1
OFFER TO PURCHASE FOR CASH
UP TO 4,600,000 SHARES OF COMMON STOCK
(INCLUDING ANY ASSOCIATED STOCK PURCHASE RIGHTS)
OF
GUARANTY NATIONAL CORPORATION
AT
$17.50 NET PER SHARE
BY
ORION CAPITAL CORPORATION
AND
CERTAIN OF ITS WHOLLY-OWNED SUBSIDIARIES NAMED HEREIN
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, JUNE 5, 1996, UNLESS THE OFFER
IS EXTENDED.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. HOWEVER, THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I)
EXPIRATION OR EARLIER TERMINATION OF ALL APPLICABLE WAITING PERIODS UNDER THE
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND (II) THE
RECEIPT OF ALL REQUIRED STATE INSURANCE DEPARTMENT REGULATORY APPROVALS ON TERMS
AND CONDITIONS SATISFACTORY TO THE PURCHASERS. THE OFFER IS ALSO SUBJECT TO
OTHER TERMS AND CONDITIONS. SEE "THE OFFER" -- SECTION 10. IF MORE THAN
4,600,000 SHARES ARE PROPERLY TENDERED AND NOT WITHDRAWN, THEN, SUBJECT TO THE
TERMS AND CONDITIONS OF THE OFFER, SUCH SHARES WILL BE ACCEPTED ON A PRO RATA
BASIS. SEE "THE OFFER" -- SECTION 2.
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IMPORTANT
Any stockholder desiring to tender all or any portion of his Shares should
either (1) request his broker, dealer, commercial bank, trust company or other
nominee to effect the transaction for him or (2) complete and sign the enclosed
Letter of Transmittal (or facsimile thereof) in accordance with the instructions
in the Letter of Transmittal and mail or deliver the Letter of Transmittal and
other required documents and guaranteed signatures to the Depositary and either
deliver the certificates for such Shares to the Depositary along with the Letter
of Transmittal or deliver such Shares pursuant to the procedure for book-entry
transfer set forth in THE OFFER -- Section 3. A stockholder whose Shares are
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 he desires to tender such Shares.
Any stockholder who desires to tender Shares and whose certificates for
such Shares are not immediately available, or who is unable to deliver all
documents required by the Letter of Transmittal to the Depositary prior to the
expiration of the Offer, or who cannot complete the procedure for book-entry
transfer on a timely basis, may tender such Shares by following the procedures
for guaranteed delivery set forth in THE OFFER -- Section 3.
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 Offer to Purchase. Additional copies of this
Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed
Delivery may be obtained from the Information Agent or from brokers, dealers,
commercial banks or trust companies.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS
OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
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The Dealer Manager for the Offer is:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
May 8, 1996
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TABLE OF CONTENTS
PAGE
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INTRODUCTION.......................................................................... 1
SPECIAL FACTORS....................................................................... 3
Background of the Transaction....................................................... 3
Fairness of the Offer............................................................... 4
Purpose and Structure of the Transaction; Plans for the Company After the Offer..... 6
Certain Effects of the Transaction.................................................. 7
Interests of Certain Persons in the Transaction; Securities Ownership; Related
Transactions........................................................................ 8
Dissenters' Rights.................................................................. 12
Certain Federal Income Tax Consequences............................................. 12
Source and Amount of Funds -- Financing of the Offer................................ 13
THE OFFER............................................................................. 13
1. Terms of the Offer; Expiration Date........................................... 13
2. Acceptance for Payment and Payment for Shares; Proration...................... 14
3. Procedures for Accepting the Offer and Tendering Shares....................... 16
4. Withdrawal Rights............................................................. 18
5. Price Range of Shares; Dividends.............................................. 19
6. Effect of the Offer on the Market for the Shares; Listing on the NYSE;
Registration Under the Exchange Act......................................... 19
7. Certain Information Concerning the Company.................................... 21
8. Certain Information Concerning the Purchasers................................. 24
9. Dividends and Distributions................................................... 26
10. Certain Conditions of the Offer............................................... 27
11. Certain Legal Matters......................................................... 29
12. Fees and Expenses............................................................. 32
13. Miscellaneous................................................................. 33
Schedule I -- Directors and Executive Officers of the Purchasers...................... I-1
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To the Holders of Common Stock of
GUARANTY NATIONAL CORPORATION:
INTRODUCTION
Orion Capital Corporation, a Delaware corporation ("Orion"), and certain of
its wholly-owned subsidiaries named below (collectively referred to herein with
Orion as the "Purchasers"), hereby offer to purchase up to 4,600,000 outstanding
shares of Common Stock, par value $1.00 per share, of Guaranty National
Corporation, a Colorado corporation (the "Company"), at $17.50 per Share, net to
the seller in cash, without interest, upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which, as amended from time to time, together constitute the
"Offer"). Each outstanding share of Common Stock of the Company is referred
herein to as a "Share." The name of each Purchaser and the percentage of Shares
to be purchased by it pursuant to the Offer are as follows: Orion (17.4%), The
Connecticut Indemnity Company (15.0%), Connecticut Specialty Insurance Company
(2.5%), Design Professionals Insurance Company (3.5%), EBI Indemnity Company
(2.9%), Employee Benefits Insurance Company (2.9%), The Fire and Casualty
Insurance Company of Connecticut (5.2%) and Security Insurance Company of
Hartford (50.6%). Each Purchaser reserves the right to purchase any Shares not
purchased by the other Purchasers. The Purchasers also reserve the right to
amend the Offer to reduce the number of Shares which will be purchased pursuant
to the Offer, including as a result of the Insurance Regulatory Condition (as
defined below).
Unless the context otherwise requires, all references to Shares shall
include any associated stock purchase rights (the "Rights") pursuant to the
Rights Agreement dated November 20, 1991 between the Company and its rights
agent and all benefits that may inure to holders thereof. Based upon publicly
available information, Orion believes that, as of the date of this Offer to
Purchase, the Rights are attached to the Shares and are not separately
transferable or exercisable and will not become so by reason of the Offer by the
Purchasers. See THE OFFER -- Section 11.
Tendering stockholders will not be obligated to pay brokerage commissions
or, except as set forth in Instruction 6 of the Letter of Transmittal, transfer
taxes on the purchase of Shares pursuant to the Offer. Orion will pay all
charges and expenses of State Street Bank and Trust Company (the "Depositary"),
D.F. King & Co., Inc. (the "Information Agent") and Donaldson, Lufkin & Jenrette
Securities Corporation, which is acting as Dealer Manager (the "Dealer Manager")
in connection with the Offer. See THE OFFER -- Section 12.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. HOWEVER, THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I)
EXPIRATION OR EARLIER TERMINATION OF ALL APPLICABLE WAITING PERIODS UNDER THE
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND (II) THE
RECEIPT OF ALL REQUIRED STATE INSURANCE DEPARTMENT REGULATORY APPROVALS ON TERMS
AND CONDITIONS SATISFACTORY TO THE PURCHASERS (THE "INSURANCE REGULATORY
CONDITION"). SUCH FOREGOING CONDITIONS AND THE OTHER CONDITIONS TO THE OFFER ARE
SET FORTH IN THE OFFER -- SECTION 10. IF MORE THAN 4,600,000 SHARES ARE PROPERLY
TENDERED BY THE EXPIRATION DATE (AS DEFINED HEREIN) AND NOT WITHDRAWN, THEN,
SUBJECT TO THE TERMS AND CONDITIONS OF THE OFFER, TENDERED SHARES WILL BE
ACCEPTED ON A PRO RATA BASIS (WITH APPROPRIATE ADJUSTMENTS TO AVOID PURCHASES OF
FRACTIONAL SHARES) ACCORDING TO THE NUMBER OF SHARES PROPERLY TENDERED BY EACH
STOCKHOLDER AT OR PRIOR TO THE EXPIRATION DATE AND NOT WITHDRAWN.
According to the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996 (the "March 10-Q"), filed with the Securities and Exchange
Commission (the "Commission"), there were 14,961,354 Shares outstanding as of
May 6, 1996. Orion and its subsidiaries own in the aggregate 7,409,942 Shares,
representing approximately 49.5% of the Shares outstanding at such date. The
4,600,000 Shares subject to the Offer represent approximately 30.7% of the
outstanding Shares and approximately 60.9% of the outstanding Shares not already
owned by Orion and its subsidiaries. The approximate number of holders of Shares
as of February 29, 1996 was 2,000, including both record and beneficial
shareholders.
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Each of the Purchasers believes that increasing its beneficial ownership of
Shares represents a favorable investment opportunity, especially since a higher
percentage of ownership will allow Orion to become more involved in setting the
strategic direction of the Company and will, among other things, enable the
Purchasers to participate to a greater extent in any future growth of the
Company and any appreciation in value of the Shares. In addition, if all
4,600,000 Shares are properly tendered and purchased in accordance with the
terms of the Offer, Orion will be able to include the Company in the
consolidated federal income tax return of Orion as a member of Orion's
affiliated group. Section 1504(a)(2) of the Internal Revenue Code of 1986, as
amended (the "Code"), requires generally that 80% or more of both the total
voting power and the total value of the stock of a corporation (other than
certain preferred stock) be owned by one or more of the members of an affiliated
group in order for such corporation to be included in the consolidated federal
income tax return of such group. See SPECIAL FACTORS -- "Background of the
Transaction"; "Purpose and Structure of the Transaction; Plans for the Company
After the Offer" and "Certain Effects of the Transaction."
If, upon consummation of the Offer, Orion and its subsidiaries together own
less than 80% of the outstanding Shares, Orion and/or one or more of its
subsidiaries may purchase additional Shares in order to acquire an 80% ownership
interest in the Company, subject to the availability of funds and other
investment opportunities. Such purchases may be made through open market or
privately negotiated purchases or another tender offer (which may be for less
than all the Shares), subject to market conditions, at prices which may be
greater or less than the Offer price for the Shares. There can be no assurance
that Orion and its subsidiaries will acquire such additional Shares or over what
period of time such additional Shares, if any, might be acquired.
Once Orion and its subsidiaries have acquired 80% of the outstanding
Shares, Orion intends to purchase additional Shares, directly or indirectly
through its wholly-owned subsidiaries, from time to time in order to offset any
dilution caused by future issuances of securities by the Company whether as a
result of grants under employee benefit plans or otherwise.
Following completion of the Offer, the Purchasers intend that the Company
will operate with its own management and that the Shares will continue to be
publicly traded. The Purchasers have no current intention to propose a merger or
other business combination with the Company. After completion of the Offer,
Orion and its subsidiaries will have effective control of the Company. See
SPECIAL FACTORS -- "Purpose and Structure of the Transaction; Plans for the
Company After the Offer" and THE OFFER -- Section 11.
Information included in this Offer to Purchase about the Company, its
advisors and contacts of the Company with parties other than the Purchasers has
been taken from, or is based upon, publicly available documents on file with the
Commission and is qualified in its entirety by reference to such documents.
Certain of the executive officers and directors of Orion are also directors of
the Company, and certain non-public information concerning the Company has been
made available to those directors in their capacity as directors of the Company.
See SPECIAL FACTORS -- "Background of the Transaction" -- "Fairness of the
Offer" and -- "Interests of Certain Persons in the Transaction; Securities
Ownership; Related Transactions." Although the Purchasers do not have any
knowledge that would indicate that any statements contained herein which are
based on such public documents or on information concerning the Company
otherwise provided to Orion are untrue, the Purchasers cannot take
responsibility for the accuracy or completeness of such public documents or for
any failure by the Company to disclose events which may have occurred and which
have affected or may affect the significance or accuracy of any such
information.
THIS OFFER TO PURCHASE AND THE ACCOMPANYING LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
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SPECIAL FACTORS
BACKGROUND OF THE TRANSACTION
Since August 1984, Orion has had, directly or through wholly-owned
subsidiaries, a substantial ownership interest in the Company. In November 1988,
Orion, through wholly-owned subsidiaries, increased its ownership of the Company
from 49.7% to 100%. On November 20, 1991, Orion sold 6,250,000 Shares of the
Company's common stock in an initial public offering at a net price per Share of
$13.60, reducing its ownership interest to 49.3% of the then outstanding Shares.
Since then, the Company has operated as an independent publicly-traded company.
In connection with the 1991 public offering, Orion, certain of its
subsidiaries and the Company entered into a Shareholders Agreement. Such
Agreement was amended in 1994 to provide for an increase in the number of
directors, including directors independent of management and Orion, and was most
recently amended in March 1995 to provide for increasing the number of directors
to eleven. Pursuant to the Shareholders Agreement, as amended (the "Shareholders
Agreement"), Messrs. Alan R. Gruber, Chairman and Chief Executive Officer of
Orion, Larry D. Hollen, President and Chief Operating Officer of Orion, and
William J. Shepherd, a director of Orion, currently serve as Orion's designated
directors on the Company's Board. Mr. Gruber is Chairman of the Board of the
Company. Messrs. Gruber and Shepherd represent two of the four members of the
Company's Compensation Committee. Mr. Shepherd is the Chairman of both Orion's
Compensation Committee and the Company's Compensation Committee. For additional
information about the Shareholders Agreement, see SPECIAL FACTORS -- "Interests
of Certain Persons in the Transaction; Securities Ownership; Related
Transactions" and THE OFFER -- Section 11.
Mr. Robert B. Sanborn, Mr. Hollen's predecessor as President and Chief
Operating Officer of Orion, who is a director of and a senior executive
consultant to Orion, is also a member of the Company's Board and of its
Compensation Committee. Mr. Sanborn receives the regular fees and other benefits
provided to all non-employee directors of the Company. Mr. Roger B. Ware, the
Company's President and Chief Executive Officer, serves as a member of Orion's
Board of Directors but is not a member of any of its committees. Mr. Ware
receives the regular fees and other benefits provided to all non-employee
directors of Orion.
Orion and the Company are also parties to an investment management
agreement pursuant to which the investment portfolio of the Company (other than
short-term investments and a portion of the equity portfolio) is managed by
Orion under the direction and supervision of the Company and subject to the
Company's investment policies. In addition, Orion's insurance subsidiaries have
entered into certain reinsurance agreements in the ordinary course of business
with the Company's insurance subsidiaries. For additional information about
transactions between Orion and the Company, see SPECIAL FACTORS -- "Interests of
Certain Persons in the Transaction; Securities Ownership; Related Transactions."
On July 18, 1995, the Company acquired all the capital stock of Viking
Insurance Holdings, Inc. ("Viking Holdings") for a total consideration of
$102,700,000 (subject to certain adjustments). The Company financed the
acquisition of Viking Holdings by selling 1,550,000 Shares in a European
offering pursuant to Regulation S under the Securities Act of 1933, as amended
(the "Securities Act"), and utilizing a portion of a new $110,000,000 credit
facility from a group of lending banks. Certain of Orion's wholly-owned
subsidiaries held $20,896,000 of the Company's subordinated promissory notes due
2003 (the "2003 Notes") which had been issued in November 1991. To facilitate
the Company's acquisition of Viking Holdings, the entire principal amount of the
2003 Notes was converted in July and October 1995 into 1,326,128 Shares at
$15.76 per Share, the same net price received by the Company in its Regulation S
offering. The conversion of the 2003 Notes restored Orion to its previous
ownership level in the Company of slightly less than 50% of the outstanding
Shares following the increase in the number of Shares resulting from the
Company's Regulation S offering. See SPECIAL FACTORS -- "Interests of Certain
Persons in the Transaction; Securities Ownership;
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Related Transactions." Orion's subsidiaries received the following number of
Shares upon conversion of the 2003 Notes:
NUMBER OF
SHARES RECEIVED
---------------
The Connecticut Indemnity Company...................................... 74,462
Connecticut Specialty Insurance Company................................ 10,154
Design Professionals Insurance Company................................. 47,448
EBI Indemnity Company.................................................. 47,046
Employee Benefits Insurance Company.................................... 67,212
The Fire and Casualty Insurance Company of Connecticut................. 27,416
Security Insurance Company of Hartford................................. 855,721
Security Reinsurance Company........................................... 128,955
SecurityRe, Inc........................................................ 67,714
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Total........................................................ 1,326,128
=========
From November 1995 through March 1996, Design Professionals Insurance
Company ("DPIC") acquired an additional 80,000 Shares in open market purchases.
Except as set forth below or elsewhere herein, there have been no transactions
or negotiations between or among Orion, the Company and their affiliates and
third parties in the last three fiscal years regarding a merger, consolidation,
asset acquisition, tender offer, sale of assets, election of directors, or
acquisition of securities.
In December 1995, a representative of a company in the insurance industry
expressed an interest to Mr. Gruber in acquiring from Orion its Shares in
connection with a possible acquisition of the Company. In a subsequent
conversation in February 1996, the representative of such company indicated that
its management had decided to pursue another possible acquisition. No further
contact has been made by the interested party and no price for securities of the
Company was discussed.
Also in February 1996, Mr. Gruber discussed with a representative of
another insurance company a possible acquisition from Orion of its Shares. Such
company decided to pursue other opportunities. No price was discussed for the
Shares, and no offer was made.
In March 1996, a representative of a financial intermediary told Mr. Gruber
that he had proposed to a named third-party entity the possible purchase from
Orion of its Shares in connection with a possible purchase of the Company. The
financial intermediary was not retained by Orion to effect such a transaction
and Orion has no information to the effect that he has been retained to do so by
the third party. Orion has had no further contact concerning the proposal, has
received no offer and is not engaged in negotiations concerning the proposal.
Messrs. Ware and Gruber have discussed from time to time increasing Orion's
ownership interest in the Company. At the April 2, 1996 Board of Directors
meeting of the Company, Mr. Ware asked Mr. Gruber to indicate Orion's present
plans, if any, with respect to increasing its ownership interest in the Company.
Mr. Gruber indicated that no plans, proposals or any intention had been arrived
at by Orion or its subsidiaries which hold Shares, but that each reserved the
right to develop plans to acquire additional Shares, including through
open-market purchases or a tender offer which could be for all or a part of the
Shares. Mr. Ware expressed his preference for Orion's acquiring all of the
equity of the Company.
On May 7, 1996, at special meetings, the Board of Directors of each
Purchaser authorized the making of the Offer. At the meeting of the Board of
Directors of Orion, Mr. Ware participated but abstained from voting. The Company
was advised that the Offer would be commenced on May 8, 1996. A press release
was issued by Orion on May 7, 1996.
FAIRNESS OF THE OFFER
The Offer price of $17.50 per Share was determined by Orion, with the other
Purchasers, after considering the factors set forth below and without
negotiations with the Company.
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The Purchasers believe that the Offer is fair to the unaffiliated holders
of Shares to whom it is directed. In concluding that the Offer is fair to such
stockholders, the Purchasers have considered, among other matters, (i) that the
$17.50 per Share price represents a premium of $1.375 over the closing sale
price of $16.125 per Share as reported by the New York Stock Exchange (the
"NYSE") on May 7, 1996, the date prior to the commencement of the Offer; (ii)
that the $17.50 per Share price represents an increase of $3.12 over the net
book value per Share of $14.38 as of March 31, 1996 and an increase of $5.33
over the tangible book value per Share of $12.17 as of the same date (the
Purchasers have made no analysis of the liquidation value of the Company and
therefore have no basis for expressing an opinion as to the comparison of the
Offer price to liquidation value); (iii) recent, and historical, market prices
of the Shares since the Company became a public company in November 1991,
including the average daily closing stock price for the six-month period ended
April 30, 1996 of $14.695; (iv) Orion's evaluation of competitive trends and
other conditions in the markets in which the Company operates; (v) Orion's
knowledge of the business, historical results of operations and the properties,
assets and earnings of the Company and its recent financial and operating
performance (see THE OFFER -- Section 7); (vi) the per Share price of $16.50
($15.76 net of expenses) received by the Company from the sale of 1,550,000
Shares in June 1995 in the Regulation S offering; (vii) the conversion price of
$15.76 per Share for an aggregate of 1,326,128 Shares issued in June and October
of 1995 for the conversion of $20,896,000 of the 2003 Notes of the Company which
were held by subsidiaries of Orion; (viii) the average per Share price of
approximately $14.45 paid by the Company both to subsidiaries of Orion and to
unaffiliated holders in 1994 for the repurchase of 459,200 Shares pursuant to
the repurchase program authorized by the Company's Board of Directors in 1994
(see THE OFFER -- Section 9); (ix) the per Share prices paid by DPIC ranging
from $13.375 to $14.00 to acquire 80,000 Shares in the open market between
November 1995 and March 1996; and (x) the fact that the Purchasers already
beneficially own 49.5% of the outstanding Shares.
The foregoing discussion of the information and factors considered by the
Purchasers is not intended to be exhaustive. In view of the wide variety of
factors considered in connection with their determination of the Offer price and
their evaluation of the fairness of the Offer, the Purchasers did not find it
practicable to, and did not, quantify or otherwise attempt to assign relative
weights to the foregoing factors or determine that any factor was of particular
importance. Rather, the Purchasers viewed their position as being based on the
totality of the information presented to and considered by them. On balance,
however, the Purchasers viewed the factors set forth in items (i) through (v)
and (x) as very favorable to their decision, the matters set forth in items (vi)
and (ix) as being influential, and the remainder of lesser significance. In
particular, the Purchasers consider that the Offer price of $17.50 per Share
represents a premium over the price at which the Shares were trading immediately
prior to the date of commencement of the Offer.
The Purchasers also have taken into account that the liquidity and market
value of the remaining Shares held by the public could be adversely affected by
the reduction in the number of stockholders, reduction in the number of Shares
held by unaffiliated stockholders, the possible delisting of the Shares by the
NYSE and the possible deregistration of the Shares under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). The Purchasers have further taken
into account their intent and present expectation that the Shares will remain
publicly traded. See SPECIAL FACTORS -- "Certain Effects of the Transaction" and
THE OFFER -- Section 6.
In advance of a meeting of the Board of Directors of the Company in
December 1995, the Company provided its 1996 operating plan to the members of
its Board of Directors, including Messrs. Gruber, Hollen, Sanborn and Shepherd
(all of whom are members of the Board of Directors of Orion of which Mr. Gruber
is Chairman of the Board, Messrs. Gruber and Hollen are executive officers and
Mr. Sanborn is a senior executive consultant) (see INTRODUCTION and SPECIAL
FACTORS -- "Interests of Certain Persons in the Transaction; Securities
Ownership; Related Transactions"). Such operating plan was prepared by the
Company's management based on numerous assumptions concerning mix of business,
changes in insurance premium rates, growth, renewal rates, claim frequencies and
severity, commission ratios, premium taxes, expenses, realized gains,
shareholder dividends and other factors. The 1996 operating plan includes
premiums earned of $486,481,000; operating earnings (earnings after taxes,
excluding realized investment gains and losses) of $22,401,000 or $1.50 per
Share; and net income (including assumed realized investment gains) of
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$24,351,000 or $1.63 per Share. In 1995 the Company had premiums earned of
$390,017,000, operating earnings of $6,790,000 or $.51 per Share, and net income
of $8,929,000 or $.67 per Share. For the first quarter of 1996 and 1995,
respectively, the Company's earned premiums were $115,470,000 and $79,468,000;
operating earnings were $4,499,000, or $.30 per Share, and $5,398,000, or $.45
per Share; and net income was $5,787,000, or $.39 per Share, and $5,768,000, or
$.48 per Share.
Orion believes that the 1996 operating plan is based on a variety of
assumptions which, though considered reasonable by the Company's management for
purposes of establishing an operating business plan, are subject to substantial
uncertainties and contingencies, many of which are beyond the Company's control.
The 1996 operating plan was not prepared with a view to public dissemination or
compliance with published guidelines of the Commission or of the American
Institute of Certified Public Accountants. The information cited therefrom is
included herein solely because it was known to the executive officers and
directors of Orion during the period when it was considering whether to proceed
with the Offer. None of the Purchasers assumes any responsibility for the
accuracy of the 1996 operating plan. For historical financial information
concerning the Company, see THE OFFER -- Section 7.
The Purchasers have not obtained, or sought to obtain, any report, opinion
or appraisal from an outside party, including, without limitation, an investment
banker's opinion as to the fairness of the Offer to unaffiliated holders of
Shares. The Purchasers have not negotiated the Offer price with the Company and
do not intend to do so.
PURPOSE AND STRUCTURE OF THE TRANSACTION; PLANS FOR THE COMPANY AFTER THE OFFER
Orion, through its subsidiaries, beneficially owns approximately 49.5% of
the Shares outstanding as of May 6, 1996. A principal purpose of the Offer, in
addition to its being a favorable investment opportunity, is to achieve a
sufficient ownership interest in the Company to permit Orion to file
consolidated federal income tax returns that include the Company. Section
1504(a)(2) of the Code requires generally that 80% or more of both the total
voting power and the total value of the stock of a corporation (other than
certain preferred stock) be owned by one or more of the members of an
"affiliated group" in order for such corporation to be included within such
group and thereby join in the filing of consolidated federal income tax returns
of such group. See INTRODUCTION and SPECIAL FACTORS -- "Certain Effects of the
Transaction" with respect to the federal income tax sharing agreement that Orion
intends to seek to enter into with the Company in such event.
As described under THE OFFER -- Section 2, if fewer than 4,600,000 Shares
are properly tendered and purchased pursuant to the Offer, and Orion together
with the other entities in its consolidated tax group then owns less than 80% of
the outstanding Shares, Orion intends, subject to market conditions, that it
and/or its wholly-owned subsidiaries will purchase additional Shares in order to
acquire an 80% ownership interest in the Company. Such purchases may be made
through open market or privately negotiated purchases or another tender offer
(which may be for less than all the Shares), at prices acceptable to Orion and
its subsidiaries, which may be greater or lesser than the Offer price for the
Shares. There can be no assurance that such purchases of Shares will be made or
over what period of time such Shares, if any, might be purchased.
After completion or termination of the Offer, regardless of the number of
Shares purchased in the Offer, Orion also reserves the right to purchase
directly or through its subsidiaries additional Shares in the open market, in
privately negotiated transactions, in another tender or exchange offer or
otherwise. Any acquisition of Shares by Orion, or its subsidiaries, would have
to be made in accordance with applicable legal requirements, including those
under the Exchange Act. After completion or termination of the Offer, Orion also
reserves the right, but has no present intention, (i) to sell Shares in open
market or negotiated transactions, (ii) to propose a merger or other similar
business combination of the Company involving consideration consisting of cash
or securities or a combination of cash and securities or (iii) to propose such a
transaction involving consideration having a value more or less than the amount
to be paid per Share pursuant to the Offer. See THE OFFER -- Section 11.
It is the present intention of the Purchasers, following the consummation
of the Offer, that the Company operate with its own management and that its
Shares will continue to be publicly traded. However, upon the completion of the
Offer, Orion reserves the right to conduct a further review of the Company and
its assets,
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corporate structure, dividend policy, capitalization, operations, properties,
policies, management and personnel and to consider what, if any, changes would
be desirable in light of the circumstances which then exist, subject to
applicable legal requirements. Such changes could include, in addition to those
described under SPECIAL FACTORS -- "Purpose and Structure of the Transaction;
Plans for the Company After the Offer" and -- "Certain Effects of the
Transaction", changes in the Company's or any subsidiary's business, corporate
structure, articles of incorporation, by-laws, capitalization, board of
directors, management or dividend policy. The Purchasers expect that the Company
will continue to have a number of directors who are independent of management of
the Company, consistent with applicable law and the requirements of the NYSE and
other regulatory bodies.
For additional information concerning legal or contractual requirements
applicable to the Purchasers' plans, see THE OFFER -- Section 11. In addition,
while Orion does not intend or presently anticipate that the acquisition of up
to 4,600,000 Shares in the Offer, if the Offer is consummated, would result in
the delisting of the Shares which currently trade on the NYSE or in
deregistration of the Shares under Section 12 of the Exchange Act, there can be
no assurance that this will not occur. See SPECIAL FACTORS -- "Certain Effects
of the Transaction" and THE OFFER -- Section 6.
Except as set forth above in this Offer to Purchase, none of the Purchasers
has any present plans or proposals which relate to or would result in (i) an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation of the Company or any of its subsidiaries, (ii) a sale or transfer
of a material amount of assets of the Company or any of its subsidiaries; (iii)
any material changes in the Company's corporate structure, business or
composition of its management or personnel; (iv) any material change in the
present capitalization, dividend rate or policy or indebtedness of the Company;
(v) any change in the present board of directors of the Company, including, but
not limited to, any plan or proposal to change the number or term of existing
directors, to fill any existing vacancy on the board or to change any term of
the employment contract of any executive officer; (vi) a class of equity
securities of the Company being delisted from a national securities exchange or
ceasing to be authorized to be quoted on an inter-dealer quotation system of a
registered national securities association or becoming eligible for termination
of registration pursuant to Section 12(g)(4) of the Exchange Act or the
suspension of the Company's obligation to file reports pursuant to Section 15(d)
of the Exchange Act.
CERTAIN EFFECTS OF THE TRANSACTION
Certain of the effects of the transactions contemplated by the Offer are
described in this Offer to Purchase under SPECIAL FACTORS -- "Purpose and
Structure of the Transaction; Plans for the Company After the Offer" and THE
OFFER -- Section 6.
The Purchasers believe that the Offer presents a favorable opportunity to
stockholders of the Company not affiliated with Orion to sell at least a portion
of their Shares (subject to proration) and to continue to hold Shares and
participate in the on-going business of the Company. See SPECIAL
FACTORS -- "Purpose and Structure of the Transaction; Plans for the Company
After the Offer." The Purchasers have also considered that if the Offer is
consummated, stockholders who tender Shares will forego the opportunity to
participate in any future growth prospects of the Company in respect of the
Shares sold by them.
In the event that the Offer is consummated, the interest of Orion and its
wholly-owned subsidiaries in the net book value and net earnings of the Company,
in terms of both percentages and dollar amounts, will increase in direct
proportion to the increase in the percentage of outstanding Shares owned by them
resulting from the Share acquisitions pursuant to the Offer. If all of the
4,600,000 Shares are purchased pursuant to the Offer, Orion's beneficial
interest in the net book value at March 31, 1996 and net earnings of the Company
for the three months ended March 31, 1996 as reflected in the March 10-Q would
increase to 80.3%, or $172,773,000, and $4,647,000, respectively, assuming no
exercise of outstanding stock options.
The liquidity of the Shares is expected to be reduced after consummation of
the Offer. The Purchasers do not believe that liquidity will be materially
adversely affected other than possibly for holders of large blocks of Shares.
Although the Purchasers do not intend and presently do not expect that this will
occur, the Purchasers cannot assure that the Shares may not be delisted from the
NYSE and the registration of the Shares under the
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Exchange Act terminated if the Purchasers purchase 4,600,000 Shares pursuant to
the Offer. Deregistration under the Exchange Act, should it occur, would make
certain provisions of the Exchange Act, such as the short-swing profit recovery
provisions of Section 16(b), and the requirement of furnishing a proxy statement
in connection with stockholders meetings, no longer applicable. In such event,
the Company would also no longer be required to file periodic reports with the
Commission. In such circumstances, the Shares may no longer be "margin
securities." See THE OFFER -- Section 6. Except as otherwise described in this
Offer to Purchase, upon consummation of the Offer, the Purchasers currently
expect the business and operations of the Company to be continued substantially
as they are currently being conducted.
In the event the Offer is consummated and Orion, together with its
subsidiaries, owns 80% or more of the outstanding Shares, Orion intends to seek
to enter into a federal income tax sharing agreement with the Company and the
Company's subsidiaries. Such agreements typically provide for the filing of
consolidated federal income tax returns and would require the Company and its
subsidiaries to make payments to Orion in amounts equal to their tax liabilities
computed on a separate basis. If the Company and its subsidiaries generate
losses or credits which actually reduce Orion's consolidated tax liability or
which would have resulted in a refund on a separate company basis during the
period the Company and its subsidiaries are members of the affiliated group,
such an agreement would generally require Orion to pay to the Company and its
subsidiaries the amount of such reduction or refund. Such agreements would
typically address the timing of such payments, the resolution of tax disputes
and other similar matters.
For a discussion of certain federal income tax consequences of the Offer
and the transactions contemplated as set forth in this Offer to Purchase, see
also SPECIAL FACTORS -- "Certain Federal Income Tax Consequences."
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION; SECURITIES OWNERSHIP; RELATED
TRANSACTIONS
Directors and Officers. As described in this Offer to Purchase under
SPECIAL FACTORS -- "Background of the Transaction" and -- "Purpose and Structure
of the Transaction; Plans for the Company After the Offer", three of the
Company's directors are designated by Orion pursuant to the Shareholders
Agreement, including Mr. Gruber, who is Chairman of the Board of the Company and
also of Orion. The Shareholders Agreement also provides that so long as Orion or
its subsidiaries beneficially own in the aggregate 30% or more of the voting
securities of the Company, Orion will continue to have the right to designate
three nominees to the Company's Board (one of whom will be the Chairman of the
Board), and so long as Orion or its subsidiaries beneficially own 20% or more of
the Company's securities, Orion will have the right to designate two nominees.
Orion may also require that the Company's Compensation Committee include Orion's
nominees to the Company's Board. None of Orion's nominees, other than Mr.
Shepherd, receives any compensation from the Company, including any retainer fee
or attendance fee, for his services, except for travel expenses in connection
with attendance at directors' meetings. For information concerning the directors
and executive officers of the Purchasers, see Schedule I to this Offer to
Purchase.
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Securities Ownership. Orion, through its subsidiaries, owns, in the
aggregate, 7,409,942 Shares. Set forth below is the number of Shares held by the
Purchasers respectively as of the date of this Offer to Purchase:
NO. OF
PURCHASER SHARES %*
------------------------------------------------------------------ --------- ----
The Connecticut Indemnity Company................................. 407,795 2.7
Connecticut Specialty Insurance Company........................... 110,154 0.7
Design Professionals Insurance Company............................ 167,115 1.1
EBI Indemnity Company............................................. 505,379 3.4
Employee Benefits Insurance Company............................... 493,612 3.3
The Fire and Casualty Insurance Company of Connecticut............ 197,416 1.3
Security Insurance Company of Hartford............................ 4,921,802 32.9
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* Based on the number of Shares reported by the Company in the March 10-Q to be
outstanding as of May 6, 1996.
In addition, two other wholly-owned subsidiaries of Orion own Shares as
follows: SecurityRe, Inc. owns 67,714 Shares or 0.5% of the Shares outstanding
and Security Reinsurance Company owns 538,955 Shares or 3.6% of the Shares
outstanding as of such date.
Although each of Orion's subsidiaries has sole power to vote and dispose of
its Shares and makes its own investment decisions, Orion is deemed by its direct
or indirect voting control of the subsidiaries to be able ultimately to direct
the acquisition, voting and disposition of the Shares held by its subsidiaries.
As indicated elsewhere herein, DPIC purchased a total of 80,000 Shares in
the open market from November 1995 through March 1996 at prices ranging from
$13.375 to $14.00 for an average price per Share of $13.70. Of the 80,000
Shares, 13,500 Shares were purchased during the 60 days prior to the date of
this Offer to Purchase on the dates and at the prices set forth below:
PRICE
PER SHARE
NO. OF (NET OF
NAME SHARES COMMISSIONS) DATE
Design Professionals Insurance Company........... 1,900 $ 13.50 3/11/96
10,000 13.625 3/12/96
1,600 13.50 3/12/96
The conversion in 1995 of the 2003 Notes of the Company is discussed under
SPECIAL FACTORS -- "Background of the Transaction" above.
In other transactions, pursuant to the Company's 1994 repurchase program
(referred to under SPECIAL FACTORS -- "Fairness of the Offer" above and THE
OFFER -- Section 9), in 1994 the Purchasers sold an aggregate of 139,600 Shares
to the Company at an average price per Share of $14.62. Such aggregate number of
Shares sold by Orion's subsidiaries represented approximately 1.1% of the Shares
outstanding immediately prior to the adoption by the Company of its share
repurchase program.
No executive officer or director of Orion or of any of the other
Purchasers, or to the knowledge of Orion, any associate of the persons named on
Schedule I hereto beneficially owns, or has the right to acquire, directly or
indirectly, any Shares except as follows:
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NAME NO. OF SHARES
W. Marston Becker....................................................... 1,400
Bertram J. Cohn......................................................... 103,600*
Robert B. Sanborn....................................................... 1,000
Raymond J. Schuyler..................................................... 500
William J. Shepherd..................................................... 5,000
John R. Thorne.......................................................... 1,500
Roger B. Ware........................................................... 74,321**
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* Mr. Cohn, as a managing director of First Manhattan Company, acts as
co-manager in conjunction with another co-manager of each of two
discretionary accounts which hold an aggregate of 103,600 Shares.
** As reported in the Company's Proxy Statement dated March 28, 1996 for its
Annual Meeting of Stockholders. The number includes Shares beneficially owned
as well as non-vested restricted stock and exercisable options.
No executive officer or director has effected any transaction in the Shares
during the past 60 days except that Mr. Robert H. Jeffrey sold 1,300 Shares on
March 11, 1996 at a price of $13.50 per Share. For information concerning the
business address of the foregoing persons, see THE OFFER -- Section 8 and
Schedule I.
None of Orion's wholly-owned subsidiaries will tender Shares in the Offer.
Orion has been advised that each of Messrs. Becker, Cohn, Schuyler, Shepherd and
Thorne intends to tender his Shares but that Mr. Sanborn does not intend to
tender his Shares. At present Orion has no information as to whether Mr. Ware
intends to tender any Shares. None of the Purchasers nor any of their directors
or executive officers, in his capacity as such, makes any recommendation to the
stockholders of the Company regarding the Offer.
According to the Company's Proxy Statement dated March 28, 1996 for its
Annual Meeting of Stockholders to be held May 15, 1996 (the "Annual Meeting
Proxy Statement"), the only holder of 5% or more of the Shares, other than Orion
through its subsidiaries, is Sanford C. Bernstein & Co., Inc., One State Street
Plaza, New York, New York 10004, which owned, as reported in its Schedule 13G
filed with the Commission on February 7, 1996, 779,200 Shares or 5.21% of the
Shares issued and outstanding as of that date. Based on information set forth in
the Annual Meeting Proxy Statement, the directors and executive officers of the
Company as of January 31, 1996 beneficially owned (including Shares outstanding,
Shares subject to options exercisable within 60 days of January 31, 1996 and
restricted Shares) an aggregate 219,122 Shares, of which 1,000 Shares were owned
by Robert B. Sanborn, 5,000 Shares were owned by William J. Shepherd, 74,321
Shares were owned by Roger B. Ware, 400 Shares by Dennis J. Lacey, 39,482 Shares
by Arthur J. Mastera, 506 Shares by M. Ann Padilla, 41,236 Shares by Michael L.
Pautler, 12,000 Shares by James R. Pouliot, 500 Shares by Carroll D. Speckman,
25,216 Shares by Fred T. Roberts and 1,500 Shares by Richard R. Thomas.
According to the Annual Meeting Proxy Statement, the Company adopted a Long
Term Incentive Plan in 1991 for all of its employees under which, as of December
31, 1995, the number of Shares underlying outstanding unexercised options held
by the named executive officers of the Company was as follows:
NUMBER OF
UNEXERCISED OPTIONS
AT YEAR-END
-----------------------------
NAME EXERCISABLE UNEXERCISABLE
Roger B. Ware....................................... 45,250 15,750
Fred T. Roberts..................................... 22,250 10,750
Arthur J. Mastera................................... 20,250 10,750
Michael L. Pautler.................................. 23,250 10,750
James R. Pouliot.................................... -- 35,000
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Except as set forth herein, to the Purchasers' knowledge, no member the
Company's management or Board of Directors has interests in the Offer which are
not identical to those of other holders of the Shares.
Related Transactions. As indicated elsewhere herein, Orion and its
subsidiaries have entered into several agreements with the Company and its
subsidiaries. Pursuant to the Shareholders Agreement, Messrs. Gruber, Hollen and
Shepherd serve on the Company's Board of Directors. Under the Shareholders
Agreement, Orion also has the right on up to three occasions to require the
Company to register under the Securities Act Shares owned by Orion and its
wholly-owned subsidiaries, which right expires in November 1997. In addition,
the Company has agreed to use its best efforts to include such Shares in any
underwritten public offering of its Shares under the Securities Act and to pay
all expenses in connection with the first two registrations.
Most state insurance codes require transactions between a licensed
insurance company and its affiliates to be fair and reasonable. In the case of
certain material transactions, an insurance company must obtain prior approval
of the transaction from the appropriate state insurance department. Reinsurance
agreements, tax sharing agreements, loans, guarantees, sales and other
transactions of a material size, as well as management, service and cost sharing
agreements must similarly be approved.
In the ordinary course of business, the Company's insurance subsidiaries
reinsure certain risks with other companies. Such arrangements serve to limit
their maximum loss on large risks. To the extent that any reinsuring company is
unable to meet its obligations, the Company's insurance subsidiaries would not
be relieved of their liabilities. For 1995, Guaranty National Insurance Company
("GNIC") and Landmark American Insurance Company ("LAIC"), wholly-owned
subsidiaries of the Company, were parties to a 100% reinsurance agreement with
an Orion insurance subsidiary. Premiums written and ceded under this agreement
are included in premiums written as reported in the Company's financial
statements and were $152,000 for 1995. Insurance subsidiaries of the Company
were paid $5,000 in fees in conjunction with this reinsurance agreement. Also,
during 1995 GNIC was a party to reinsurance agreements with Orion insurance
subsidiaries pursuant to which GNIC assumed business written through affiliates
totalling $9,495,000 in premiums. GNIC paid to the Orion insurance subsidiaries
$160,000 in fees and reimbursed $178,000 of actual expenses incurred by Orion's
insurance subsidiaries in conjunction with this reinsurance agreement. For 1994,
GNIC and LAIC were parties to a 100% reinsurance agreement with an Orion
insurance subsidiary. Premiums written and ceded under this agreement are
included in premiums written as reported in the Company's financial statements
and were $643,000 for 1994. The Company's insurance subsidiaries were paid
$14,000 in fees and reimbursed $1,000 for expenses in conjunction with this
reinsurance agreement. Also, during 1994 GNIC was a party to reinsurance
agreements with Orion insurance subsidiaries pursuant to which GNIC assumed
business written through affiliates totalling $30,921,000 in premium. GNIC paid
to Orion's insurance subsidiaries $666,000 in fees and reimbursed $774,000 of
actual expenses incurred by Orion's insurance subsidiaries in conjunction with
this reinsurance agreement. For 1993 GNIC and LAIC were parties to a 100%
reinsurance agreement with an Orion insurance subsidiary. Premiums written and
ceded under this agreement are included in premiums written as reported in the
Company's financial statements and were $847,000 for 1993. The Company's
insurance subsidiaries were paid $15,000 in fees and reimbursed $1,000 for
expenses in conjunction with this reinsurance agreement. Also, during 1993 GNIC
and LAIC were parties to reinsurance agreements with Orion insurance
subsidiaries pursuant to which GNIC assumed business written through affiliates
totalling $30,856,000 in premiums. The Company's insurance subsidiaries paid to
Orion's insurance subsidiaries $582,000 in fees and reimbursed $673,000 for
actual expenses in conjunction with this reinsurance agreement.
Effective January 1, 1993, the Company's insurance subsidiaries entered
into a reinsurance agreement ("1993 Agreement") with National Reinsurance
Corporation ("NRC"), a wholly-owned subsidiary of National Re Holdings
Corporation ("National Re"). The 1993 Agreement, as amended, primarily provides
reinsurance limits up to $6,000,000 in excess of the Company's retention of
$150,000 to $300,000. The Company ceded $38,215,000 in premiums to NRC during
1995 and received $12,358,000 in ceding commissions. Subject to certain renewal
and cancellation provisions, the agreement expires at the end of 1998. With the
exception of 1992, NRC has been a principal reinsurer of the Company since 1985.
Mr. Steven B. Gruber, a son of Mr. Alan R. Gruber, Chairman of the Company and
of Orion, has been a director of National
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Re since 1990. Neither of the Messrs. Gruber participated in the negotiation of
the 1993 Agreement and its subsequent amendments. The 1993 Agreement, as amended
in 1994, provided reinsurance limits up to $9,700,000 in excess of the Company's
retention of $300,000. The Company ceded $31,929,000 in premiums to NRC during
1994 and received $10,377,000 in ceding commissions. The Company ceded
$27,722,000 in premiums during 1993 to NRC and received $9,010,000 in ceding
commissions.
A subsidiary of Orion is an agent for the Company, pursuant to the
Company's standard agency contract. During 1995, this agency produced $411,000
in premiums and was paid $72,000 in commissions. The Company expects similar
premium production and commissions in 1996. During 1994, this agency produced
$516,000 in premiums and was paid $90,000 in commissions. During 1993, this
agency produced $537,000 in premiums and was paid $94,000 in commissions.
During 1995, the Company's 2003 Notes in the principal amount of
$20,896,000, were converted by Orion's subsidiaries into 1,326,128 Shares. Total
interest paid by the Company on the 2003 Notes in 1995 to Orion's subsidiaries
was $1,122,000. Total interest paid to Orion's subsidiaries for 1993 was
$1,928,000 and for 1994 was $1,640,000. See SPECIAL FACTORS -- Background of the
Transaction.
In 1995, in connection with the Viking Holdings acquisition financing,
Orion made a commitment for a $21,000,000 bridge loan to the Company. The loan
was not drawn down, but the Company paid a $210,000 commitment fee to Orion at
the time the commitment was executed.
The Company and Orion have entered into an investment management agreement
pursuant to which the investment portfolio of the Company (other than short-term
investments and a portion of the equity securities) is managed by investment
managers of Orion under the direction and supervision of the Company and subject
to the Company's investment policies. For its investment management services,
fees were paid to Orion at a rate of $550,000 per year from 1993 through July
1995, at which time they were increased to a rate of $650,000 per year in
recognition of the additional investment balances resulting from the Viking
Holdings acquisition. The contract continues in effect for annual periods unless
terminated by either party upon 90 days prior written notice.
During 1990, GNIC entered into a loan participation agreement pursuant to
which DPIC borrowed approximately $9 million from affiliates. The loan, which
was secured by a leasehold deed of trust on an office building in Monterey,
California owned and primarily occupied by DPIC, matured in November 1995.
GNIC's proportionate share of this loan was $3,700,000 or 41.1%. GNIC received
quarterly interest payments at a rate of 11% per year. Interest earned for each
of 1993 and 1994 was $407,000 and for 1995 was $355,000.
Orion has committed to invest up to $5,000,000 in Insurance Partners, L.P.,
a partnership formed to make equity investments of up to approximately $550
million in the insurance industry. The Company has committed to participate in
Orion's commitment in an aggregate amount not to exceed $1,500,000. As of
December 31, 1995, Orion had invested $510,000 and the Company $219,000 in such
partnership investments. Insurance Partners L.P. is managed by Insurance
Partners Advisors L.P., of which Mr. Steven B. Gruber is a managing director.
As described under SPECIAL FACTORS -- "Certain Effects of the Transaction,"
Orion may enter into a tax sharing agreement with the Company and its
subsidiaries. See also, SPECIAL FACTORS -- "Background of the Transaction."
DISSENTERS' RIGHTS
No dissenters' rights under the Colorado Corporation Code are available to
stockholders of the Company with respect to the Offer. See THE OFFER -- Section
11.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The receipt of cash for Shares pursuant to the Offer will be a taxable
transaction for federal income tax purposes and may also be a taxable
transaction under applicable state, local or foreign tax laws. The tax
consequences of such receipt pursuant to the Offer may vary depending upon,
among other things, the
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particular circumstances of the stockholder. In general, a stockholder who
receives cash for Shares pursuant to the Offer will recognize gain or loss for
federal income tax purposes equal to the difference between the amount of cash
received for the Shares sold and his adjusted tax basis in such Shares. Such
gain or loss will be capital gain or loss if the stockholder held Shares as a
capital asset, and will be long-term capital gain or loss if the stockholder
held the Shares for more than one year at the time of sale. Gain or loss will be
calculated separately for each block of Shares tendered pursuant to the Offer.
The foregoing discussion may not be applicable to stockholders who are not
citizens or residents of the United States or to certain foreign corporations,
to stockholders who acquired their Shares pursuant to the exercise of employee
stock options or otherwise as compensation, or to other categories of
stockholders subject to special treatment under federal income tax laws.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND IS BASED ON PRESENT LAW. BECAUSE OF THE INDIVIDUAL NATURE
OF TAX CONSEQUENCES, EACH STOCKHOLDER IS URGED TO CONSULT HIS TAX ADVISOR WITH
RESPECT TO THE TAX CONSEQUENCES TO HIM OF THE OFFER, INCLUDING THE APPLICATION
AND EFFECT OF THE ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL AND FOREIGN TAX
LAWS.
SOURCE AND AMOUNT OF FUNDS -- FINANCING OF THE OFFER
The total amount of funds required to purchase all 4,600,000 Shares
pursuant to the Offer and to pay related fees and expenses is expected to be
approximately $81,250,000. The Purchasers have available cash and short-term
investments of approximately $186,516,000 as of March 31, 1996. For information
as to the respective purchase obligations of the Purchasers, see the
Introduction in this Offer to Purchase and THE OFFER -- Sections 1, 3 and 11.
The Purchasers reserve the right to amend the Offer to reduce the number of
Shares which will be purchased pursuant to the Offer, including as a result of
the Insurance Regulatory Condition. See THE OFFER -- Section 10.
THE OFFER
1. TERMS OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the
conditions of the Offer, the Purchasers will accept for payment (and thereby
purchase) and pay for, at the time and in the manner set forth in The
Offer -- Section 2, up to 4,600,000 Shares validly tendered prior to the
Expiration Date (as hereinafter defined) and not withdrawn in accordance with
The Offer -- Section 4 at an Offer price of $17.50 per Share net to the seller
in cash without interest thereon. The obligation of any Purchaser to purchase
Shares in the Offer is several and not joint. Each Purchaser reserves the right
to purchase any Shares not purchased by the other Purchasers. The term
"Expiration Date" means 12:00 Midnight, New York City time, on June 5, 1996,
unless and until Orion shall have extended the period of time for which the
Offer is open, in which event the term "Expiration Date" shall mean the latest
time and date on which the Offer, as so extended by Orion, shall expire.
Orion on behalf of the Purchasers expressly reserves the right, in its sole
discretion, for any reason, at any time or from time to time, and regardless of
whether or not any of the events set forth in THE OFFER -- Section 10 shall have
occurred or shall have been determined by Orion to have occurred, to extend the
period of time during which the Offer is open by giving oral or written notice
of such extension to the Depositary and by making a public announcement thereof.
During any such extension, all Shares previously tendered may be withdrawn as
set forth in The Offer -- Section 4. There can be no assurance that Orion will
exercise its right to extend the Offer. Subject to applicable rules of the
Commission, the Purchasers expressly reserve the right, in their sole
discretion, at any time or from time to time, and regardless of whether or not
any of the events in THE OFFER -- Section 10 shall have occurred or shall have
been determined by Orion to have occurred, to increase or decrease the price per
Share payable in the Offer or to make any other changes in the terms and
conditions of the Offer by giving written or oral notice of such amendment to
the Depositary (which shall be given by Orion on behalf of the Purchasers). The
rights reserved to the Purchasers in this paragraph are in addition to the
Purchasers' right to terminate the Offer pursuant to THE OFFER -- Section 10. If
the Purchasers shall decide, in their sole discretion, to increase or decrease
the consideration offered in the Offer to holders of Shares or to increase or
decrease the number of Shares being sought, and, at the time that notice
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of such change is first published, sent or given to holders of Shares in the
manner specified below, the Offer is scheduled to expire at any time earlier
than the expiration of a period ending on the tenth business day from, and
including, the date that such notice is first so published, sent or given, then
the Offer will be extended at least until the expiration of such period of ten
business days. If, prior to the Expiration Date, the Purchasers shall increase
the consideration offered to holders of Shares pursuant to the Offer, such
increased consideration shall be paid to all holders whose Shares are accepted
for payment pursuant to the Offer. For purposes of the Offer, a "business day"
means any day other than a Saturday, Sunday or federal holiday, and consists of
the time period from 12:01 a.m. through 12:00 midnight, New York City time.
The Commission has announced that under its interpretation of Rules
14d-4(c) and 14d-6(d) under the Exchange Act material changes in the terms of a
tender offer or information concerning the tender offer may require that the
tender offer be extended for a sufficient period of time to allow stockholders
to consider such material changes or information in deciding whether or not to
tender, withdraw or hold their shares. If the Purchasers make a material change
in the terms of the Offer or the information concerning the Offer, or Orion on
behalf of the Purchasers waives a material condition to the Offer, Orion will
disseminate additional tender offer materials to the extent required by Rules
14d-4(c) and 14d-6(d) promulgated under the Exchange Act. The minimum period
during which an offer must remain open following material changes in the terms
of the offer or information concerning the offer, other than a change in price
or a change in percentage of securities sought, will depend upon the facts and
circumstances, including the relative materiality of the terms or information
changed. With respect to a change in price or change in percentage of securities
sought, a minimum ten business day period is generally required to allow for
adequate dissemination to stockholders and investor response.
The Commission has stated that in its view an offer should remain open for
a minimum of five business days from the date a material change is first
published, sent or given to securityholders, and that if material changes are
made with respect to information that approaches the significance of price and
share levels, a minimum of ten business days may be required to allow for
adequate dissemination and investor response.
The Purchasers do not expect this to be the case, but should for any reason
the Rights be deemed to be exercisable, stockholders will be required to tender
one Right for each Share tendered to effect a valid tender of such Shares. See
THE OFFER -- Sections 3 and 11.
Orion on behalf of the Purchasers also expressly reserves the right (i) to
delay acceptance for payment or payment for any Shares, regardless of whether
such Shares were theretofore accepted for payment, or to terminate the Offer and
not accept for payment or pay for any Shares not theretofore accepted for
payment or paid for, upon the occurrence of any of the events specified in THE
OFFER -- Section 10 by giving oral or written notice of such delay in acceptance
or payment or termination to the Depositary and (ii) at any time, or from time
to time, to amend the Offer in any respect. Any extension of the Offer, delay in
acceptance or payment, termination or amendment of the Offer will be followed as
promptly as practicable by public announcement thereof, such announcement in the
case of an extension to be issued no later than 9:00 A.M., New York City time,
on the next business day after the previously scheduled Expiration Date, in
accordance with the public announcement requirements of Rule 14d-4(c)
promulgated under the Exchange Act. Without limiting the manner in which Orion
may choose to make any public announcement, Orion shall have no obligation, and
currently does not intend, except as required by law, to publish, advertise or
otherwise communicate any such public announcement other than by issuing a
release to the Dow Jones News Service and making any appropriate filing with the
Commission.
A request is being made of the Company pursuant to Rule 14d-5 under the
Exchange Act for the use of its stockholder lists and security position listings
for the purpose of disseminating the Offer to holders of Shares. This Offer to
Purchase and the related Letter of Transmittal will be mailed to record holders
of Shares and will be furnished to brokers, banks and similar persons whose
names, or the names of whose nominees, appear on the stockholder lists or, if
applicable, who are listed as participants in a clearing agency's security
position listing for subsequent transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES; PRORATION. Upon the
terms and subject to the conditions of the Offer, including the provisions
thereof relating to proration, the Purchasers shall accept for
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payment (and thereby purchase), and the Purchasers will pay for, up to 4,600,000
Shares validly tendered and not properly withdrawn in accordance with THE
OFFER -- Section 4 (including Shares validly tendered and not withdrawn during
any extension of the Offer, if the Offer is extended, upon the terms and subject
to the conditions of such extension), as promptly as practicable after the later
to occur of (i) the Expiration Date and (ii) the satisfaction or waiver of the
conditions of the Offer set forth in THE OFFER -- Section 10. THE OFFER IS NOT
CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED. The Purchasers
expressly reserve the right to delay acceptance for payment of or payment for
Shares in order to comply in whole or in part with any applicable law or
regulation (including the Insurance Regulatory Condition). See THE OFFER --
Sections 10 and 11. The reservation by the Purchasers of the right to delay
acceptance for payment or payment for Shares is subject to the provisions of
applicable law under Rule 14e-1 promulgated under the Exchange Act, which
require that the purchaser pay the consideration offered or return the Shares
deposited by or on behalf of stockholders promptly after termination or
withdrawal of the Offer.
Upon the terms and subject to the conditions of the Offer, if more than
4,600,000 Shares are validly tendered and not withdrawn in accordance with
Section 4 of this Offer to Purchase prior to the Expiration Date, the Purchasers
will accept for payment and pay for 4,600,000 Shares, on a pro rata basis (with
appropriate adjustments to avoid purchases of fractional Shares) according to
the number of Shares properly tendered and not withdrawn by each stockholder at
or prior to the Expiration Date. In the event that proration of tendered Shares
is required, because of the difficulty of determining the precise number of
Shares properly tendered and not withdrawn (due in part to the guaranteed
delivery procedure described in Section 3), Orion on behalf of the Purchasers,
does not expect that it will be able to announce the final results of such
proration or pay for any Shares until at least five NYSE trading days after the
Expiration Date. Preliminary results of proration will be announced by press
release as promptly as practicable after the Expiration Date. Stockholders may
obtain such preliminary information from the Information Agent, the Dealer
Manager or their brokers.
The Purchasers reserve the right (but shall not be obligated) to accept for
payment more than 4,600,000 Shares pursuant to the Offer, but have no present
intention of exercising such right. If a number of additional Shares in excess
of two percent of the outstanding Shares is to be accepted for payment, and, at
the time notice of the Purchasers' decision to accept for payment such
additional Shares is first published, sent or given to holders of Shares, the
Offer is scheduled to expire at any time earlier than the tenth business day
from the date that such notice is so published, sent or given, the Offer will be
extended until the expiration of such period of ten business days.
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of certificates for such
Shares, or timely confirmation (a "Book-Entry Confirmation") of book-entry
transfer of such Shares into the Depositary's account at The Depository Trust
Company ("DTC") or The Philadelphia Depository Trust Company ("PDTC") (sometimes
hereinafter referred to individually as a "Book-Entry Transfer Facility" and
collectively as the "Book-Entry Transfer Facilities") pursuant to the procedure
set forth in THE OFFER -- Section 3, and, in either such case, timely receipt by
the Depositary of a properly completed and duly executed Letter of Transmittal
(or facsimile thereof) with any required signature guarantees or Agent's Message
(as defined in Section 3 ) and any other documents required by the Letter of
Transmittal.
For purposes of the Offer, the Purchasers shall be deemed to have accepted
for payment (and thereby purchased) tendered Shares when, as and if Orion on
behalf of the Purchasers gives oral or written notice to the Depositary of the
Purchasers' acceptance for payment of such Shares pursuant to the Offer. Upon
the terms and subject to the conditions of the Offer, payment for Shares
purchased pursuant to the Offer will in all cases be made by deposit of the
purchase price with the Depositary, which will act as an agent for the tendering
stockholders for the purpose of receiving payment from the Purchasers and
transmitting payments to tendering stockholders. Under no circumstances will
interest be paid on the purchase price by the Purchasers by reason of any delay
in making such payment.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if certificates submitted represent more Shares than are tendered,
certificates for such Shares not purchased or tendered will be
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returned without expense to the tendering stockholder (or, in the case of Shares
delivered by book-entry transfer into the Depositary's account at a Book-Entry
Transfer Facility pursuant to the procedures set forth in THE OFFER -- Section
3, such Shares will be credited to an account maintained at such Book-Entry
Transfer Facility) as promptly as practicable following the expiration or
termination of the Offer. If for any reason whatsoever (whether before or after
the acceptance for payment of Shares), acceptance for payment of or payment for
any Shares tendered pursuant to the Offer is delayed, or the Purchasers are
unable to accept for payment or pay for Shares tendered pursuant to the Offer,
then, without prejudice to the Purchasers' rights under THE OFFER -- Section 10,
the Depositary may, nevertheless, to the extent permitted by law, retain
tendered Shares on behalf of the Purchasers, and such Shares may not be
withdrawn except to the extent that the tendering stockholders are entitled to
withdrawal rights as described in THE OFFER -- Section 4. The ability of the
Purchasers to delay the payment for the Shares which the Purchasers have
accepted for payment is limited by Rule 14e-1 under the Exchange Act referred to
above.
Each of the Purchasers reserves the right to transfer or assign, in whole
or from time to time in part, to Orion or to one or more of the other
wholly-owned subsidiaries of Orion the right to purchase Shares tendered
pursuant to the Offer, but no such transfer or assignment will relieve the
Purchasers of their obligations under the Offer or prejudice the rights of
tendering stockholders, upon the terms and subject to the conditions of the
Offer, to receive payment for Shares validly tendered and accepted for payment
pursuant to the Offer.
3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES. For Shares to
be validly tendered pursuant to the Offer, a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantees or Agent's Message (as defined below) and any other
documents required by the Letter of Transmittal must be received by the
Depositary at any one of its addresses set forth on the back cover of this Offer
to Purchase, and either (i) the certificates for such Shares must be delivered
to the Depositary along with the Letter of Transmittal or such Shares must be
delivered pursuant to the procedure for book-entry transfer set forth below and
a Book-Entry Confirmation must be received by the Depositary, in each case prior
to the Expiration Date, or (ii) the tendering stockholder must comply with the
guaranteed delivery procedure set forth below. The term "Agent's Message" means
a message transmitted by a Book-Entry Transfer Facility to and received by the
Depositary and forming a part of a Book-Entry Confirmation, which states that
such Book-Entry Transfer Facility has received an express acknowledgment from
the participant in such Book-Entry Transfer Facility tendering the Shares which
are the subject of such Book-Entry Confirmation, that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that Purchasers may enforce such agreement against such participant.
The Depositary will make a request to establish an account with respect to
the Shares at each of the Book-Entry Transfer Facilities for purposes of the
Offer within two business days after the date of this Offer to Purchase, and any
financial institution that is a participant in the Book-Entry Transfer
Facilities' systems may make book-entry delivery of the Shares by causing DTC or
PDTC, as the case may be, to transfer such Shares into the Depositary's account
at such Book-Entry Transfer Facility in accordance with such Book-Entry Transfer
Facility's procedure for such transfer. However, although delivery of Shares may
be effected through a Book-Entry Transfer Facility, the Letter of Transmittal
(or facsimile thereof) with any required signature guarantees, or an Agent's
Message in connection with a book-entry transfer, and any other required
documents must, in any case, be transmitted to, and received by, the Depositary
at one of its addresses set forth on the back cover of this Offer to Purchase or
the guaranteed delivery procedure set forth below must be complied with, prior
to the Expiration Date. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY
IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE DEPOSITARY.
Except as otherwise provided below, signatures on all Letters of
Transmittal must be guaranteed by a financial institution (including most banks,
savings and loan associations and brokerage houses) which is a participant in
the Securities Transfer Association's approved medallion program (such as the
Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Program or the Stock Exchange Medallion Program (each, an
"Eligible Institution"). Signatures on Letters of Transmittal need not be
guaranteed if the Shares tendered thereby are tendered (i) by a registered
holder of Shares who has not completed either the box entitled "Special Payment
Instructions" or the box entitled "Special
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Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution. See Instructions 1 and 5 of the Letter of Transmittal.
If the certificates for Shares are registered in the name of a person or persons
other than the signer of the Letter of Transmittal, or if payment is to be made
or unpurchased Shares are to be issued to a person other than the registered
holder or holders, then the certificates must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name or names of
the registered holder or holders appear on the certificates, with the signatures
on the certificates or stock powers guaranteed as provided in the instructions
to the Letter of Transmittal. See Instructions 1 and 5 of the Letter of
Transmittal.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER AND,
EXCEPT AS OTHERWISE PROVIDED IN THE LETTER OF TRANSMITTAL, 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.
If a stockholder desires to tender Shares pursuant to the Offer and such
stockholder's certificates are not immediately available or such stockholder is
unable to deliver all documents required by the Letter of Transmittal to the
Depositary prior to the Expiration Date, or such stockholder cannot complete the
procedure for book-entry transfer on a timely basis, such Shares, nevertheless,
may be tendered if all of the following conditions are met:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchasers herewith, is
received by the Depositary as provided below prior to the Expiration Date;
and
(iii) the certificates for all tendered Shares in proper form for
transfer (or a Book-Entry Confirmation), together with a properly completed
and duly executed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees (or in the case of a book-entry transfer, an
Agent's Message) are received by the Depositary within three NYSE trading
days after the date of execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in such Notice of
Guaranteed Delivery and a representation that the stockholder on whose behalf
the tender is being made is deemed to own the Shares being tendered within the
meaning of Rule 10b-4 under the Exchange Act.
Notwithstanding any other provision hereof, in all cases payment for Shares
tendered and accepted for payment (and thus purchased) pursuant to the Offer
will be made only after timely receipt by the Depositary of certificates for
such Shares (or a Book-Entry Confirmation), a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) and any other documents
required by the Letter of Transmittal. Accordingly, payment may be made to
tendering stockholders at different times if Shares and these documents are
delivered at different times.
TO PREVENT BACK-UP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT
OF THE PURCHASE PRICE FOR SHARES PURCHASED PURSUANT TO THE OFFER, A STOCKHOLDER
MUST PROVIDE THE DEPOSITARY WITH HIS CORRECT TAXPAYER IDENTIFICATION NUMBER AND
CERTIFY THAT HE IS NOT SUBJECT TO BACK-UP FEDERAL INCOME TAX WITHHOLDING BY
COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL. SEE
INSTRUCTION 8 OF THE LETTER OF TRANSMITTAL.
By executing a Letter of Transmittal as set forth above, a tendering
stockholder irrevocably appoints designees of the Purchasers as his
attorneys-in-fact and proxies, each with full power of substitution, in the
manner set forth in the Letter of Transmittal, to the full extent of such
stockholder's rights with respect to the Shares tendered by such stockholder and
accepted for payment by the Purchasers (and any and all other Shares and other
securities issued or issuable in respect thereof on or after the date of this
Offer to Purchase). All such proxies shall be considered coupled with an
interest in the tendered Shares. Such appointment will be
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effective when, and only to the extent that, the Purchasers accept such Shares
for payment, which will be no earlier than June 5, 1996. Upon such acceptance
for payment, all prior proxies given with respect to such Shares and other
securities will, without further action, be revoked and no subsequent proxies
may be given (and if given will not be deemed effective). The designees of the
Purchasers will be empowered, among other things, to exercise all voting and
other rights of such stockholder with respect to Shares and other securities
accepted for payment as they, in their sole discretion, may deem proper at any
annual, special or adjourned meeting of the Company's stockholders, by written
consent or otherwise. Each of the Purchasers reserves the right to require that,
in order for Shares to be deemed validly tendered, immediately upon the
Purchaser's acceptance for payment of such Shares, the Purchaser must be able to
exercise full voting and other rights with respect to such Shares and other
securities issued in respect thereof.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of Shares pursuant to any of
the procedures described above will be determined by Orion on behalf of the
Purchasers, in its sole discretion, which determination shall be final and
binding. Orion on behalf of the Purchasers reserves the absolute right to reject
any or all tenders of any Shares determined by it not to be in proper form or if
the acceptance for payment of or payment for such Shares may, in the opinion of
Orion's counsel, be unlawful. Orion also reserves the right to waive any defect
or irregularity in any tender with respect to any particular Shares of any
particular stockholder, and Orion's interpretation of the terms and conditions
of the Offer (including the Letter of Transmittal and the Instructions thereto)
will be final and binding. None of the Purchasers, the Dealer Manager, the
Depositary, the Information Agent, or any other person will be under any duty to
give notification of any defects or irregularities in the tender of any Shares
or will incur any liability for failure to give any such notification.
It is a violation of Rule 14e-4 promulgated under the Exchange Act, for a
person, directly or indirectly, to tender Shares for his own account unless the
person so tendering (i) has a net long position equal to or greater than the
number of Shares tendered or other securities immediately convertible into, or
exercisable or exchangeable for such number of Shares and (ii) will cause such
Shares to be delivered in accordance with the terms of the Offer. Rule 14e-4
provides a similar restriction applicable to the tender or guarantee of a tender
on behalf of another person.
A tender of Shares pursuant to any of the procedures described above will
constitute a binding agreement between the tendering stockholder and the
Purchasers upon the terms and subject to the conditions of the Offer, including
the tendering stockholder's acceptance of the terms and conditions of the Offer,
as well as the tendering stockholder's representation and warranty that (i) such
stockholder has a net long position in the Shares being tendered within the
meaning of Rule 14e-4 under the Exchange Act and (ii) the tender of such Shares
complies with Rule 14e-4.
4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4,
tenders made pursuant to the Offer are irrevocable. Upon the terms and subject
to the conditions of the Offer, Shares tendered pursuant to the Offer may be
withdrawn at any time prior to the Expiration Date and, unless theretofore
accepted for payment pursuant to the Offer, may also be withdrawn at any time
after July 6, 1996.
For withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder, if different from that of the person having tendered such
Shares. If certificates for Shares have been delivered or otherwise identified
to the Depositary, then, prior to the physical release of such certificates, the
withdrawing stockholder also must submit to the Depositary the serial numbers
shown on the particular certificates evidencing the Shares to be withdrawn, and
the signature on the notice of withdrawal must be guaranteed by an Eligible
Institution, except in the case of Shares tendered for the account of an
Eligible Institution. If Shares have been delivered pursuant to the procedure
for book-entry transfer set forth in THE OFFER -- Section 3, any notice of
withdrawal must specify the name and account number of the account at a Book
Entry Facility to be credited with the withdrawn Shares.
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All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Orion on behalf of the Purchasers,
in its sole discretion, which determination shall be final and binding. None of
the Purchasers, the Dealer Manager, the Depositary, the Information Agent, or
any other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or will incur any liability for
failure to give any such notification.
Any Shares properly withdrawn will be deemed not to be validly tendered for
purposes of the Offer. Withdrawn Shares may be re-tendered, however, by
following any of the procedures described in THE OFFER -- Section 3 at any
subsequent time prior to the Expiration Date.
5. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are traded on the NYSE
under the symbol "GNC." The following table sets forth, for the calendar
quarters indicated, the reported high and low closing prices per Share and the
cash dividends per Share. The information for 1994 and 1995 was reported in the
1995 Annual Report. The information for 1996 was derived from reports in
published financial sources:
CLOSING SALES PRICES
CASH
DIVIDENDS
HIGH LOW PAID
1996:
Second Quarter (through May 7, 1996)........................ $16.25 $15.00 $ --
First Quarter............................................... 17.00 13.50 .125
1995:
Fourth Quarter.............................................. 16.875 13.75 .125
Third Quarter............................................... 19.00 15.75 .125
Second Quarter.............................................. 18.50 15.25 .125
First Quarter............................................... 18.25 15.50 .125
1994:
Fourth Quarter.............................................. 18.375 15.125 .125
Third Quarter............................................... 18.50 14.625 .125
Second Quarter.............................................. 16.50 14.375 .125
First Quarter............................................... 18.75 13.75 .125
On May 7, 1996, the last full trading day prior to the commencement of the
Offer, the closing sales price reported by the NYSE was $16.125 per Share.
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
In 1994 the Board of Directors of the Company announced the repurchase by
the Company of up to $10,000,000 of outstanding Shares. In conjunction with the
repurchase of Shares, purchases were also made from Orion's subsidiaries by the
Company, thereby maintaining Orion's percentage beneficial ownership of Shares.
During 1994 the Company repurchased 459,200 Shares, of which 139,600 Shares were
purchased from subsidiaries of Orion. To the Purchasers' knowledge, no
additional repurchases of Shares have been made by the Company since December
31, 1994. The average repurchase price of Shares repurchased was $14.45. In view
of applicable regulations under the Exchange Act, the Purchasers expect that any
repurchase program would be suspended during the Offer.
6. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; QUOTATION ON THE
NYSE; REGISTRATION UNDER THE EXCHANGE ACT. The purchase of Shares by the
Purchasers pursuant to the Offer will reduce the number of Shares that might
otherwise trade publicly and, depending on the number of Shares purchased, may
reduce the number of holders of Shares and could affect the liquidity and market
value of the remaining Shares held by the public.
According to the NYSE's published guidelines, the NYSE would consider
delisting the Shares if, among other things, the number of record holders of at
least 100 Shares should fall below 1,200, the number of
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publicly held Shares (exclusive of holdings of officers, directors, their
immediate families and other concentrated holdings of 10% or more ("NYSE
Excluded Holdings")) should fall below 600,000 or the aggregate market value of
publicly held Shares (exclusive of NYSE Excluded Holdings) should fall below
$5,000,000.
The Purchasers do not presently believe that under the published guidelines
described above, the purchase of up to 4,600,000 Shares pursuant to the Offer
will result in a delisting of the Shares by the NYSE. According to the 1995
Annual Report, there were approximately 2,000 holders of Shares as of February
29, 1996 and December 31, 1995. If, however, as a result of the purchase of
Shares pursuant to the Offer or otherwise, the Shares no longer meet the
requirements of the NYSE for continued listing and/or trading and such trading
of the Shares were discontinued, the market for the Shares could be adversely
affected.
In the event that the Shares should no longer be listed or traded on the
NYSE, Orion believes that the Company will be able to arrange for the Shares to
trade on another national securities exchange or in the over-the-counter market
and that price quotations would be reported by such exchange, through the NASDAQ
or other sources. Such trading and the availability of such quotations would,
however, depend upon the number of stockholders and/or the aggregate market
value of the Shares remaining at such time, the interest in maintaining a market
in the Shares on the part of securities firms, the possible termination of
registration of the Shares under the Exchange Act as described below and other
factors.
Exchange Act Registration
The Shares are currently registered under the Exchange Act. While the
Purchasers do not expect deregistration to occur as a result of the consummation
of the Offer for up to 4,600,000 Shares, there can be no assurance that the
purchase of the Shares pursuant to the Offer will not result in the Shares
becoming eligible for deregistration under the Exchange Act. Registration of the
Shares may be terminated if the Shares are not listed on a "national securities
exchange" and there are fewer than 300 record holders of Shares. Termination of
registration of the Shares under the Exchange Act would substantially reduce the
information required to be furnished by the Company to its stockholders and the
Commission and would make certain provisions of the Exchange Act, such as the
short-swing profit recovery provisions of Section 16(b) and the requirements of
furnishing a proxy statement in connection with stockholders' meetings pursuant
to Section 14(a), no longer applicable to the Company. If the Shares should no
longer be registered under the Exchange Act, the requirements of Rule 13e-3
under the Exchange Act with respect to "going private" transactions would no
longer be applicable to the Company. Furthermore, the ability of "affiliates" of
the Company and persons holding "restricted securities" of the Company to
dispose of such securities pursuant to Rule 144 promulgated under the Securities
Act of 1933, as amended, may be impaired or eliminated.
Margin Regulations
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which have the effect, among other things, of allowing brokers to extend credit
on the collateral of such Shares for the purpose of buying, carrying or trading
in securities ("Purpose Loans"). While Orion does not presently expect that this
will occur, depending upon factors such as the number of record holders of the
Shares and the number and market value of publicly held Shares, following the
purchase of up to 4,600,000 Shares pursuant to the Offer, the Shares might no
longer constitute "margin securities" for purposes of the Federal Reserve
Board's margin regulations and, therefore, no longer be able to be used as
collateral for Purpose Loans made by brokers. In addition, if registration of
the Shares under the Exchange Act should be terminated, the Shares would no
longer constitute "margin securities."
The continuation of such trading and the continued availability of such
quotations would depend, however, upon the number of holders of Shares remaining
at such time, the interest in maintaining a market in the Shares on the part of
securities firms, the possible termination of registration under the Exchange
Act, as described below, and other factors.
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7. CERTAIN INFORMATION CONCERNING THE COMPANY. The Company is
incorporated under the laws of the State of Colorado. Its principal executive
offices are located at 9800 South Meridian Boulevard, Englewood, Colorado 80112,
and its telephone number is (303) 754-8400. The Company is a holding company
whose principal business is conducted through wholly-owned subsidiaries. The
following information about the Company is derived from its 1995 Annual Report
on Form 10-K. The Company and its subsidiaries principally underwrite and sell
specialty property and casualty insurance coverages which are not readily
available in traditional insurance markets. Personal and commercial automobile
insurance accounted for approximately 84% of the Company's net premiums written
during 1995. The Company's personal lines unit principally writes nonstandard
automobile insurance for individuals who do not qualify for preferred or
standard insurance because of their payment history, driving records, ages,
vehicle types, or other factors, including market conditions for standard risks.
The Company's commercial lines unit principally writes nonstandard commercial
automobile coverage. Typical risks include local and intermediate trucking,
garages, used car dealers, public and private livery, and artisan contractors.
Other commercial lines coverages include property, general liability, umbrella
and excess insurance, standard multi-peril packages and other coverages.
Nonstandard risks generally involve a potential for poor claims experience
because of increased risk exposure. Premium levels for nonstandard risks are
substantially higher than for preferred or standard risks. In personal lines,
the Company's loss exposure is limited by the fact that nonstandard drivers
typically purchase low liability limits, often at a state's statutory minimum.
The nonstandard insurance industry is also characterized by the insurer's
ability to minimize its exposure to unprofitable business by effecting timely
changes in premium rates and policy terms in response to changing loss and other
experiences. In those states where prior approval for rate changes is required,
the Company has generally gained approval in a timely manner. The Company also
writes business in states where prior approval to effectuate rate changes is not
required.
Many nonstandard risks written by the Company require specialized
underwriting, claims management, and other skills and experience. The Company
historically has focused its operations in those nonstandard markets where it
expects that its expertise and market position will allow it to generate an
underwriting profit. An indicator of underwriting profit is a generally accepted
accounting principles ("GAAP") combined ratio of less than 100%. Although the
Company's GAAP combined ratio for the year ended December 31, 1995, was 105.3%,
the Company has achieved a GAAP combined ratio of less than 100% in four of the
last five years. The Company's average GAAP combined ratio for all its lines for
the five-year period ending 1995 was 99.9%.
Commercial lines business is written through three divisions. The general
and specialty divisions write business through 68 general agents and various
brokers throughout the United States except for New Jersey, Massachusetts and
five other Northeastern states. These agents specialize in particular types of
risks and/or geographic locations. The general division primarily offers
commercial coverages for transportation risks and small to medium businesses.
The specialty division primarily offers regional programs, specialized coverages
for medium-sized businesses, and umbrella coverages for a variety of
organizations. Also, during 1995, the specialty division implemented a new
personal automobile physical damage program in California. The Company's
objective for its general and specialty business is to maintain long-term
mutually profitable relationships with a small number of selected general agents
who follow strict underwriting guidelines.
The Company's third commercial lines division is the standard division,
with business written by Colorado Casualty Insurance Company ("CCIC"). CCIC
writes small standard commercial package policies primarily in the Rocky
Mountain region, but has recently expanded into states outside of the Rocky
Mountain region. This expansion has primarily occurred in the Southeast Region
of the United States. CCIC has been successful in serving a niche market of
approximately 510 small to medium retail agents. In addition, CCIC utilizes five
general agents as branch offices. The standard business produced by CCIC
complements the nonstandard focus of the commercial lines unit.
In August 1994, the Company acquired General Electric Mortgage Insurance
Corporation of California ("GEMIC"), an inactive insurance company licensed in
California. As part of the acquisition, the Company renamed GEMIC as Guaranty
National Insurance Company of California ("GNICOC"). The GNICOC
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acquisition allowed for the expansion of the Company's commercial business and
has reduced fees previously paid to Orion insurance subsidiaries in connection
with business produced in California.
In July 1995, the Company acquired Viking Holdings and its wholly-owned
subsidiaries, Viking Insurance Company of Wisconsin ("VICW") and Viking General
Agency, which is headquartered in Madison, Wisconsin. Viking is a property and
casualty insurance company writing nonstandard personal automobile insurance.
The acquisition of Viking has enabled the Company to change its business mix,
expand its personal lines business into new territories, strengthen personal
lines market share in existing states, and provide flexibility in marketing the
Company's personal lines products. Following the acquisition, the Company
entered into 100% reinsurance agreements with Viking County Mutual Insurance
Company ("VCM"), whereby the Company assumes business written by this affiliate.
Included in 1995 premiums assumed was $5,525,000 of premiums written under these
agreements. The policy issue fee charged by VCM is offset by the management fee
charged by the Company to VCM.
Personal lines business is written through two divisions: the Guaranty
National division and the Viking division. The Guaranty National division
provides personal lines automobile coverage through approximately 2,500
independent agents located in 22 states, primarily in the Rocky Mountain and
Pacific Northwest regions. In addition, this division markets business through
four general agents. In recent years, this division has begun marketing its
personal lines products in Louisiana, Indiana, Ohio and Virginia. Additionally,
during the third quarter of 1995, this division discontinued writing new
policies in the state of Texas. However, renewals of existing policies will
continue to be made so as to remain in compliance with the regulations of the
Texas Insurance Department.
The Viking division writes nonstandard personal automobile coverage through
approximately 5,400 independent insurance agents in 18 states. The states in
which the Viking division writes the largest amount of net premiums are
California, Washington, Texas and Wisconsin. Viking primarily sells
minimum-limits policies on a monthly basis, with a one-month downpayment and a
monthly payment option.
Overall, the Company seeks to distinguish itself from its personal lines
competitors by providing a superior, highly automated and responsive level of
service to its agents and insureds. In addition to high quality service, the
Company's personal lines unit provides ease of payment for insureds.
The Company also writes collateral protection insurance, primarily insuring
automobiles pledged as security for loans for which the borrower has not
maintained physical damage coverage as required by the lender. The business is
written through a wholly-owned general agency which, in turn, obtains business
from 32 general agents across the country. During 1995, this division expanded
geographically into the Commonwealth of Puerto Rico.
Commercial lines, personal lines and collateral protection represented 44%,
44% and 12%, respectively, of the Company's gross premiums written during 1995.
A.M. Best Company currently rates the GNIC and its subsidiaries "A
(Excellent)" and VICW and its affiliate "A- (Excellent)." A.M. Best ratings are
based upon factors of concern to policyholders, agents and reinsurers and are
not primarily directed toward the protection of investors.
The Company is required to file periodic reports, proxy statements and
other information with the Commission under the Exchange Act relating to its
business, financial statements and other matters. The Company is required to
disclose in such proxy statements certain information, as of particular dates,
concerning its directors and officers, their remuneration, stock, options
granted to them, the principal holders of the Company's securities, and any
material interests of such persons in transactions with the Company. Such
reports, proxy statements and other information may be inspected at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and should also be available for
inspection and copying at the regional offices of the Commission located in
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and 7 World Trade Center, 13th Floor, New York, New York 10048.
Copies of such material can also be obtained from the Public Reference Room of
the Commission in Washington, D.C. at prescribed rates. Similar information can
be inspected and copied at the NYSE, 20 Broad Street, New York, New York.
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Set forth below is certain summary consolidated financial information
derived from the 1995 Annual Report and from the March 10-Q. More comprehensive
financial information and other information is included in the Company's 1995
Annual Report, the March 10-Q and the other documents filed by the Company with
the Commission, and such summary financial information is qualified in its
entirety by reference to such reports and should be considered in connection
with the more comprehensive financial information in such reports and other
publicly available reports and documents filed with the Commission, including
the financial statements and related notes contained therein. Such material may
be examined at the offices of and copies may be obtained from the Commission.
GUARANTY NATIONAL CORPORATION
SELECTED FINANCIAL INFORMATION
(IN THOUSANDS EXCEPT PER SHARE DATA AND RATIOS)
THREE MONTHS YEAR ENDED
ENDED MARCH 31, DECEMBER 31,
--------------------- ---------------------
1996 1995 1995 1994
Income Statement Data(a):
Premiums earned............................... $115,470 $ 79,468 $390,017 $321,638
Total revenues................................ 126,704 86,502 424,284 348,223
Operating earnings(b)(c)...................... $ 4,499 $ 5,398 $ 6,790 $ 20,596
After-tax realized investment gains........... 1,288 370 2,139 1,955
-------- -------- -------- --------
Net earnings(c)............................ $ 5,787 $ 5,768 $ 8,929 $ 22,551
======== ======== ======== ========
Earnings per common share:
Operating earnings(b)...................... $ .30 $ .45 $ .51 $ 1.70
After-tax realized investment gains........ .09 .03 .16 .16
-------- -------- -------- --------
Net earnings.......................... $ .39 $ .48 $ .67 $ 1.86
======== ======== ======== ========
GAAP combined ratio........................... 101.6% 97.7% 105.3% 97.5%
Balance Sheet Data(d):
Total assets.................................. $879,308 $617,235 $875,173 $605,088
Total assets less goodwill.................... 846,237 594,027 842,040 581,684
Stockholders' equity.......................... 215,159 156,289 215,551 144,759
Book value per common share................... 14.38 12.98 14.41 12.02
The following summary pro forma information (unaudited) assumes the Viking
acquisition had occurred on January 1, 1995 and 1994. These amounts reflect
adjustments used in recording the purchase, such as adjustments for interest on
notes payable issued as part of the purchase price, amortization of goodwill,
and fees eliminated as a result of the acquisition.
YEAR ENDED
DECEMBER 31,
---------------------
1995 1994
Total revenue.................................................. $512,718 $509,657
Net income..................................................... 7,765 30,014
Earnings per common share...................................... .53 2.05
- ---------------
(a) The computation of the ratio of earnings to fixed charges has not been made
as the Company has neither publicly held debt securities nor preferred stock
outstanding.
(b) Earnings after taxes, excluding realized investment gains and losses.
(c) Full year 1994 results include a nonrecurring relocation charges of
$838,000.
(d) The computation of working capital has not been made as it is not applicable
to insurance enterprises.
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Certain additional information concerning the Company and its subsidiaries
and the transactions between the Company and its subsidiaries and Orion and its
subsidiaries is set forth in this Offer to Purchase under INTRODUCTION, SPECIAL
FACTORS -- "Background of the Transaction;" -- "Certain Effects of the
Transaction" and -- "Interests of Certain Persons in the Transaction; Securities
Ownership: Related Transactions." Highlights from the Company's 1996 operating
plan prepared by the Company's management are included in SPECIAL
FACTORS -- "Fairness of the Offer."
8. CERTAIN INFORMATION CONCERNING THE PURCHASERS.
Orion is a property and casualty insurance holding company. Its insurance
subsidiaries and affiliates are authorized to underwrite and sell most types of
property and casualty insurance. Such insurance businesses are concentrated in
niche insurance markets, particularly workers compensation, professional
liability, nonstandard automobile insurance (through its slightly less than 50%
interest in the Company) and underwriting ocean marine, inland marine and
property insurance through underwriting pools. EBI Companies provide workers
compensation insurance products and DPIC Companies sell professional liability
insurance. Other specialty property and casualty insurance is written
principally through Connecticut Specialty Insurance Group. Orion and its
subsidiaries also offer assumed reinsurance through SecurityRe Companies and
underwriting management and related services through Wm. H. McGee & Co., Inc.
("McGee").
Orion also owns approximately 22% of the outstanding common stock of
Intercargo Corporation ("Intercargo"), an insurance holding company whose
subsidiaries specialize in international trade and transportation coverages. In
February 1995, the Company and Intercargo reached an agreement which permits the
Company to purchase additional shares from time to time, to bring its ownership
up to 24.9% of Intercargo's outstanding common stock. Intercargo operates as an
independent company.
On June 30, 1995, Orion purchased all the capital stock of McGee for
$22,000,000 in cash. McGee has been underwriting ocean marine, inland marine and
property insurance on behalf of the insurance companies it represents for over
108 years. Security Insurance Company of Hartford has been represented by McGee
for over a century. McGee provides all related services in connection with this
business, including policy issuance, claim settlement, accounting and placement
of reinsurance. Operations are conducted in the United States through its head
office in New York and twenty branch offices throughout the country. Activities
in Canada, Bermuda and Puerto Rico are managed by McGee's subsidiaries located
in those jurisdictions.
Orion was incorporated under the laws of the State of Delaware in 1960.
Orion's principal executive offices are located at 600 Fifth Avenue, New York,
New York 10020, and its telephone number is (212) 332-8080. The home office of
Orion's wholly-owned insurance subsidiaries, including the Purchasers, is
located at 9 Farm Springs Drive, Farmington, Connecticut 06032. Their telephone
number is (860) 674-6600.
Orion's insurance, brokerage and management subsidiaries are licensed to
transact business throughout the United States and in all Canadian provinces.
They obtain substantially all of their business from approximately 3,000
independent insurance agents and brokers. Orion has approximately 2,200
employees, substantially all of whom are employed in Orion's insurance-related
operations.
Certain information, including the name, business address, citizenship,
present principal occupation or employment and five-year employment history of
each of the executive officers and directors of the Purchasers is set forth in
Schedule I hereto.
Set forth below is certain summary consolidated financial information
derived from Orion's Annual Report on Form 10-K for the year ended December 31,
1995 and its Quarterly Report on Form 10-Q for the quarter ended March 31, 1996.
Such summary financial information is qualified in its entirety by reference to
such reports and should be considered in connection with the more comprehensive
financial information in such reports and other publicly available reports and
documents filed with the Commission.
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ORION CAPITAL CORPORATION
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS EXCEPT PER SHARE DATA AND RATIOS)
THREE MONTHS YEAR ENDED
ENDED MARCH 31, DECEMBER 31,
----------------------- -----------------------
1996 1995 1995 1994
Income Statement Data
Premiums earned............................... $ 186,932 $ 175,058 $ 749,003 $ 691,223
Total revenues................................ 221,087 201,797 874,280 780,947
Operating earnings (a)........................ $ 15,683 $ 15,398 $ 59,914 $ 52,818
After-tax realized investment gains........... 2,204 1,664 7,708 2,427
--------- --------- --------- ---------
Net earnings............................... $ 17,887 $ 17,062 $ 67,622 $ 55,245
========= ========= ========= =========
Earnings per common share:
Operating earnings (a)..................... $ 1.12 $ 1.08 $ 4.22 $ 3.68
After-tax realized investment gains........ .16 .12 .55 .17
--------- --------- --------- ---------
Net earnings............................... $ 1.28 $ 1.20 $ 4.77 $ 3.85
========= ========= ========= =========
GAAP combined ratio........................... 99.4% 101.2% 100.3% 101.2%
Balance Sheet Data
Total assets.................................. $2,537,445 $2,162,921 $2,473,588 $2,112,761
Stockholder's equity.......................... 487,792 402,512 490,903 365,088
Book value per share.......................... 35.15 28.60 35.18 26.00
- ---------------
(a) Earnings after taxes, excluding realized investment gains and losses
As described in this Offer to Purchase under INTRODUCTION and SPECIAL
FACTORS "Background of the Transaction" and -- "Interests of Certain Persons in
the Transaction; Securities Ownership; Related Transactions," as of the date
hereof, Orion is the beneficial owner through its subsidiaries of 7,409,942
Shares.
Except as described in INTRODUCTION and SPECIAL FACTORS -- "Background of
the Transaction:" and -- "Interests of Certain Persons in the Transaction;
Securities Ownership; Related Transactions" or elsewhere in this Offer to
Purchase, none of the directors or executive officers or subsidiaries of the
Purchasers has any interest, direct or indirect, in any material transaction or
material proposed transaction to which the Company or its subsidiaries is or was
a party.
Except as described in SPECIAL FACTORS -- "Background of the Transaction,"
"Certain Effects of the Transaction" and -- "Interests of Certain Persons in the
Transaction; Securities Ownership; Related Transactions," or as set forth
elsewhere in this Offer to Purchase or in Schedule I, no Purchaser, nor to the
best knowledge of the Purchasers, any of the persons listed in Schedule I hereto
or any associate or majority-owned subsidiary of Orion or any of the persons so
listed, beneficially owns or has a right to acquire any of the Shares, and
neither Orion nor to the best knowledge of the Orion, any executive officer,
director or majority-owned subsidiary of any of the foregoing, has effected any
transaction in the Shares during the past 60 days.
Except as described in SPECIAL FACTORS -- "Certain Transactions"
and -- "Interests of Certain Persons in the Transaction; Securities Ownership;
Related Transactions" and as described elsewhere in this Offer to Purchase,
neither Orion, nor any direct or indirect subsidiary of Orion nor, to the best
knowledge of Orion, any of the persons listed in Schedule I hereto, has any
contract, arrangement, understanding or relationship with any other person with
respect to any securities of the Company, including, but not limited to,
contracts, arrangements, understandings or relationships concerning the transfer
or voting of such securities, joint ventures, loan or option arrangements, puts
or calls, guaranties of loans, guaranties against loss or the giving or
withholding of proxies, consents or authorizations. Except as set forth in this
Offer to Purchase, since January 1, 1993, there have been no transactions that
would be required to be reported under the rules of the
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Commission between Orion or, to the best knowledge of Orion, any of the persons
listed in Schedule I hereto, and the Company or any of its executive officers,
directors or affiliates. Except as described in SPECIAL FACTORS -- "Background
of the Transaction"; "Certain Effects of the Transaction" and -- "Interests of
Certain Persons in the Transaction; Related Transactions; Securities Ownership,"
and as set forth elsewhere in this Offer to Purchase, since January 1, 1993,
there have been no other contacts, negotiations or transactions between Orion or
any of its subsidiaries or, to the best knowledge of Orion, any of the persons
listed in Schedule I hereto, and the Company or its directors, executive
officers or affiliates, or between any affiliates of the Company, or between the
Company or any of its affiliates and any person not affiliated with the Company
and who would have a direct interest therein, concerning a merger, consolidation
or acquisition, a tender offer or other acquisition of securities of the
Company, an election of directors of the Company, or a sale or other transfer of
a material amount of assets.
Orion is subject to the information filing requirements of the Exchange Act
and in accordance therewith files reports, proxy statements and other
information with the Commission relating to its business, financial condition
and other matters. Information, as of particular dates, concerning Orion's
directors and officers, their remuneration, options granted to them, the
principal holders of Orion's securities and any material interest of such
persons in transactions with Orion is disclosed in proxy statements distributed
to Orion's stockholders and filed with the Commission. Such reports, proxy
statements and other information may be examined, and copies may be obtained
from the Commission, in the manner set forth in THE OFFER -- Section 7 with
respect to information concerning the Company. Such information should also be
available for inspection at the NYSE, 20 Broad Street, New York, New York 10005.
9. DIVIDENDS AND DISTRIBUTIONS. Except for any action taken by the
Company which shall have been expressly approved in writing by Orion on behalf
of the Purchasers:
If, on or after May 8, 1996, the Company should declare or pay any dividend
on the Shares or other distribution except for the Regular Dividend (as defined
below) (including, without limitation, the issuance of additional 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 Shares that is payable or distributable to stockholders of record on a date
prior to the transfer to the name of a Purchaser or its nominee or transferee on
the Company's stock transfer records of the Shares purchased pursuant to the
Offer, then, without prejudice to the Purchasers' rights under THE
OFFER -- Section 1 and -- Section 10, (i) the purchase price per Share payable
by the Purchasers, pursuant to the Offer shall be reduced to the extent any such
dividend or distribution is payable in cash and (ii) any non-cash dividend,
distribution or right shall be remitted by the tendering stockholder to the
Depositary for the account of the Purchasers, accompanied by appropriate
documentation of transfer. Pending such remittance, and subject to applicable
law, the Purchasers shall 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 or value thereof, as
determined by the Purchasers in their sole discretion. The Company has, since
January 1, 1994, declared regular quarterly dividends at the rate of $0.125 per
share. If, during the second quarter of 1996 the Company declares a dividend of
not more than $0.125 per share (the "Regular Dividend"), the Purchasers do not
intend to adjust the Offer Price should the record date for payment of such
Regular Dividend be a date prior to the Purchasers' acceptance for payment and
payment for Shares tendered pursuant to the Offer. See THE OFFER -- Section 10.
If, on or after May 8, 1996, the Company should (i) split, combine or
otherwise change the Shares or its capitalization, (ii) issue or sell any
additional securities of the Company or otherwise cause an increase in the
number of outstanding securities of the Company or (iii) acquire currently
outstanding Shares or otherwise cause a reduction in the number of outstanding
Shares, or shall disclose that it has taken such action, then, without prejudice
to the Purchasers' rights under THE OFFER -- Section 10, the Purchasers, in
their sole discretion, may make such adjustments in the Offer price and other
terms of the Offer (including, without limitation, the number and type of
securities to be purchased) as it deems appropriate, including, without
limitation, the amount and type of securities to be offered to be purchased.
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10. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision
of the Offer, and in addition to (and not in limitation of) the Purchasers'
rights to amend the Offer at any time in their sole discretion, the Purchasers
will not be required to accept for payment, or pay for, any Shares tendered, and
may terminate, extend or amend the Offer, or, subject to the provisions of
applicable law which require that the Purchasers pay the consideration offered
or return the Shares deposited by or on behalf of stockholders promptly after
termination or withdrawal of the Offer, may delay the acceptance for payment or
the payment for Shares tendered, if, at any time on or after May 8, 1996, and at
or prior to the time of payment for any such Shares (whether or not any Shares
have theretofore been accepted for payment or paid for pursuant to the Offer),
any of the following events shall occur, which in the sole judgment of Orion, on
behalf of the Purchasers, in any case and regardless of the circumstances giving
rise to any such condition (including any action or inaction by Orion or any of
its subsidiaries or affiliates other than the Company) makes it inadvisable to
proceed with the Offer or with acceptance for payment or payment for Shares:
(a) any change shall have occurred or be threatened in the business,
operations or financial condition of the Company or any of its subsidiaries
or affiliates which is or which the Purchasers in their sole discretion
believe is threatened to be materially adverse to the Company and its
subsidiaries taken as a whole;
(b) the Purchasers shall not have received or obtained all required
state insurance department regulatory approvals necessary for the
Purchasers to consummate the Offer on terms and conditions satisfactory to
the Purchasers in their sole discretion (see INTRODUCTION and THE OFFER --
Section 11(a));
(c) the waiting periods applicable to the Offer under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, shall not
have expired or been earlier terminated by the Department of Justice or the
Federal Trade Commission;
(d) there shall have been threatened, instituted or pending any action
or proceeding by or before any court or governmental regulatory or
administrative agency, authority or tribunal, domestic or foreign, which
(i) seeks to challenge the acquisition by the Purchasers of the Shares, or
to restrain, prohibit or delay the making or consummation of the Offer,
(ii) seeks to make the purchase of, or payment for, some or all of the
Shares pursuant to the Offer illegal, (iii) seeks to impose material
limitations on the ability of the Purchasers (or any of their affiliates)
effectively to acquire or hold, or requires any of the Purchasers, or the
Company, or any of their respective affiliates or subsidiaries to dispose
of or hold separate, any material portion of the assets or the business of
Orion and its affiliates taken as a whole or the Company and its
subsidiaries taken as a whole, (iv) seeks to impose material limitations on
the ability of the Purchasers (or their affiliates) to exercise full rights
of ownership of the Shares purchased, including, but not limited to, the
right to vote the Shares purchased on all matters properly presented to the
stockholders of the Company or (v) may result in a material diminution in
the benefits expected to be derived by the Purchasers as a result of the
transactions contemplated by the Offer;
(e) there shall have been proposed, sought, promulgated, enacted,
entered, enforced or deemed applicable to the Offer, by any state, federal
or foreign government or governmental authority or by any domestic or
foreign court, any statute, rule, regulation, judgment, order or
injunction, that, in the sole judgment of Orion, might, directly or
indirectly, result in any of the consequences referred to in clauses (i)
through (v) of (d) above;
(f) the Purchasers shall have failed to receive all other governmental
or third party consents and approvals, in addition to those referred to in
(b) and (c) above, to consummation of the Offer which, if not received,
would in the aggregate have or be reasonably anticipated to have a
materially adverse effect on Orion or the Company or any of their
respective subsidiaries, or Orion shall have determined in good faith that
consummation of the Offer would cause a breach of or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under agreements or
other obligations of the Company which would individually or in the
aggregate have or be reasonably anticipated to have a materially adverse
effect on Orion or the Company or any of their respective subsidiaries;
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(g) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on any national securities
exchange or in the over-the-counter market in the United States, (ii) the
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States, (iii) a material adverse change in
United States or any other currency exchange rates or a suspension of, or a
limitation on, the markets therefor, (iv) the commencement of a war, armed
hostilities or other international or national calamity directly or
indirectly involving the United States, (v) any limitation (whether or not
mandatory) by any governmental authority on, or any other event which, in
the sole judgment of Orion, might affect the extension of credit by banks
or other lending institutions, or (vi) in the case of any of the foregoing
existing at the time of the commencement of the Offer, in the sole judgment
of Orion, a material acceleration or worsening thereof;
(h) unless Orion shall have consented in writing on behalf of the
Purchasers, the Company or any of its subsidiaries shall have, on or after
May 8, 1996, (i) issued, distributed, pledged or sold, or authorized,
proposed or announced the issuance, distribution, pledge or sale of (A) any
shares of capital stock (including, without limitation, the Shares), or
securities convertible into any such shares, or any rights, warrants, or
options to acquire any such shares or convertible securities, other than
Shares issued or sold upon the exercise (in accordance with the present
terms thereof) of employee stock options outstanding on March 31, 1996 or
(B) any other securities in respect of, in lieu of, or in substitution for
Shares (ii) purchased or otherwise acquired, or proposed or offered to
purchase or otherwise acquire, any outstanding Shares or other securities,
(iii) declared or paid any dividend or distribution (other than the Regular
Dividend) on any shares of capital stock or issued, or authorized,
recommended or proposed the issuance of, any other distribution in respect
of the Shares, whether payable in cash, securities or other property, or
altered or proposed to alter any material term of any outstanding security,
(iv) issued, or announced its intention to issue, any debt securities or
any securities convertible into or exchangeable for debt securities or any
rights, warrants or options entitling the holder thereof to purchase or
otherwise acquire any debt securities, or incurred, or announced its
intention to incur, any debt other than in the ordinary course of business
and consistent with past practice, (v) authorized, recommended, proposed or
publicly announced its intention to enter into (A) any merger,
consolidation, liquidation, dissolution, business combination, acquisition
of assets or securities or disposition of assets or securities other than
in the ordinary course of business, (B) any material change in its
capitalization, (C) any release or relinquishment of any material contract
rights, or (D) any comparable event not in the ordinary course of business,
(vi) authorized, recommended or proposed or announced its intention to
authorize, recommend or propose any transaction which could adversely
affect the value of the Shares, (vii) proposed, adopted or authorized any
amendment to its articles of incorporation or by-laws or similar
organizational documents or the Purchasers shall have learned about any
such proposal or amendment which shall not have been previously disclosed
or (viii) agreed in writing or otherwise to take any of the foregoing
actions;
(i) the Company or any of its subsidiaries shall have entered into any
employment, severance or similar agreement, arrangement or plan with any of
its employees other than in the ordinary course of business or entered into
or amended any agreements, arrangements or plans so as to provide for
increased benefits to the employee as a result of or in connection with the
transactions contemplated by the Offer;
(j) a tender or exchange offer for some portion or all of the Shares
shall have been publicly proposed to be made or shall have been made by
another person (including the Company or any of its subsidiaries or
affiliates), or it shall have been publicly disclosed or Orion shall have
learned that (i) any person or "group" (as defined in Section 13(d) (3) of
the Exchange Act) shall have acquired or proposed to acquire more than 5%
of any class or series of capital stock of the Company (including the
Shares) or shall have been granted any option or right to acquire more than
5% of any class or series of capital stock of the Company (including the
Shares), other than acquisitions for bona fide arbitrage positions and
other than acquisitions by persons or groups who have publicly disclosed
such ownership on or prior to May 8, 1996, or (ii) any such person or group
who has publicly disclosed any such ownership of more than 5% of any class
or series of capital stock of the Company (including the Shares) prior to
such date shall have acquired or proposed to acquire additional Shares
constituting more than 2% of any class or series of capital stock of the
Company (including the Shares) or shall have been granted any
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option or right to acquire more than 2% of any class or series of capital
stock of the Company (including the Shares); or
(k) the Rights shall have become exercisable or for any reason Orion
and its subsidiaries shall not be deemed to be "Exempt Persons" (see THE
OFFER -- Section 11),
The foregoing conditions are for the sole benefit of the Purchasers and may
be asserted by the Purchasers regardless of the circumstances giving rise to any
such condition and may be waived by the Purchasers, in whole or in part, at any
time and from time to time in the sole discretion of the Purchasers. The failure
by the Purchasers at any time to exercise their rights under any of the
foregoing conditions shall not be deemed a waiver of any such rights and each
such right shall be deemed an ongoing right which may be asserted at any time or
from time to time. Any determination by Orion on behalf of the Purchasers
concerning the events described in this Section 10 will be final and binding on
all parties, including tendering stockholders.
11. CERTAIN LEGAL MATTERS. Based upon Orion's examination of publicly
available information filed by the Company with the Commission and other
publicly available information with respect to the Company, except as otherwise
set forth in this Section 11, Orion is not aware of any license or regulatory
permit which appears to be material to the business of the Company and its
subsidiaries that might be adversely affected by the acquisition of Shares
pursuant to the Offer, or, except as disclosed below, of any approval or other
action by any state, federal or foreign governmental or administrative or
regulatory agency that would be required for the acquisition of the Shares as
contemplated herein. Should any such license, permit, approval or other action
be required, it is presently contemplated that the same would be sought, except
as described below under "State Takeover Statutes." While Orion does not
currently intend to delay the acceptance for payment of, or payment for, Shares
pending the outcome of any such matters, other than with respect to the
Insurance Regulatory Condition and compliance with the requirements of the
Hart-Scott-Rodino Antitrust Improvements Act (see subparagraphs (a) and (c)
below), there can be no assurance that any license, permit, consent, approval or
other action, if needed, would be obtained without substantial conditions or
that adverse consequences might not result to the Company's business or that
certain parts of the Company's business might not have to be disposed of or held
separate or other substantial conditions complied with in the event that such
license, permit or approval is not obtained or any such other action is not
taken. The Purchasers' obligation under the Offer to accept for payment and pay
for Shares is subject to certain conditions, including conditions relating to
the legal matters discussed in this Section 11 and, if certain types of adverse
action are taken with respect to the matters discussed below, the Purchasers
could decline to accept for payment any Shares tendered. See THE
OFFER -- Section 10.
(a) State Insurance Approvals. The Company is an insurance holding company
whose insurance company subsidiaries and affiliates are domiciled in Colorado,
Wisconsin, California, Oklahoma and Texas. Orion is deemed to be the ultimate
parent of those insurance company subsidiaries and affiliates. The Insurance
Holding Company System Act of some of those states requires Orion to file
information with the insurance commissioner in order to obtain approval of the
acquisition of additional voting securities of a domestic insurer (including an
insurance holding company). In some states the Insurance Codes (the "Insurance
Codes") require a Form A filing. The Insurance Codes of those states include a
presumption of control arising from the ownership, directly or indirectly of 10%
or more of the insurer's voting securities. In certain states, the Form A filing
triggers public hearing requirements and/or statutory periods within which the
Commissioner shall approve or disapprove the acquisition of control. In other
states, public hearings are discretionary and/or there are no periods within
which such decisions must be rendered. The periods within which hearings must be
commenced or decisions rendered do not begin until the relevant Insurance
Department has deemed the filing of the Form A complete.
The Purchasers have advised the insurance departments of California,
Colorado, Connecticut, Oklahoma, Texas and Wisconsin of their intention to
commence the Offer. Form A filings will be made in California and Wisconsin, and
a Form E filing will be made in Texas, seeking approval of the acquisition of
the Shares. If the purchase of Shares is effected pursuant to the Offer, the
Company's Oklahoma insurance subsidiary will amend its Oklahoma Form B filing to
reflect the acquisition of Shares by the Purchasers. The Purchasers, other than
Orion, are Connecticut-domiciled insurance companies. The Connecticut Insurance
Code requires
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a domestic insurer to give prior notice to the insurance department of its
intention to invest in an affiliate in an amount which equals the lesser of
three percent of the insurance company's admitted assets or twenty-five percent
of its policyholder surplus and obtain the insurance department's prior approval
of the investment.
On May 1, 1996 the Purchasers advised the Connecticut Insurance Department
of their intent to make the Offer and the number of Shares to be purchased by
each Purchaser.
If the Purchasers are unable to receive or are delayed in receiving the
approval of any Insurance Department or are required to receive approvals from
any other state authorities, the Purchasers might be unable to accept for
payment or pay for Shares tendered pursuant to the Offer, or be delayed in
continuing or purchasing Shares pursuant to the Offer. In such case, Purchasers
may not be obligated to accept for payment or pay for Shares. In addition, the
Purchasers may terminate the Offer if a Purchaser becomes subject to an order
preventing it from purchasing Shares or limiting its ability to exercise control
of the Company or any of its subsidiaries or affiliates or if in its judgment
necessary approvals have not been obtained. See THE OFFER -- Section 10.
(b) State Takeover Statutes. A number of states have adopted laws and
regulations that purport to be applicable to offers to acquire shares of
corporations that are incorporated or have substantial assets, stockholders
and/or a principal place of business in such states. In Edgar v. MITE Corp., the
U.S. Supreme Court held that the Illinois Business Takeover Statute, which
involved state securities laws which made the takeover of certain corporations
more difficult, imposed a substantial burden on interstate commerce and was
therefore unconstitutional. However, in 1987 the U.S. Supreme Court held in CTS
Corp. v. Dynamics Corp. of America, that, at least under certain circumstances,
the U.S. Constitution permits a state, as a matter of corporate law and, in
particular, those laws concerning corporate governance, to disqualify a
potential acquiror from voting on the affairs of a target corporation without
prior approval of the remaining stockholders. Subsequently, a number of Federal
courts ruled that various state takeover statutes were unconstitutional insofar
as they apply to corporations incorporated outside the state of enactment. Orion
believes that no such statute purporting to be applicable to offers to acquire
shares of a corporation has been enacted or is in effect in Colorado, the state
of incorporation of the Company.
The Company and certain of its subsidiaries directly or indirectly conduct
business in a number of other states throughout the United States, some of which
have enacted takeover laws and regulations. Orion does not know whether any of
these laws will, by its terms, apply to the Offer. The Offer is being made
without compliance by the Purchasers with any such state takeover statutes that
may purport to apply to the Offer. Should any governmental official or other
person seek to apply any such statute or regulation to the Offer, the Purchasers
will take such action as then appears desirable, and presently anticipate that
they would contest the applicability or validity of any such statute or
regulation in appropriate court proceedings. If it is asserted that one or more
state takeover statutes are applicable to the Offer, and an appropriate court
does not determine that such statutes are inapplicable or invalid as applied to
the Offer, the Purchasers might be unable to accept for payment or pay for
Shares tendered pursuant to the Offer, or be delayed in accepting or purchasing
Shares pursuant to the Offer. In such case, the Purchasers will not be obligated
to accept for payment or pay for Shares. In addition, the Purchasers may
terminate the Offer if any of them becomes subject to an order preventing it
from purchasing Shares or limiting its ability to exercise control of the
Company. See THE OFFER -- Section 10.
(c) Antitrust
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and the rules promulgated thereunder, certain acquisition
transactions may not be consummated unless information has been furnished to the
Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "Antitrust Division") and applicable waiting period
requirements have been satisfied. Pursuant to the requirements of the HSR Act,
on May 8, 1996, Orion filed a Notification and Report Form with respect to the
acquisition of more than 50% of the equity of the Company with the FTC and the
Antitrust Division. Under the provisions of the HSR Act applicable to the Offer,
the purchase of Shares under the Offer may not be consummated until the
expiration of a 15 calendar-day waiting period following the filing
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33
by Orion. Accordingly, the waiting period with respect to the Offer will expire
at 11:59 p.m., New York City time, on May 23, 1996, unless Orion receives a
request for additional information or documentary material, or the Antitrust
Division and the FTC terminate the waiting period prior thereto. If, within such
15-day period, either the Antitrust Division or the FTC requests additional
information or material from Orion concerning the Offer, the waiting period will
be extended and would expire at 11:59 p.m., New York City time, on the tenth
calendar day after the date of substantial compliance by Orion with such
request. Only one extension of the waiting period pursuant to a request for
additional information is authorized by the HSR Act. Thereafter, such waiting
period may be extended only by court order or with the consent of Orion; Orion
reserves the right to consent or not in its sole discretion. The Purchasers will
not accept for payment Shares tendered pursuant to the Offer unless and until
the waiting period requirements imposed by the HSR Act with respect to the Offer
have been satisfied.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchasers' proposed acquisition
of Shares pursuant to the Offer. At any time before or after the Purchasers'
purchase of Shares, the FTC or the Antitrust Division could take such action
under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the purchase of Shares pursuant to the
Offer or seeking the divestiture of Shares purchased by the Purchasers or the
divestiture of substantial assets of any Purchaser or any of its subsidiaries or
affiliates or of the Company or its subsidiaries. While there can be no
assurance that a challenge to the Offer on antitrust grounds will not be made
or, if such challenge is made, of the result, Orion does not believe that
consummation of the Offer will result in violation of any applicable antitrust
laws. In the event any legal action or administrative proceeding by the United
States or an agency thereof challenging the Offer under the federal antitrust
laws are threatened or instituted, the Purchasers will not be obligated to
accept for payment or pay for any tendered Shares and may terminate the Offer.
In addition, the Purchasers may terminate the Offer if the Purchasers become
subject to an order preventing the purchase of Shares or limiting the
Purchasers' ability to exercise control of the Company. See THE OFFER -- Section
10.
(d) Mergers and Business Combinations. As described under INTRODUCTION and
SPECIAL FACTORS -- "Purpose of the Transaction; Plans for the Company After the
Offer," the Purchasers reserve the right, to the extent permitted by applicable
law, to acquire additional Shares following the expiration or termination of the
Offer. Such acquisitions may be made through open market purchases, privately
negotiated transactions, a tender offer or exchange offer, or otherwise, on such
terms and at such prices as the Purchaser shall determine. Each Purchaser also
reserves the right to dispose of any or all Shares which it owns. The
acquisition of Shares by the Purchasers may be subject to compliance with the
requirements of Rule 13e-3 promulgated under the Exchange Act, which applies to
certain "going-private" transactions. Notwithstanding the foregoing, the
Purchasers have no present intention of proposing a merger or other business
combination transaction with the Company. If Orion were to consummate a merger
or similar business combination, or seek to undertake certain other actions, the
stockholders of the Company might have the right to dissent from, and obtain
payment for the fair value of their Shares in accordance with Colorado law.
Statutory appraisal rights are not available under Colorado law with respect to
the Offer.
Several decisions by Delaware courts have held that, in certain instances,
a controlling stockholder of a corporation involved in a merger has a fiduciary
duty to the other stockholders that requires that the merger be fair to such
other stockholders. In determining whether a merger is fair to minority
stockholders, the Delaware courts have considered, among other things, the type
and amount of consideration to be received by the stockholders and whether there
were fair dealings among the parties. The Delaware Supreme Court indicated in
Weinberger v. UOP, Inc. that, in most cases, the remedy available in a merger
that is found not to be "fair" to minority stockholders is the right to
appraisal or a damages remedy.
(e) Credit Agreement. The Company has entered into a Credit Agreement
dated June 2, 1995 with bank lenders, providing for an unsecured $110,000,000
reducing revolving credit facility. As of March 31, 1996, there were borrowings
outstanding under the Credit Agreement in the aggregate amount of $100,000,000.
The Credit Agreement provides that it shall be an Event of Default if the Shares
are deregistered under the Exchange Act, entitling the lenders to accelerate the
full amount of the borrowings. See THE OFFER -- Section 6. Orion does not expect
deregistration to occur as a result of the Offer. Should
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34
deregistration occur, Orion expects to be able to obtain a waiver with respect
to such default under the Credit Agreement from the lenders.
(f) The Company's Charter Documents; The Shareholder Agreement; the Rights
Plan and Other Matters. The Company's Articles of Incorporation, as amended and
restated, authorize the Company's Board of Directors to set the terms of, and
provide for the issuance of, one or more series of preferred stock without the
vote of the Company's existing stockholders. In the event that the Board of
Directors of the Company authorizes the issuance by the Company of preferred
stock upon terms that would render consummation of the Offer impracticable or
undesirable to the Purchasers, the Purchasers will have no obligation to accept
for payment or pay for any Shares pursuant to the Offer. Pursuant to the
Shareholder Agreement, three members of the present Board of Directors of the
Company have been designated by Orion. The Company's Board of Directors consists
of eleven members.
In November 1991, the Board of Directors of the Company approved the
adoption of a Shareholder Rights Agreement and in connection therewith declared
a dividend distribution of one Right for each outstanding share of Common Stock
until such time as separate Right certificates are distributed or the Rights are
redeemed or expire. When exercisable, each Right will entitle a holder to
purchase from the Company a unit consisting of one one-hundredth of a share of a
new series of the Company's Preferred Stock at a purchase price of $60 per
share. The Rights become exercisable ten days following a public announcement
that a person or group of acquirers (other than "Exempt Persons") has acquired
or obtained the rights to acquire beneficial ownership of 20% or more of the
Company's common stock or ten business days following announcement of a tender
offer or exchange offer that could result in beneficial ownership of 20% or more
of the Company's common stock. Prior to consummation of such a transaction, each
holder of a Right is entitled to purchase shares of the Company's common stock
having a value equal to two times the exercise price of the Right. The Company
has the right to redeem the Rights at $.01 per Right prior to the time they
become exercisable. The Rights will expire on December 30, 2001. In accordance
with the form of Rights Agreement included in the Company's Current Report on
Form 8-K filed with the Commission on December 19, 1991, Orion and its
subsidiaries are "Exempt Persons" as defined in the Agreement. Orion does not
believe that at the present time the Rights are exercisable or that the Offer
will result in the Rights becoming exercisable.
12. FEES AND EXPENSES. Orion on behalf of the Purchasers has retained
State Street Bank and Trust Company to act as Depositary in connection with the
Offer. The Depositary will receive reasonable and customary compensation for its
services. D.F. King & Co., Inc. has been retained by Orion on behalf of the
Purchasers as Information Agent in connection with the Offer. The Information
Agent may contact holders of Shares by mail, telephone, telex, telegraph and
personal interview and may request brokers, dealers and other nominee
stockholders to forward material relating to the Offer to beneficial owners.
Reasonable and customary compensation will be paid for such services. Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJ") is acting as Dealer Manager in
connection with the Offer. Orion on behalf of the Purchasers has agreed to pay
DLJ a fee of $200,000 for such services. In July 1995, DLJ acted as co-manager
for Orion's $100,000,000 Senior Note offering. Orion on behalf of the Purchasers
has also agreed to reimburse the Depositary, the Dealer Manager and the
Information Agent for reasonable out-of-pocket expenses and to indemnify each of
them against certain liabilities and expenses, including, in the case of the
Dealer Manager and Information Agent, certain liabilities under the federal
securities laws.
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35
It is estimated that the expenses incurred by Orion in connection with the
Offer will be approximately as set forth below (if all of the Shares other than
those held by Orion's wholly-owned subsidiaries are purchased):
Filing fees............................................................... $ 61,100
Printing and mailing fees................................................. 100,000
Accounting and legal fees................................................. 300,000
Dealer Manager fee........................................................ 200,000
Depositary fees........................................................... 25,000
Miscellaneous............................................................. 63,900
----------
$ 750,000
==========
None of the foregoing fees will be paid by the Company.
Except as set forth herein, the Purchasers will not pay any fees or
commissions to any broker or dealer or to any other person in connection with
the solicitation of tenders of Shares pursuant to the Offer. Brokers, dealers,
commercial banks and trust companies will be reimbursed for customary mailing
and handling expenses incurred by them in forwarding material to their
customers. Except as set forth in this Offer to Purchase, no persons or classes
of persons have been employed or retained or are to be compensated by the Orion
or by any person on behalf of the Purchasers, to make solicitations or
recommendations in connection with the Offer, and no officer, employee or class
of employees or corporate asset of the Company has been or is proposed to be
employed, availed or utilized by Orion in connection with the Offer.
13. MISCELLANEOUS. The Offer is not being made to, nor will tenders be
accepted from, or on behalf of, holders of Shares in any jurisdiction in which
the making of the Offer or the acceptance thereof would not be in compliance
with the securities, blue sky or other laws of such jurisdiction. However, the
Purchasers may, at their discretion, take such action as they may deem necessary
to make the Offer in any such jurisdiction and extend the Offer to holders of
Shares in such jurisdiction. In those jurisdictions whose securities laws
require the Offer to be made by a licensed broker or dealer, the Offer shall be
deemed to be made on behalf of the Purchasers, if at all, only by the Dealer
Manager or by one or more registered brokers or dealers licensed under the laws
of such jurisdictions.
The Purchasers have filed with the Commission a Tender Offer Statement on
Schedule 14D-1 and a Transaction Statement on Schedule 13E-3, together with
exhibits, pursuant to Rules 13e-3 and 14d-3 respectively of the General Rules
and Regulations under the Exchange Act, furnishing certain additional
information with respect to the Offer, and may file amendments thereto. Such
Schedules 13E-3 and 14D-1 and any amendments thereto, including exhibits, may be
examined at, and copies may be obtained from, the Commission (but not the
regional offices of the Commission) in the manner set forth in THE OFFER --
Section 7.
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36
No person has been authorized to give any information or make any
representation on behalf of the Purchasers not contained in this Offer to
Purchase or the Letter of Transmittal, and, if given or made, such information
or representation must not be relied upon as having been authorized.
ORION CAPITAL CORPORATION
and
THE CONNECTICUT INDEMNITY COMPANY
CONNECTICUT SPECIALTY INSURANCE
COMPANY
DESIGN PROFESSIONALS INSURANCE COMPANY
EBI INDEMNITY COMPANY
EMPLOYEE BENEFITS INSURANCE COMPANY
THE FIRE AND CASUALTY INSURANCE
COMPANY OF CONNECTICUT
SECURITY INSURANCE COMPANY OF HARTFORD
May 8, 1996
34
37
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
THE PURCHASERS
Set forth below are the name, business address, position with Orion Capital
Corporation, a Delaware corporation ("Orion"), and/or one of the wholly-owned
subsidiaries of Orion which are purchasing Shares in the Offer ("Subsidiaries"),
present principal occupation or employment and five-year employment history of
each director and executive officer of Orion and/or the Subsidiaries. Each of
the Subsidiaries listed in footnotes 2-8 below is a Connecticut corporation.
Each person listed below is a citizen of the United States except Mr. Graham A.
Addington who is a citizen of the United Kingdom. Except as indicated in this
Schedule, none of the persons listed below beneficially owns Shares or is a
director of Guaranty National Corporation. Unless otherwise indicated, each
occupation set forth opposite an individual's name refers to employment with
Orion or the designated Subsidiaries. All officers serve at the pleasure of the
Board of Directors of the entity named.
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT/MATERIAL POSITIONS
NAME AND ADDRESS HELD DURING THE PAST FIVE YEARS
W. Marston Becker (1-8) Vice Chairman of the Board of Orion, CI, CSIC, EBIC,
Design Professionals EIC, F&C and SICH since March 8, 1996; President and
Insurance Company Chief Executive Officer of DPIC Companies, Inc. ("DPIC
2959 Monterey-Salinas Highway Companies"), a subsidiary of Orion, since July 1994;
Monterey, CA 93940 Senior Vice President of Orion from July 1994 to March
1996; President and Chief Executive Officer of
McDonough Caperton Insurance Group, an insurance
brokerage firm, from March 1987 to July 1994.
Bertram J. Cohn(1) Managing Director, First Manhattan Company (investment
437 Madison Avenue, 30th Floor bankers), 1982-present.
New York, NY 10022
John C. Colman(1) Private investor and consultant.
4 Briar Lane
Glencoe, IL 60022
Alan R. Gruber (1-8) Chairman of the Board and Chief Executive Officer of
Orion Capital Corporation Orion, 1976-present. Chairman of the Board of CI,
600 Fifth Avenue CSIC, DPIC, EBIC, EIC, F&C and SICH. Director:
New York, NY 10020 Guaranty National Corporation.
Larry D. Hollen (1-8) President and Chief Operating Officer of Orion,
Orion Capital Corporation President of CI, EIC, F&C and SICH and Vice Chairman
9 Farm Springs Drive of DPIC and EBIC since March 1, 1994; Vice Chairman of
Farmington, CT 06032 CSIC since June 9, 1994, Executive Vice President and
Assistant Chief Operating Officer of Orion from
December 1, 1992 to February 28, 1994 and Senior Vice
President from 1990 to 1992. President of EBI
Companies, Inc. ("EBI Companies"), a wholly-owned
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(1) Director of Orion
(2) Director of the Connecticut Indemnity Company ("CI")
(3) Director of Design Professionals Insurance Company ("DPIC")
(4) Director of Connecticut Specialty Insurance Company ("CSIC")
(5) Director of Employee Benefits Insurance Company ("EBIC")
(6) Director of EBI Indemnity Company ("EIC")
(7) Director of The Fire and Casualty Insurance Company of Connecticut ("F&C")
(8) Director of Security Insurance Company of Hartford ("SICH")
I-1
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PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT/MATERIAL POSITIONS
NAME AND ADDRESS HELD DURING THE PAST FIVE YEARS
subsidiary of Orion, from January 1990 to May 31,
1993. Director: Guaranty National Corporation.
Robert H. Jeffrey(1) Chairman of the Board, Jeflion Investment Company,
The Jeffrey Company 1994-present, President from 1974 to 1994; Chairman of
8 E. Broad Street, Suite 1560 the Board, The Jeffrey Company (a privately held
Columbus, OH 43215 investment company which is the parent of Jeflion
Investment Company), 1994-present, President from 1973
to 1994.
Warren R. Lyons(1) Chairman, Avco Financial Services (a financial
Avco Financial Services services company and a subsidiary of Textron Inc.),
600 Anton Boulevard August 1995-present, President from 1989 to July 1995.
Costa Mesa, CA 92628C
James K. McWilliams(1) Proprietor of McWilliams & Company and general partner
McWilliams & Company of McWilliams Associates (investment counselors),
2288 Broadway, #8 1967-present; General Partner, Mt. Eden Vineyards,
San Francisco, CA 94115 Inc., 1986-present.
Ronald W. Moore(1) Adjunct Professor of Business Administration, Graduate
Morgan Hall School of Business Administration, Harvard University,
Soldiers Field 1990-present.
Boston, MA 02163
Robert B. Sanborn(1) Senior Executive Consultant to Orion since March 1,
Orion Capital Corporation 1995; Vice Chairman of the Board of Orion from March
9 Farm Springs Drive 1, 1994 to February 28, 1995; President and Chief
Farmington, CT 06032 Operating Officer of Orion from 1987 to 1994; Chairman
of the American Insurance Association (a property and
casualty insurance company trade group) from January
1993 to January 1994. Director: Guaranty National
Corporation.
William J. Shepherd(1) Private investor; Chairman, Chemical New Jersey
109 Golf Edge Holdings (a bank holding company), 1990-1991,
Westfield, NJ 07090 Chairman, Chemical Bank New Jersey (a commercial
bank), 1989-1991; Chairman, Princeton Bank and Trust
Company (a commercial bank), 1989-1991. Director:
Guaranty National Corporation.
John R. Thorne(1) Morgenthaler Professor of Entrepreneurship, Graduate
Furnace Run School of Industrial Administration of Carnegie Mellon
Laughlintown, PA 15655 University, 1986-present; Chairman, The Enterprise
Corporation of Pittsburgh (a private, non-profit
corporation encouraging and supporting entrepreneurial
businesses), 1983-present; a general partner of
Pittsburgh Venture Partners, the general partner of
the Pittsburgh Seed Fund (a private venture capital
fund), 1985-present.
Roger B. Ware(1) President and Chief Executive Officer of Guaranty
Guaranty National Corporation National Corporation (a property and casualty
9800 South Meridian Boulevard insurance company), 1983-present; Senior Vice
Englewood, CO 80112 President of Orion from 1988 to November 1991.
Director: Guaranty National Corporation.
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(1) Director of Orion
I-2
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PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT/MATERIAL POSITIONS
NAME AND ADDRESS HELD DURING THE PAST FIVE YEARS
Raymond W. Jacobsen(3,5,6) Senior Vice President of Orion since July 1994;
Orion Capital Corporation Chairman of the EBI Companies since March 29, 1996,
9 Farm Springs Drive President and Chief Executive Officer from June 1,
Farmington, CT 06032 1993 to March 1996; President and Chief Executive
Officer of CSIC since October 17, 1995; and Senior
Vice President of CI, DPIC, EIC, F&C and SICH since
March, 1990; Vice President of Orion from March 1990
to July 1994; Executive Vice President of the EBI
Companies from December 1989 to May 31, 1993.
Daniel L. Barry(2-8) Chief Financial Officer of Orion since March 29, 1996,
Orion Capital Corporation Vice President and Controller since October 1987; Vice
9 Farm Springs Drive Chairman of Security Reinsurance Company and
Farmington, CT 06032 SecurityRe, Inc., subsidiaries of Orion, since 1989,
Chief Financial Officer since March 29, 1996; Senior
Vice President and Controller of CI, CSIC, DPIC, EBIC,
EIC, F&C, and SICH since 1989, Chief Financial Officer
since March 29, 1996.
Michael P. Maloney(2-4 & 6-8) Vice President, General Counsel and Secretary of Orion
Orion Capital Corporation since August 1979; Senior Vice President and Assistant
600 Fifth Avenue Secretary of each of the Subsidiaries since March
New York, NY 10020 1987.
William G. McGovern Vice President and Chief Actuary of Orion since March
Orion Capital Corporation 1990; Senior Vice President and Chief Actuary of each
9 Farm Springs Drive of the Subsidiaries since October 1989.
Farmington, CT 06032
Vincent T. Papa(2-4 & 6-8) Vice President and Treasurer of Orion since June 1985;
Orion Capital Corporation Chairman of Wm. H. McGee & Co., Inc., a wholly-owned
600 Fifth Avenue subsidiary of Orion, since September 30, 1995; Senior
New York, NY 10020 Vice President of each of the Subsidiaries since March
1987, Treasurer from December 1990 to March 1996.
Raymond J. Schuyler(8) Vice President-Investments of Orion since June 1984;
Orion Capital Corporation Senior Vice President-Investments of each of the
600 Fifth Avenue Subsidiaries since March 1986.
New York, NY 10020
Jonathan H. Gice(5) President of EBIC and EBI Companies, Inc. since March
EBI Companies, Inc. 29, 1996; Vice President of EIC, SICH, CI and F&C
325 N. Corporate Drive since 1991; Executive Vice President of EBIC and EBI
Suite 100 Companies, Inc. from November 1994 to March 29, 1996,
Milwaukee, WI 53045 Senior Vice President from April 1993 to November
1994, Vice President from 1991 to April 1993.
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(2) Director of CI
(3) Director of CSIC
(4) Director of DPIC
(5) Director of EBIC
(6) Director of EIC
(7) Director of F&C
(8) Director of SICH
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PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT/MATERIAL POSITIONS
NAME AND ADDRESS HELD DURING THE PAST FIVE YEARS
Eva Schlehofer(2 & 5-7) Senior Vice President of each of the Subsidiaries
Orion Capital Companies, Inc. since March 1994; Vice President of EIC, EBIC, CI, and
9 Farm Springs Drive F&C from 1991 to March 1994.
Farmington, CT 06032
Stanley G. Fullwood(2-8) Vice President, General Counsel and Secretary of Orion
Orion Capital Companies, Inc. Capital Companies, Inc., a subsidiary of Orion, and
9 Farm Springs Drive each of the Subsidiaries since 1988.
Farmington, CT 06032
Craig A. Nyman Vice President of Orion Capital Companies, Inc. and
Orion Capital Companies, Inc. each of the Subsidiaries since 1991, Treasurer since
9 Farm Springs Drive March 29, 1996 and Assistant Treasurer from 1991 to
Farmington, CT 06032 March 1996.
Graham A. Addington Senior Vice President of DPIC since March 1995; Chief
Security Insurance Company of Agent in Canada of SICH since December 1994; Vice
Hartford President of SICH since 1991.
155 University Avenue
Suite 702
Toronto, Ontario M5H 3B7 Canada
A. Russell Chaney Senior Vice President of DPIC and DPIC Companies since
Design Professionals 1991.
Insurance Company
2959 Monterey-Salinas Highway
Monterey, CA 93940
Richard D. Crowell Senior Vice President of DPIC since March 7, 1996.
Design Professionals Senior Vice President of DPIC Companies from August
Insurance Company 1995 to March 1996; self employed consultant from 1991
2959 Monterey-Salinas Highway to 1993.
Monterey, CA 93940
William M. Demmon Senior Vice President of DPIC since October 1993; Vice
Design Professionals President of SICH since March 1994. Assistant Vice
Insurance Company President of DPIC Companies from 1991 to 1993.
2959 Monterey-Salinas Highway
Monterey, CA 93940
Ralph M. Hermann Senior Vice President of EIC, EBIC, CI and F&C since
EBI Companies, Inc. March 29, 1996, Vice President from 1991 to March
325 N. Corporate Drive 1996.
Milwaukee, WI 53045
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(2) Director of CI
(3) Director of CSIC
(4) Director of DPIC
(5) Director of EBIC
(6) Director of EIC
(7) Director of F&C
(8) Director of SICH
I-4
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PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT/MATERIAL POSITIONS
NAME AND ADDRESS HELD DURING THE PAST FIVE YEARS
Paul E. McCarthy Senior Vice President of DPIC and President of
Peninsula Excess Insurance Peninsula Excess Insurance Brokers, Inc. ("PenEx"), a
Brokers, Inc. subsidiary of Orion, since December 1995, Executive
1640 Powers Ferry Road Vice President of PenEx from January 1995 to December
Building 5, Suite 250 1995. Affiliated with McCarthy & Associates,
Marietta, GA 30067 underwriting consultants, 1993-1994, and Capital
Special Risks, Inc., a wholesale insurance brokerage
firm, 1991-1992.
Thomas M. Okarma Senior Vice President -- Chief Claims Officer of DPIC
Design Professionals since December 1995. Associated with AVA Insurance
Insurance Company Agency, Inc. an Illinois insurance agency specializing
2959 Monterey-Salinas Highway in professional liability, 1984-November 1995.
Monterey, CA 93940
David J. Vermeulen Senior Vice President of DPIC since 1991; Vice
Design Professionals President of SICH since March 1994.
Insurance Company
2959 Monterey-Salinas Highway
Monterey, CA 93940
Florence E. Whitmire Senior Vice President of DPIC since October 1993, Vice
Design Professionals President from 1991 to September 1993; Vice President
Insurance Companies of SICH since March 1994.
2959 Monterey-Salinas Highway
Monterey, CA 93940
I-5
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Facsimile copies of the Letter of Transmittal will be accepted. The Letter
of Transmittal, certificates for Shares, and any other required documents should
be sent or delivered by each stockholder or his broker, dealer, commercial bank,
trust company or other nominee to the Depositary, at one of the addresses set
forth below.
The Depositary is:
STATE STREET BANK AND TRUST COMPANY
By Mail: By Courier: By Hand:
State Street Bank State Street Bank Bank of Boston
and Trust Company and Trust Company c/o Boston Equiserve
Corporate Reorganization Corporate Reorganization Corporate Reorganization
P.O. Box 9061 2 Heritage Drive 55 Broadway
Boston, MA 02205-8686 North Quincy, MA 02171 3rd Floor
New York, New York 10006
By Facsimile:
(617) 774-4519
Confirm by telephone:
(617) 774-4511
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
specified below. Additional copies of the Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent. A stockholder may also contact his broker, dealer, commercial
bank or trust company for assistance concerning the Offer.
The Information Agent is:
D.F. KING & CO., INC.
77 Water Street
New York, NY 10005
(212) 269-5550
(Call Collect)
or
Call Toll Free (800) 829-6551.
The Dealer Manager for the Offer is:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
277 Park Avenue
New York, New York 10172
(212) 892-7700 (Call Collect)
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