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR
ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR" IN THE SPACE PROVIDED FOR THE TIN IN PART I OF SUBSTITUTE
FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I CERTIFY UNDER PENALTIES OF PERJURY THAT A TAXPAYER IDENTIFICATION NUMBER HAS NOT BEEN ISSUED TO ME, AND EITHER (1) I HAVE MAILED
OR DELIVERED AN APPLICATION TO RECEIVE A TAXPAYER IDENTIFICATION NUMBER TO THE APPRO- PRIATE INTERNAL REVENUE SERVICE CENTER OR
SOCIAL SECURITY ADMINISTRATION OFFICE, OR (2) I INTEND TO MAIL OR DELIVER AN APPLICATION IN THE NEAR FUTURE. I UNDERSTAND THAT IF I
DO NOT PROVIDE A TAXPAYER IDENTIFICATION NUM- BER BY THE TIME OF PAYMENT, 31% OF ALL REPORTABLE PAYMENTS MADE TO ME WILL BE
WITHHELD.
SIGNATURE DATE , 19-
-------------------------------------- ------------------
</TABLE>
14
<PAGE>
Questions and requests for assistance or additional copies of the Offer to
Purchase, this revised Letter of Transmittal and other tender offer materials
may be directed to the Information Agent or the Dealer Manager as set forth
below:
THE INFORMATION AGENT FOR THE OFFER IS:
[MacKenzie Partners, Inc. Logo]
156 Fifth Avenue
New York, NY 10010
Call Collect (212) 929-5500
or
CALL TOLL FREE (800) 322-2885
THE DEALER MANAGER FOR THE OFFER IS:
[Cochran, Caronia Securites LLC Logo]
1 South Wacker Drive
Chicago, Illinois 60606
(312) 425-9335
or
CALL TOLL FREE (800) 248-8163
15
AMENDMENT
THIRD AMENDMENT, dated as of November 25, 1998 (the
"Amendment"), to the Rights Agreement, dated as of June 5, 1995, as amended (the
"Rights Agreement"), between Gryphon Holdings Inc., a Delaware corporation (the
"Company"), and State Street Bank and Trust Company, as Rights Agent (the
"Rights Agent").
WHEREAS, the Company and the Rights Agent are parties to the
Rights Agreement; and
WHEREAS, pursuant to Section 27 of the Rights Agreement, the
Company and the Rights Agent desire to amend the Rights Agreement as set forth
below.
NOW, THEREFORE, in consideration of the premises and the
mutual promises set forth herein, the parties hereto agree as follows:
Section 1. Amendments to Section 1.
(a) The definitions of "Beneficial Owner" and "beneficially
own" are amended by adding the following at the end thereof:
"Notwithstanding anything contained in this Agreement to the contrary,
none of Markel, Acquisition Corp. or any of their Affiliates or Associates shall
be deemed to be the Beneficial Owner of, or to beneficially own, any of the
Common Shares of the Company solely by virtue of the approval, execution or
delivery of the Merger Agreement."
(b) The following definitions are added to Section 1 of the
Rights Agreement:
"Acquisition Corp." shall mean MG Acquisition Corp., a Delaware
corporation.
"Markel" shall mean Markel Corporation, a Virginia corporation.
"Merger" shall mean the merger of the Company with and into Acquisition
Corp. in accordance with the General Corporation Law of the State of Delaware
upon the terms and subject to the conditions set forth in the Merger Agreement.
"Merger Agreement" shall mean the Agreement and Plan of Merger, dated
as of November 25, 1998, by and among Markel, Acquisition Corp. and the Company,
but shall not include any amendment to such Merger Agreement.
"Offer" shall mean the tender offer to acquire all the outstanding
Common Shares contemplated by the Merger Agreement.
<PAGE>
Section 2. Expiration Date.
Section 7(a) of the Rights Agreement is hereby amended by
replacing the word "or" with a comma immediately prior to the symbol "(iii)" and
by adding immediately prior to the parenthetical at the end thereof the
following:
", (iv) upon the acceptance for payment of and payment for Common
Shares pursuant to the Offer or (v) immediately prior to the Effective Time (as
defined in the Merger Agreement) of the Merger; whereupon the Rights shall
expire"
Section 3. New Section 35.
The following is added as a new Section 35 to the Rights
Agreement:
"Section 35. The Offer and the Merger, etc.
Notwithstanding anything in this Agreement to the contrary,
none of (a) the approval, execution or delivery of the Merger Agreement or the
performance by any party of the transactions contemplated thereby or permitted
thereunder or (b) the making of (or the public announcement of the intent to
make) the Offer or the acceptance for payment of or payment for Common Shares
pursuant to the Offer shall cause (i) Markel or Acquisition Corp. or any of
their Affiliates or Associates to be an Acquiring Person, (ii) a Shares
Acquisition Date to occur or (iii) a Distribution Date to occur."
Section 4. Severability. If any term, provision, covenant or
restriction of this Amendment is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Amendment shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Section 5. Governing Law. This Amendment shall be deemed to be
a contract made under the laws of the State of Delaware and for all purposes
shall be governed by and construed in accordance with the laws of such State
applicable to contracts made and to be performed entirely within such State.
Section 6. Counterparts. This Amendment may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 7. Effect of Amendment. Except as expressly modified
herein, the Rights Agreement, as previously amended, shall remain in full force
and effect in accordance with the provisions thereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed all as of the day and year first above written.
GRYPHON HOLDINGS INC.
ATTEST:
By: ______________________
Name:
___________________ Title:
STATE STREET BANK AND TRUST
COMPANY
ATTEST:
By: ______________________
Name:
____________________ Title:
