SC 14D1/A

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                               AMENDMENT NO. 2 TO
                                 SCHEDULE 14D-1
               TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                               AND AMENDMENT NO. 7
                                 TO SCHEDULE 13D
                      UNDER SECURITIES EXCHANGE ACT OF 1934

                              GRYPHON HOLDINGS INC.
                            (NAME OF SUBJECT COMPANY)

                               MARKEL CORPORATION
                              MG ACQUISITION CORP.
                                    (Bidders)
                     COMMON STOCK, PAR VALUE $0.01 PER SHARE
           (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
                         (Title of Class of Securities)
                                   400515 10 2
                      (CUSIP Number of Class of Securities)

                             GREGORY B. NEVERS, ESQ.
                                CORPORATE COUNSEL
                               MARKEL CORPORATION
                                  4551 COX ROAD
                         GLEN ALLEN, VIRGINIA 23060-3382
                            TELEPHONE: (804) 965-1673
            (Name, Address and Telephone Number of Person Authorized
           to Receive Notices and Communications on Behalf of Bidders)

                                 WITH A COPY TO:
                             LESLIE A, GRANDIS, ESQ.
                       McGUIRE, WOODS, BATTLE & BOOTHE LLP
                              901 EAST CARY STREET.
                            RICHMOND, VIRGINIA 23219
                            TELEPHONE: (804) 775-1000





      This Amendment to Schedule 14D-1 filed by MG Acquisition Corp., a Delaware
corporation, a wholly owned subsidiary of Markel Corporation, a Virginia
corporation Parent, in connection with its pending tender offer for all
outstanding shares of common stock, par value $0.01 per share (the "Common
Stock") of Gryphon Holdings Inc., a Delaware corporation (the "Company"), also
constitutes an Amendment to Statement on Schedule 13D with respect to the
acquisition by Markel Corporation and MG Acquisition Corp. of beneficial
ownership of shares of Common Stock of the Company. The Schedule 14D-1 is hereby
amended as follows:


                    ITEM 11. MATERIAL TO BE FILED AS EXHIBITS

(g)(2)    Correspondence filed in the Court of Chancery of the State of Delaware
          on Octber 23, and October 26, 1998, respectively.
          






SIGNATURE

After due inquiry and to the best of its knowledge and belief, the undersigned
certifies that the information set forth in this statement is true, complete and
correct.


Dated:  October 27, 1998                        MARKEL CORPORATION

                                                By: /s/   Steven A. Markel 
                                                   -----------------------
                                                Name:  Steven A. Markel
                                                Title: Vice Chairman



                                                MG AQUISITION CORP.

                                                By: /s/ Steven A. Markel
                                                   ------------------------
                                                Name:  Steven A. Markel
                                                Title: Vice Chairman



                                  EXHIBIT INDEX


         EXHIBIT                       EXHIBIT NAME

         (g)(2)          Correspondence filed in the Court of Chancery of the
                         State of Delaware on Octber 23, and October 26, 1998, 
                         respectively.

EX-99

                                  [letterhead]

                        Morris, Nichols, Arsht & Tunnell
                            1201 North Market Street
                                  P.O. Box 1347
                         Wilmington, Delaware 19899-1347

                            Telephone (302) 658-9200
                            Telecopy (302) 658-3989

                          Writer's Direct Dial Number:
                                 (302) 575-7277

                                October 23, 1998

Honorable Myron T. Steele
Court of Chancery
Kent County Courthouse
38 The Green
Dover, Delaware 19901

     Re: Markel Corporation, et al. v. Gryphon Holdings, Inc., et al., C.A.
         No. 16723-NC

Dear Vice Chancellor Steele:

     I write on behalf of defendants in the captioned action in anticipation of
Monday's telephonic scheduling conference to set forth briefly our argument
that expedition is not appropriate.

     On October 20, 1998, plaintiffs Markel Corporation and MG Acquisition Corp.
(collectively "Markel") launched a hostile tender offer (the "Tender Offer") for
all of the outstanding shares of my client, Gryphon Holdings, Inc. ("Gryphon" or
the "Company") at $18.00 per share in cash. Simultaneously, Markel filed the
complaint in this action, asking the Court to compel the individual defendants,
who are the members of Gryphon's Board of Directors, to remove all of Gryphon's
protective mechanisms, including its shareholder rights plan (the "Rights Plan")
and the prohibitions of 8 Del. C. (sec) 203 and to enjoin them from taking "any
other action designed to impede, or which has the effect of impeding, the
[Tender Offer] or the efforts of Markel to acquire control of Gryphon." Markel
now asks this Court to order expedited proceedings and to schedule a hearing on
its motion for a mandatory preliminary injunction.

     Preliminarily, the Court should be aware that with respect to the issues
raised by Count I of the complaint, Gryphon's Board of Directors, eight of whose
ten members are independent, yesterday met and amended the Rights Plan to remove
any doubt that Markel has not triggered the Rights Plan at its current ownership
level. Count I is therefore moot.

     As to the remaining counts, we respectfully urge that the Court should
decline to expedite proceedings and to schedule a hearing on plaintiffs' motion
for a preliminary injunction for four reasons.

     First, Counts II and III are premature. The Tender Offer was just
initiated, and Gryphon's Board has not yet had the opportunity to consider it.
Under the Federal securities laws, Gryphon's Board has ten days to take a
position on the Tender Offer. Until the Board acts, Markel's assertions about
what the Board may or may not do with respect to Gryphon's protective devices
are speculative; Markel has no claim until the Board makes its position known.

     Second, plaintiffs have failed to raise even the specter of imminent,
irreparable harm. This Court has consistently refused to allow expedited
proceedings where the pleadings do not set forth a colorable claim of
irreparable harm. See In re International Jensen Inc. Shareholders Litigation,
Del. Ch., C.A. No. 14992, Jacobs, V.C. (July 13, 1996); Taylor v. LSI Logic
Corp., Del. Ch., C.A. No. 13915-NC, Steele, V.C. (June 19, 1995); Union Pacific
Corp. v. Santa Fe Pacific Corp., Del. Ch., C.A. No. 13778, Jacobs, V.C. (Oct.
18, 1994); Steiner v. Puritan Bennett, Del. Ch., C.A. No. 13790, Steele, V.C.,
mem. op. at 3 (Dec. 6, 1994); Giammargo v. Snapple Beverage Corp., Del. Ch.,
C.A. No. 13845, Allen, C., mem. op. at 6 (Nov. 15, 1994).

     Here, plaintiffs have not come close to meeting their threshold burden of
articulating a colorable claim of irreparable harm warranting injunctive relief.
Plaintiff's sole argument (putting aside the mooted claims of irreparable harm
relating to Count I) is that presence of the Shareholder Rights Plan (adopted in
1995) and the protections of Section 203 "will hinder and potentially prevent"
Markel from proceeding with its Tender Offer and that if this should occur,
Markel "will have lost the unique opportunity to acquire Gryphon." (Complaint
(paragraph) 39) (emphasis added). As noted above, such harm, rather than being
imminent, is wholly speculative because there remains a possibility that Markel
will acquire Gryphon. See Steiner, mem. op. at 3 ("Expedited discovery and a
hearing for preliminary injunctive relief should be ordered only when the
prospect of imminent irreparable injury is not speculative."). Moreover, even
assuming that Markel's Tender Offer did not proceed due to the Shareholder
Rights Plan or Section 203, Markel does not have an inviolate right to have its
offer accepted. Paramount Communications, Inc. v. QVC Network, Del. Supr., 637
A.2d 34, 43 n.13 (1993) (recognizing "the prerogative of a board of directors to
resist a third party's unsolicited acquisition proposal or offer"). It is well
within the business judgment of the independent Gryphon Board to determine
whether to accept an offer and when to remove protective devices. Id. at 44-45
(noting that Court will not second-guess such decisions). In any event, it is
Markel's own actions that are depriving it of the opportunity to be considered
on the same level playing field as all other suitors.

     Specifically, and third, this action is no more than an effort by Markel to
circumvent the orderly process which the Board has implemented to evaluate 
Markel's bid and to determine whether the interests of Gryphon's stockholders
are best served by a sale or business combination of the Company or by its
continuation as an independent entity. As Markel is well aware, in recent months
the Board, with the assistance of Gryphon's financial advisor, Donaldson, 
Lufkin & Jenrette ("DLJ"), has been evaluating the merits of a sale of the 
Company. In connection with that process, DLJ has communicated with several
parties, including Markel. Six parties signed confidentiality and standstill
agreements in precisely the form that Markel refused to sign, and several of 
those parties are now conducting due diligence with respect to the Company.
Gryphon and DLJ have repeatedly encouraged Markel to participate in this 
process.



     As plaintiffs note, there have been discussions about Markel's 
unwillingness to agree to a two-year standstill provision in the confidentiality
agreement. However, while the Company did reject Markel's proposal that the 
standstill period be six months, the Company and its advisors have told Markel
that the two-year standstill period is negotiable. The more problematic issue is
Markel's insistence that the standstill terminate in the event Gryphon enters
into a sale or other business combination agreement with any other party. Such
a provision would put Markel in an unwarranted preferred position and would 
seriously compromise the Board's control over the process it has begun. It
appears that Markel, having chosen to eschew the Gryphon Board's orderly 
process, is now asking this Court, not only to safeguard Markel against the
consequences of that decision, but also to reward Markel's effort to bypass the
orderly Board process.

     Fourth, the complaint does not even state a claim. It is clear that a 
board of directors need not redeem rights even in the face of an all cash bid 
for all shares. See, Doskocil Companies, Inc. v. Griggy, Del. Ch., C.A. No. 
10095, Berger, V.C. (Oct. 7, 1988); Facet Enterprises, Inc. v. The Prospect
Group, Del. Ch., C.A. No. 9746, Jacobs, V.C. (April 11, 1988); Tate & Lyle PLC
v. Staley Continental, Inc., Del. Ch., C.A. No. 9813, Hartnett, V.C. (May 9,
1988).



     We respectfully urge that plaintiffs should not be permitted to draw this
Court into their campaign to usurp the Board's right to proceed in an orderly
way to explore and evaluate the possibility of a sale of the Company. Plaintiffs
have not raised a colorable claim of the type of specific, imminent, irreparable
harm that has before caused this Court to set into motion the expensive and
onerous mechanism of expedited proceedings. Accordingly, plaintiffs' motion to
expedite should be denied.

                                   Respectfully,


                                   /s/ Alan J. Stone
                                   --------------------
                                   Alan J. Stone




ks

cc:  Register in Chancery
     Daniel A. Dreisbach, Esq.
     Michael L. Hirschfeld, Esq.





                                  [letterhead]

                        Richards, Layton & Finger, P.A.
                               One Rodney Square
                                  P.O. Box 551
                           Wilmington, Delaware 19899
                            Telephone (302) 658-6541


                                October 26, 1998





VIA FACSIMILE

The Honorable Myron T. Steele
Vice Chancellor
Court of Chancery
417 South State Street
Dover, Delaware 19901

                   Re:      Markel Corporation v. Gryphon Holdings Inc.,
                            Del. Ch., C.A. No. 16723

Dear Vice Chancellor Steele:

     I am writing on behalf of plaintiffs Markel Corporation ("Markel") and MG
Acquisition Corp. to advise the Court that in light of Friday's developments,
they are withdrawing their present request for the scheduling of a preliminary
injunction hearing.

     As Your Honor may be aware from reviewing plaintiffs' complaint, motion to
expedite and the October 20, 1998 offer to purchase, Markel tried for several
weeks to negotiate a transaction with defendants, sending letters and draft
merger agreements to the Board members and their advisors. Even in the face of
the decision by Markel three weeks ago to offer consideration of $18.00 per
share without requiring any access to confidential information (thereby removing
any argument that a standstill would need to be signed), defendants continued to
stonewall in response, insisting that no negotiations could commence until after
Markel signed a standstill agreement. Markel declined to sign the form proposed
by defendants, which would have precluded Markel from taking a number of actions
for two years, including engaging in a proxy contest or a tender offer, and
defendants refused to discuss any of the provisions of the form proposed by
Markel as an attempted compromise. In light of the fact that there had been no
indication to date that Gryphon was willing to engage in serious negotiations,
Markel had a concern that if it signed such an agreement, defendants would
simply refuse to negotiate and Markel would be left with no means of exercising
its rights as a stockholder. Faced with the ultimate refusal by Gryphon's
representatives to have any substantive discussions whatsoever, MG Acquisition
Corp., a subsidiary of Markel, commenced an offer to purchase all outstanding







shares of the common stock of Gryphon, par value $.01 per share (the "Common
Stock"), not owned by Markel or its affiliates, at a price per share of $18.00
in cash (the "Offer").

     At the same time, after making fruitless attempts to receive clarification
of the apparent drafting mistake in the Poison Pill created by the Board members
on July 28 in their haste to lower the trigger to try to prevent Markel from
acquiring any additional shares of Common Stock, plaintiffs were forced to
include a cause of action relating to that issue in the complaint filed in this
action. It appears from the press release issued on Friday1 that the members of
the Board, faced with the threat of a preliminary injunction hearing, have
finally complied with their fiduciary duties and taken the step of amending the
Poison Pill to remove the uncertainty concerning the issue of whether Markel was
an "Acquiring Person." As a result of that development, plaintiffs are willing
to withdraw their request for the scheduling of a preliminary injunction hearing
at this time, while respectfully reserving the right to make a later application
for the scheduling of such a hearing in the event that further action by the
Board makes it necessary.

     The Board must formally respond to the Offer in the Schedule 14D-9 which is
required to be filed no later than November 3, 1998. Plaintiffs are hopeful that
on that date, the Board will recommend that the Gryphon stockholders tender
their shares into the Offer. Unfortunately, based upon the history of the course
of conduct by the Board, plaintiffs fear that they will be forced to return to
this Court to seek further relief. For example, in the letter delivered to the
Court at the end of the day on Friday, defendants criticized Markel for its
"insistence that [any standstill] terminate in the event Gryphon enters into a
sale or other business combination agreement with any other party." If
defendants had as their goal the attainment of the maximization of value for the
stockholders, presumably they should welcome the opportunity to receive
additional bids in such an instance.

     Finally, plaintiffs wish to alert Your Honor to one additional matter as to
which they may need to seek the Court's assistance. As Your Honor may be aware
from the description of the Poison Pill contained in the offer to purchase, the
Rights have been, since issuance, attached to the Common Stock. The terms of the
Poison Pill provide that the Rights will not separate from the common shares and
be distributed to the holders of the Common Stock until the earlier of two
dates, one of which is "the tenth Business Day, or such specified or unspecified
later date as may be determined by action of the Board of Directors of the
Company" after the commencement of or the announcement of the intention to
commence "a tender or exchange offer for an amount of Common Shares of the
Company which, together with the Common Shares already beneficially owned by
such Person, constitutes a percentage of the Common Shares then outstanding
greater than the Acquiring Person Percentage ..." Once the Rights have been
distributed, they will be freely exercisable. Plaintiffs believe that, as a
result of the public announcement of the Offer, the distribution date for the
Rights will be no later than
________ 
     1 Plaintiffs have not yet seen the actual amendment, a copy of which they
will be requesting today from defendants' counsel.






November 3, 1998, unless prior to that date the Board redeems the Rights or
takes action to delay the distribution date.

     Plaintiffs recognize that it would be an extraordinary occurrence for the
members of the Board to allow distribution of the Rights and have no present
knowledge of any such intention of the members of the Board. However, in the
event that the Board intends not to delay distribution, plaintiffs would be
forced to return to this Court to seek injunctive relief delaying the
distribution. In that connection, plaintiffs' counsel is sending a letter to
defendants' Delaware counsel this morning requesting that defendants either
confirm that distribution of the Rights will be delayed or commit to giving at
least 24 hours notice (or one business day, if the decision should be made
during a weekend) of a planned distribution in order to give plaintiffs an
opportunity to seek temporary injunctive relief from this Court. In the event
that no such confirmation or commitment is received from defendants' counsel,
plaintiffs will seek the Court's assistance in resolving this matter.

     I am available at the Court's convenience if Your Honor should have any
questions in this regard.

                                            Respectfully submitted,

 

                                            Anne C. Foster
ACF/jsb

cc:      Register in Chancery
         Alan J. Stone, Esquire