The following is a proxy statement released by Tower Group on July 3rd, 2014. PEO Compass will continue to keep its readers and subscribers up-to-date regarding the Tower acquisition.SUMMARY The following summary highlights selected information in this proxy statement and may not contain all the information that may be important to you. Accordingly, we encourage you to read carefully this entire proxy statement and its annexes. Each item in this summary includes a page reference directing you to a more complete description of that topic. Parties to the Merger (Page 20 ) Tower Group International, Ltd. , or the Company, we or us, a Bermuda exempted company, offers a broad range of commercial, specialty and personal property and casualty insurance products and services. ACP Re Ltd. , or ACP Re, a Bermuda exempted company, is a Bermuda based reinsurance company. London Acquisition Company Limited , or Merger Sub, a Bermuda exempted company, is a wholly owned subsidiary of ACP Re that was formed by ACP Re solely for purposes of entering into the merger agreement and completing the transactions contemplated by the merger agreement. Upon completion of the merger, Merger Sub will be merged with and into the Company and will cease to exist. In this proxy statement, we refer to the Agreement and Plan of Merger, dated as of January 3, 2014, among the Company, ACP Re and Merger Sub, as the original agreement and plan of merger. We refer to the Amendment No. 1 to the Agreement and Plan of Merger, dated as of May 8, 2014, among the Company, ACP Re and Merger Sub, as the amendment. We refer to the original agreement and plan of merger, as amended by the amendment and as it may be further amended from time to time, as the agreement and plan of merger, and we refer to the agreement between the Company, ACP Re and Merger Sub required by Section 105 of the Bermuda Companies Act, or the Companies Act, that is attached as Exhibit A to the agreement and plan of merger, the statutory merger agreement. We refer to the agreement and plan of merger and the statutory merger agreement together as the merger agreement. We refer to the merger of Merger Sub with and into the Company pursuant to the merger agreement as the merger. Structure of the Merger (Page 66 ) The merger agreement provides that Merger Sub will merge with and into the Company. The Company will be the surviving company in the merger and will continue to do business following the merger as a wholly owned subsidiary of ACP Re. As a result of the merger, the Company will cease to be a publicly traded company. If the merger is completed, you will not own any of the common shares of the surviving company. Merger Consideration (Page 26 ) In the merger, each issued and outstanding common share, par value $0.01 per share, of the Company (except for shares owned by the Company, ACP Re, Merger Sub or any other direct or indirect wholly owned subsidiary of ACP Re, and dissenting shares as to which appraisal rights have been properly exercised under the Companies Act) will be cancelled and converted into the right to receive $2.50 in cash, without interest, which amount we refer to as the merger consideration, less any applicable withholding taxes. The Special General Meeting (Page 21) Time, Place and Purpose of the Special General Meeting (Page 21 ) The special general meeting will be held on August 6, 2014, starting at 9:30 a.m., local time, at the Fairmont Hamilton Princess Hotel, 76 Pitts Bay Road, Pembroke HM 08, Bermuda. At the special general meeting, holders of our common shares will consider and vote on the following proposals:
- to approve and adopt the merger agreement and approve the merger;
- to approve, on an advisory basis, certain compensatory arrangements between the Company and its named executive officers that are based on or otherwise relate to the merger, as described in this proxy statement;
- to approve the adjournment of the special general meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special general meeting to approve the proposal to approve and adopt the merger agreement and approve the merger; and
- to transact any other business that may properly come before the special general meeting, or any adjournment of the special general meeting, by or at the direction of the board of directors.
Record Date and Quorum (Page 21) You are entitled to receive notice of, and to vote at, the special general meeting if your name was entered in the register of members of the Company as of the close of business on June 13, 2014, the record date for the special general meeting, which we refer to as the record date. You will have one vote for each common share that you owned on the record date. As of the record date, there were 57,297,589 common shares issued and entitled to vote at the special general meeting. The presence, in person or by proxy, of two or more persons at the start of the special general meeting and representing in person or by proxy in excess of 50% of the total issued voting shares of the company throughout the special general meeting constitutes a quorum. Votes Required (Page 22 ) Approval of the proposal to approve and adopt the merger agreement and approve the merger requires the affirmative vote of a majority of the votes cast by shareholders present or represented by proxy and voting at the special general meeting at which a quorum is present. Approval of each of the other proposals described in this proxy statement, other than the proposal to direct the chairman to adjourn the special general meeting, requires the affirmative vote of the holders of a majority of the common shares present or represented by proxy at the special general meeting at which a quorum is present and entitled to vote on the proposal. Approval of the proposal to direct the chairman of the meeting to adjourn the special general meeting requires the affirmative vote of the holders of a majority of the common shares present in person or represented by proxy at the special general meeting, whether or not a quorum is present. Concurrently with the execution of the original agreement and plan of merger, Michael H. Lee, former Chairman of the Board, President and Chief Executive Officer of the Company, solely in his capacity as a shareholder of the Company, entered into a support agreement with ACP Re pursuant to which he, among other things, (i) agreed to vote his common shares of the Company in favor of the proposal to approve and adopt the merger agreement and of any matter necessary to the consummation of the transactions contemplated thereby, against any competing proposed transaction and against any action, agreement, transaction or proposal that would result in a material breach by the Company of the merger agreement or a failure of any condition to the Company’s obligations thereunder to be satisfied, and (ii) granted ACP Re an irrevocable proxy to vote his shares in accordance with the foregoing. As of June 13, 2014, the record date for the special general meeting, Mr. Lee was entitled to vote 2,297,926 shares, or approximately 4.0%, of the issued common shares of the Company. A copy of the support agreement is attached to the proxy statement as Annex B . Proxies and Revocation (Page 24 ) Any shareholder of record entitled to vote at the special general meeting may submit a proxy by telephone, over the Internet, or by returning the enclosed proxy card in the accompanying prepaid reply envelope, or may
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vote in person by appearing at the special general meeting. If your common shares of the Company are held in street name by your bank, broker or other nominee, you should instruct your bank, broker or other nominee how to vote your shares using the instructions provided by your bank, broker or other nominee. If you fail to submit a proxy or to vote in person at the special general meeting, or do not provide your bank, broker or other nominee with instructions, as applicable, your shares will not be voted on the proposal to approve and adopt the merger agreement and approve the merger. You have the right to revoke a proxy, whether delivered over the Internet, by telephone or by mail, at any time before it is exercised, by submitting another proxy at a later date through any of the methods available to you, by giving written notice of revocation to our Corporate Secretary, which must be filed with our Corporate Secretary before the special general meeting begins, or by attending the special general meeting and voting in person. Background of the Merger (Page 26 ) A description of the actions that led to the execution of the merger agreement, including our discussions with ACP Re, is included under the section entitled “The Merger—Background of the Merger,” which begins on page 26. Reasons for the Merger; Recommendation of the Board of Directors (Page 40) After careful consideration, the board of directors unanimously (i) declared advisable the merger agreement, (ii) determined that the terms of the merger agreement and the transactions contemplated thereby, including the merger, to be fair to and in the best interests of the Company, (iii) determined that the fair value for each common share of the Company is $2.50, without interest, and (iv) approved, authorized and recommended that the shareholders of the Company approve and adopt the merger agreement. For the factors considered by the board of directors in reaching its decision to approve the merger agreement, please see the section entitled “The Merger—Reasons for the Merger,” which begins on page 40. The board of directors unanimously recommends that you vote “FOR” approval of the proposal to approve and adopt the merger agreement and approve the merger, and “FOR” approval of the other proposals described in this proxy statement. Opinions of Financial Advisers (Page 45 ) Opinion of J.P. Morgan In connection with the execution of the amendment, the Company’s board of directors received an opinion, dated May 8, 2014, from the Company’s financial adviser, J.P. Morgan Securities LLC, which we refer to as J.P. Morgan, as to the fairness, from a financial point of view, of the consideration to be paid to the holders of the common shares of Company pursuant to the merger agreement, as of the date of the opinion. The full text of the written opinion of J.P. Morgan, dated May 8, 2014, which sets forth, among other things, the assumptions made, procedures followed, matters considered, and qualifications and limitations on the review undertaken by J.P. Morgan in connection with rendering its opinion, is included as Annex C to this document and is incorporated by reference herein in its entirety. You are encouraged to read the opinion and the description beginning on page 45 carefully in their entirety. This summary and the description of the opinion beginning on page 45 are qualified in their entirety by reference to the full text of the opinion. J.P. Morgan provided its opinion to the board of directors of the Company (in its capacity as such) in connection with, and for purposes of, its evaluation of the transaction contemplated by the merger agreement. J.P. Morgan’s written opinion is addressed to the board of directors of the Company, is directed only to the fairness, from a financial point of view, of the consideration to be paid to the holders of Company common shares pursuant to the merger agreement,
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and does not address any other matter. The opinion does not constitute a recommendation to any shareholder as to how any shareholder should vote with respect to the proposal to approve and adopt the merger agreement and approve the merger, or whether to take any other action with respect to the merger. Opinion of BofA Merrill Lynch (Page 49 ) In connection with the merger, Merrill Lynch, Pierce, Fenner & Smith Incorporated, which we refer to as BofA Merrill Lynch, the Company’s financial adviser, delivered to the Company’s board of directors a written opinion, dated May 8, 2014, as to the fairness, from a financial point of view and as of the date of the opinion, of the merger consideration to be received by holders of common shares (other than ACP Re and its affiliates). The full text of the written opinion, dated May 8, 2014, of BofA Merrill Lynch, which describes, among other things, the assumptions made, procedures followed, factors considered and limitations on the review undertaken, is attached as Annex D to this document and is incorporated by reference herein in its entirety. BofA Merrill Lynch provided its opinion to the Company’s board of directors (in its capacity as such) for the benefit and use of the Company’s board of directors in connection with and for purposes of its evaluation of the merger consideration from a financial point of view. BofA Merrill Lynch’s opinion does not address any other aspect of the merger and no opinion or view was expressed as to the relative merits of the merger in comparison to other strategies or transactions that might be available to the Company, or in which the Company might engage or as to the underlying business decision of the Company to proceed with or effect the merger, including, without limitation, the Company’s decision to agree to reduce the consideration payable to holders of common shares by entering into the amendment. BofA Merrill Lynch’s opinion does not address any other aspect of the merger and does not constitute a recommendation to any shareholder as to how to vote or act in connection with the proposed merger or any related matter. No Financing Covenants or Conditions (Page 68 ) The merger is not subject to any financing covenants or conditions. We anticipate that the total funds needed to complete the merger will be approximately $143.3 million. ACP Re has informed us that it will fund this amount through a combination of cash at ACP Re and the proceeds from the issuance of notes to AmTrust Financial Services, Inc., or AmTrust, and/or National General Holdings Corp., or NGHC, that will occur substantially simultaneously with the consummation of the merger. Pursuant to a guaranty, dated as of January 3, 2014, made by The Michael Karfunkel 2005 Grantor Retained Annuity Trust, which we refer to as the Karfunkel Trust, in favor of the Company, the Karfunkel Trust has unconditionally and irrevocably guaranteed ACP Re’s payment of the aggregate merger consideration and the expenses required to be paid by ACP Re and the Merger Sub pursuant to the merger agreement. A copy of the guaranty is attached to this proxy statement as Annex E . Interests of Certain Persons in the Merger (Page 57) When considering the recommendation by the board of directors, you should be aware that our officers and directors have interests in the merger that are different from, or in addition to, your interests as a shareholder. The board of directors was aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending that the shareholders of the Company approve the proposal to approve and adopt the merger agreement and approve the merger. These interests include the following:
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the interests of the Company’s officers in continuing their roles with the Company after the merger;
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the cash-out of all restricted shares and restricted share units held by our executive officers and directors; and
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that the Company’s directors and executive officers are entitled to continued indemnification and insurance coverage under the merger agreement.
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Material U.S. Federal Income Tax Consequences of the Merger (Page 61) The exchange of common shares for cash pursuant to the merger generally will be a taxable transaction for U.S. federal income tax purposes. Shareholders who are “U.S. holders” and who exchange their common shares in the merger generally will recognize gain or loss in an amount equal to the difference, if any, between the cash payments they receive pursuant to the merger and their adjusted tax basis in their common shares of the Company. Shareholders who are “non-U.S. holders” and who realize gain on the exchange of their common shares of the Company in the merger generally will not be subject to U.S. federal income tax on the realized gain, subject to certain exceptions. You should read “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 61, which provides a discussion of tax consequences of the merger for “U.S. holders” and “non-U.S. holders” as defined in that discussion. You should consult your tax adviser for a complete analysis of the effect of the merger on your U.S. federal, state, local and foreign taxes. Regulatory Approvals (Page 63) The Company has insurance company subsidiaries and affiliates that are domiciled or deemed to be “commercially domiciled” in Bermuda, California, Florida, Illinois, Maine, Massachusetts, New Hampshire, New Jersey and New York. The insurance laws of these jurisdictions require an acquiring person to obtain the approval of the applicable insurance regulator prior to the direct or indirect acquisition of control of an insurance company that is domiciled or commercially domiciled therein. ACP Re, AmTrust and NGHC have filed formal applications with the applicable insurance regulatory authorities for the approval of the merger and those applications are currently under review. Although the Company and ACP Re do not expect the applicable insurance regulators to withhold their approvals, there is no assurance that such approvals will be obtained. In addition, the merger agreement limits the conditions that ACP Re is required to accept in connection with obtaining such approvals. There is no assurance that an insurance regulator will not impose a “burdensome condition” on its approval of ACP Re’s application that ACP Re will not be required to accept under the merger agreement. See “The Merger Agreement—Filings; Other Actions.” In addition, the insurance laws and regulations of certain U.S. states require that, prior to an acquisition of an insurance company doing business in that state or licensed by that state (or the acquisition of its holding company), a notice filing that discloses certain market share data in that jurisdiction must be made and an applicable waiting period must expire or be terminated. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, or the HSR Act, and the rules promulgated thereunder by the Federal Trade Commission, or the FTC, the merger cannot be completed until each of the Company and ACP Re file a notification and report form with the FTC and the Antitrust Division of the Department of Justice, or the DOJ, under the HSR Act and the applicable waiting period has expired or been terminated. Each of the Company and ACP Re filed such a notification and report form on January 17, 2014 and requested early termination of the applicable waiting period. On January 30, 2014, the FTC notified the parties that their request for earlier termination of the applicable waiting period under the HSR Act had been granted. The Merger Agreement (Page 66 ) Treatment of Common Shares and Restricted Shares (Page 67) At the effective time of the merger, or the effective time, each issued and outstanding common share of the Company (except for shares owned by the Company, ACP Re, Merger Sub or any other direct or indirect wholly owned subsidiary of ACP Re, and dissenting shares as to which appraisal rights have been properly exercised under the Companies Act) will be cancelled and converted into the right to receive the merger consideration of $2.50 in cash, without interest, less any applicable withholding taxes. Each restricted share of the Company, issued and outstanding and subject to forfeiture immediately prior to the effective time, will become fully vested without restrictions at the effective time and will be treated as an
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unrestricted issued and outstanding common share of the Company. The holder of each such restricted share will be entitled to receive the merger consideration with respect thereto, without interest, less any applicable withholding taxes. Treatment of Options and Restricted Share Units (Page 67) At the effective time of the merger, each outstanding option to acquire Company common shares, whether granted under the Company’s 2013 Long-Term Equity Plan or 2004 Long-Term Equity Plan (as amended and restated, effective May 15, 2008), which we refer to as the long-term equity plans, will become vested and exercisable as of the Effective Time and will be exchanged for a cash payment equal to the product of (A) the number of the Company’s common shares subject to the stock option and (B) the excess, if any, of (1) the merger consideration over (2) the exercise price per share subject to such stock option. Each outstanding restricted share unit granted under the Company’s long-term equity plans will become fully vested and exchanged for a cash payment equal to the merger consideration. Solicitation of Other Offers (Page 73) The merger agreement contains detailed provisions that restrict the Company, its subsidiaries and their respective officers, directors, employees, consultants, agents, financial advisers, investment bankers, attorneys, accountants, other advisers, affiliates and other representatives from soliciting, initiating or knowingly facilitating or encouraging the submission of any inquiries regarding, or the making of any proposal, request or offer that constitutes, a takeover proposal (as defined in the merger agreement). The merger agreement also restricts the Company, its subsidiaries and their respective officers, directors, employees, consultants, agents, financial advisers, investment bankers, attorneys, accountants, other advisers, affiliates and other representatives from participating in any discussions or negotiations regarding any other takeover proposal. The merger agreement does not, however, prohibit the board of directors from considering, recommending to the Company’s shareholders and even entering into an alternative transaction with a third party if specified conditions are met, including, in certain cases, that the Company did not violate the non-solicitation provision and the payment of the termination fee to ACP Re required by the merger agreement. Conditions to the Merger (Page 79) The respective obligations of the Company, ACP Re and Merger Sub to consummate the merger are subject to the satisfaction or waiver of certain conditions, including the approval of the merger agreement by our shareholders, the receipt of required insurance regulatory and antitrust approvals, the accuracy of the parties’ representations and warranties (subject to specified materiality qualifications), the performance of the parties’ covenants, the absence of legal restrictions on the consummation of the merger, the absence of a material adverse effect on the Company, and the absence of certain insolvency events involving the Company’s insurance subsidiaries and affiliates. Termination of the Merger Agreement (Page 80) The merger agreement may be terminated at any time prior to the completion of the merger by mutual written consent of the Company and ACP Re. The merger agreement may also be terminated by either the Company or ACP Re if:
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the merger is not consummated on or before November 15, 2014, which date we refer to as the walk-away date;
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any injunction, judgment, ruling, law, order or decree that prohibits the consummation of the merger shall have become final and non-appealable; or
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the Company’s shareholders fail to approve the proposal to approve and adopt the merger agreement and approve the merger at the special general meeting or at any adjournment or postponement thereof.
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In addition, ACP Re may terminate the merger agreement if:
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the Company has breached any of its representations, warranties, covenants or agreements under the merger agreement and such breach would give rise to the failure of the related conditions to ACP Re’s obligation to close to be satisfied;
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the board of directors withdraws or modifies its recommendation that the Company’s shareholders approve the merger agreement or fails to include such recommendation in this proxy statement, takes any action to exempt any person from the provisions of any applicable anti-takeover law, or recommends the approval of a takeover proposal;
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the proxy statement relating to the merger has not been filed with the Securities and Exchange Commission, or SEC, on or prior to March 3, 2014 (a preliminary version of this proxy statement was filed with the SEC on February 13, 2014);
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the special general meeting of shareholders has not been held on or prior to November 15, 2014;
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the Company or any subsidiary of the Company has breached in any material respect any of the material covenants set forth in quota share reinsurance agreements between certain of the Company’s insurance subsidiaries and certain affiliates of ACP Re; or
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if any insurance regulatory approval required to be obtained by the Company or any of its subsidiaries in respect of the quota share reinsurance agreements has not been obtained by January 17, 2014 (all such approvals were obtained by such date).
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In addition, the Company may terminate the merger agreement if:
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ACP Re has breached any of its representations, warranties, covenants or agreements under the merger agreement and such breach would give rise to the failure of the related conditions to the Company’s obligation to close to be satisfied;
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Prior to the approval by the shareholders of the proposal to approve and adopt the merger agreement and approve the merger, the Company enters into a definitive agreement providing for a superior proposal (as defined in the merger agreement), provided that the Company simultaneously pays or had previously paid to ACP Re the termination fee described below; or
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the Karfunkel Trust has breached in any material respect any of its representations, warranties or covenants under the guaranty.
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Termination Fee (Page 81) The Company has agreed to pay ACP Re a termination fee of $6.8 million, which amount represents approximately 4.75% of the equity value of the merger, if the merger agreement is terminated under any of the following circumstances:
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the Company terminates the merger agreement because it enters into a definitive agreement providing for a superior proposal; |
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ACP Re terminates the merger agreement because the board of directors makes an adverse recommendation change; |
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the Company or ACP Re terminates the merger agreement because the shareholder approval necessary to complete the merger is not obtained at the special general meeting of the Company’s shareholders and the Company’s board of directors has effected an adverse recommendation change before the special general meeting; or |
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any person publicly makes, proposes or communicates (and does not withdraw) a takeover proposal; and |
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thereafter, either party terminates the merger agreement because:
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the merger has not been completed by the walk-away date; or
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the shareholder approval necessary to complete the merger is not obtained at the special general meeting; and
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within nine months after the termination of the merger agreement, the Company enters into a definitive agreement with respect to a takeover proposal or consummates a takeover proposal.
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If the merger agreement is terminated as a result of clause (i) above, the termination fee will be payable by the Company to ACP Re prior to or simultaneously with such termination. If the merger agreement is terminated as a result of either clause (ii) or (iii) above, the termination fee will be payable by the Company to ACP Re within two business days after such termination. If the merger is terminated as a result of clause (iv) above, the termination fee will be payable by the Company to ACP Re no later than two business days following the consummation of the takeover proposal. Expenses (Page 82) If the merger agreement is terminated by ACP Re or the Company because the Company’s shareholders have not approved the proposal to approve and adopt the merger agreement and approve the merger at the special general meeting and the board of directors has not effected an adverse recommendation change, or by ACP Re because the special general meeting is not convened and held by November 15, 2014, then the Company will reimburse ACP Re for the reasonable and documented costs and expenses of ACP Re, Merger Sub and their affiliates in connection with the transactions associated with the merger, up to a maximum of $2 million. Any termination fee payable by the Company after this expense reimbursement will be reduced by the amount of the reimbursement. Remedies (Page 82) If ACP Re receives payment of the termination fee or the expense reimbursement described above from the Company, ACP Re’s receipt of that termination fee or expense reimbursement will be the sole and exclusive remedy of ACP Re against the Company. The parties are entitled to an injunction, specific performance and other equitable relief to prevent breaches of the merger agreement and to enforce specifically the terms of the merger agreement in addition to any other remedy to which they may be entitled at law or in equity. Market Price of Common Shares (Page 87) The closing price of the common shares on the NASDAQ on May 7, 2014, the last trading day prior to the public announcement of the amendment, was $1.70 per common share. On June 27, 2014, the most recent practicable date before this proxy statement was mailed to our shareholders, the closing price of the common shares on the NASDAQ was $2.03 per common share. You are encouraged to obtain current market quotations for our common shares in connection with voting your common shares. Appraisal Rights (Page 89) Shareholders who do not vote in favor of the merger agreement and who are not satisfied that they have been offered fair value for their common shares may exercise, within one month after the date of the giving of
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notice convening the special general meeting (that is, no later than August 11, 2014), appraisal rights under Bermuda law to have the fair value of their common shares appraised by the court subject to compliance with all of the required procedures, as described in the section entitled “Appraisal Rights” beginning on page 89. Failure to follow exactly the procedures specified under the Companies Act will result in the loss of appraisal rights. Because of the complexity of the Companies Act relating to appraisal rights, if you are considering exercising your appraisal right, we encourage you to seek the advice of your own legal counsel. Delisting and Deregistration of Common Shares (Page 93) If the merger is completed, the Company’s common shares will be delisted from the NASDAQ and deregistered under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. As such, we would no longer file periodic reports with the SEC on account of our common shares. Litigation Relating to the Merger (Page 64) On January 14, 2014, a purported shareholder of the Company (Derek Wilson) filed a purported class action complaint against the Company, certain of its current and former officers and directors, ACP Re, Merger Sub, and AmTrust, in the United States District Court for the Southern District of New York, which we refer to as the Wilson Complaint. The Wilson Complaint alleges that the members of the Company’s board of directors breached their fiduciary duties owed to the shareholders of the Company under Bermuda law by approving the Company’s entry into the merger agreement and failing to take steps to maximize the value of the Company to its public shareholders, and that the Company, ACP Re, Merger Sub, and AmTrust aided and abetted such breaches of fiduciary duties. The Wilson Complaint also alleges, among other things, that the proposed transaction undervalues the Company, that the process leading up to the merger agreement was flawed, and that certain provisions of the merger agreement improperly favor ACP Re and discourage competing offers for the Company. The Wilson Complaint further alleges oppressive conduct by the directors against the Company’s shareholders in violation of Bermuda law. The Wilson Complaint seeks, among other things, declaratory and injunctive relief concerning the alleged fiduciary breaches, injunctive relief prohibiting the defendants from consummating the proposed transaction, rescission of the merger agreement to the extent already implemented, and other forms of equitable relief. On February 27, 2014, the same purported shareholder filed an amended complaint alleging, in addition, that the Company and the directors disseminated a materially false and misleading preliminary proxy statement regarding the merger agreement in violation of sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder, which we refer to as the Wilson Amended Complaint. On March 3, 2014, another purported shareholder (David Raul) filed a purported class action complaint against the Company, certain of its current and former officers and directors, ACP Re, Merger Sub, and AmTrust, also in the United States District Court for the Southern District of New York, which we refer to as the Raul Complaint. The Raul Complaint alleges that the defendants disseminated a materially false and misleading preliminary proxy statement regarding the merger agreement in violation of sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9. On May 12, 2014, the United States District Court for the Southern District of New York issued an order consolidating the Wilson and Raul actions, which, as so consolidated, we refer to as the Consolidated Federal Action. On May 22, 2014, the Court issued an order appointing Wilson and George Strum, another purported shareholder of the Company, as co-lead plaintiffs in the Consolidated Federal Action and appointing Robbins Arroyo LLP and WeissLaw LLP as co-lead counsel. On March 24, 2014, two purported shareholders of the Company (Dmitriy Bekkerman and Glenn Austin Wester) filed a purported class action and shareholder derivative complaint against the Company, certain of its current and former officers and directors, and Tower Group, Inc., in the Supreme Court of the State of New York, County of New York, which we refer to as the Bekkerman Complaint. The Bekkerman Complaint alleges, among other things, that the members of the Company’s board of directors breached their fiduciary duties owed to the shareholders of the Company by failing to exercise appropriate oversight over the conduct of the Company’s business, awarding Michael Lee excessive compensation, approving the Company’s entry into the
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original agreement and plan of merger, failing to take steps to maximize the value of the Company to its public shareholders, and misrepresenting or omitting material information in connection with the proposed transaction, and that the Company and Tower Group, Inc. aided and abetted such breaches of fiduciary duties. The Bekkerman Complaint also alleges, among other things, that Michael Lee was unjustly enriched as a result of the compensation he received while allegedly breaching his fiduciary duties and by selling stock while in the possession of material, adverse, non-public information. The Bekkerman Complaint seeks, among other things, an award of money damages, declaratory and injunctive relief concerning the alleged fiduciary breaches, injunctive relief prohibiting the defendants from consummating the proposed transaction, rescission of the merger agreement to the extent already implemented, and other forms of equitable relief. On May 16, 2014, the defendants removed the Bekkerman action to the United States District Court for the Southern District of New York, and requested that it be designated as related to the Consolidated Federal Action. On June 3, 2014, the United States District Court for the Southern District of New York accepted the designation of the Bekkerman Complaint as related to the Consolidated Federal Action. The defendants believe that each of the foregoing complaints is without merit and intend to defend the actions vigorously.
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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This proxy statement, and the documents to which we refer you in this proxy statement, as well as information included in oral statements or other written statements made or to be made by us, contain statements that, in our opinion, may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements containing words such as expect, anticipate, believe, estimate, likely or similar words that are used herein or in other written or oral information conveyed by or on behalf of the Company, are intended to identify forward-looking statements. Forward-looking statements are made based upon management’s current expectations and beliefs concerning future developments and their potential effects on the Company. Such forward-looking statements are not guarantees of future events. Actual results may differ materially from those contemplated by the forward-looking statements due to, among others, the following factors:
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the shareholders of the Company may not approve the proposal to approve and adopt the merger agreement and approve the merger;
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the parties may be unable to obtain governmental and regulatory approvals required for the merger, or required governmental and regulatory approvals may delay the merger or result in the imposition of conditions that could cause the parties to abandon the merger;
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the parties may be unable to complete the merger because, among other reasons, conditions to the closing of the merger agreement may not be satisfied or waived;
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developments beyond the parties’ control, including, but not limited to, changes in domestic or global economic conditions, competitive conditions and consumer preferences, adverse weather conditions or natural disasters, health concerns, international, political or military developments and technological developments; or
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the “risk factors” and other factors referred to in the Company’s annual report on Form 10-K for the year ended December 31, 2013, which we refer to as the 2013 10-K, as filed with the SEC on May 2, 2014, and the Company’s quarterly report on Form 10-Q/A for the period ended March 31, 2014, which we refer to as the First Quarter Form 10-Q, as filed with the SEC on June 27, 2014, copies of which are attached to this proxy statement as Annex H and Annex I, respectively.
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Consequently, all of the forward-looking statements we make in this proxy statement are qualified by the information contained herein, including, but not limited to, (i) the information contained under this heading and (ii) the information contained under the headings “Risk Factors” and “Business” and in our consolidated financial statements and notes thereto included in the 2013 10-K and the quarterly report on Form 10-Q/A, copies of which are attached to this proxy statement as Annex H and Annex I, respectively. You should carefully consider the cautionary statements contained or referred to in this section in connection with any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our behalf.
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PARTIES TO THE MERGER
The Company Tower Group International, Ltd. Bermuda Commercial Bank Building, 2nd Floor 19 Par-la-Ville Road Hamilton, HM 11, Bermuda +1 441.279.6610 The Company is a Bermuda exempted company headquartered in Hamilton, Bermuda. Through its insurance subsidiaries, Tower offers a broad range of commercial, specialty and personal property and casualty insurance products and services to businesses in various industries and to individuals through the United States. Our common shares are publicly traded on the NASDAQ under the symbol “TWGP.” ACP Re ACP Re Limited PO Box HM 242 Hamilton HM AX, Bermuda +1 441.297.4620 ACP Re, a Bermuda exempted company, is a Bermuda based reinsurance company. Merger Sub London Acquisition Company Limited c/o ACP Re Limited PO Box HM 242 Hamilton HM AX, Bermuda +1 441.297.4620 Merger Sub is a Bermuda exempted company and a wholly owned subsidiary of ACP Re that was formed by ACP Re solely for purposes of entering into the merger agreement and completing the transactions contemplated by the merger agreement. Merger Sub has not engaged in any business except for activities incidental to its formation and as contemplated by the merger agreement. At the effective time of the merger, Merger Sub will merge with and into the Company and will cease to exist, and the Company will continue as the surviving company.
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