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) April 5, 2006
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Tower Group, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 000-50990 20-3894120
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(State or other jurisdiction (Commission (IRS Employer
or incorporation) File 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 20e-4(c) under the
Exchange Act (17 CFR 240.203-4(c))
Item 1.01 Entry into a Material Definitive Agreement
On March 31, 2006, Tower Group, Inc. (the "Company") participated in a private
placement of $20 million of fixed/floating rate capital securities (the "Trust
Preferred Securities") issued by Tower Group Statutory Trust V (the "Trust"), an
affiliated Delaware trust formed on March 29, 2006. The Trust Preferred
Securities mature in April 2036, are redeemable at the Company's option at par
beginning April 7, 2011, 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 8.5625% for the first five years and will then
reset quarterly for changes in the three-month London Interbank Offered Rate
("LIBOR") rate plus 330 basis points. The Trust simultaneously issued 619 of the
Trust's common securities to the Company for a purchase price of $619,000, 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 $20,000,000 a Junior Subordinated Debt Security due 2036 in the
principal amount of $20,000,000 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
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 March 31, 2006, by and
between the Company and Wells Fargo 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 April 7, 2011. 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 March 31, 2006, by and among Wells Fargo
Bank, National Association, as Institutional Trustee; Wells Fargo Delaware Trust
Company, as Delaware Trustee; Tower Group, Inc, as Sponsor; and the Trust
Administrators, 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 March 31, 2006, by and between Tower
Group, Inc. and Wells Fargo Delaware 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
Purchase Agreement dated March 29, 2006 amongst the Company, Tower Group
Statutory Trust V and Bear Stearns & Company, Inc. Cochran Colonia Waller LLC,
the introducing agent, 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 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 Purchase Agreement between the Company, Tower Group Statutory
Trust V and Bear Stearns & Co., Inc.
10.02 Guarantee Agreement dated March 31, 2006, by and between Tower
Group, Inc. and Wells Fargo Delaware Trust Company
10.03 Indenture between Tower Group, Inc. and Wells Fargo Bank,
National Association , as Trustee, dated March 31, 2006
10.04 Amended and Restated Declaration of Trust, dated March 31, 2006,
by and among Wells Fargo Bank, National Association , as
Institutional Trustee; Wells Fargo Delaware Trust Company, as
Delaware Trustee; Tower Group, Inc, as Sponsor; and the Trust
Administrators Francis M. Colalucci and Steve G. Fauth.
10.05 Junior Subordinated Debt Security due 2036 issued by Tower Group,
Inc. dated March 31, 2006
10.06 Capital Securities Certificate dated March 31, 2006.
10.07 Common Securities Certificate dated March 31, 2006
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 April 6, 2006
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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 Purchase Agreement between the Company, Tower Group Statutory
Trust V and Bear Stearns & Co., Inc.
10.02 Guarantee Agreement dated March 31, 2006, by and between Tower
Group, Inc. and Wells Fargo Delaware Trust Company
10.03 Indenture between Tower Group, Inc. and Wells Fargo Bank,
National Association , as Trustee, dated March 31, 2006
10.04 Amended and Restated Declaration of Trust, dated March 31, 2006,
by and among Wells Fargo Bank, National Association , as
Institutional Trustee; Wells Fargo Delaware Trust Company, as
Delaware Trustee; Tower Group, Inc, as Sponsor; and the Trust
Administrators Francis M. Colalucci and Steve G. Fauth.
10.05 Junior Subordinated Debt Security due 2036 issued by Tower Group,
Inc. dated March 31, 2006
10.06 Capital Securities Certificate dated March 31, 2006.
10.07 Common Securities Certificate dated March 31, 2006