UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 17, 2004
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Tower Group, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 000-50990 13-3894120
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(State or other jurisdiction or Commission File (IRS Employer
incorporation) Number: Identification No.)
120 Broadway, 14th Floor, New York, NY 10271
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 655-2000
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(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.133-4(c))
Item 1.01 Entry into a Material Definitive Agreement
On December 15, 2004 Tower Group, Inc. (the "Company") participated in a private
placement of $13 million of fixed/floating rate capital securities (the "Trust
Preferred Securities") issued by Tower Group, Inc. Statutory Trust III (the
"Trust"), an affiliated Delaware trust formed on December 3, 2004. The Trust
Preferred Securities mature in December 2034, are redeemable at the Company's
option at par beginning December 15, 2009, and require quarterly distributions
of interest by the Trust to the holder of the Trust Preferred Securities.
Distributions are initially at a fixed rate of 7.4% for the first five years and
will then reset quarterly for changes in the three-month London Interbank
Offered Rate ("LIBOR") rate plus 340 basis points. The Trust simultaneously
issued 403 of the Trust's common securities to the Company for a purchase price
of $403,000, which constitutes all of the issued and outstanding common
securities of the Trust.
The Trust used the proceeds from the sale of the Trust Preferred Securities to
purchase for $13,000,000 a Fixed/Floating Rate Junior Subordinated Deferrable
Interest Debenture due 2034 in the principal amount of $13,000,000 issued by the
Company. The net proceeds to the Company from the sale of the Debenture to the
Trust will be used by the Company, along with the net cash proceeds from another
proposed placement of trust preferred securities, to acquire and capitalize a
shell insurance company with multi-state licensing and for working capital
purposes. There is no assurance that the acquisition of a shell insurance
company or the second private placement will be completed.
The Debenture was issued pursuant to an Indenture dated December 15, 2004, by
and between the Company and Wilmington Trust Company, as trustee. The terms of
the Debenture are substantially the same as the terms of the Trust Preferred
Securities. The interest payments by the Company will be used by the Trust to
pay the quarterly distributions to the holders of the Trust Preferred
Securities. The Indenture permits the Company to redeem the Debenture (and thus
a like amount of the Preferred Trust Securities) after December 15, 2009. If the
Company redeems any amount of its Debenture, the Trust must redeem a like amount
of the Trust Preferred Securities.
The terms of the Trust Preferred Securities are governed by an Amended and
Restated Declaration of Trust, dated December 15, 2004, by and among Wilmington
Trust Company, as Institutional Trustee; Wilmington Trust Company, as Delaware
Trustee; Tower Group, Inc, as Sponsor; and the Trust Administrators Michael H.
Lee, Francis M. Colalucci and Steve G. Fauth. The Company, as the sole holder of
the Trust's Common Securities, controls the election of the trustee and
administrators. Under the terms of the Trust Preferred Securities, an event of
default may occur upon:
o non-payment of interest on the Trust Preferred Securities, unless such
non-payment is due to a valid extension of an interest payment period;
o non-payment of all of any part of the principal of the Trust Preferred
Securities;
o the Company's failure to comply with the covenants or other provisions of
the indentures or the Trust Preferred Securities; or
o bankruptcy or liquidation of the Company or of the Trust.
Pursuant to a Guarantee Agreement dated December 15, 2004, by and between Tower
Group, Inc. and Wilmington Trust Company, Tower has agreed to guarantee the
payment of distributions and payments on liquidation or redemption of the Trust
Preferred Securities, but only in each case to the extent of funds held by the
Trust. The obligations of the Company under the Guarantee Agreement and the
Trust Preferred Securities are subordinate to all of the Company 's senior and
subordinated debt.
The offering of the Trust Preferred Securities was conducted pursuant to a
Placement Agreement dated December 7, 2004 between the Company, FTN Financial
Capital Markets and Keefe, Bruyette & Woods, Inc. The placement agents received
a commission of two percent of the principal amount of the Debenture.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under
an Off- Balance Sheet Arrangement of a Registrant
See Item 1.01
Item 7.01 Regulation FD Disclosure
On December 15, 2004, the Company announced the closing of
the placement of the Trust Preferred Securities and issuance of the Debenture. A
copy of the press release is included as exhibit 99.1 to this report.
Item 9.01 - Financial Statements and Exhibits
(c) The following exhibits are filed as part of this report.
Number Description
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10.01 Placement Agreement between the Company, FTN Financial Capital Markets
and Keefe, Bruyette & Woods, Inc.
10.02 Guarantee Agreement dated December 15, 2004, by and between Tower
Group, Inc. and Wilmington Trust Company.
10.03 Indenture between Tower Group, Inc. and Wilmington Trust Company, as
Trustee, dated December 15, 2004
10.04 Amended and Restated Declaration of Trust, dated December 15, 2004, by
and among Wilmington Trust Company, as Institutional Trustee;
Wilmington Trust Company ,as Delaware Trustee; Tower Group, Inc, as
Sponsor ; and the Trust Administrators Michael H. Lee, Francis M.
Colalucci and Steve G. Fauth.
10.05 Fixed/Floating Rate Junior Subordinated Deferrable Interest Debenture
due 2034 issued by Tower Group, Inc. dated December 15, 2004
10.06 Capital Securities Certificate dated December 15, 2004.
10.07 Common Securities Certificate dated December 15, 2004
10.08 Subscription Agreement executed by Preferred Term Securities XVI, Ltd.
dated December 15, 2004.
99.1 Copy of press release issued by Tower Group, Inc, dated December 15,
2004
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Tower Group, Inc.
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Date December 17, 2004
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/s/ Francis M. Colalucci
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Francis M.
Colalucci
Chief Financial Officer
INDEX TO EXHIBITS
Number Description
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10.01 Placement Agreement between the Company, FTN Financial Capital Markets
and Keefe, Bruyette & Woods, Inc.
10.02 Guarantee Agreement dated December 15, 2004, by and between Tower
Group, Inc. and Wilmington Trust Company.
10.03 Indenture between Tower Group, Inc. and Wilmington Trust Company, as
Trustee, dated December 15, 2004
10.04 Amended and Restated Declaration of Trust, dated December 15, 2004, by
and among Wilmington Trust Company, as Institutional Trustee;
Wilmington Trust Company, as Delaware Trustee; Tower Group, Inc, as
Sponsor; and the Trust Administrators Michael H. Lee, Francis M.
Colalucci and Steve G. Fauth.
10.05 Fixed/Floating Rate Junior Subordinated Deferrable Interest Debenture
due 2034 issued by Tower Group, Inc. dated December 15, 2004
10.06 Capital Securities Certificate dated December 15, 2004.
10.07 Common Securities Certificate dated December 15, 2004
10.08 Subscription Agreement executed by Preferred Term Securities XVI, Ltd.
Dated December 15, 2004.
99.1 Copy of press release issued by Tower Group, Inc, dated December 15,
2004