THE HARTFORD FINANCIAL SERVICES GROUP, INC.
17,211,837 SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE
________________________________________________________________________________
THE HARTFORD INCENTIVE STOCK PLAN
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PLAN INFORMATION
________________________________________________________________________________
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
THE PROSPECTUS COVERS SUCH ADDITIONAL SECURITIES AS MAY BE ISSUABLE AS A RESULT
OF ANTI-DILUTION PROVISIONS CONTAINED IN THE INSTRUMENTS PURSUANT TO WHICH
SECURITIES COVERED BY THE PROSPECTUS ARE ISSUED.
________________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
FOR NORTH CAROLINA RESIDENTS:
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE COMMISSIONER OF
INSURANCE FOR THE STATE OF NORTH CAROLINA, NOR HAS THE COMMISSIONER OF INSURANCE
RULED UPON THE ACCURACY OR THE ADEQUACY OF THIS DOCUMENT.
________________________________________________________________________________
JANUARY, 2002
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Additional information about The Hartford Incentive Stock Plan (the
"Plan") and its administration may be obtained without charge by written or oral
request to the Manager of Stock Option Plan Administration, The Hartford
Financial Services Group, Inc. ("The Hartford"), Hartford Plaza, Hartford, CT
06115, telephone number (860) 547-5000.
AVAILABLE INFORMATION
The Hartford will provide, without charge, upon the written or oral
request of any person to whom this Prospectus is delivered, a copy of any of the
following documents, all of which are incorporated by reference in this
Prospectus:
(a) The Hartford's latest Annual Report on Form 10-K filed with
the Securities and Exchange Commission (the "Commission")
pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act");
(b) All other reports filed pursuant to Section 13(a) or 15(d) of
the Exchange Act since the end of the fiscal year covered by
the Form 10-K referred to in (a) above; and
(c) The description of the Common Stock contained in a
registration statement filed under the Exchange Act, including
any amendment or report filed for the purpose of updating such
description.
All documents subsequently filed with the Commission by The Hartford
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act,
after the date hereof and prior to the filing of a post-effective
amendment which indicates that all securities offered have been sold or
which deregisters all securities then remaining unsold shall be deemed
to be incorporated by reference in the Prospectus and to be a part
thereof from the date of filing such documents.
In addition, The Hartford will provide, without charge, upon the
written or oral request of any person to whom this Prospectus is
delivered, the following documents:
(a) When updating information is furnished, a copy of all
documents previously delivered containing Plan information
that then constitute part of this Prospectus; and
(b) A copy of whichever of the following was previously
distributed pursuant to Rule 428(b)(2) under the Securities
Act of 1933, as amended (the "Securities Act"):
(i) The Hartford's annual report to stockholders
containing the information required by Rule 14a-3(b)
under the Exchange Act for its latest fiscal year;
(ii) The Hartford's annual report on Form 10-K for its
latest fiscal year; or
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(iii) The latest prospectus filed pursuant to Rule 424(b)
under the Securities Act that contains audited
financial statements for The Hartford's latest fiscal
year.
Any statement contained in a document incorporated or deemed to be
incorporated by reference in the Prospectus shall be deemed to be
modified or superseded for purposes of the Prospectus to the extent
that a statement contained in the Prospectus or in any other
subsequently filed document which also is or is deemed to be
incorporated by reference in the Prospectus modifies or supersedes such
statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of
the Prospectus. Any such document, as well as The Hartford's most
recent annual report to shareholders and any other report or
communication distributed to The Hartford shareholders generally, may
be obtained without charge by written or oral request to the Manager of
Stock Option Plan Administration, The Hartford, Hartford Plaza,
Hartford, CT 06115, telephone number: (860) 547-5000.
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TABLE OF CONTENTS
General Information...................................................... 4
Hartford Incentive Stock Plan........................................... 5
Administration........................................................... 23
Federal Tax Treatment.................................................... 23
GENERAL INFORMATION
The Plan contains a limit on the aggregate number of shares which may
be awarded for the duration of the Plan. The maximum limit applicable to all
share awards for the duration of the Plan (the "Maximum Limit") is eight percent
(8%) of the total outstanding shares of The Hartford Common Stock as of the date
of shareholder approval of the Plan. In addition, no more than 20% of the total
may be available for awards of restricted stock or performance shares under the
Plan. The Plan limits the award of stock options to any one person in any year
to no more than 1,000,000 shares.
The Plan permits the committee administering the Plan to award
performance shares and restricted stock, as well as non-qualified stock options
and incentive stock options, with or without stock appreciation rights.
Reference is made to the text of the Plan herein for a complete description of
awards permitted under the Plan and the relevant provisions and conditions
applicable thereto.
The prospectus does not cover resales of The Hartford Common Stock
acquired pursuant to the provisions of the Plan. Resales may be subject to
restrictions or limitations imposed by the Securities Act of 1933 and the
Securities Exchange Act of 1934.
The Plan is not subject to any of the provisions of the Employee
Retirement Income Security Act of 1974. Furthermore, Section 401 of the Internal
Revenue Code relating to certain qualified pension, profit-sharing and stock
bonus plans does not apply to the Plan.
Plan participants receive information with respect to their
participation, including the date of grant, the exercise price, the amount
exercisable and the expiration date, as well as applicable information
concerning whatever performance shares or restricted stock may be relevant to
them.
Set forth below is the text of the Plan.
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THE HARTFORD INCENTIVE STOCK PLAN
1. PURPOSE
The purpose of The Hartford Incentive Stock Plan is to
motivate and reward superior performance on the part of Key Employees
of The Hartford Financial Services Group, Inc. and its subsidiaries
("The Hartford") and to thereby attract and retain Key Employees of
superior ability. In addition, the Plan is intended to further
opportunities for stock ownership by such Key Employees and Directors
(as defined below) in order to increase their proprietary interest in
The Hartford and, as a result, their interest in the success of the
Company. Awards will be made, in the discretion of the Committee, to
Key Employees (including officers and directors who are also Key
Employees) whose responsibilities and decisions directly affect the
performance of any Participating Company and its subsidiaries, and also
to Directors. Such incentive awards may consist of stock options and
stock appreciation rights payable in stock or cash for Key Employees or
Directors, and performance shares, restricted stock or any combination
of the foregoing for Key Employees, as the Committee may determine.
2. DEFINITIONS
When used herein, the following terms shall have the following
meanings:
"Act" means the Securities Exchange Act of 1934, as amended.
"Award" means an award granted to any Key Employee or Director
in accordance with the provisions of the Plan in the form of Options,
Rights, Performance Shares or Restricted Stock, or any combination of
the foregoing, as applicable.
"Award Agreement" means the written agreement evidencing each
Award granted under the Plan.
"Beneficial Owner" means any Person who, directly or
indirectly, has the right to vote or dispose of or has "beneficial
ownership" (within the meaning of Rule 13d-3 under the Act) of any
securities of a company, including any such right pursuant to any
agreement, arrangement or understanding (whether or not in writing),
provided that: (i) a Person shall not be deemed the Beneficial Owner of
any security as a result of an agreement, arrangement or understanding
to vote such security (A) arising solely from a revocable proxy or
consent given in response to a public proxy or consent solicitation
made pursuant to, and in accordance with, the Act and the applicable
rules and regulations thereunder, or (B) made in connection with, or to
otherwise participate in, a proxy or consent solicitation made, or to
be made, pursuant to, and in accordance with, the applicable provisions
of the Act and the applicable rules and regulations thereunder, in
either case described in clause (A) or (B)
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above, whether or not such agreement, arrangement or understanding is
also then reportable by such Person on Schedule 13D under the Act (or
any comparable or successor report); and (ii) a Person engaged in
business as an underwriter of securities shall not be deemed to be the
Beneficial Owner of any security acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
"Beneficiary" means the beneficiary or beneficiaries
designated pursuant to Section 10 to receive the amount, if any,
payable under the Plan upon the death of an Award Recipient.
"Board" means the Board of Directors of the Company.
"Change of Control" means the occurrence of an event defined
in Section 9 of the Plan.
"Code" means the Internal Revenue Code of 1986, as now in
effect or as hereafter amended. (All citations to sections of the Code
are to such sections as they may from time to time be amended or
renumbered.)
"Committee" means the Compensation and Personnel Committee of
the Board or such other committee as may be designated by the Board to
administer the Plan.
"Company" means The Hartford and its successors and assigns.
"Director" means a member of the Board of The Hartford
Financial Services Group, Inc. who is not an employee of any
Participating Company.
"Eligible Employee" means an Employee employed by a
Participating Company; provided, however, that except as the Board of
Directors or the Committee, pursuant to authority delegated by the
Board of Directors, may otherwise provide on a basis uniformly
applicable to all persons similarly situated, "Eligible Employee" shall
not include any "Ineligible Person," which includes (i) a person who
(A) holds a position with the Company's "HARTEMP" Program, (B) is hired
to work for a Participating Company through a temporary employment
agency, or (C) is hired to a position with a Participating Company with
notice on his or her date of hire that the position will terminate on a
certain date; (ii) a person who is a leased employee (within the
meaning of Code Section 414(n)(2)) of a Participating Company or is
otherwise employed by or through a temporary help firm, technical help
firm, staffing firm, employee leasing firm, or professional employer
organization, regardless of whether such person is an Employee of a
Participating Company, and (iii) a person who performs services for a
Participating Company as an independent contractor or under any other
non-employee classification, or who is classified by a Participating
Company as, or determined by a Participating Company to be, an
independent contractor, regardless of whether such person is
characterized or ultimately determined by the Internal Revenue Service
or any other Federal, State or local governmental authority or
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regulatory body to be an employee of a Participating Company or its
affiliates for income or wage tax purposes or for any other purpose.
Notwithstanding any provision in the Plan to the contrary, if
any person is an Ineligible Person, or otherwise does not qualify as an
Eligible Employee, or otherwise is ineligible to participate in the
Plan, and such person is later required by a court or governmental
authority or regulatory body to be classified as a person who is
eligible to participate in the Plan, such person shall not be eligible
to participate in the Plan, notwithstanding such classification, unless
and until designated as an Eligible Employee by the Committee, and if
so designated, the participation of such person in the Plan shall be
prospective only.
"Employee" means any person regularly employed by a
Participating Company, but shall not include any person who performs
services for a Participating Company as an independent contractor or
under any other non-employee classification, or who is classified by a
Participating Company as, or determined by a Participating Company to
be, an independent contractor.
"Fair Market Value", unless otherwise indicated in the
provisions of this Plan, means, as of any date, the composite closing
price for one share of Stock on the New York Stock Exchange or, if no
sales of Stock have taken place on such date, the composite closing
price on the most recent date on which selling prices were quoted, the
determination to be made in the discretion of the Committee.
"Incentive Stock Option" means a stock option qualified under
Section 422 of the Code.
"Key Employee" means an Employee (including any officer or
director who is also an Employee) of any Participating Company who is
an Eligible Employee and whose responsibilities and decisions, in the
judgment of the Committee, directly affect the performance of the
Company and its subsidiaries.
"Option" means an option awarded under Section 5 of the Plan
to purchase Stock of the Company, which option may be an Incentive
Stock Option or a non-qualified stock option.
"Participating Company" means the Company or any subsidiary or
other affiliate of the Company; provided, however, for Incentive Stock
Options only, "Participating Company" means the Company or any
corporation which at the time such Option is granted qualifies as a
"subsidiary" of the Company under Section 424(f) of the Code.
"Performance Share" means a performance share awarded under
Section 6 of the Plan.
"Person" has the meaning ascribed to such term in Section
3(a)(9) of the Act, as
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supplemented by Section 13(d)(3) of the Act; provided, however, that
Person shall not include (i) the Company, any subsidiary of the Company
or any other Person controlled by the Company, (ii) any trustee or
other fiduciary holding securities under any employee benefit plan of
the Company or of any subsidiary of the Company, or (iii) a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of securities of
the Company.
"Plan" means The Hartford 2000 Incentive Stock Plan, as the
same may be amended, administered or interpreted from time to time.
"Plan Year" means the calendar year.
"Retirement" means, solely with respect to a Key Employee with
an original hire date with a Participating Company before January 1,
2002, eligibility to receive immediate retirement benefits under a
Participating Company pension plan.
"Restricted Stock" means Stock awarded under Section 7 of the
Plan subject to such restrictions as the Committee deems appropriate or
desirable.
"Right" means a stock appreciation right awarded in connection
with an Option under Section 5 of the Plan.
"Stock" means the common stock ($.01 par value) of The
Hartford.
"Total Disability" means the complete and permanent inability
of a Key Employee to perform all of his or her duties under the terms
of his or her employment with any Participating Company, as determined
by the Committee upon the basis of such evidence, including independent
medical reports and data, as the Committee deems appropriate or
necessary.
"Transferee" means any person or entity to whom or to which a
non-qualified stock option has been transferred and assigned in
accordance with Section 5(h) of the Plan.
3. SHARES SUBJECT TO THE PLAN
The aggregate number of shares of Stock which may be awarded
under the Plan shall be subject to a maximum limit applicable to all
Awards for the duration of the Plan (the "Maximum Limit"). The Maximum
Limit shall be eight percent (8%) of the total of the outstanding
shares of Stock as of the date of shareholder approval of the Plan.
In addition to the foregoing, in no event shall more than
twenty percent (20%) of the total number of shares on a cumulative
basis be available for Restricted Stock and Performance Share Awards.
For any Plan Year, no individual employee may receive an Award of
Options for more than 1,000,000 shares.
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Subject to the above limitations, shares of Stock to be issued
under the Plan may be made available from the authorized but unissued
shares, or shares held by the Company in treasury or from shares
purchased in the open market.
For the purpose of computing the total number of shares of
Stock available for Awards under the Plan, there shall be counted
against the foregoing limitations the number of shares of Stock subject
to issuance upon exercise or settlement of Awards and the number of
shares of Stock which equal the value of performance share Awards, in
each case determined as at the dates on which such Awards are granted.
If any Awards under the Plan are forfeited, terminated, expire
unexercised, are settled in cash in lieu of Stock or are exchanged for
other Awards, the shares of Stock which were theretofore subject to
such Awards shall again be available for Awards under the Plan to the
extent of such forfeiture, termination, expiration, cash settlement or
exchange of such Awards. Further, any shares that are exchanged (either
actually or constructively) by optionees as full or partial payment to
the Company of the purchase price of shares being acquired through the
exercise of a stock option granted under the Plan may be available for
subsequent Awards.
4. GRANT OF AWARDS AND AWARD AGREEMENTS
(a) Subject to the provisions of the Plan, the Committee shall
(i) determine and designate from time to time those Key Employees or
groups of Key Employees to whom Awards are to be granted, and those
Directors to whom Options and Rights may be granted; (ii) determine the
form or forms of Award to be granted to any Key Employee and any
Director; (iii) determine the amount or number of shares of Stock
subject to each Award; and (iv) determine the terms and conditions of
each Award.
(b) Each Award granted under the Plan shall be evidenced by a
written Award Agreement. Such Award Agreement shall be subject to and
incorporate the express terms and conditions, if any, required under
the Plan or required by the Committee.
5. STOCK OPTIONS AND RIGHTS
(a) With respect to Options and Rights, the Committee shall
(i) authorize the granting of Incentive Stock Options, non-qualified
stock options, or a combination of Incentive Stock Options and
non-qualified stock options; (ii) authorize the granting of Rights
which may be granted in connection with all or part of any Option
granted under this Plan, either concurrently with the grant of the
Option or at any time thereafter during the term of the Option; (iii)
determine the number of shares of Stock subject to each Option or the
number of shares of Stock that shall be used to determine the value of
a Right; and (iv) determine the time or times when and the manner in
which each Option or Right shall be exercisable and the duration of the
exercise period.
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(b) Any option issued hereunder which is intended to qualify
as an Incentive Stock Option shall be subject to such limitations or
requirements as may be necessary for the purposes of Section 422 of the
Code or any regulations and rulings thereunder to the extent and in
such form as determined by the Committee in its discretion.
(c) The exercise period for a non-qualified stock option and
any related Right shall not exceed ten years and two days from the date
of grant, and the exercise period for an Incentive Stock Option and any
related Right shall not exceed ten years from the date of grant.
(d) The Option price per share shall be determined by the
Committee at the time any Option is granted and shall be not less than
the Fair Market Value of one share of Stock on the date the Option is
granted.
(e) No part of any Option or Right may be exercised until the
Key Employee who has been granted the Award shall have remained in the
employ of a Participating Company for such period after the date of
grant as the Committee may specify, if any, and the Committee may
further require exercisability in installments.
(f) Except as provided in Section 9, the purchase price of the
shares as to which an Option shall be exercised shall be paid to the
Company at the time of exercise either in cash or Stock already owned
by the optionee having a total Fair Market Value equal to the purchase
price, or a combination of cash and Stock having a total fair market
value, as so determined, equal to the purchase price. The Committee
shall determine acceptable methods for tendering Stock as payment upon
exercise of an Option and may impose such limitations and prohibitions
on the use of Stock to exercise an Option as it deems appropriate.
(g) In case of a Key Employee's termination of employment, the
following provisions shall apply:
(A) If a Key Employee who has been granted an Option
shall die before such Option has expired, his or her Option may be
exercised in full by (i) the person or persons to whom the Key
Employee's rights under the Option pass by will, or if no such person
has such right, by his or her executors or administrators; (ii) his or
her Transferee(s) (with respect to non-qualified stock options); or
(iii) his or her Beneficiary designated pursuant to Section 10, at any
time, or from time to time, within five years after the date of the Key
Employee's death or within such other period, and subject to such terms
and conditions as the Committee may specify, but not later than the
expiration date specified in Section 5(c) above.
(B) If the Key Employee's employment by any
Participating Company terminates (i) because of his or her Total
Disability, or (ii) solely in the case of a Key Employee with an
original hire date with a Participating Company before January 1, 2002,
because of his or her voluntary termination of employment due to
Retirement; he or she may exercise his or her Options in full at any
time, or from time to time, within five
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years after the date of the termination of his or her employment, or
within such other period, and subject to such terms and conditions as
the Committee may specify, but not later than the expiration date
specified in Section 5(c) above. Any such Options not fully exercisable
immediately prior to such optionee's Retirement shall become fully
exercisable upon such Retirement unless the Committee, in its sole
discretion, shall otherwise determine.
(C) Except as provided in Section 5(g)(B) and Section
9, if the Key Employee shall voluntarily resign from employment or he
or she is terminated for cause as determined by the Committee, the
Options or Rights shall be canceled coincident with the effective date
of the termination of employment.
(D) Except as provided in Section 9, if a Key
Employee's employment terminates for any other reason, he or she may
exercise his or her Options, to the extent that he or she shall have
been entitled to do so at the date of the termination of his or her
employment at any time, or from time to time, within three months after
the date of the termination of his or her employment, or within such
other period, and subject to such terms and conditions as the Committee
may specify, but not later than the expiration date specified in
Section 5(c) above.
(h) Except as provided in this Section 5(h), no Option or
Right granted under the Plan shall be transferable other than by will
or by the laws of descent and distribution. During the lifetime of the
optionee, an Option or Right shall be exercisable only by the Key
Employee or Director, to whom the Option or Right is granted (or his or
her estate or designated Beneficiary). Notwithstanding the foregoing,
all or a portion of a non-qualified stock option may be transferred and
assigned by such persons designated by the Committee, to such persons
designated by the Committee, and upon such terms and conditions as the
Committee may from time to time authorize and determine in its sole
discretion.
(i) Except as provided in Section 9, if a Director's service
on the Board terminates for any reason, including without limitation,
termination due to death, disability or retirement, such Director may
exercise any Option or Right granted to him or her only to the extent
determined by the Committee as set forth in such Director's Award
Agreement and/or any administrative rules or other terms and conditions
adopted by the Committee from time to time applicable to such Option or
Right granted to such Director.
(j) With respect to an Incentive Stock Option, the Committee
shall specify such terms and provisions as the Committee may determine
to be necessary or desirable in order to qualify such Option as an
"incentive stock option" within the meaning of Section 422 of the Code.
(k) With respect to the exercisability and settlement of
Rights:
(i) Upon exercise of a Right, a Key Employee or
Director shall be entitled, subject to such terms and conditions the
Committee may specify, to receive upon
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exercise thereof all or a portion of the excess of (A) the Fair Market
Value of a specified number of shares of Stock at the time of exercise,
as determined by the Committee, over (B) a specified amount which shall
not, subject to Section 5(d), be less than the Fair Market Value of
such specified number of shares of Stock at the time the Right is
granted. Upon exercise of a Right, payment of such excess shall be made
as the Committee shall specify in cash, the issuance or transfer to the
Key Employee or Director of whole shares of Stock with a Fair Market
Value at such time equal to any excess, or a combination of cash and
shares of Stock with a combined Fair Market Value at such time equal to
any such excess, all as determined by the Committee. The Company will
not issue a fractional share of Stock and, if a fractional share would
otherwise be issuable, the Company shall pay cash equal to the Fair
Market Value of the fractional share of Stock at such time.
(ii) In the event of the exercise of such Right, the
Company's obligation in respect of any related Option or such portion
thereof will be discharged by payment of the Right so exercised.
6. PERFORMANCE SHARES
(a) Subject to the provisions of the Plan, the Committee shall
(i) determine and designate from time to time those Key Employees or
groups of Key Employees to whom Awards of Performance Shares are to be
made, (ii) determine the Performance Period (the "Performance Period")
and Performance Objectives (the "Performance Objectives") applicable to
such Awards, (iii) determine the form of settlement of a Performance
Share and (iv) generally determine the terms and conditions of each
such Award. At any date, each Performance Share shall have a value
equal to the Fair Market Value of a share of Stock at such date;
provided that the Committee may limit the aggregate amount payable upon
the settlement of any Award. The maximum award for any individual
employee in any given year shall be 200,000 Performance Shares.
(b) The Committee shall determine a Performance Period of not
less than two nor more than five years. Performance Periods may overlap
and Key Employees may participate simultaneously with respect to
Performance Shares for which different Performance Periods are
prescribed.
(c) The Committee shall determine the Performance Objectives
of Awards of Performance Shares. Performance Objectives may vary from
Key Employee to Key Employee and between groups of Key Employees and
shall be based upon one or more of the following objective criteria, as
the Committee deems appropriate, which may be (i) determined solely by
reference to the performance of the Company, any subsidiary or
affiliate of the Company or any division or unit of any of the
foregoing, or (ii) based on comparative performance of any one or more
of the following relative to other entities: (A) earnings per share,
(B) return on equity, (C) cash flow, (D) return on total capital, (E)
return on assets, (F) economic value added, (G) increase in surplus,
(H) reductions in operating expenses, (I) increases in operating
margins, (J) earnings before income taxes and depreciation, (K) total
shareholder return, (L) return on invested capital, (M) cost reductions
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and savings, (N) earnings before interest, taxes, depreciation and
amortization ("EBITDA"), (O) pre-tax operating income, (P) productivity
improvements, or (Q) a Key Employee's attainment of personal objectives
with respect to any of the foregoing criteria or other criteria such as
growth and profitability, customer satisfaction, leadership
effectiveness, business development, negotiating transactions and sales
or developing long term business goals. If during the course of a
Performance Period there shall occur significant events which the
Committee expects to have a substantial effect on the applicable
Performance Objectives during such period, the Committee may revise
such Performance Objectives.
(d) At the beginning of a Performance Period, the Committee
shall determine for each Key Employee or group of Key Employees the
number of Performance Shares or the percentage of Performance Shares
which shall be paid to the Key Employee or member of the group of Key
Employees if the applicable Performance Objectives are met in whole or
in part.
(e) If a Key Employee terminates service with all
Participating Companies during a Performance Period: (i) because of
death, (ii) because of Total Disability, (iii) solely in the case of a
Key Employee with an original hire date with a Participating Company
before January 1, 2002, because of his or her voluntary termination of
employment due to Retirement, or (iv) under other circumstances where
the Committee in its sole discretion finds that a waiver would be in
the best interests of the Company; that Key Employee may, as determined
by the Committee, be entitled to payment in settlement of such
Performance Shares at the end of the Performance Period based upon the
extent to which the Performance Objectives were satisfied at the end of
such period and prorated for the portion of the Performance Period
during which the Key Employee was employed by any Participating
Company; provided, however, the Committee may provide for an earlier
payment in settlement of such Performance Shares in such amount and
under such terms and conditions as the Committee deems appropriate or
desirable. If a Key Employee terminates service with all Participating
Companies during a Performance Period for any other reason, then such
Key Employee shall not be entitled to any Award with respect to that
Performance Period unless the Committee shall otherwise determine.
(f) Each Award of a Performance Share shall be paid in whole
shares of Stock, or cash, or a combination of Stock and cash either as
a lump sum payment or in annual installments, all as the Committee
shall determine, with payment to commence as soon as practicable after
the end of the relevant Performance Period.
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7. RESTRICTED STOCK
(a) Except as provided in Section 9, Restricted Stock shall be
subject to a restriction period (after which restrictions will lapse)
which shall mean a period commencing on the date the Award is granted
and ending on such date as the Committee shall determine (the
"Restriction Period"). The Committee may provide for the lapse of
restrictions in installments where deemed appropriate and it may also
require the achievement of predetermined performance objectives in
order for such shares to vest. Except as otherwise provided in the
Plan, certificates for shares of Restricted Stock shall be delivered to
a Key Employee as soon as administratively practicable following the
end of the applicable Restriction Period.
(b) Except when the Committee determines otherwise pursuant to
Section 7(d), if a Key Employee terminates employment with all
Participating Companies for any reason before the expiration of the
Restriction Period, all shares of Restricted Stock still subject to
restriction shall be forfeited by the Key Employee and shall be
reacquired by the Company.
(c) Except as otherwise provided in this Section 7, no shares
of Restricted Stock received by a Key Employee shall be sold,
exchanged, transferred, pledged, hypothecated or otherwise disposed of
during the Restriction Period.
(d) In cases of: (i) death, (ii) Total Disability, (iii)
solely in the case of a Key Employee with an original hire date with a
Participating Company before January 1, 2002, a voluntary termination
of employment due to Retirement, or (iv) in cases of special
circumstances, the Committee may, in its sole discretion when it finds
that a waiver would be in the best interests of the Company, elect to
waive any or all remaining restrictions with respect to such Key
Employee's Restricted Stock.
(e) The Committee may require, under such terms and conditions
as it deems appropriate or desirable, that the certificates for Stock
delivered under the Plan may be held in custody by a bank or other
institution, or that the Company may itself hold such shares in custody
until the Restriction Period expires or until restrictions thereon
otherwise lapse, or later as provided in Section 14 hereof. The
Committee may require, as a condition of any Award of Restricted Stock
that the Key Employee shall have delivered a stock power endorsed in
blank relating to the Restricted Stock, and shall require, as a
condition of settlement of any Award of Stock, that the Key Employee
satisfy applicable tax withholding obligations as provided in Section
14 hereof.
(f) Nothing in this Section 7 shall preclude a Key Employee
from exchanging any shares of Restricted Stock subject to the
restrictions contained herein for any other shares of Stock that are
similarly restricted.
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(g) Subject to Section 7(e) and Section 8, each Key Employee
entitled to receive Restricted Stock under the Plan shall be issued a
certificate for the shares of Stock. Such certificate shall be
registered in the name of the Key Employee, and shall bear an
appropriate legend reciting the terms, conditions and restrictions, if
any, applicable to such Award and shall be subject to appropriate
stop-transfer orders.
8. CERTIFICATES FOR AWARDS OF STOCK
(a) The Company shall not be required to issue or deliver any
certificates for shares of Stock prior to (i) the listing of such
shares on any stock exchange on which the Stock may then be listed,
(ii) the completion of any registration or qualification of such shares
under any federal or state law, or any ruling or regulation of any
government body which the Company shall, in its sole discretion,
determine to be necessary or advisable, and (iii) the satisfaction of
any tax withholding obligations as provided in Section 14 hereof.
(b) All certificates for shares of Stock delivered under the
Plan shall also be subject to such stop-transfer orders and other
restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the Stock is then listed and
any applicable federal or state securities laws, and the Committee may
cause a legend or legends to be placed on any such certificates to make
appropriate reference to such restrictions. In making such
determination, the Committee may rely upon an opinion of counsel for
the Company.
(c) Except for the restrictions on Restricted Stock under
Section 7, each Key Employee who receives Stock in settlement of an
Award of Stock, shall have all of the rights of a shareholder with
respect to such shares, including the right to vote the shares and
receive dividends and other distributions. No Key Employee awarded an
Option, a Right or Performance Share, and no Director awarded an Option
or Right, shall have any right as a shareholder with respect to any
shares covered by his or her Option, Right or Performance Share prior
to the date of issuance to him or her of a certificate or certificates
for such shares.
9. CHANGE OF CONTROL
(a) For purposes of this Plan, a Change of Control shall occur
if:
(i) a report on Schedule 13D shall be filed with the
Securities and Exchange Commission pursuant to Section 13(d) of the Act
disclosing that any Person, other than the Company or a subsidiary of
the Company or any employee benefit plan sponsored by the Company or a
subsidiary of the Company is the Beneficial Owner of twenty percent or
more of the outstanding stock of the Company entitled to vote in the
election of directors of the Company;
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(ii) any Person other than the Company or a
subsidiary of the Company or any employee benefit plan sponsored by the
Company or a subsidiary of the Company shall purchase shares pursuant
to a tender offer or exchange offer to acquire any stock of the Company
(or securities convertible into stock) for cash, securities or any
other consideration, provided that after consummation of the offer, the
Person in question is the Beneficial Owner of fifteen percent or more
of the outstanding stock of the Company entitled to vote in the
election of directors of the Company (calculated as provided in
paragraph (d) of Rule 13d-3 under the Act in the case of rights to
acquire stock);
(iii) the stockholders of the Company shall approve
(A) any consolidation or merger in which the Company is not the
continuing or surviving corporation or pursuant to which shares of
stock of the Company entitled to vote in the election of directors of
the Company would be converted into cash, securities or other property,
other than a consolidation or merger of the Company in which holders of
such stock of the Company immediately prior to the consolidation or
merger have the same proportionate ownership of common stock of the
surviving corporation entitled to vote in the election of directors
immediately after the consolidation or merger as immediately before, or
(B) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all or substantially all the
assets of the Company; or
(iv) within any 12 month period, the persons who were
directors of the Company immediately before the beginning of such
period (the "Incumbent Directors") shall cease (for any reason other
than death) to constitute at least a majority of the Board or the board
of directors of any successor to the Company, provided that any
director who was not a director at the beginning of such period shall
be deemed to be an Incumbent Director if such director (A) was elected
to the Board by, or on the recommendation of or with the approval of,
at least two-thirds of the directors who then qualified as Incumbent
Directors either actually or by prior operation of this clause (iv),
and (B) was not designated by a Person who has entered into an
agreement with the Company to effect a transaction described in the
immediately preceding paragraph (iii).
(b) Notwithstanding any provisions in this Plan to the
contrary, upon the occurrence of a Change of Control:
(i) Each Option and related Right outstanding on the
date such Change of Control occurs, and which is not then fully vested
and exercisable, shall immediately vest and become exercisable to the
full extent of the original grant for the remainder of its term.
(ii) The surviving or resulting corporation may, in
its discretion, provide for the assumption or replacement of each
outstanding Option and related Right granted under the Plan on terms
which are no less favorable to the optionee than those applicable to
the Options and Rights immediately prior to the Change of Control. If
the surviving or resulting corporation offers to assume or replace the
Options and Rights, the optionee may elect to have his or her Options
and Rights assumed or replaced, in whole or in part, or to
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surrender on the date the Change of Control occurs his or her Options
and Rights, in whole or in part, for cash equal to the excess of the
Formula Price as defined in Section 9(b)(v) hereof over the exercise
price.
(iii) In the event the successor corporation does
not offer to assume or replace the outstanding Options and Rights as
described in Section 9(b)(ii) hereof, each Option and Right will be
exercised on the date such Change of Control occurs for cash equal to
the excess of the Formula Price as defined in Section 9(b)(v) hereof
over the exercise price.
(iv) If an employee elects to have his or her Options
and Rights assumed or replaced in accordance with clause (ii) above,
and within the three (3) year period following the date of the Change
of Control either of the following occurs: (A) the employment of such
employee is involuntarily terminated other than in a Termination For
Just Cause (as defined below), or (B) such employee voluntarily
terminates employment in a Termination For Good Reason (as defined
below); then such employee's assumed or replaced Options and Rights
shall remain exercisable in whole or in part for seven (7) months after
the date of such termination (or until the expiration date for such
Options and Rights, if earlier). Such assumed or replaced Options and
Rights may be exercised for cash equal to the higher of (1) the excess
------
of the Fair Market Value of the successor corporation's common stock on
the date of such termination over the exercise price for such Options
and Rights, or (2) the excess of the Formula Price (as defined below)
of the Company's Stock on the date the Change of Control occurred over
the exercise price for such Options and Rights.
(v) The following definitions shall apply for
purposes of this Section 9 only:
----
"Base Salary" means the amount an employee is entitled to
receive as wages or salary on an annualized basis, excluding
all bonus, overtime, and incentive compensation, payable by
the Company or the successor corporation, as the case may be,
as consideration for the employee's services, and including
earned but deferred wages or salary.
"Formula Price" means the highest of (A) the highest composite
-------
daily closing price of the Stock during the period beginning
on the 60th calendar day prior to the Change of Control and
ending on the date of such Change of Control, (B) the highest
gross price paid for the Stock during the same period of time,
as reported in a report on Schedule 13D filed with the
Securities and Exchange Commission, or (C) the highest gross
price paid or to be paid for a share of Stock (whether by way
of exchange, conversion, distribution upon merger, liquidation
or otherwise) in any of the transactions set forth in this
Section as constituting a Change of Control; provided that in
the case of the exercise of any such Right related to an
Incentive Stock Option, "Formula Price" shall mean the Fair
Market Value of the Stock at the time of such exercise.
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"Required Base Salary" means with respect to any employee the
higher of (a) the employee's Base Salary as in effect
immediately prior to the Change of Control, or (b) the
employee's highest Base Salary in effect at any time
thereafter.
"Target Bonus" means the annual bonus of an employee
determined as a percentage of annual Base Salary based on the
annual target bonus percentage established for the employee
under the Executive Bonus Program or the Performance Share
Program (or any other similar or successor plan, policy or
program) for a calendar year, or if no annual target bonus
percentage has been established under the applicable bonus
plan, policy or program, based on the highest actual bonus
percentage awarded to the employee under the applicable bonus
plan, policy or program during the three preceding full
calendar years.
"Termination For Good Reason" means a voluntary termination of
employment by an employee because of the occurrence of any of
the following (A) a reduction in the employee's Base Salary
below the Required Base Salary; (B) a greater than 10%
reduction in the level of the Total Compensation offered to
the employee in comparison to the Total Compensation enjoyed
by the employee immediately prior to the Change of Control; or
(C) the successor corporation requiring the employee to be
based at any office or location more than 50 miles from the
location at which he or she performed services immediately
prior to the Change of Control, except for travel reasonably
required in the performance of the employee's job
responsibilities. "Termination For Just Cause" means a
termination of employment based on fraud, misappropriation or
embezzlement on the part of the employee which results in a
final conviction of a felony.
"Total Compensation" means the aggregate of an employee's Base
Salary, Target Bonus, and the value of any long-term incentive
compensation award (including any option award) made to the
employee under this Plan or the 1997 Hartford Life, Inc.
Incentive Stock Plan (or any successor plan, policy or
program), such value to be determined as of the date such
award was made.
(vi) The restrictions applicable to shares of
Restricted Stock held by Key Employees pursuant to Section 7 shall
lapse upon the occurrence of a Change of Control, and such Key
Employees shall be entitled to elect, at any time during the 60
calendar days following such Change of Control, to receive immediately
after the date the Key Employee makes such election either of the
following: (A) unrestricted certificates for all of such shares, or (B)
a lump sum cash amount equal to the number of such shares multiplied by
the Formula Price. If a Key Employee does not make any election during
the foregoing 60 day period, such Key Employee shall be deemed to have
made the election described in Section 9(b)(vi)(A) as of the 60th day
of such period, and unrestricted certificates shall be issued to such
Key Employee immediately following such day as described in Section
9(b)(vi)(A)
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hereof.
(vii) If a Change of Control occurs during the course
of a Performance Period applicable to an Award of Performance Shares
pursuant to Section 6, then a Key Employee shall be deemed to have
satisfied the Performance Objectives effective on the date of such
occurrence. Such Key Employee shall be paid, immediately following the
occurrence of such Change of Control, a lump sum cash amount equal to
the number of outstanding Performance Shares awarded to such Key
Employee multiplied by the Formula Price.
(c) In the event of a Change of Control, no amendment,
suspension or termination of the Plan thereafter shall impair or reduce
the rights of any person with respect to any Award made under the Plan.
10. BENEFICIARY
(a) Each Key Employee, Director and/or his or her Transferee
may file with the Company a written designation of one or more persons
as the Beneficiary who shall be entitled to receive the Award, if any,
payable under the Plan upon his or her death. A Key Employee, Director
or Transferee may from time to time revoke or change his or her
Beneficiary designation without the consent of any prior Beneficiary by
filing a new designation with the Company. The last such designation
received by the Company shall be controlling; provided, however, that
no designation, or change or revocation thereof, shall be effective
unless received by the Company prior to the Key Employee's, Director's
or Transferee's death, as the case may be, and in no event shall it be
effective as of a date prior to such receipt.
(b) If no such Beneficiary designation is in effect at the
time of a Key Employee's, Director's or Transferee's death, as the case
may be, or if no designated Beneficiary survives the Key Employee,
Director or Transferee or if such designation conflicts with law, the
Key Employee's, Director's or Transferee's estate, as the case may be,
shall be entitled to receive the Award, if any, payable under the Plan
upon his or her death. If the Committee is in doubt as to the right of
any person to receive such Award, the Company may retain such Award,
without liability for any interest thereon, until the Committee
determines the rights thereto, or the Company may pay such Award into
any court of appropriate jurisdiction and such payment shall be a
complete discharge of the liability of the Company therefor.
11. ADMINISTRATION OF THE PLAN
(a) Each member of the Committee shall be both a member of the
Board and both a "non-employee director" within the meaning of Rule
16b-3 under the Act or successor rule or regulation and an "outside
director" for purposes of Section 162(m) of the Internal Revenue Code.
(b) All decisions, determinations or actions of the Committee
made or taken
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pursuant to grants of authority under the Plan shall be made or taken
in the sole discretion of the Committee and shall be final, conclusive
and binding on all persons for all purposes.
(c) The Committee shall have full power, discretion and
authority to interpret, construe and administer the Plan and any part
thereof, and its interpretations and constructions thereof and actions
taken thereunder shall be, except as otherwise determined by the Board,
final, conclusive and binding on all persons for all purposes.
(d) The Committee's decisions and determinations under the
Plan need not be uniform and may be made selectively among Key
Employees, whether or not such Key Employees are similarly situated.
(e) The Committee may, in its sole discretion, delegate such
of its powers as it deems appropriate to the chief executive officer or
other members of senior management, except that Awards to executive
officers shall be made solely by the Committee or the Board of
Directors.
(f) If a Change of Control has not occurred and if the
Committee determines that a Key Employee has taken action inimical to
the best interests of any Participating Company, the Committee may, in
its sole discretion, terminate in whole or in part such portion of any
Option (including any related Right) as has not yet become exercisable
at the time of termination, terminate any Performance Share Award for
which the Performance Period has not been completed or terminate any
Award of Restricted Stock for which the Restriction Period has not
lapsed.
12. AMENDMENT, EXTENSION OR TERMINATION
The Board may, at any time, amend or terminate the Plan and,
specifically, may make such modifications to the Plan as it deems
necessary to avoid the application of Section 162(m) of the Code and
the Treasury regulations issued thereunder. However, (1) with respect
only to Incentive Stock Options, no amendment shall, without approval
by a majority of the Company's stockholders, (a) alter the group of
persons eligible to participate in the Plan, or (b) except as provided
in Section 13 increase the maximum number of shares of Stock which are
available for Awards under the Plan; or, (2) with respect to all
Options, allow the Committee to reprice the Options. If a Change of
Control has occurred, no amendment or termination shall impair the
rights of any person with respect to a prior Award.
13. ADJUSTMENTS IN EVENT OF CHANGE IN COMMON STOCK
In the event of any reorganization, merger, recapitalization,
consolidation, liquidation, stock dividend, stock split,
reclassification, combination of shares, rights offering, split-up or
extraordinary dividend (including a spin-off) or divestiture, or any
other change in the corporate structure or shares, the Committee may
make such adjustment in the Stock subject to Awards, including Stock
subject to purchase by an Option, or the terms,
- 20 -
conditions or restrictions on Stock or Awards, including the price
payable upon the exercise of such Option and the number of shares
subject to restricted stock awards, as the Committee deems equitable.
14. MISCELLANEOUS
(a) Except as provided in Section 9, nothing in this Plan or
any Award granted hereunder shall confer upon any employee any right to
continue in the employ of any Participating Company or interfere in any
way with the right of any Participating Company to terminate his or her
employment at any time. No Award payable under the Plan shall be deemed
salary or compensation for the purpose of computing benefits under any
employee benefit plan or other arrangement of any Participating Company
for the benefit of its employees unless the Company shall determine
otherwise. No Key Employee shall have any claim to an Award until it is
actually granted under the Plan. To the extent that any person acquires
a right to receive payments from the Company under this Plan, such
right shall be no greater than the right of an unsecured general
creditor of the Company. All payments to be made hereunder shall be
paid from the general funds of the Company and no special or separate
fund shall be established and no segregation of assets shall be made to
assure payment of such amounts except as provided in Section 7(e) with
respect to Restricted Stock.
(b) The Committee or the Group Senior Vice President, Human
Resources (or other person holding a similar position) shall have the
right to make such provisions as deemed appropriate in its sole
discretion to satisfy any obligation of the Company to withhold
federal, state or local income or other taxes incurred by reason of the
operation of the Plan or an Award under the Plan, including but not
limited to at any time (i) requiring a Key Employee to submit payment
to the Company for such taxes before making settlement of any Award of
Stock or other amount due under the Plan, (ii) withholding such taxes
from wages or other amounts due to the Key Employee before making
settlement of any Award of Stock or other amount due under the Plan,
(iii) making settlement of any Award of Stock or other amount due under
the Plan part in Stock and part in cash to facilitate satisfaction of
such withholding obligations, or (iv) receiving Stock already owned by
the Key Employee or withholding Stock otherwise due to the Key Employee
in an amount determined necessary to satisfy such withholding
obligations.
(c) The Plan and the grant of Awards shall be subject to all
applicable federal and state laws, rules, and regulations and to such
approvals by any government or regulatory agency as may be required.
(d) The terms of the Plan shall be binding upon the Company
and its successors and assigns.
(e) Captions preceding the sections hereof are inserted solely
as a matter of convenience and in no way define or limit the scope or
intent of any provision hereof.
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15. EFFECTIVE DATE, TERM OF PLAN AND SHAREHOLDER APPROVAL
The effective date of the Plan shall be May 18, 2000. No Award
shall be granted under this Plan after the Plan's termination date. The
Plan's termination date shall be the earlier of: (a) May 18, 2010, or
(b) the date on which the Maximum Limit is reached; provided, however,
that the Plan will continue in effect for existing Awards as long as
any such Award is outstanding.
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ADMINISTRATION
The Plan is administered by a Committee of the Board of
Directors of The Hartford, presently designated as the Compensation and
Personnel Committee, the members of which serve at the pleasure of the
Board. The Committee is composed of directors none of whom is an
officer or employee of The Hartford.
FEDERAL TAX TREATMENT
The following is a brief summary of the current Federal income
tax rules generally applicable to options, SARs, performance shares and
restricted stock. Awardees should consult their own tax advisors as to
the specific Federal, state and local tax consequences applicable to
them.
A. OPTIONS AND STOCK APPRECIATION RIGHTS
Options granted under the Plan may be either non-qualified
options or "incentive stock options" qualifying under Section 422A of
the Internal Revenue Code.
Non-qualified Options
An optionee is not subject to Federal income tax upon grant of
a non-qualified option. At the time of exercise, the optionee will
realize compensation income (subject to withholding) to the extent that
the then fair market value of the stock exceeds the option price. The
amount of such income will constitute an addition to the optionee's tax
basis in the optioned stock. Sale of the shares will result in capital
gain or loss (long-term or short-term depending on the optionee's
holding period). The Hartford is entitled to a Federal tax deduction at
the same time and to the same extent that the optionee realizes
compensation income.
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Incentive Stock Options ("ISOs")
Options under the Plan denominated as ISOs are intended to
constitute incentive stock options under Section 422A of the Internal
Revenue Code of 1986, as amended. An optionee is not subject to Federal
income tax upon either the grant or exercise of an ISO. If the optionee
holds the shares acquired upon exercise for at least one year after
issuance of the optioned shares and until at least two years after
grant of the option, then the difference between the amount realized on
a subsequent sale or other taxable disposition of the shares and the
option price will constitute long-term capital gain or loss. To obtain
favorable tax treatment, an ISO must be exercised within three months
after termination of employment (other than by retirement, disability,
or death) with The Hartford or a 50% subsidiary. To obtain favorable
tax treatment, an ISO must be exercised within three months of
retirement or within one year of cessation of employment for disability
(with no limitation in the case of death), notwithstanding any longer
exercise period permitted under the terms of the Plan. The Hartford
will not be entitled to a Federal tax deduction with respect to the
grant or exercise of the ISO.
If the optionee sells the shares acquired under an ISO before
the requisite holding period, he or she will be deemed to have made a
"disqualifying disposition" of the shares and will realize compensation
income in the year of disposition equal to the lesser of the fair
market value of the shares at exercise or the amount realized on their
disposition over the option price of the shares. (However, if the
disposition is by gift or by sale to a related party, the compensation
income must be measured by the value of the shares at exercise over the
option price.) Any gain recognized upon a disqualifying disposition in
excess of the ordinary income portion will constitute either short-term
or long-term capital gain. In the event of a disqualifying disposition,
The Hartford will be entitled to a Federal tax deduction in the amount
of the compensation income realized by the optionee.
The option spread on the exercise of an ISO is an adjustment
in computing alternative minimum taxable income. No adjustment is
required, however, if the optionee made a disqualifying disposition of
the shares in the same year as he or she is taxed on the exercise.
Stock Appreciation Rights ("SARs")
SARs may have been awarded to officers and directors of The
Hartford subject to Section 16(b) of the Act with respect to both ISOs
and non-qualified options granted under the Plan. An optionee is not
taxed upon the grant of SARs. An optionee exercising SARs for cash will
realize compensation income (subject to withholding) in the amount of
the cash received. The Hartford is entitled to a tax deduction at the
same time and to the same extent that the optionee realizes
compensation income.
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B. PERFORMANCE SHARES
An awardee of Performance Shares will generally realize
compensation income (subject to withholding) when and to the extent
that payment is made, whether in the form of cash or shares of The
Hartford Stock. To the extent that payment is made in the form of
Stock, income shall be measured by the then fair market value of the
shares, which shall constitute an addition to the awardee's tax basis
in such shares. The Hartford will be entitled to a Federal tax
deduction for the value of payment at the time of payment.
C. RESTRICTED STOCK
An awardee of Restricted Stock will generally realize
compensation income (subject to withholding) when and to the extent
that the restrictions on the shares lapse, as measured by the value of
the shares at the time of lapse. The awardee's holding period for the
shares will not commence until the date of lapse, and dividends paid
during the restriction period will be treated as compensation. The
income realized on lapse of the restrictions will constitute an
addition to the awardee's tax basis in the shares.
In lieu of deferred recognition of income, the awardee may
formally elect, within 30 days of award, to realize compensation income
at the time of award, as measured by the fair market value of the stock
on the date of award determined without regard to the restrictions. The
income realized will constitute an addition to the tax basis of the
shares. In the case of such election, any appreciation (or
depreciation) on the shares during the restriction period will give
rise to capital gain (or capital loss). In the event that the awardee
terminates employment during the restriction period and forfeits his or
her shares, no deduction may be claimed and the taxes paid on award of
the shares shall be forfeited.
The Hartford will be entitled to a Federal tax deduction at
the same time and to the same extent that the awardee realizes
compensation income. However, if an awardee makes an election to
realize compensation income at the time of the award and subsequently
forfeits the shares of Restricted Stock, The Hartford must include as
ordinary income the amount it previously deducted in the year of grant
with respect to such shares.
D. GOLDEN PARACHUTE TAX PENALTIES
Options, SARs, Performance Shares or Restricted Stock which
are granted, accelerated or enhanced upon the occurrence of a takeover
(i.e., a Change of Control as defined in Section 9 of the Plan) may
give rise, in whole or in part, to "excess parachute payments" within
the meaning of Section 280G of the Internal Revenue Code and, to such
extent, will be nondeductible by The Hartford and subject to a 20%
excise tax to the awardee.
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