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 23, 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 21, 2004 Tower Group, Inc. (the "Company") participated in the
second of two $13 million trust preferred placements for Tower Group, Inc. in
December 2004 of floating rate capital securities (the "Trust Preferred
Securities") issued by Tower Group Statutory Trust IV (the "Trust"), an
affiliated Delaware trust formed in December of 2004. The Trust Preferred
Securities mature in December 2034, are redeemable at the Company's option at
par beginning December 21, 2009, and require quarterly distributions of interest
by the Trust to the holder of the Trust Preferred Securities. Distributions are
at a variable rate that resets 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 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 an earlier
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 will be
completed.
The Debenture was issued pursuant to an Indenture dated December 21, 2004, by
and between the Company and JPMorgan Chase Bank, National Association, 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 21,
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 21, 2004, by and among JPMorgan
Chase Bank, National Association, as Institutional Trustee; Chase Manhattan Bank
USA, National Association, 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 21, 2004, by and between Tower
Group, Inc. and JPMorgan Chase Bank, National Association, 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 17, 2004 between the Company and Cohen Bros.
& Company. The placement agent received a commission of 1.75 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 21, 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 and Cohen Bros. & Company as
placement agent.
10.02 Guarantee Agreement dated December 21, 2004, by and between Tower Group,
Inc. and JPMorgan Chase Bank, National Association.
10.03 Indenture between Tower Group, Inc. and JPMorgan Chase Bank, National
Association, as Trustee, dated December 21, 2004
10.04 Amended and Restated Declaration of Trust, dated December 21, 2004, by and
among JPMorgan Chase Bank, National Association, as Institutional Trustee;
Chase Manhattan Bank USA, National Association, as Delaware Trustee; Tower
Group, Inc, as Sponsor; and the Trust Administrators Michael H. Lee,
Francis M. Colalucci and Steve G. Fauth.
10.05 Floating Rate Junior Subordinated Deferrable Interest Debenture due 2034
issued by Tower Group, Inc. dated December 21, 2004
10.06 Capital Securities Certificate dated December 21, 2004.
10.07 Common Securities Certificate dated December 21, 2004
10.08 Subscription Agreement executed by Merrill Lynch International, dated
December 21, 2004.
99.1 Copy of press release issued by Tower Group, Inc, dated December 21, 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 23, 2004
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/s/ Steven G. Fauth
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Steven G.
Fauth
SVP, General Counsel
INDEX TO EXHIBITS
Number Description
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10.01 Placement Agreement between the Company and Cohen Bros. & Company as
placement agent.
10.02 Guarantee Agreement dated December 21, 2004, by and between Tower Group,
Inc. and JPMorgan Chase Bank, National Association.
10.03 Indenture between Tower Group, Inc. and JPMorgan Chase Bank, National
Association, as Trustee, dated December 21, 2004
10.04 Amended and Restated Declaration of Trust, dated December 21, 2004, by and
among JPMorgan Chase Bank, National Association, as Institutional Trustee;
Chase Manhattan Bank USA, National Association, as Delaware Trustee; Tower
Group, Inc, as Sponsor; and the Trust Administrators Michael H. Lee,
Francis M. Colalucci and Steve G. Fauth.
10.05 Floating Rate Junior Subordinated Deferrable Interest Debenture due 2034
issued by Tower Group, Inc. dated December 21, 2004
10.06 Capital Securities Certificate dated December 21, 2004.
10.07 Common Securities Certificate dated December 21, 2004
10.08 Subscription Agreement executed by Merrill Lynch International, dated
December 21, 2004.
99.1 Copy of press release issued by Tower Group, Inc, dated December 21, 2004