Assurant 2005 Annual Report Download - page 29

In July 1997, Fortis Capital Trust II, a trust established by us, issued 50,000 of 7.94% capital securities (the “1997 Capital Securities II”) to
investors and 1,547 of 7.94% common securities (the “1997 Common Securities II”)
to us, in each case with a liquidation amount of $1,000 per
security. Fortis Capital Trust II used the proceeds from the sale of the 1997 Capital Securities II and the 1997 Common Securities II to
purchase $51,547,000 of our 7.94% junior subordinated debentures due 2027 (the “1997 Junior Subordinated Debentures II”). The 1997 Junior
Subordinated Debentures II were the sole asset of Fortis Capital Trust II.
With respect to each of Fortis Capital Trust and Fortis Capital Trust II, each of, Fortis SA/ NV and Fortis N.V. entered into a junior
subordinated guarantee of the distributions and payments on the liquidation and redemption of the 1997 Capital Securities I and the 1997
Capital Securities II, respectively, but only to the extent that funds were held by Fortis Capital Trust and Fortis Capital Trust II, respectively.
Fortis SA/ NV and Fortis N.V. also entered into a junior subordinated guarantee of the payment of the principal, premium, if any, and interest
on the 1997 Junior Subordinated Debentures I and 1997 Junior Subordinates Debentures II (together, the “1997 Junior Subordinated
Debentures”). The 1997 Junior Subordinated Debentures and the guarantees were unsecured, junior subordinated obligations.
In January 2004, we redeemed all of the outstanding 1997 Junior Subordinated Debentures, which resulted in a mandatory redemption of
all of the outstanding 1997 Capital Securities I and 1997 Capital Securities II. The issuer trusts under the 1997 Capital Securities I and 1997
Capital Securities II were dissolved in January 2004. We paid a premium of approximately $66.7 million as a result of early redemption.
Fortis Commercial Paper Program
Historically, Fortis Finance N.V. maintained a $1 billion commercial paper facility that, until our initial public offering in February 2004,
we were able to access, through intercompany loans, for up to $750 million. We used the commercial paper facility to cover any cash shortfalls,
which may have occurred from time to time. Although we were able to access funds for a few months in 2004, we had no commercial paper
borrowings with Fortis Finance N.V. associated with this commercial paper facility during the year ended December 31, 2004. In connection
with our separation from Fortis at our initial public offering in February 2004, we no longer have access to this facility and have established our
own commercial paper program.
Guarantee of Senior Bridge Credit Facilities
Until February 10, 2004, Fortis guaranteed our obligations under a $1,100 million senior bridge credit facility and a $650 million senior
bridge facility, all of which facilities were repaid by us and the guarantees of Fortis were extinguished.
Consulting Agreement and Retirement Agreement
Effective July 31, 2000, Allen R. Freedman, one of our directors, retired as the Chief Executive Officer of the Company. In connection with
his retirement, Mr. Freedman entered into a Consulting, Non-Compete and Payments Agreement with us and Fortis pursuant to which he
agreed to (1) perform consulting services for the Company for a period of three years from and after July 31, 2000, and (2) refrain from certain
activities that would be in competition with the Company, which includes refraining from encouraging, soliciting or inducing any officer or
employee of the Company or its subsidiaries to enter into an employment relationship with any entity whose business activities are in
competition with those of the Company for a period of five years ending July 31, 2005. Pursuant to the terms of this agreement, Mr. Freedman
received total payments of $3,098,000, with the final payment taking place on August 1, 2004, and reimbursement of any reasonable out-of-
pocket expenses incurred in providing his consulting services.
On July 19, 1999, Mr. Freedman entered into a Retirement Agreement with us and Fortis relating to the payments and benefits to be
provided to Mr. Freedman in connection with his scheduled retirement on July 31, 2000. The agreement provided that as of the date of
Mr. Freedman’s retirement on July 31, 2000, Mr. Freedman would be fully vested in all amounts earned under our long term incentive plan.
The amounts due Mr. Freedman under the long term incentive plan could be deferred by Mr. Freedman for a period of five years beyond the
later of his retirement as an employee and his departure from our Board of Directors. The
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