Assurant 2005 Annual Report Download - page 19

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Assurant Appreciation Incentive Rights Plan
During 2004, the Company maintained the Assurant Appreciation Incentive Rights Plan, to provide key employees with the right to receive
long-term incentive cash compensation based on the appreciation in value of incentive units of Assurant and incentive units of each of its
operating business segments. This plan is administered by a committee appointed by our Board of Directors.
Under this plan, an eligible employee of Assurant received 75% of his or her award in Assurant incentive rights and 25% of his or her
award in operating business segment incentive rights. Conversely, an eligible employee of an operating business segment of Assurant received
25% of his or her award in Assurant incentive rights and 75% of his or her award in operating business segment incentive rights. Each
incentive right represented the right to the appreciation in value of an incentive unit. Each Assurant incentive unit originally represented one ten
millionth (.0000001) of the entity value of Assurant, and each operating business segment incentive unit represented one ten millionth of the
entity value of each operating business segment that participated in the plan. However, the number of incentive units has been adjusted over
time for cash flows into and out of each entity. The entity value of Assurant and the entity value of the respective operating business segments
were determined by the committee as of each December 31st based on a valuation provided by an independent, qualified appraiser. The
committee also determined the adjustment to the number of incentive units outstanding in each entity and the value of each unit as of the
valuation date. Each incentive right entitled the holder to a cash payment equal to the difference between the value of the incentive unit on the
December 31st immediately preceding the date of exercise and the value of the incentive unit on the December 31st immediately preceding the
date of grant.
Each right becomes vested on the third anniversary of the effective date the right was granted, except that (1) each Assurant right becomes
fully vested if Assurant undergoes a change in control (as defined in the plan); (2) each business unit segment becomes fully vested if that
operating business segment undergoes a change in control; and (3) if a participant retires, becomes disabled, or dies, then the participant vests
in 1/36th of each right for each month elapsed from January 1st of the year of grant to the date the participant terminates employment. Rights
that have become vested may be exercised during a 45-day exercise period following the announcement by the plan committee of the value of
Assurant incentive units and of the incentive units of each operating business segment. To the extent not previously exercised, all rights will
automatically be exercised on the tenth anniversary of the date of grant. Rights that are exercised are payable solely in cash.
The Company anticipates that it will not grant any additional rights under the Assurant Appreciation Incentive Rights Plan.
Pension Plans
The Company maintains two executive defined benefit pension plans, each of which is inter-related with our broad-based, tax-qualified,
defined benefit pension plan. These plans, the Supplemental Executive Retirement Plan and the Executive Pension and 401(k) Plan, are
described below.
As described below, the Supplemental Executive Retirement Plan (the “SERP”)
benefit is offset by benefits payable to the participant under
the Company’s other defined benefit plans. As such, the aggregate
13
(3) Ms. Landreth voluntarily terminated her employment on December 31, 2004. She did not participate in the Assurant Appreciation
Incentive Rights Plan.
(4) Represents the total number of incentive rights awarded. Rights are distributed between Assurant, Inc. (25%) and Assurant Solutions
(75%). The Assurant, Inc. incentive rights were replaced with stock appreciation rights on Assurant common stock following our initial
public offering, as more fully described under
“
—
Assurant Appreciation Incentive Rights Plan.
”
Supplemental Executive Retirement Plan