<PAGE>
RULE NO. 424(b)(5)
REGISTRATION NO. 333-12617
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+ INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. +
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SUBJECT TO COMPLETION, DATED OCTOBER 21, 1996
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED OCTOBER 2, 1996
20,000,000 PREFERRED SECURITIES
HARTFORD CAPITAL II
[LOGO]
% CUMULATIVE QUARTERLY INCOME PREFERRED SECURITIES,
SERIES B (QUIPS SM)*
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT THE ISSUER HAS FUNDS AS SET FORTH HEREIN BY
ITT HARTFORD GROUP, INC.
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The % Cumulative Quarterly Income Preferred Securities, Series B (the
"Series B Preferred Securities"), offered hereby represent undivided beneficial
interests in the assets of Hartford Capital II, a trust formed under the laws
of the State of Delaware (the "Series B Issuer"). ITT Hartford Group, Inc., a
Delaware corporation ("ITT Hartford"), will be the owner of the beneficial
interests represented by common securities of the Series B Issuer ("Series B
Common Securities"). Wilmington Trust Company is the Property Trustee of the
Series B Issuer. The Series B Issuer exists for the sole purpose of issuing the
Series B Preferred Securities and the Series B Common Securities and investing
the proceeds thereof in % Junior Subordinated Deferrable Interest Debentures,
Series B (the "Series B Debentures") to be issued by ITT Hartford. The Series B
Debentures will mature on , 2026, which date may be extended to a date not
later than , 2045 if certain conditions are met. The Series B Preferred
Securities will have a preference under certain circumstances with respect to
cash distributions and amounts payable on liquidation, redemption or otherwise
over the Series B Common Securities. See "Description of Preferred Securities--
Subordination of Common Securities" in the accompanying Prospectus.
(Continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE S-5 HEREOF FOR CERTAIN INFORMATION
RELEVANT TO INVESTMENT IN THE SERIES B PREFERRED SECURITIES.
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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 THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO THE
OFFERING PRICE COMMISSION(1) SERIES B ISSUER(2)(3)
-------------- ------------- ---------------------
<S> <C> <C> <C>
Per Series B Preferred Security....... $25.00 (2) $25.00
Total................................. $500,000,000 (2) $500,000,000
</TABLE>
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(1) The Series B Issuer and ITT Hartford have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting".
(2) In view of the fact that the proceeds of the sale of the Series B Preferred
Securities will be used to purchase the Series B Debentures, the
Underwriting Agreement provides that ITT Hartford will pay to the
Underwriters, as compensation ("Underwriters' Compensation") for their
arranging the investment therein of such proceeds, $ per Series B
Preferred Security (or $ in the aggregate). See "Underwriting".
(3) Expenses of the offering, which are payable by ITT Hartford, are estimated
to be $ .
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The Series B Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein and subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that delivery of the Series B Preferred Securities will be made only
in book entry form through the facilities of DTC on or about , 1996,
against payment therefor in immediately available funds.
- -----
* QUIPS is a servicemark of Goldman, Sachs & Co.
GOLDMAN, SACHS & CO.
DEAN WITTER REYNOLDS INC. A.G. EDWARDS & SONS, INC.
LEHMAN BROTHERS MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED PRUDENTIAL SECURITIES INCORPORATED
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The date of this Prospectus Supplement is October , 1996.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES B
PREFERRED SECURITIES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK
EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT
ANY TIME.
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(Continued from previous page)
Holders of the Series B Preferred Securities will be entitled to receive
preferential cumulative cash distributions accruing from the date of original
issuance and payable quarterly in arrears on the last day of March, June,
September and December of each year, commencing December 31, 1996, at the
annual rate of % of the liquidation amount of $25 per Series B Preferred
Security ("Distributions"). ITT Hartford has the right to defer payments of
interest on the Series B Debentures by extending the interest payment period
thereon at any time or from time to time for up to 20 consecutive quarters
with respect to each deferral period (each an "Extension Period"), provided
that such Extension Period may not extend beyond the Stated Maturity (as
defined herein) of the Series B Debentures. Upon the termination of any such
Extension Period and the payment of all amounts then due, ITT Hartford may
select a new Extension Period subject to the requirements set forth herein. If
interest payments are so deferred, Distributions on the Series B Preferred
Securities will also be deferred and ITT Hartford will not be permitted,
subject to certain exceptions set forth herein, to declare or pay any cash
distributions with respect to ITT Hartford's capital stock or debt securities
that rank pari passu with or junior to the Series B Debentures. During an
Extension Period, interest on the Series B Debentures will continue to accrue
(and the Series B Preferred Securities will accumulate additional interest
thereon at the rate of % per annum, compounded quarterly), and holders of
Series B Preferred Securities will be required to accrue interest income for
United States Federal income tax purposes. See "Certain Terms of Series B
Debentures--Option to Extend Interest Payment Period" and "Certain Federal
Income Tax Considerations--Potential Extension of Interest Payment Period and
Original Issue Discount".
ITT Hartford has, through the Series B Guarantee, the Trust Agreement, the
Series B Debentures, the Indenture and the Expense Agreement (each as defined
herein), taken together, fully, irrevocably and unconditionally guaranteed all
of the Series B Issuer's obligations under the Preferred Securities. The
Series B Guarantee of ITT Hartford guarantees the payment of Distributions and
payments on liquidation or the redemption with respect to the Series B
Preferred Securities as set forth below, in each case out of funds held by the
Series B Issuer, to the extent described herein (the "Series B Guarantee").
See "Description of Guarantee" in the accompanying Prospectus. If ITT Hartford
does not make interest payments on the Series B Debentures held by the Series
B Issuer, the Series B Issuer will have insufficient funds to pay
Distributions on the Series B Preferred Securities. The Series B Guarantee
does not cover payment of Distributions when the Series B Issuer does not have
sufficient funds to pay such Distributions. In such event, the remedy of a
holder of Series B Preferred Securities is to enforce the rights of the Series
B Issuer under the Series B Debentures held by the Series B Issuer, including
the institution of a direct action against ITT Hartford by such holder. The
obligations of ITT Hartford under the Series B Guarantee and the Series B
Debentures are subordinate and junior in right of payment to all Senior Debt
(as defined in "Description of Junior Subordinated Debentures--Subordination"
in the accompanying Prospectus).
The Series B Preferred Securities are subject to mandatory redemption upon
repayment of the Series B Debentures at maturity or their earlier redemption.
The Series B Debentures are redeemable prior to maturity at the option of ITT
Hartford (i) in whole at any time or in part from time to time, at a
redemption price equal to the accrued and unpaid interest on the Series B
Debentures so redeemed to the date fixed for redemption, plus the greater of
(a) the principal amount thereof and (b) an amount equal to the Discounted
Remaining Fixed Amount Payments (as defined in "Description of Junior
Subordinated Debentures--Redemption" in the accompanying Prospectus), (ii) on
or after ,
S-2
<PAGE>
(Continued from previous page)
2001, in whole or in part, at a redemption price equal to the accrued and
unpaid interest on the Series B Debentures so redeemed to the date fixed for
redemption plus 100% of the principal amount thereof, or (iii) at any time, in
whole (but not in part), upon the occurrence of a Special Event (as defined
herein), at a redemption price equal to the accrued and unpaid interest on the
Series B Debentures so redeemed to the date fixed for redemption, plus 100% of
the principal amount thereof, in each case subject to the further conditions
described under "Description of Junior Subordinated Debentures--Redemption"
and "Description of Corresponding Junior Subordinated Debentures--Optional
Redemption" in the accompanying Prospectus.
At any time, ITT Hartford will have the right to terminate the Series B
Issuer and cause the Series B Debentures to be distributed to the holders of
the Series B Preferred Securities in liquidation of the Series B Issuer. If
ITT Hartford elects to liquidate the Series B Issuer and thereby causes the
Series B Debentures to be distributed to holders of the Series B Preferred
Securities in liquidation of the Series B Issuer, ITT Hartford shall have the
right to shorten or extend the maturity of such Series B Debentures, provided
that it can extend the maturity only if at the time such election is made and
at the time of extension (i) ITT Hartford is not in bankruptcy, otherwise
insolvent or in liquidation, (ii) ITT Hartford is not in default in the
payment of any interest or principal on the Series B Debentures, (iii) the
Series B Issuer is not in arrears on payments of Distributions on the Series B
Preferred Securities and no deferred Distributions are accumulated, (iv) the
Series B Debentures are rated not less than BBB- by Standard & Poor's Ratings
Services or Baa3 by Moody's Investors Service, Inc. or the equivalent by any
other nationally recognized statistical rating organization and (v) the
extended Stated Maturity is no later than the 49th anniversary of the initial
issuance of the Series B Preferred Securities. See "Certain Terms of Series B
Debentures--General."
The Series B Debentures are subordinate and junior in right of payment to
all Senior Debt. As of June 30, 1996, ITT Hartford had approximately $1.5
billion of principal amount of Senior Debt outstanding. The terms of the
Series B Debentures place no limitation on the amount of Senior Debt that may
be incurred by ITT Hartford. As a non-operating holding company, most of the
operating assets of ITT Hartford and its consolidated subsidiaries are owned
by such subsidiaries and ITT Hartford relies primarily on dividends from such
subsidiaries to meet its obligations for payment of principal and interest on
its outstanding debt obligations and corporate expenses. Accordingly, the
Series B Debentures will be effectively subordinated to all existing and
future liabilities of ITT Hartford's subsidiaries, and holders of Series B
Debentures should look only to the assets of ITT Hartford for payments on
Series B Debentures. The payment of dividends by ITT Hartford's insurance
company subsidiaries is limited under the insurance holding company laws in
the states in which such subsidiaries are domiciled. See "ITT Hartford Group"
and "Description of Junior Subordinated Debentures--Subordination" in the
accompanying Prospectus.
In the event of the liquidation of the Series B Issuer, after satisfaction
of liabilities to creditors of the Series B Issuer as required by applicable
law, the holders of the Series B Preferred Securities will be entitled to
receive a liquidation amount of $25 per Series B Preferred Security plus
accrued and unpaid Distributions thereon to the date of payment, which may be
in the form of a distribution of such amount in Series B Debentures, subject
to certain limitations. See "Description of Preferred Securities--Liquidation
Distribution Upon Termination" in the accompanying Prospectus.
The Series B Preferred Securities have been approved for listing on the New
York Stock Exchange subject to official notice of issuance. If the Series B
Debentures are distributed to the holders of Series B Preferred Securities
upon the liquidation of the Series B Issuer, ITT Hartford will use its best
efforts to list the Series B Debentures on the New York Stock Exchange or such
other stock exchanges or other self-regulatory organizations, if any, on which
the Series B Preferred Securities are then listed or traded.
S-3
<PAGE>
(Continued from previous page)
The Series B Preferred Securities will be represented by global certificates
registered in the name of The Depository Trust Company ("DTC") or its nominee.
Beneficial interests in the Series B Preferred Securities will be shown on, and
transfers thereof will be effected only through, records maintained by
participants in DTC. Except as described in the accompanying Prospectus, Series
B Preferred Securities in certificated form will not be issued in exchange for
the global certificates. See "Description of Preferred Securities--Book-entry
Issuance" in the accompanying Prospectus.
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FOR NORTH CAROLINA INVESTORS: THE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH CAROLINA,
NOR HAS THE COMMISSIONER RULED UPON THE ACCURACY OR ADEQUACY OF THIS DOCUMENT.
S-4
<PAGE>
The following information supplements and should be read in conjunction with
the information contained in the accompanying Prospectus. As used herein, (i)
the "Indenture" means the Junior Subordinated Indenture, as amended and
supplemented from time to time, between ITT Hartford and Wilmington Trust
Company, as trustee (the "Debenture Trustee"), and (ii) the "Trust Agreement"
means the Amended and Restated Trust Agreement, dated as of , 1996, among
ITT Hartford, as Depositor, Wilmington Trust Company, as Property Trustee and
Delaware Trustee, and the Administrative Trustees named therein. Each of the
other capitalized terms used in this Prospectus Supplement has the meaning set
forth in this Prospectus Supplement or in the accompanying Prospectus.
RISK FACTORS
Prospective purchasers of the Series B Preferred Securities should carefully
review the information contained elsewhere in this Prospectus Supplement and
in the accompanying Prospectus and should particularly consider the following
matters.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE SERIES B GUARANTEE AND THE
SERIES B DEBENTURES
The obligations of ITT Hartford under the Series B Guarantee issued by ITT
Hartford for the benefit of the holders of Series B Preferred Securities are
unsecured and rank subordinate and junior in right of payment to all Senior
Debt of ITT Hartford. The obligations of ITT Hartford under the Series B
Debentures are subordinate and junior in right of payment to all Senior Debt.
At June 30, 1996, the Senior Debt of ITT Hartford aggregated approximately
$1.5 billion. As a non-operating holding company, most of the operating assets
of ITT Hartford and its consolidated subsidiaries are owned by such
subsidiaries and ITT Hartford relies primarily on dividends from such
subsidiaries to meet its obligations for payment of principal and interest on
its outstanding debt obligations and corporate expenses. Accordingly, the
Series B Debentures will be effectively subordinated to all existing and
future liabilities of ITT Hartford's subsidiaries, and holders of Series B
Debentures should look only to the assets of ITT Hartford for payments on the
Series B Debentures. The payment of dividends by ITT Hartford's insurance
company subsidiaries is limited under the insurance holding company laws in
the states in which such subsidiaries are domiciled. See "ITT Hartford Group."
None of the Indenture, the Series B Guarantee or the Trust Agreement place any
limitation on the amount of secured or unsecured debt, including Senior Debt,
that may be incurred by ITT Hartford. See "Description of Guarantee--Status of
the Guarantee" and "Description of Junior Subordinated Debentures--
Subordination" in the accompanying Prospectus.
The ability of the Series B Issuer to pay amounts due on the Series B
Preferred Securities is solely dependent upon ITT Hartford making payments on
the Series B Debentures as and when required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES
ITT Hartford has the right under the Indenture to defer the payment of
interest at any time and from time to time on the Series B Debentures to a
period not exceeding 20 consecutive quarters with respect to each Extension
Period, provided that no Extension Period may extend beyond the Stated
Maturity of the Series B Debentures. As a consequence of any such extension,
quarterly Distributions on the Series B Preferred Securities would be deferred
(but would continue to accumulate additional Distributions thereon at the rate
of % per annum) by the Series B Issuer during any such Extension Period. In
the event that ITT Hartford exercises this right, during any such Extension
Period, ITT Hartford may not, and may not permit any subsidiary of ITT
Hartford to, (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of ITT
Hartford's capital stock or (ii) make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem any debt securities
(including other Junior Subordinated Debentures) that
S-5
<PAGE>
rank pari passu with or junior in interest to the Series B Debentures or make
any guarantee payments with respect to the foregoing (other than (a) dividends
or distributions in common stock of ITT Hartford, (b) redemptions or purchases
of any rights pursuant to ITT Hartford's Rights Plan, or any successor to such
Rights Plan, and the declaration of a dividend of such rights in the future,
and (c) payments under any Guarantee). Prior to the termination of any such
Extension Period, ITT Hartford may further extend the interest payment period,
provided that such Extension Period together with all such previous and
further extensions of such Extension Period may not exceed 20 consecutive
quarters or extend beyond the maturity of the Series B Debentures. Upon the
termination of any Extension Period and the payment of all amounts then due,
ITT Hartford may select a new Extension Period subject to the above
requirements. See "Certain Terms of the Series B Preferred Securities--
Distributions" and "Certain Terms of the Series B Debentures--Option to Extend
Interest Payment Period."
Should an Extension Period occur, a holder of Series B Preferred Securities
will continue to accrue interest income in respect of its pro rata share of
the Series B Debentures held by the Series B Issuer for United States Federal
income tax purposes. As a result, a holder of Series B Preferred Securities
will include such interest in gross income for United States Federal income
tax purposes in advance of the receipt of cash, and will not receive the cash
related to such income from the Series B Issuer if the holder disposes of the
Series B Preferred Securities prior to the record date for the payment of
Distributions. See "Certain Federal Income Tax Considerations--Potential
Extension of Interest Payment Period and Original Issue Discount."
ITT Hartford has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Series B
Debentures. However, should ITT Hartford elect to exercise such right in the
future, the market price of the Series B Preferred Securities is likely to be
affected. A holder that disposes of its Series B Preferred Securities during
an Extension Period, therefore, might not receive the same return on its
investment as a holder that continues to hold its Series B Preferred
Securities. In addition, as a result of the existence of ITT Hartford's right
to defer interest payments, the market price of the Series B Preferred
Securities (which represent a preferred undivided beneficial interest in the
Series B Debentures) may be more volatile than other securities on which
original issue discount accrues that do not have such rights.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence and continuation of a Special Event, as described in
"Description of Preferred Securities--Redemption--Special Event Redemption or
Distribution" in the accompanying Prospectus, ITT Hartford has the right to
redeem the Series B Debentures in whole (but not in part) and therefore cause
a mandatory redemption of the Series B Preferred Securities and Series B
Common Securities at the redemption price within 90 days following the
occurrence of such Special Event. See "Description of Preferred Securities--
Redemption--Special Event Redemption or Distribution" in the accompanying
Prospectus.
On December 7, 1995, President Clinton proposed certain tax law changes that
would, among other things, generally deny interest deductions to corporate
issuers of debt that has a term of more than 40 years. Under the proposal, for
purposes of determining the term of an instrument, any right to extend would
be treated as exercised. The President's proposal would also deny interest
deductions for interest on a debt instrument issued by a corporation that has
a term exceeding 20 years and is not reflected as indebtedness on the issuer's
consolidated balance sheet. The same proposal was included in President
Clinton's budget plan on March 19, 1996. Under the President's proposal and
the budget plan, these provisions would be effective for instruments issued on
or after December 7, 1995. However, the Chairmen of the House Ways and Means
Committee and the Senate Finance Committee, as well as the Ranking Minority
Member of the House Ways and Means Committee, have publicly indicated their
intent that the proposals, if enacted, would not apply to debt issued prior to
the date of "appropriate Congressional action". No such Congressional action
has occurred or is expected
S-6
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to occur prior to the issuance of the Series B Debentures. However, if either
of the President's proposals were enacted and applied to the Series B
Debentures, ITT Hartford would not be able to deduct interest or original
issue discount on the Series B Debentures and a Tax Event, as described in
"Description of Preferred Securities--Redemption--Special Event Redemption or
Distribution" in the accompanying Prospectus, would occur, which would permit
ITT Hartford to redeem the Series B Debentures in whole (but not in part) and
therefore cause a mandatory redemption of the Series B Common Securities and
the Series B Preferred Securities. Neither the President's proposal nor the
budget plan would effect the United States federal income tax consequences of
the purchase, ownership or disposition of the Series B Preferred Securities.
There can be no assurance as to the market prices for Series B Preferred
Securities or Series B Debentures that may be distributed in exchange for
Series B Preferred Securities if a dissolution or liquidation of the Series B
Issuer were to occur. Accordingly, the Series B Preferred Securities that an
investor may purchase, whether pursuant to the offer made hereby or in the
secondary market, or the Series B Debentures that a holder of Series B
Preferred Securities may receive on dissolution and liquidation of the Series
B Issuer, may trade at a discount to the price that the investor paid to
purchase the Series B Preferred Securities offered hereby. In addition,
because ITT Hartford has the right to shorten or extend the maturity of the
Series B Debentures upon a termination of the Series B Issuer and the
distribution of the Series B Debentures to holders of Series B Preferred
Securities, there can be no assurance that ITT Hartford will not exercise its
option to change the maturity of the Series B Debentures upon an exchange.
Because holders of Series B Preferred Securities may receive Series B
Debentures upon the termination of the Series B Issuer, prospective purchasers
of Series B Preferred Securities are also making an investment decision with
regard to the Series B Debentures and should carefully review all the
information regarding the Series B Debentures contained herein. See
"Description of the Preferred Securities--Redemption--Special Event Redemption
or Distribution" and "Description of the Corresponding Junior Subordinated
Debentures--General" in the accompanying Prospectus.
RIGHTS UNDER THE SERIES B GUARANTEE
The Series B Guarantee will be qualified as an indenture under the Trust
Indenture Act. Wilmington Trust Company will act as the indenture trustee
under the Series B Guarantee (the "Guarantee Trustee") for the purposes of
compliance with the Trust Indenture Act and will hold the Series B Guarantee
for the benefit of the holders of the Series B Preferred Securities.
Wilmington Trust Company will also act as Debenture Trustee for the Series B
Debentures and as Property Trustee and Delaware Trustee under the Trust
Agreement. The Series B Guarantee guarantees to the holders of the Series B
Preferred Securities the following payments, to the extent not paid by the
Series B Issuer: (i) any accumulated and unpaid Distributions required to be
paid on the Series B Preferred Securities, to the extent that the Series B
Issuer has funds on hand available therefor, (ii) the redemption price with
respect to any Series B Preferred Securities called for redemption to the
extent that the Series B Issuer has funds on hand available therefor, and
(iii) upon a voluntary or involuntary dissolution, winding up or liquidation
of the Series B Issuer (unless the Series B Debentures are distributed to
holders of the Series B Preferred Securities), the lesser of (a) the aggregate
of the liquidation amount and all accrued and unpaid Distributions to the date
of payment and (b) the amount of assets of the Series B Issuer remaining
available for distribution to holders of the Series B Preferred Securities.
The holders of not less than a majority in aggregate liquidation amount of the
Series B Preferred Securities have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Guarantee
Trustee in respect of the Series B Guarantee or to direct the exercise of any
trust power conferred upon the Guarantee Trustee under the Series B Guarantee.
Any holder of the Series B Preferred Securities may institute a legal
proceeding directly against ITT Hartford to enforce its rights under the
Series B Guarantee without first instituting a legal proceeding against the
Series B Issuer, the Guarantee Trustee or any other person or entity. If ITT
Hartford were to default
S-7
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on its obligation to pay amounts payable under the Series B Debentures, the
Series B Issuer would lack funds for the payment of Distributions or amounts
payable on redemption of the Series B Preferred Securities or otherwise, and,
in each such event, holders of the Series B Preferred Securities would not be
able to rely upon the Series B Guarantee for payment of such amounts. Instead,
in the event a Debenture Event of Default shall have occurred and be
continuing and such event is attributable to the failure of ITT Hartford to
pay interest on or principal of the Series B Debentures on the payment date on
which such payment is due and payable, then a holder of Series B Preferred
Securities may institute a legal proceeding directly against ITT Hartford for
enforcement of payment to such holder of the principal of or interest on such
Series B Debentures having a principal amount equal to the aggregate
Liquidation Amount of the Series B Preferred Securities of such holder (a
"Direct Action"). In connection with such Direct Action, ITT Hartford will
have a right of set-off under the Indenture to the extent of any payment made
by ITT Hartford to such holder of Series B Preferred Securities in the Direct
Action. Except as set forth herein, holders of Series B Preferred Securities
will not be able to exercise directly any other remedy available to the
holders of the Series B Debentures or assert directly any other rights in
respect of the Series B Debentures. See "Description of Junior Subordinated
Debentures--Enforcement of Certain Rights of Holders of Preferred Securities,"
"Description of Junior Subordinated Debentures--Debenture Events of Default"
and "Description of Guarantee" in the accompanying Prospectus. The Trust
Agreement provides that each holder of Series B Preferred Securities by
acceptance thereof agrees to the provisions of the Series B Guarantee and the
Indenture.
LIMITED VOTING RIGHTS
Holders of Series B Preferred Securities will generally have limited voting
rights relating only to the modification of the Series B Preferred Securities
and the dissolution, winding-up or termination of the Series B Issuer. Holders
of Series B Preferred Securities will not be entitled to vote to appoint,
remove or replace the Property Trustee or the Delaware Trustee, which voting
rights are vested exclusively in the holder of the Series B Common Securities
except upon the occurrence of certain events described herein. The Issuer
Trustees and ITT Hartford may amend the Trust Agreement to ensure that the
Series B Issuer will be classified for Federal income tax purposes as a
grantor trust without the consent of holders, even if such action adversely
affects the interests of holders. See "Description of Preferred Securities--
Voting Rights; Amendment of Trust Agreement" and "--Removal of Issuer
Trustees" in the accompanying Prospectus.
TRADING CHARACTERISTICS OF SERIES B PREFERRED SECURITIES
The Series B Preferred Securities have been approved for listing, subject to
official notice of issuance, on the New York Stock Exchange. Accordingly, the
Series B Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying Series
B Debentures. A holder of Series B Preferred Securities who disposes of its
Series B Preferred Securities between record dates for payments of
Distributions will nevertheless be required to include accrued but unpaid
interest on the Series B Debentures through the date of disposition in income
as ordinary income and to add such amount to its adjusted basis in its Series
B Preferred Securities disposed of. Such holder will recognize a capital loss
to the extent the selling price (which may not fully reflect the value of
accrued but unpaid interest) is less than its adjusted tax basis (which will
include accrued but unpaid interest). Subject to certain limited exceptions,
capital losses cannot be applied to offset ordinary income for Federal income
tax purposes. See "Certain Federal Income Tax Considerations--Sale or
Redemption of Series B Preferred Securities."
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HARTFORD CAPITAL II
Hartford Capital II is a statutory business trust formed under Delaware law
pursuant to (i) the Trust Agreement executed by ITT Hartford, as sponsor of
the Series B Issuer, and Wilmington Trust Company as Delaware Trustee and (ii)
the filing of a certificate of trust with the Delaware Secretary of State on
October 25, 1995. The Series B Issuer's business and affairs are conducted by
three Issuer Trustees: Wilmington Trust Company, as Property Trustee and
Delaware Trustee, and two individual Administrative Trustees who are employees
or officers of or affiliated with ITT Hartford. The Series B Issuer exists for
the exclusive purposes of (i) issuing and selling the Series B Preferred
Securities and Series B Common Securities, (ii) using the proceeds from the
sale of Series B Preferred Securities and Series B Common Securities to
acquire Series B Debentures issued by ITT Hartford and (iii) engaging in only
those other activities necessary, convenient or incidental thereto.
Accordingly, the Series B Debentures will be the sole assets of the Series B
Issuer, and payments under the Series B Debentures will be the sole revenue of
the Series B Issuer. All of the Series B Common Securities will be owned by
ITT Hartford. The Series B Common Securities will rank pari passu, and
payments will be made thereon pro rata, with the Series B Preferred
Securities, except that upon the occurrence and continuance of an event of
default under the Trust Agreement, the rights of ITT Hartford as holder of the
Series B Common Securities to payment in respect of Distributions and payments
upon liquidation, redemption or otherwise will be subordinated to the rights
of the holders of the Series B Preferred Securities. See "Description of
Preferred Securities--Subordination of Common Securities" in the accompanying
Prospectus. ITT Hartford will acquire Series B Common Securities in an
aggregate liquidation amount equal to 3% of the total capital of the Series B
Issuer. The Series B Issuer has a term of 55 years, but may terminate earlier
as provided in the Trust Agreement. The principal executive office of the
Series B Issuer is Hartford Plaza, Hartford, Connecticut 06115, Attention:
Secretary and its telephone number is (860) 547-5000. See "The Issuers" in the
accompanying Prospectus.
ITT HARTFORD GROUP
ITT Hartford Group, Inc. ("ITT Hartford" and, together with its
subsidiaries, "ITT Hartford Group") is a holding company that owns, directly
or indirectly, a number of insurance companies, including Hartford Fire
Insurance Company ("Hartford Fire"). ITT Hartford Group, a diversified
international organization founded in 1810, is the seventh largest property
and casualty insurer and the eighth largest life insurer in the United States,
with total assets of $100.2 billion and equity of $4.4 billion at June 30,
1996.
The North American property and casualty operations, with written premiums
of $2.9 billion for the six months ended June 30, 1996, provide a wide range
of personal, commercial, specialty and reinsurance coverages. In personal
lines, ITT Hartford Group ranks among the 10 largest carriers and is the
endorsed provider of automobile and homeowners coverages to members of the
American Association of Retired Persons ("AARP"). Commercial insurance, the
property and casualty company's largest line with $1.3 billion in written
premiums for the six months ended June 30, 1996, offers an array of products
to address customer needs, including commercial multi-peril, general liability
and workers' compensation. Specialty lines provide the expertise necessary to
meet the needs of customers with sophisticated insurance, service or risk
financing requirements. ITT Hartford Group is also a major reinsurer, with
subsidiaries and operations located in Hong Kong, Spain, the United States,
the United Kingdom and Canada.
ITT Hartford Group also provides property and casualty and life products in
the European insurance market. The largest operations are London and Edinburgh
in the United Kingdom, Zwolsche Algemeene in The Netherlands and ITT Ercos in
Spain.
S-9
<PAGE>
ITT Hartford Group's life insurance operations, with assets exceeding $68.0
billion at June 30, 1996, provide individual and group life insurance and
disability insurance, asset accumulation products and financial services for
individuals, corporations and government entities. ITT Hartford Group ranks
among the top providers of retirement planning products and services for
corporations and government entities, and, with $7.0 billion in new fixed and
variable annuity deposits in 1995, it continues to rank among industry leaders
in the sale of these products.
As a holding company with no significant business operations of its own, ITT
Hartford relies on dividends from its insurance company subsidiaries, which
are primarily domiciled in Connecticut, as the principal source of cash to
meet its obligations, including the payment of principal of (and premium, if
any) and any interest on debt obligations of ITT Hartford (including the
Series B Debentures), and to pay dividends to holders of its capital stock.
The payment of dividends by Connecticut-domiciled insurers is limited under
the insurance holding company laws of Connecticut which require notice to and
approval by the state insurance commissioner for the declaration or payment of
any dividend, which together with the other dividends or distributions made
within the preceding twelve months, exceeds the greater of (i) 10% of the
insurer's policyholder surplus as of December 31 of the preceding year or (ii)
net income for the twelve-month period ending on the thirty-first day of
December last preceding, in each case determined under statutory insurance
accounting policies. The insurance holding company laws of the other
jurisdictions in which ITT Hartford's insurance subsidiaries are incorporated
generally contain similar (although in certain instances somewhat more
restrictive) limitations on the payment of dividends.
ITT Hartford is an entity separate and distinct from its insurance
subsidiaries. The principal source for payment of principal (and premium, if
any) and any interest on debt obligations of ITT Hartford (including the
Securities) is expected to be dividends paid on common stock of these
subsidiaries. The rights of ITT Hartford to participate in any distribution of
assets of any of its subsidiaries upon the liquidation or reorganization
thereof or otherwise (and thus the ability of holders of the Securities to
benefit indirectly from such distribution) are subject to the prior claims of
creditors of the applicable subsidiary, except to the extent that ITT Hartford
may itself be a creditor of that subsidiary. Claims on these subsidiaries by
persons other than ITT Hartford include, as of June 30, 1996, claims by
policyholders for benefits payable amounting to $44.3 billion, claims of trade
creditors, claims from guaranty associations and claims from holders of debt
obligations amounting to $1.5 billion.
S-10
<PAGE>
RECENT DEVELOPMENTS
THIRD QUARTER 1996 AND NINE MONTHS ENDED SEPTEMBER 30, 1996--OPERATING RESULTS
ITT Hartford had a net loss of $543 million for the third quarter 1996, due
to $693 million of special after-tax charges. These actions included an
increase in asbestos and environmental reserves by $510 million, the
recognition of losses on ITT Hartford's closed book of Guaranteed Rate
Contracts ("GRC"), resulting in a $169 million charge, and certain other,
primarily foreign tax-related, items amounting to $14 million. Absent these
charges, ITT Hartford's net income would have been $150 million for the
quarter, a 13% decline from the third quarter 1995 results. Core earnings
(defined as after-tax net income, excluding the impact of accounting changes,
the reserve increase and other charges noted above, allocated items relating
to the spin-off of ITT Hartford from ITT Corporation and net realized capital
gains or losses) were $132 million for the third quarter of 1996, down 15%
compared with $155 million for the third quarter of 1995, primarily due to
unusually high catastrophe claims and the resolution of several large
environmental cases. Excluding these two items, core earnings were up 16% to
$215 million from $186 million for the third quarter of 1995. Catastrophe
claims for the period were unusually high at $49 million, compared with the
$14 million reported for the same period in 1995.
Due to the GRC charge, ITT Hartford's revenues were down 7% to $2.8 billion.
Revenues for ongoing operations, which exclude the GRC charge and other run-
off operations, were up 1% to almost $3 billion compared with the $2.9 billion
for the same quarter in 1995. Realized capital gains, after tax, excluding the
GRC charge, were $18 million, compared with $6 million for the same period in
1995. Since the beginning of the year, assets have grown nearly 11% to $104
billion as of September 30, 1996 from $93.9 billion.
For the first nine months of the year, ITT Hartford had a net loss of $304
million, compared with $418 million of net income for the same period in 1995.
Core earnings were down 4% to $343 million from $356 million in 1995, due
primarily to unusually adverse catastrophe experience in the first and third
quarters. Excluding these items, core earnings for the nine-month period rose
19% to $601 million from $505 million for the comparable period in 1995.
Revenues for ongoing operations, which exclude the GRC charge and other run-
off operations, increased 6% to $9.1 billion, from $8.6 billion for the first
nine months in 1995.
ENVIRONMENTAL AND ASBESTOS ISSUES
ITT Hartford continues to receive claims asserting damages from
environmental exposures and for injuries from asbestos and asbestos-related
products, both of which affect the North American Property & Casualty,
International and Runoff segments. Environmental claims relate primarily to
pollution and related clean-up costs. With regard to these claims, uncertainty
exists which impacts the ability of insurers and reinsurers to estimate the
ultimate reserves for unpaid losses and related settlement expenses. ITT
Hartford finds that conventional reserving techniques cannot estimate the
ultimate cost of these claims because of inadequate development patterns and
inconsistent emerging legal doctrine. For the majority of environmental claims
and many types of asbestos claims, unlike any other type of contractual claim,
there is almost no agreement or consistent precedent to determine what, if
any, coverage exists or which, if any, policy years and insurers or reinsurers
may be liable. Further uncertainty arises with environmental claims since
claims are often made under policies, the existence of which may be in
dispute, the terms of which may have changed over many years, which may or may
not provide for legal defense costs, and which may or may not contain
environmental exclusion clauses that may be absolute or allow for fortuitous
events. Courts in different jurisdictions have reached disparate conclusions
on similar issues and in certain situations have broadened the interpretation
of policy coverage and liability issues. In light of the extensive claim
settlement process for environmental and asbestos claims, involving
comprehensive fact gathering, subject matter expertise and intensive
litigation, ITT Hartford established an environmental claims facility in 1992
to defend itself aggressively against unwarranted claims and to minimize
costs.
S-11
<PAGE>
Within the property and casualty insurance industry, progress has been made
in developing sophisticated, alternative methodologies utilizing company
experience and supplemental databases to assess environmental and asbestos
liabilities. Consistent with ITT Hartford's practice of using the best
techniques to estimate ITT Hartford's environmental and asbestos exposures, a
study was initiated in April 1996. ITT Hartford, utilizing internal staff
supplemented by outside legal and actuarial consultants, completed the study
in October 1996.
The study included a review of identified environmental and asbestos
exposures of North American Property & Casualty, U.S. exposures of ITT
Hartford's International segment and exposures of the Runoff segment, and
covered ITT Hartford's Personal, Commercial, Reinsurance, Specialty and Other
lines of business. The methodology utilized a ground up analysis of policy,
site and exposure level data for a representative sample of ITT Hartford's
claims. The results of the evaluation were extrapolated against the balance of
the claim population to estimate ITT Hartford's overall exposure for reported
claims.
In addition to estimating liabilities on reported environmental and asbestos
claims, ITT Hartford estimated reserves of claims incurred but not reported
("IBNR"). The IBNR reserve was estimated using information on reporting
patterns of known insureds, characteristics of insureds such as limits
exposed, attachment points and number of coverage years involved, third party
costs, and closed claims.
Included in ITT Hartford's analysis of environmental and asbestos exposures
was a review of applicable reinsurance coverage. Reinsurance coverage
applicable to the sample was used to estimate the reinsurance coverage that
applied to the balance of the reported environmental and asbestos claims and
to the IBNR estimates.
An international actuarial firm reviewed ITT Hartford's approach and
concluded that the way it studied its exposures, the thoroughness of its
analysis and the way it came to its estimates was reasonable and
comprehensive.
Upon completion of the study and assessment of the results in October 1996,
ITT Hartford determined that its environmental and asbestos reserves should be
increased, on an undiscounted basis, by $493 million (net of reinsurance) and
$292 million (net of reinsurance), respectively, as of September 30, 1996.
Reserve activity for both reported and unreported environmental and asbestos
claims, including reserves for legal defense costs, was as follows (net of
reinsurance):
ENVIRONMENTAL AND ASBESTOS CLAIMS LOSS AND LOSS ADJUSTMENT EXPENSES (IN
MILLIONS)
<TABLE>
<CAPTION>
FOR THE
FOR THE NINE MONTHS ENDING YEAR ENDING
SEPTEMBER 30, 1996 DECEMBER 31, 1995
----------------------------- -----------------
ENVIRONMENTAL ASBESTOS TOTAL TOTAL(1)
------------- -------- ----- -------
<S> <C> <C> <C> <C>
Beginning liability..... $ 926 $410 $1,336 $1,334
Loss and loss expense
incurred............... 604 336 940 163
Loss and loss expense
paid.................... (96) (34) (130) (161)
------ ---- ------ ------
Ending liability........ $1,434 $712 $2,146 $1,336
------ ---- ------ ------
</TABLE>
- --------
(1) Prior to December 31, 1995 claims were not split between environmental and
asbestos exposures.
S-12
<PAGE>
ITT Hartford's pretax operating earnings have been impacted over the last
three years by incurred environmental and asbestos loss and loss expense as
follows (in millions): $163 in 1995, $145 in 1994 and $160 in 1993, with all
years reported net of reinsurance.
ITT Hartford believes that the environmental and asbestos reserves reported
at September 30, 1996 are a reasonable estimate of the ultimate remaining
liability for these claims based upon known facts, current assumptions and ITT
Hartford's methodologies. Future social, economic, legal or legislative
developments may alter the original intent of policies and the scope of
coverage. ITT Hartford will continue to evaluate new developments and
methodologies as they become available for use in supplementing ITT Hartford's
ongoing analysis and review of its environmental and asbestos exposures. These
future reviews may result in a change in reserves, impacting ITT Hartford's
results of operations in the period in which the reserve estimates are
changed. While the effects of future changes in facts, legal and other issues
could have a material effect on future results of operations, ITT Hartford
does not expect such changes would have a material effect on its liquidity or
financial condition.
GUARANTEED RATE CONTRACT PORTFOLIO
Prior to 1996, the closed book of guaranteed rate contract business ("Closed
Book GRC") was reported as a component of the Asset Management Services
Division of the Life segment. Closed Book GRC is now reported as a component
of Runoff Operations and had no new or renewal business as of the end of 1995.
The majority of products included in Closed Book GRC are guaranteed investment
contracts with guaranteed fixed or indexed rates for a specific period. Closed
Book GRC results have been negatively affected by lower investment rates and
earnings on mortgage backed securities due to prepayments experienced in
excess of assumed levels in years prior to 1995. Closed Book GRC was also
affected by the interest rate rise in 1994 when the duration of its assets
lengthened relative to that of the liabilities. Due to the reduced investment
earnings and duration mismatch, the portfolio had insufficient assets to fund
fully its liability commitments. During the third quarter of 1996, the Life
segment transferred assets in the amount of $200 million to the Runoff segment
to adequately fund Closed Book GRC so that future cash infusions would be
minimal.
Although the Closed Book GRC asset portfolio as a whole is duration matched
with its liabilities, certain investments continue to have a longer maturity
than their corresponding liabilities and will need to be liquidated prior to
maturity in order to meet the specific liability commitments. To protect the
existing value of these investments, ITT Hartford entered into various hedge
transactions in late September 1996 which substantially eliminated further
fluctuation in fair value of the investments due to Interest rate changes.
ITT Hartford's accounting policy is to record an other than temporary
impairment charge on a security if it is determined that ITT Hartford is
unable to recover all amounts due under the contractual obligations of the
security. In addition, ITT Hartford has established specific criteria to be
used in the impairment evaluation of an individual portfolio of assets.
Specifically, if the asset portfolio is supporting a runoff operation, is
forced to be liquidated prior to maturity to meet liability commitments, and
has a fair value below amortized cost which will not materially fluctuate as a
result of future interest rate changes, then an other than temporary
impairment charge has been determined to have occurred. Once an impairment
charge has been recorded, ITT Hartford continues to review the impaired
securities for appropriate valuation.
With the initiation of the hedge transactions which eliminated the
possibility that the fair value of Closed Book GRC investments would recover
to their current amortized cost, an other than temporary impairment loss of
$82 million after tax was determined to have occurred and was recorded in
September 1996. Also, during the third quarter of 1996, Closed Book GRC had
asset sales resulting in proceeds of approximately $500 million and a realized
loss of $55 million after tax. The asset sales
S-13
<PAGE>
were the result of current liquidity needs in addition to taking advantage of
favorable market conditions for certain securities. Other charges of $32
million after-tax were also incurred in the third quarter.
During 1995, Closed Book GRC incurred a $68 million after-tax loss from
operations. In addition, prior to the above actions, the level of the 1995
loss was expected to decline by 10% to 25% in 1996 and 1997 with the losses
having run off in their entirety by the year 2000. As a result of the above
actions, it is now expected that the comparable after-tax 1996 loss will be in
the range of $51 to $55 million, while after-tax losses in 1997 and 1998 will
be reduced to the range of $10 to $20 million per year. Losses from Closed
Book GRC in years subsequent to 1998 are expected to be minimal.
FINANCIAL RATINGS
The following table summarizes ITT Hartford's significant U.S. member
companies' financial ratings from the major independent rating organizations
as of September 30, 1996:
<TABLE>
<CAPTION>
A.M. DUFF & STANDARD
BEST PHELPS & POOR'S MOODY'S
---- ------ -------- ---------
<S> <C> <C> <C> <C>
Hartford Fire............................... A+ AA AA Aa2
Hartford Life............................... A+ AA+ AA Aa2
Hartford Life & Accident.................... A+ AA+ AA Not Rated
ITT Hartford Life & Annuity................. A+ AA+ AA Not Rated
</TABLE>
On September 24, 1996 Standard & Poor's announced that it had reduced the
claims-paying ability ratings of the ITT Hartford group of companies from AA+
to AA. In announcing the rating change, Standard & Poor's said that the action
was based primarily on increased concern with the overall strength of ITT
Hartford's consolidated capital, partially offset by a superior business
position within the markets that ITT Hartford operates. It noted that the
rating action assumed continued significant capital raising initiatives by ITT
Hartford over the next year and said that these initiatives, in combination
with continued improvement in operating earnings, excluding any unusual
charges, should allow the group to improve its overall capital position.
On October 18, 1996, Moody's Investors Service announced that it was
reviewing for possible downgrade various ratings of ITT Hartford and its
subsidiaries, including the financial strength ratings of ITT Hartford's
insurance subsidiaries, and the ratings assigned to the quarterly income
preferred securities of Hartford Capital I and the preferred stock of Hartford
Capital II, III and IV. Moody's stated that the review was prompted by ITT
Hartford's announcement that it was taking the charges relating to its
environmental and asbestos reserves and GRC portfolio referred to above, and
that its review would focus on ITT Hartford's exposure to asbestos and
environmental losses, its appetite for financial leverage and its strategic
complexion over the intermediate term.
ITT Hartford expects to undertake capital-raising transactions during the
remainder of 1996 and 1997, including the offering of the Series B Preferred
Securities hereby and other offerings. There can be no assurance, however, as
to the timing of or amount of capital raised by such transactions, which will
depend on many factors, including market conditions and ITT Hartford's need
for and intended use of proceeds from any such transaction. Any such
transaction that is a public offering of securities registered under the
Securities Act of 1933 will be made only by means of a prospectus.
Certain of the statements contained herein (other than statements of
historical fact) are forward-looking statements. Forward-looking statements
are made based upon management's expectations and belief concerning future
developments and their potential effect upon ITT Hartford. There can be no
assurance that future developments will be in accordance with management's
expectations or that the effect of future developments on ITT Hartford will be
those anticipated by management. Actual results could differ materially from
those expected by ITT Hartford, depending on the outcome of certain factors,
including those described with the forward-looking statements.
S-14
<PAGE>
SUMMARY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
NINE MONTHS
THIRD QUARTER ENDED SEPTEMBER
ENDED SEPTEMBER 30, 30,
------------------- ---------------
<S> <C> <C> <C> <C>
1996 1995 1996 1995
--------- --------- -------- -------
(UNAUDITED)
(DOLLARS IN MILLIONS)
ITT HARTFORD:
Revenues...................... $ 2,836 $ 3,058 $ 9,140 $ 8,977
Net Income (loss) ............ (543) 173 (304) 418
Core earnings................. 132 155 343 356
Total assets.................. $104,021 $90,237
SUMMARY SEGMENT RESULTS:
Core Earnings:
North American Property &
Casualty...................... $ 61 $ 84 $ 152 $ 179
International................. 24 28 71 77
Life.......................... 67 60 180 157
Runoff........................ (20) (17) (60) (57)
--------- --------- -------- -------
Core Earnings............... $ 132 $ 155 $ 343 $ 356
========= ========= ======== =======
Revenues:
North American Property &
Casualty...................... $ 1,594 $ 1,589 $ 4,756 $ 4,746
International................. 389 376 1,178 1,106
Life.......................... 993 983 3,166 2,751
Runoff ....................... 70 110 250 374
GRC realized capital loss..... (210) -- (210) --
--------- --------- -------- -------
Revenues.................... $ 2,836 $ 3,058 $ 9,140 $ 8,977
========= ========= ======== =======
</TABLE>
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth ITT Hartford's ratios of earnings to fixed
charges for the years and periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------ -------------------------
1996 1995 1995 1994 1993 1992 1991
----- ----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Consolidated Earnings to Fixed
Charges and Preferred Dividend
Requirements........................... 4.3 5.3 5.8 7.4 6.8 (3.1) 5.0
</TABLE>
For purposes of computing the ratio of earnings to fixed charges, "earnings"
consists of income from operations before Federal income taxes and fixed
charges. "Fixed charges" consists of interest expense, capitalized interest,
amortization of debt expense, an imputed interest component for rental expense
and dividend requirements on preferred stock of Hartford Fire.
USE OF PROCEEDS
All of the proceeds from the sale of Series B Preferred Securities will be
invested by the Series B Issuer in Series B Debentures. ITT Hartford intends
to use the proceeds from the sale of such Series B Debentures for general
corporate purposes.
S-15
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of ITT
Hartford as of June 30, 1996 and after giving effect to the consummation of
the offering of the Series B Preferred Securities. See "Use of Proceeds." The
following data is qualified in its entirety by the financial statements of ITT
Hartford and other information contained elsewhere in this Prospectus
Supplement and the accompanying Prospectus or incorporated herein or therein
by reference.
<TABLE>
<CAPTION>
AS OF
JUNE 30, 1996
--------------
PRO
ACTUAL FORMA
------ ------
(IN MILLIONS)
<S> <C> <C>
Cash .......................................................... $ 156 $ 156
====== ======
Short-Term Debt................................................ $ 500 $ 500
Long-Term Debt................................................. 1,021 1,021
Company Obligated Mandatorily Redeemable Preferred Securities
of Subsidiary Trust Holding Solely Parent Junior Subordinated
Debentures, Series A(1)....................................... 485 485
Company Obligated Mandatorily Redeemable Preferred Securities
of Subsidiary Trust Holding Solely Parent Junior Subordinated
Debentures, Series B(2)....................................... --
Common Stock and Capital Surplus............................... 1,613 1,613
Cumulative Translation Adjustments............................. 16 16
Unrealized Loss on Securities, Net of Tax...................... (189) (189)
Retained Earnings.............................................. 2,946 2,946
------ ------
Total Capitalization .......................................... $6,392 $
====== ======
</TABLE>
- --------
(1) On February 28, 1996, Hartford Capital I issued 20,000,000 7.70%
Cumulative Quarterly Income Preferred Securities, Series A. The sole
assets of Hartford Capital I are $500,000,000 of 7.70% Junior Subordinated
Deferrable Interest Debentures, Series A, due February 28, 2016. ITT
Hartford owns all of the common securities of Hartford Capital I. The
obligations of ITT Hartford, under certain documents, including without
limitation a guarantee agreement, constitute a full and unconditional
guarantee by ITT Hartford of the obligations of Hartford Capital I under
the preferred securities. It is anticipated that Hartford Capital I will
not be subject to the reporting requirements under the Securities Exchange
Act of 1934.
(2) As described herein, the sole assets of the Series B Issuer will be $
million of % Junior Subordinated Deferrable Interest Debentures, Series
B, issued by ITT Hartford to the Series B Issuer. The Series B Debentures
will mature on , 2026, which date may be extended to a date not later
than , 2045 if certain conditions are met. ITT Hartford owns all of
the Series B Common Securities of the Series B Issuer. It is anticipated
that the Series B Issuer will not be subject to the reporting requirements
under the Securities Exchange Act of 1934.
S-16
<PAGE>
ACCOUNTING TREATMENT
For financial reporting purposes, the Series B Issuer will be treated as a
subsidiary of ITT Hartford and, accordingly, the accounts of the Series B
Issuer will be included in the consolidated financial statements of ITT
Hartford. The Preferred Securities will be presented as a separate line item
in the consolidated balance sheet of ITT Hartford entitled "Company Obligated
Mandatorily Redeemable Preferred Securities of Subsidiary Trust Holding Solely
Parent Junior Subordinated Debentures, Series B", and appropriate disclosures
about the Preferred Securities, the Series B Guarantee and the Junior
Subordinated Debentures will be included in the notes to the consolidated
financial statements. For financial reporting purposes, ITT Hartford will
record distributions payable on the Preferred Securities as operating
expenses.
SELECTED FINANCIAL INFORMATION
The following selected financial data for the five years ended December 31,
1995, are derived from the consolidated audited financial statements of ITT
Hartford. The financial data for the six months ended June 30, 1996 and June
30, 1995, are derived from the consolidated unaudited financial statements of
ITT Hartford. The unaudited financial statements include all adjustments,
consisting of normal recurring accruals, which ITT Hartford considers
necessary for a fair presentation of its financial position and the results of
operations of such dates and for such periods. Operating results for the six
months ended June 30, 1996 are not necessarily indicative of the results as
might be expected for the entire year ending December 31, 1996.
The table below reflects the consolidated financial position and results of
operations of ITT Hartford. All material intercompany transactions and
balances between ITT Hartford and its subsidiaries have been eliminated.
The following amounts should be read in conjunction with the consolidated
financial statements and notes thereto incorporated herein by reference.
S-17
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
----------------- -------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- ------- ------- ------- ------- ------- -------
(IN MILLIONS, OTHER THAN PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues............... $ 6,304 $ 5,919 $12,150 $11,102 $10,338 $ 9,862 $ 9,242
======== ======= ======= ======= ======= ======= =======
Net Income:
North American
Property & Casualty... $ 91 $ 95 $ 251 $ 309 $ 287 $ 170 $ 230
International.......... 35 30 68 47 (16) (37) 3
Life................... 113 97 153 150 125 95 73
-------- ------- ------- ------- ------- ------- -------
Sub-Total............ $ 239 $ 222 $ 472 $ 506 $ 396 $ 228 $ 306
Runoff(1).............. (28) (21) 6 17 9 23 --
-------- ------- ------- ------- ------- ------- -------
Operating Income, Af-
ter-Tax............. $ 211 $ 201 $ 478 $ 523 $ 405 $ 251 $ 306
Net Realized Capital
Gains, After-Tax...... 28 31 67 59 101 293 95
Accounting Changes,
Net of Tax Expense.... -- -- -- 12 -- (379) --
Other(2)............... -- 13 14 50 31 (818) 30
-------- ------- ------- ------- ------- ------- -------
Net income........... $ 239 $ 245 $ 559 $ 644 $ 537 $ (653) $ 431
======== ======= ======= ======= ======= ======= =======
Earnings Per Share:(3)
Operating Income, Af-
ter-Tax............... $ 1.80 $ 1.72 $ 4.08 $ 4.47 $ 3.46 $ 2.14 $ 2.61
Net Income............. $ 2.04 $ 2.09 $ 4.77 $ 5.50 $ 4.59 $ (5.58) $ 3.68
BALANCE SHEET DATA:
Assets................. $100,214 $86,831 $93,855 $76,765 $66,179 $54,180 $37,771
======== ======= ======= ======= ======= ======= =======
Debt and Subsidiary
Preferred Stock:
Short-Term Debt........ $ 500 $ 915 $ 886 $ 902 $ 384 $ 469 $ 583
Long-Term Debt......... 1,021 598 1,022 596 579 575 594
Note Payable to ITT.... -- -- -- -- 140 -- --
-------- ------- ------- ------- ------- ------- -------
Total Debt........... $ 1,521 $ 1,513 $ 1,908 $ 1,498 $ 1,103 $ 1,044 $ 1,177
Subsidiary Preferred
Stock................. -- 86 -- 86 263 292 292
-------- ------- ------- ------- ------- ------- -------
Debt and Subsidiary
Preferred Stock..... $ 1,521 $ 1,599 $ 1,908 $ 1,584 $ 1,366 $ 1,336 $ 1,469
-------- ------- ------- ------- ------- ------- -------
Company Obligated
Mandatorily Redeemable
Preferred Securities
Trust Holding Solely
Parent Junior Subordi-
nated Debentures,
Series A.............. 485 -- -- -- -- -- --
Other Liabilities...... $ 93,822 $80,425 $87,245 $71,997 $60,801 $49,165 $32,486
-------- ------- ------- ------- ------- ------- -------
Liabilities............ $ 95,828 $82,024 $89,153 $73,581 $62,167 $50,501 $33,955
======== ======= ======= ======= ======= ======= =======
Stockholders' Equity
Excluding Unrealized
Gain (Loss)........... $ 4,575 $ 4,956 $ 4,457 $ 4,403 $ 3,934 $ 3,652 $ 3,837
Unrealized Gain
(Loss)................ (189) (149) 245 (1,219) 78 27 (21)
-------- ------- ------- ------- ------- ------- -------
Stockholders' Equi-
ty.................. $ 4,386 $ 4,807 $ 4,702 $ 3,184 $ 4,012 $ 3,679 $ 3,816
======== ======= ======= ======= ======= ======= =======
Capitalization Exclud-
ing Unrealized Gain
(Loss)................ $ 6,581 $ 6,555 $ 6,365 $ 5,987 $ 5,300 $ 4,988 $ 5,306
======== ======= ======= ======= ======= ======= =======
OTHER DATA:
Debt to Equity Exclud-
ing Unrealized Gain
(Loss)(4)(5).......... 43.8% 32.3% 42.8% 36.0% 34.7% 36.6% 38.3%
Debt to Capitalization
Excluding Unrealized
Gain (Loss)(4)(5)..... 30.5% 24.4% 30.0% 26.5% 25.8% 26.8% 27.7%
Combined Ratio(6)...... 106.4 105.4 104.6 102.6 105.1 114.8 111.3
Hartford Fire Statutory
Surplus............... $ 3,730 $ 3,530 $ 3,639 $ 3,104 $ 3,314 $ 3,007 $ 3,059
</TABLE>
- --------
(1) The Runoff segment includes certain insurance operations of ITT Hartford
which have discontinued writing new and renewal business.
(2) Primarily reflects ITT Hartford's allocation of ITT Corporation corporate
tax and related interest reserves, as well as general provisions for
expenses and exposure related to the spin-off of ITT Hartford by ITT
Corporation which occurred on December 19, 1995. Also includes the
following in 1992: reserve strengthening of $759 million and Hurricane
Andrew related claims of $112 million.
(3) Actual number of common shares outstanding at December 31, 1995 of 117.1
million assumed for all periods presented.
(4) Debt includes subsidiary preferred stock.
(5) Debt at June 30, 1996 includes Company Obligated Mandatorily Redeemable
Preferred Securities Trust Holding Solely Parent Junior Subordinated
Debentures, Series A.
(6) For the periods after 1992, the combined ratios exclude the results of
Runoff Operations. Additionally, the 1992 combined ratio excludes the
impact of $900 million of reserve strengthening actions taken to address
loss developments in surplus lines and reinsurance at First State
Insurance Companies, a group of entities that ceased writing new and
renewal business at the end of 1992, and $250 million of legal defense
costs associated with environmental-related claims. Including the impact
of these actions, the combined ratio for 1992 was 133.7.
S-18
<PAGE>
CERTAIN TERMS OF SERIES B PREFERRED SECURITIES
GENERAL
The following summary of certain terms and provisions of the Series B
Preferred Securities supplements the description of the terms and provisions
of the Preferred Securities set forth in the accompanying Prospectus under the
heading "Description of the Preferred Securities", to which description
reference is hereby made. This summary of certain terms and provisions of the
Series B Preferred Securities does not purport to be complete and is subject
to, and qualified in its entirety by reference to, the Trust Agreement. The
form of the Trust Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus Supplement and accompanying Prospectus is a
part.
DISTRIBUTIONS
The Series B Preferred Securities represent undivided beneficial interests
in the assets of the Series B Issuer, and Distributions on each Series B
Preferred Security will be payable at the annual rate of % of the stated
liquidation amount of $25, payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year. Distributions that are in arrears
for more than one quarter will accumulate additional interest thereon
("Additional Amounts") at the rate per annum of % thereof, compounded
quarterly. The term "Distributions" as used herein shall include any such
Additional Amounts. Distributions will accrue from , 1996, the date of
original issuance. The first Distribution payment date for the Series B
Preferred Securities will be December 31, 1996, and such Distribution will be
cumulative from the date of original issuance. The amount of Distributions
payable for any period will be computed on the basis of a 360-day year of
twelve 30-day months. See "Description of Preferred Securities--Distributions"
in the accompanying Prospectus.
ITT Hartford has the right under the Indenture to defer the payment of
interest at any time and from time to time on the Series B Debentures, for a
period not exceeding 20 consecutive quarters with respect to each Extension
Period, provided that no Extension Period may extend beyond the Stated
Maturity of the Series B Debentures. As a consequence of any such extension,
quarterly Distributions on the Series B Preferred Securities would be deferred
(but would continue to accumulate additional interest thereon at the rate of
% per annum) by the Series B Issuer during any such Extension Period. In the
event that ITT Hartford exercises this right, during any such Extension
Period, ITT Hartford may not, and may not permit any subsidiary of ITT
Hartford to, (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of ITT
Hartford's capital stock or (ii) make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem any debt securities
(including other Junior Subordinated Debentures) that rank pari passu with or
junior in interest to the Series B Debentures or make any guarantee payments
with respect to the foregoing (other than (a) dividends or distributions in
common stock of ITT Hartford, (b) redemptions or purchases of any rights
pursuant to ITT Hartford's Rights Plan, or any successor to such Rights Plan,
and the declaration of a dividend of such rights in the future, and (c)
payments under any Guarantee). Prior to the termination of any such Extension
Period, ITT Hartford may further extend the interest payment period, provided
that such Extension Period together with all such previous and further
extensions of such Extension Period may not exceed 20 consecutive quarters or
extend beyond the maturity of the Series B Debentures. Upon the termination of
any such Extension Period and the payment of all amounts then due, ITT
Hartford may select a new Extension Period subject to the above requirements.
See "Certain Terms of the Series B Debentures--Option to Extend Interest
Payment Period" and "Certain Federal Income Tax Consequences--Potential
Extension of Interest Payment Period and Original Issue Discount".
ITT Hartford has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Series B
Debentures.
S-19
<PAGE>
REDEMPTION
Upon the repayment or redemption, in whole or in part, of the Series B
Debentures, whether at maturity or upon earlier redemption as provided in the
Indenture, the proceeds from such repayment or redemption shall be applied by
the Property Trustee to redeem a Like Amount (as defined in the accompanying
Prospectus) of the Series B Preferred Securities, upon not less than 30 nor
more than 60 days notice, at a Redemption Price equal to the aggregate
liquidation amount of such Series B Preferred Securities plus accumulated and
unpaid Distributions thereon to the date of Redemption (the "Redemption Date")
and the related amount of the premium, if any, paid by ITT Hartford upon the
concurrent redemption of the Series B Debentures. See "Description of
Preferred Securities-- Redemption" in the accompanying Prospectus and "Certain
Terms of Series B Debentures--Redemption".
ITT Hartford will have the right to redeem the Series B Debentures (i) in
whole at any time or in part from time to time, at a redemption price equal to
the accrued and unpaid interest on the Series B Debentures so redeemed to the
date fixed for redemption, plus the greater of (a) the principal amount
thereof and (b) an amount equal to the Discounted Remaining Fixed Amount
Payments (as defined in "Description of Junior Subordinated Debentures--
Redemption" in the accompanying Prospectus), (ii) on or after , 2001, in
whole or in part, at a redemption price equal to the accrued and unpaid
interest on the Series B Debentures so redeemed to the date fixed for
redemption plus 100% of the principal amount thereof, or (iii) at any time, in
whole (but not in part), upon the occurrence of a Tax Event or an Investment
Company Event (each as defined in the accompanying Prospectus, and as so
collectively defined, a "Special Event"), at a redemption price equal to the
accrued and unpaid interest on the Series B Debentures so redeemed to the date
fixed for redemption, plus 100% of the principal amount thereof, in each case
subject to conditions described under "Description of Junior Subordinated
Debentures--Redemption" and "Description of Corresponding Junior Subordinated
Debentures--Optional Redemption" in the accompanying Prospectus.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence and continuation of a Special Event, ITT Hartford has
the right to redeem the Series B Debentures in whole (but not in part) and
therefore cause a mandatory redemption of the Series B Preferred Securities
and Series B Common Securities at the Redemption Price within 90 days
following the occurrence of such Special Event. At any time, ITT Hartford will
have the right to terminate the Series B Issuer and after satisfaction of the
liabilities of creditors of the Series B Issuer as provided by applicable law,
cause the Series B Debentures to be distributed to the holders of the Series B
Preferred Securities in liquidation of the Series B Issuer. Under current
United States Federal income tax law and interpretations and assuming, as
expected, the Series B Issuer is treated as a grantor trust, a distribution of
the Series B Debentures should not be a taxable event to holders of the Series
B Preferred Securities. Should there be a change in law, a change in legal
interpretation, a Special Event or other circumstances, however, the
distribution could be a taxable event to holders of the Series B Preferred
Securities. See "Certain Federal Income Tax Consequences--Distribution of
Series B Debentures to Holders of Series B Preferred Securities." If ITT
Hartford does not elect either option described above, the Series B Preferred
Securities will remain outstanding until the repayment of the Series B
Debentures.
If ITT Hartford elects to liquidate the Series B Issuer and thereby causes
the Series B Debentures to be distributed to holders of the Series B Preferred
Securities in liquidation of the Series B Issuer, ITT Hartford shall have the
right to shorten or extend the maturity of such Series B Debentures, provided
that it can extend the maturity only if certain conditions are met. See
"Certain Terms of Series B Debentures--General."
S-20
<PAGE>
LIQUIDATION VALUE
The amount payable on the Series B Preferred Securities in the event of any
liquidation of the Series B Issuer is $25 per Series B Preferred Security plus
accumulated and unpaid Distributions, which, subject to certain exceptions,
may be in the form of a distribution of such amount in Series B Preferred
Securities. See "Description of Preferred Securities--Liquidation Distribution
upon Termination" in the accompanying Prospectus.
CERTAIN TERMS OF SERIES B DEBENTURES
GENERAL
The following summary of certain terms and provisions of the Series B
Debentures supplements the description of the terms and provisions of the
Corresponding Junior Subordinated Debentures set forth in the accompanying
Prospectus under the headings "Description of Junior Subordinated Debentures"
and "Description of Corresponding Junior Subordinated Debentures", to which
description reference is hereby made. The summary of certain terms and
provisions of the Series B Debentures set forth below does not purport to be
complete and is subject to, and qualified in its entirety by reference to, the
Indenture. The Indenture has been filed as an exhibit to the Registration
Statement of which this Prospectus Supplement and accompanying Prospectus is a
part.
Concurrently with the issuance of the Series B Preferred Securities, the
Series B Issuer will invest the proceeds thereof and the consideration paid by
ITT Hartford for the Series B Common Securities in the Series B Debentures
issued by ITT Hartford. The Series B Debentures will bear interest at the
annual rate of % of the principal amount thereof, payable quarterly in
arrears on March 31, June 30, September 30 and December 31 of each year (each,
an "Interest Payment Date"), commencing December 31, 1996, to the person in
whose name each Series B Debenture is registered, subject to certain
exceptions, at the close of business on the Business Day next preceding such
Interest Payment Date. It is anticipated that each Series B Debenture will be
held in the name of the Property Trustee in trust for the benefit of the
holders of the Series B Preferred Securities. The amount of interest payable
for any period will be computed on the basis of a 360-day year of twelve 30-
day months. In the event that any date on which interest is payable on the
Series B Debentures is not a Business Day, then payment of the interest
payable on such date will be made on the next succeeding day which is a
Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on the date such payment
was originally payable. Interest that is in arrears for more than one quarter
will bear the additional interest on the amount thereof (to the extent
permitted by law) at the rate per annum of % thereof, compounded quarterly.
The term "interest" as used herein shall include quarterly interest payments,
interest on quarterly interest payments in arrears and Additional Sums (as
defined below), as applicable.
The Series B Debentures will be issued as a series of Junior Subordinated
Debentures under the Indenture. The Series B Debentures will mature on ,
2026, which date may be extended at any time at the election of ITT Hartford
for one or more periods, but in no event to a date later than , 2045
(such date, as it may be extended, the "Stated Maturity"), provided that at
the time such election is made and at the time of extension (i) ITT Hartford
is not in bankruptcy, otherwise insolvent or in liquidation, (ii) ITT Hartford
is not in default in the payment of any interest or principal on the Series B
Debentures, (iii) the Series B Issuer is not in arrears on payments of
Distributions on the Series B Preferred Securities and no deferred
Distributions are accumulated, (iv) the Series B Debentures are rated not less
than BBB- by Standard & Poor's Ratings Services or Baa3 by Moody's Investors
Service, Inc. or the equivalent by any other nationally recognized statistical
rating organization and (v) the extended Stated Maturity is not later than the
49th anniversary of the initial
S-21
<PAGE>
issuance of the Series B Preferred Securities; provided, however, that, if ITT
Hartford exercises its right to liquidate the Series B Issuer and distribute
the Series B Debentures, effective upon such exercise the Stated Maturity of
the Series B Debentures may be changed to any date elected by ITT Hartford
that is (i) no earlier than the date five years after the initial issuance of
the Series B Preferred Securities and (ii) no later than the date 30 years
(plus an extended term of up to an additional 19 years if the above-referenced
conditions are satisfied) after the date of the initial issuance of the
Series B Preferred Securities.
The Series B Debentures will rank pari passu with the 7.70% Junior
Subordinated Deferrable Interest Debentures, Series A, Due February 28, 2016
and with all other series of Junior Subordinated Debentures, and will be
unsecured and will rank junior and be subordinate in right of payment to all
Senior Debt of ITT Hartford. See "Description of Junior Subordinated
Debentures--Subordination" in the accompanying Prospectus. As a non-operating
holding company, most of the operating assets of ITT Hartford and its
consolidated subsidiaries are owned by such subsidiaries, and ITT Hartford
relies primarily on dividends from such subsidiaries to meet its obligations
for payment of principal and interest on its outstanding debt obligations and
corporate expenses. Accordingly, the Series B Debentures will be effectively
subordinated to all existing and future liabilities of ITT Hartford's
subsidiaries, and holders of Series B Debentures should look only to the
assets of ITT Hartford for payments on the Series B Debentures. The payment of
dividends by ITT Hartford's insurance company subsidiaries, including Hartford
Fire, is limited under the insurance holding company laws in which such
subsidiaries are domiciled. See "ITT Hartford Group". The Indenture does not
limit the incurrence or issuance of other secured or unsecured debt of ITT
Hartford, whether under the Indenture, any other indenture that ITT Hartford
may enter into in the future or otherwise. See "Description of Junior
Subordinated Debentures--Subordination" in the accompanying Prospectus.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
ITT Hartford has the right under the Indenture at any time during the term
of the Series B Debentures to defer the payment of interest from time to time
for a period not exceeding 20 consecutive quarters with respect to each
deferral period, provided that no Extension Period may extend beyond the
Stated Maturity of the Series B Debentures. At the end of such Extension
Period, ITT Hartford must pay all interest then accrued and unpaid (together
with interest thereon at the annual rate of % to the extent permitted by
applicable law). During an Extension Period, interest will continue to accrue
and holders of Series B Debentures will be required to accrue interest income
for Federal income tax purposes. See "Certain Federal Income Tax
Considerations--Potential Extension of Interest Payment Period and Original
Issue Discount."
In the event that ITT Hartford exercises this right, during any such
Extension Period, ITT Hartford may not, and may not permit any subsidiary of
ITT Hartford to, (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any
of ITT Hartford's capital stock or (ii) make any payment of principal,
interest or premium, if any, on or repay, repurchase or redeem any debt
securities (including other Junior Subordinated Debentures) that rank pari
passu with or junior in interest to the Series B Debentures or make any
guarantee payments with respect to the foregoing (other than (a) dividends or
distributions in common stock of ITT Hartford, (b) redemptions or purchases of
any rights pursuant to ITT Hartford's Rights Plan, or any successor to such
Rights Plan, and the declaration of a dividend of such rights in the future,
and (c) payments under any Guarantee). Prior to the termination of any such
Extension Period, ITT Hartford may further extend the interest payment period,
provided that such Extension Period together with all such previous and
further extensions of such Extension Period may not exceed 20 consecutive
quarters or extend beyond the maturity of the Series B Debentures. Upon the
termination of any such Extension Period and the payment of all amounts then
due, ITT Hartford may select a new Extension Period subject to the above
requirements. No interest shall be due and payable during an Extension Period,
except at the end thereof. ITT Hartford must give the Property Trustee, the
Administrative Trustees and the Debenture
S-22
<PAGE>
Trustee notice of its selection of such Extension Period at least one Business
Day prior to the earlier of (i) the date the Distributions on the Series B
Preferred Securities are payable or (ii) the date the Administrative Trustees
are required to give notice to the New York Stock Exchange or other applicable
self-regulatory organization or to holders of such Series B Preferred
Securities of the record date or the date such Distributions are payable, but
in any event not less than one Business Day prior to such record date. The
Debenture Trustee shall give notice of ITT Hartford's selection of such
Extension Period to the holders of the Series B Preferred Securities. See
"Description of Junior Subordinated Debentures--Option to Extend Interest
Payment Period" in the accompanying Prospectus.
ADDITIONAL SUMS
If the Series B Issuer would be required to pay any additional taxes, duties
or other governmental charges as a result of a Tax Event, ITT Hartford will
pay as additional amounts on the Series B Debentures such amounts as shall be
required so that the Distributions payable by the Series B Issuer shall not be
reduced as a result of any such additional taxes, duties or other governmental
charges, subject to the conditions described under "Description of Preferred
Securities--Redemption--Special Event Redemption or Distribution" in the
accompanying Prospectus.
REDEMPTION
The Series B Debentures are redeemable prior to maturity at the option of
ITT Hartford (i) in whole at any time or in part from time to time, at a
redemption price equal to the accrued and unpaid interest on the Series B
Debentures so redeemed to the date fixed for redemption, plus the greater of
(a) the principal amount thereof and (b) an amount equal to the Discounted
Remaining Fixed Amount Payments (as defined in "Description of Junior
Subordinated Debentures--Redemption" in the accompanying Prospectus), (ii) on
or after , 2001, in whole or in part, at a redemption price equal to the
accrued and unpaid interest on the Series B Debentures so redeemed to the date
fixed for redemption plus 100% of the principal amount thereof, or (iii) at
any time, in whole (but not in part), upon the occurrence of a Special Event,
at a redemption price equal to the accrued and unpaid interest on the Series B
Debentures so redeemed to the date fixed for redemption, plus 100% of the
principal amount thereof, in each case subject to the further conditions
described under "Description of Junior Subordinated Debentures--Redemption"
and "Description of Corresponding Junior Subordinated Debentures--Optional
Redemption" in the accompanying Prospectus.
DISTRIBUTION OF SERIES B DEBENTURES
Under certain circumstances involving the termination of the Series B
Issuer, Series B Debentures may be distributed to the holders of the Series B
Preferred Securities in liquidation of the Series B Issuer after satisfaction
of liabilities to creditors of the Series B Issuer as provided by applicable
law. If distributed to holders of Series B Preferred Securities in
liquidation, the Series B Debentures will initially be issued in the form of
one or more global securities and DTC, or any successor depositary for the
Series B Preferred Securities, will act as depositary for the Series B
Debentures. It is anticipated that the depositary arrangements for the Series
B Debentures would be substantially identical to those in effect for the
Series B Preferred Securities. If the Series B Debentures are distributed to
the holders of Series B Preferred Securities upon the liquidation of the
Series B Issuer, ITT Hartford will use its best efforts to list the Series B
Debentures on the New York Stock Exchange or such other stock exchanges, if
any, on which the Series B Preferred Securities are then listed. There can be
no assurance as to the market price of any Series B Debentures that may be
distributed to the holders of Series B Preferred Securities. For a description
of DTC and the terms of the depositary matters, see "Book-Entry Issuance."
S-23
<PAGE>
REGISTRATION OF SERIES B DEBENTURES
A global security shall be exchangeable for Series B Debentures registered
in the names of persons other than DTC or its nominee only if (i) DTC notifies
ITT Hartford that it is unwilling or unable to continue as a depository for
such global security and no successor depository shall have been appointed, or
if at any time DTC ceases to be a clearing agency registered under the
Securities Exchange Act of 1934, as amended, at a time when DTC is required to
be so registered to act as such depository, (ii) ITT Hartford in its sole
discretion determines that such global security shall be so exchangeable, or
(iii) there shall have occurred and be continuing a Debenture Event of Default
under the Indenture with respect to such global security. Any global security
that is exchangeable pursuant to the preceding sentence shall be exchangeable
for definitive certificates registered in such names as DTC shall direct. It
is expected that such instructions will be based upon directions received by
DTC from its Participants (as defined in the accompanying Prospectus) with
respect to ownership of beneficial interests in such global security. In the
event that Series B Debentures are issued in definitive form, such Series B
Debentures will be in denominations of $25 and integral multiples thereof and
may be transferred or exchanged at the offices described below.
Payments on Series B Debentures represented by a global security will be
made to DTC, as the depositary for the Series B Debentures. In the event
Series B Debentures are issued in definitive form, principal and interest will
be payable, the transfer of the Series B Debentures will be registrable, and
Series B Debentures will be exchangeable for Series B Debentures of other
denominations of a like aggregate principal amount, at the office of the
Debenture Trustee in the City of New York, or at the offices of any paying
agent or transfer agent appointed by ITT Hartford, provided that payment of
interest may be made at the option of ITT Hartford by check mailed to the
address of the persons entitled thereto or by wire transfer. In addition, if
the Series B Debentures are issued in certificated form, the record dates for
payment of interest will be the 15th day of the last month of each calendar
quarter. For a description of DTC and the terms of the depositary arrangements
relating to payments, transfers, voting rights, redemptions and other notices
and other matters, see "Book-Entry Issuance."
BOOK-ENTRY ISSUANCE
DTC will act as securities depositary for the Series B Preferred Securities
and the Series B Debentures. The Series B Preferred Securities and the Series
B Debentures will be issued only as fully-registered securities registered in
the name of Cede & Co. (DTC's nominee). One or more fully-registered global
certificates will be issued for the Series B Preferred Securities and the
Series B Debentures, representing in the aggregate the total number of such
Series B Preferred Securities or aggregate principal balance of Series B
Debentures, respectively, and will be deposited with DTC.
DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its Participants deposit with DTC. DTC also facilitates
the settlement among Participants of securities transactions, such as
transfers and pledges, in deposited securities through electronic computerized
book-entry changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations ("Direct Participants"). DTC is owned by a
number of its Direct Participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks and trust companies that clear through
or maintain custodial relationships with Direct Participants, either directly
or indirectly ("Indirect Participants"). The rules applicable to DTC and its
Participants are on file with the Securities and Exchange Commission.
S-24
<PAGE>
Purchases of Series B Preferred Securities or Series B Debentures within the
DTC system must be made by or through Direct Participants, which will receive
a credit for the Series B Preferred Securities or Series B Debentures on DTC
records. The ownership interest of each actual purchaser or each Series B
Preferred Security and each Series B Debenture ("Beneficial Owner") is in turn
to be recorded on the Direct and Indirect Participants' records. Beneficial
Owners will not receive written confirmation from DTC of their purchases, but
Beneficial Owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of their holdings,
from the Direct or Indirect Participants through which the Beneficial Owners
purchased Series B Preferred Securities or Series B Debentures. Transfers of
ownership interests in the Series B Preferred Securities or Series B
Debentures are to be accomplished by entries made on the books of Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in Series B Preferred
Securities or Series B Debentures, except in the event that use of the book-
entry system for the Series B Preferred Securities or Series B Debentures is
discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Series B
Preferred Securities or Series B Debentures; DTC's records reflect only the
identity of the Direct Participants to whose accounts such Series B Preferred
Securities or Series B Debentures are credited, which may or may not be the
Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners and the voting
rights of Direct Participants, Indirect Participants and Beneficial Owners
will be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. as the registered holder of
the Series B Preferred Securities or Series B Debentures. If less than all of
the Series B Preferred Securities or the Series B Debentures are being
redeemed, DTC's current practice is to determine by lot the amount of the
interest of each Direct Participant to be redeemed.
Although voting with respect to the Series B Preferred Securities or the
Series B Debentures is limited to the holders of record of the Series B
Preferred Securities or Series B Debentures, in those instances in which a
vote is required, neither DTC nor Cede & Co. will itself consent or vote with
respect to Series B Preferred Securities or Series B Debentures. Under its
usual procedures, DTC would mail an omnibus proxy (the "Omnibus Proxy") to the
relevant Trustee as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants
to whose accounts such Series B Preferred Securities or Series B Debentures
are credited on the record date (identified in a listing attached to the
Omnibus Proxy).
Distribution payments on the Series B Preferred Securities or the Series B
Debentures will be made by the relevant Trustee to DTC. DTC's practice is to
credit Direct Participants' accounts on the relevant payment date in
accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payments on such payment date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices and will be the responsibility of such
Participant and not of DTC, the relevant Trustee, the Series B Issuer or ITT
Hartford, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of Distributions to DTC is the
responsibility of the relevant Trustee, disbursement of such payments to
Direct Participants is the responsibility of DTC, and disbursements of such
payments to the Beneficial Owners is the responsibility of Direct and Indirect
Participants.
S-25
<PAGE>
DTC may discontinue providing its services as securities depositary with
respect to the Series B Preferred Securities or the Series B Debentures at any
time by giving reasonable notice to the relevant Trustee and ITT Hartford. In
the event that a successor securities depositary is not obtained, definitive
Series B Preferred Security or Series B Debenture certificates representing
such Series B Preferred Securities or Series B Debentures are required to be
printed and delivered. ITT Hartford, at its option, may decide to discontinue
use of the system of book-entry transfers through DTC (or a successor
depositary). After a Debenture Event of Default, the holders of a majority in
liquidation amount of Series B Preferred Securities or aggregate principal
amount of Series B Debentures may determine to discontinue the system of book-
entry transfers through DTC. In any such event, definitive certificates for
such Series B Preferred Securities or Series B Debentures will be printed and
delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Series B Issuer and ITT Hartford
believe to be accurate, but the Series B Issuer and ITT Hartford assume no
responsibility for the accuracy thereof. Neither the Series B Issuer nor ITT
Hartford has any responsibility for the performance by DTC or its Participants
of their respective obligations as described herein or under the rules and
procedures governing their respective operations.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material United States Federal income tax
considerations relevant to the purchase, ownership and disposition of Series B
Preferred Securities by a beneficial owner acquiring Series B Preferred
Securities on their original issue at their original offering price who is (i)
an individual citizen or resident of the United States, (ii) a corporation or
partnership organized in or under the laws of the United States or any state
thereof or the District of Columbia or (iii) an estate or trust treated as a
United States person for Federal income tax purposes (a "United States
Person"). The statements of law or legal conclusion set forth in this summary
constitute the opinion of Debevoise & Plimpton, special counsel to ITT
Hartford and the Series B Issuer. This summary does not address potential tax
considerations applicable to a prospective purchaser that is not a United
States Person. PROSPECTIVE INVESTORS IN THE SERIES B PREFERRED SECURITIES THAT
ARE NOT UNITED STATES PERSONS ARE URGED TO CONSULT THEIR TAX ADVISORS.
This summary does not purport to address all potential tax consequences that
may be applicable to a beneficial owner of a Series B Preferred Security, and
is not intended to be wholly applicable to all categories of investors
(including, for example, banks, insurance companies, tax-exempt organizations
and dealers in securities or currencies), or to persons that will hold
Preferred Securities as part of a position in a "straddle" or as part of a
"hedging" or "conversion" transaction for Federal income tax purposes or whose
functional currency is not the United States dollar. This summary is based
upon the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations (including proposed Treasury Regulations), Internal Revenue
Service rulings and pronouncements and judicial decisions now in effect, all
of which are subject to change at any time. Such changes may be applied
retroactively in a manner that could cause the tax consequences to vary
substantially from the consequences described below, possibly adversely
affecting a beneficial owner of a Series B Preferred Security. These
authorities are subject to various interpretations and it is therefore
possible that the Federal income tax treatment of the Series B Preferred
Securities may differ from the treatment described below. Legislation has been
proposed that could, if enacted, adversely affect ITT Hartford's ability to
deduct interest on the Series B Debentures, which may in turn result in a
redemption of the Series B Preferred Securities. See "--Possible Tax Law
Changes."
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS IN
LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES AS TO THE FEDERAL TAX CONSEQUENCES
OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF SERIES B PREFERRED SECURITIES,
AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
S-26
<PAGE>
CLASSIFICATION OF THE SERIES B ISSUER
In connection with the issuance of the Series B Preferred Securities,
Debevoise & Plimpton will render its opinion to the effect that, under then
current law and assuming compliance with the terms of the Trust Agreement, the
Series B Issuer will be classified as a grantor trust and not as an
association taxable as a corporation for Federal income tax purposes. Each
beneficial owner of a Series B Preferred Security (a "Securityholder") will be
treated as owning an undivided beneficial interest in the Series B Debentures.
Accordingly, each Securityholder will be required to include in its gross
income its share of the interest income accrued with respect to the Series B
Debentures whether or not actually distributed to the Securityholders. Any
amount included in a Securityholder's gross income will increase such
Securityholder's tax basis in its Series B Preferred Securities, and the
amount of Distributions to a Securityholder will reduce such Securityholder's
tax basis in its Series B Preferred Securities. No amount included in income
with respect to the Series B Preferred Securities will be eligible for the
dividends received deduction.
POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD AND ORIGINAL ISSUE DISCOUNT
Under the Indenture, ITT Hartford has the option to defer from time to time
the payment of interest on the Series B Debentures for a period not exceeding
20 consecutive quarters with respect to each Extension Period, provided that
no Extension Period may extend beyond the Stated Maturity of the Series B
Debentures. ITT Hartford's option to extend the interest payment period will
cause the Series B Debentures to be subject to the "original issue discount"
rules for Federal income tax purposes. Accordingly, a Securityholder will
recognize interest income (in the form of original issue discount) on a daily
basis under a constant yield method over the term of the Series B Debentures
(including during any Extension Period), regardless of the receipt of cash
with respect to the period to which such income is attributable and regardless
of whether ITT Hartford exercises its option to extend any interest payment
period.
As a result, Securityholders of record during an Extension Period will
include interest in gross income in advance of the receipt of cash, and any
such holders who dispose of Series B Preferred Securities prior to the record
date for the payment of distributions following such Extension Period will
include interest in gross income but will not receive any cash related thereto
from the Series B Issuer. The tax basis of a Preferred Security will be
increased by the amount of any interest that is included in income, and will
be decreased when and if such cash is subsequently received from the Series B
Issuer by such Securityholder.
DISTRIBUTION OF SERIES B DEBENTURES TO HOLDERS OF SERIES B PREFERRED
SECURITIES
Under current law, a distribution by the Series B Issuer of the Series B
Debentures as described under the caption "Certain Terms of Series B Preferred
Securities--Special Event Redemption or Distribution" will be non-taxable and
will result in the Securityholder receiving directly his pro rata share of the
Series B Debentures previously held indirectly through the Series B Issuer,
with a holding period and tax basis equal to the holding period and tax basis
such Securityholder had in his Series B Preferred Securities before such
distribution. A Securityholder will accrue interest in respect of Series B
Debentures received from the Series B Issuer in the manner described above
under "--Potential Extension of Interest Payment Period and Original Issue
Discount."
SALES OR REDEMPTION OF SERIES B PREFERRED SECURITIES
Gain or loss will be recognized by a Securityholder on a sale of Series B
Preferred Securities (including a redemption for cash) in an amount equal to
the difference between the amount realized and the Securityholder's adjusted
tax basis in the Series B Preferred Securities sold or so redeemed. Gain or
loss recognized by a Securityholder on Series B Preferred Securities held for
more than one year will generally be taxable as long-term capital gain or
loss.
S-27
<PAGE>
The Series B Preferred Securities may trade at a price that does not fully
reflect the value of accrued but unpaid interest with respect to the
underlying Series B Debentures. A Securityholder who disposes of its Series B
Preferred Securities between record dates for payments of Distributions will
nevertheless be required to include accrued but unpaid interest on the Series
B Debentures through the date of disposition in income as ordinary income and
to add such amount to its adjusted basis in its Series B Preferred Securities
disposed of. Such Securityholder will recognize a capital loss to the extent
the selling price (which may not fully reflect the value of accrued but unpaid
interest) is less than the Securityholder's adjusted tax basis (which will
include accrued but unpaid interest). Subject to certain limited exceptions,
capital losses cannot be applied to offset ordinary income for Federal income
tax purposes.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
In general, information reporting requirements on Form 1099-OID will apply
to payments on a Series B Preferred Security to a noncorporate United States
person, and "backup withholding" at a rate of 31% will apply to such payments
if such United States person fails to provide an accurate taxpayer
identification number.
Payment of the proceeds from the sale of Series B Preferred Securities to or
through the United States office of a broker is subject to information
reporting and backup withholding unless the holder or beneficial owner
certifies as to its non-United States status or otherwise establishes an
exemption from information reporting and backup withholding.
These backup withholding tax and information reporting rules are subject to
proposed Treasury Regulations and currently are under review by the United
States Treasury. Accordingly, the application of such rules to the Series B
Preferred Securities could be changed.
POSSIBLE TAX LAW CHANGES
On December 7, 1995, President Clinton proposed certain tax law changes that
would, among other things, generally deny interest deductions to corporate
issuers of debt that has a term of more than 40 years. Under the proposal, for
purposes of determining the term of an instrument, any right to extend would
be treated as exercised. The President's proposal would also deny interest
deductions for interest on a debt instrument issued by a corporation that has
a term exceeding 20 years and is not reflected as indebtedness on the issuer's
consolidated balance sheet. The same proposal was included in President
Clinton's budget plan on March 19, 1996. Under the President's proposal and
the budget plan, these provisions would be effective for instruments issued on
or after December 7, 1995. However, the Chairmen of the House Ways and Means
Committee and the Senate Finance Committee, as well as the Ranking Minority
Member of the House Ways and Means Committee, have publicly indicated their
intent that the proposals, if enacted, would not apply to debt issued prior to
the date of "appropriate Congressional action". No such Congressional action
has occurred or is expected to occur prior to the issuance of the Series B
Debentures. However, if either of the President's proposals were enacted and
applied to the Series B Debentures, ITT Hartford would not be able to deduct
interest or original issue discount on the Series B Debentures and a Tax
Event, as described in "Description of Preferred Securities--Redemption--
Special Event Redemption or Distribution" in the accompanying Prospectus,
would occur, which would permit ITT Hartford to redeem the Series B Debentures
in whole (but not in part) and therefore cause a mandatory redemption of the
Series B Common Securities and the Series B Preferred Securities. Neither the
President's proposal nor the budget plan would effect the United States
federal income tax consequences of the purchase, ownership or disposition of
the Series B Preferred Securities.
S-28
<PAGE>
ERISA CONSIDERATIONS
ITT Hartford and its affiliates may be considered a "party in interest"
(within the meaning of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) or a "disqualified person" (within the meaning of Section
4975 of the Code) with respect to many employee benefit plans ("Plans") that
are subject to ERISA. The purchase and/or holding of Series B Preferred
Securities by a Plan that is subject to the fiduciary responsibility
provisions of ERISA or the prohibited transaction provisions of Section 4975
of the Code (including individual retirement arrangements and other plans
described in Section 4975(e)(1) of the Code) and with respect to which any
affiliate is a service provider (or otherwise is a party in interest or a
disqualified person) may constitute or result in a prohibited transaction
under ERISA or Section 4975 of the Code, unless such Series B Preferred
Securities are acquired pursuant to and in accordance with an applicable
exemption, such as Prohibited Transaction Class Exemption ("PTCE") 84-14 (an
exemption for certain transactions determined by an independent qualified
professional asset manager), PTCE 91-38 (an exemption for certain transactions
involving bank collective investment funds), PTCE 90-1 (an exemption for
certain transactions involving insurance company pooled separate accounts) or
PTCE 95-60 (an exemption for transactions involving certain insurance company
general accounts). Any purchaser proposing to acquire Series B Preferred
Securities with assets of any pension or other employee benefit plan should
consult with its counsel.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, ITT
Hartford and the Series B Issuer have agreed that the Series B Issuer will
sell to each of the Underwriters named below (for whom Goldman, Sachs & Co.,
Dean Witter Reynolds Inc., A.G. Edwards & Sons, Inc., Lehman Brothers Inc.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, PaineWebber Incorporated
and Prudential Securities Incorporated are acting as Representatives) and each
of the Underwriters has severally agreed to purchase from the Series B Issuer
the respective number of Series B Preferred Securities set forth opposite its
name below:
<TABLE>
<CAPTION>
NUMBER
OF SERIES B
PREFERRED
UNDERWRITER SECURITIES
----------- -----------
<S> <C>
Goldman, Sachs & Co. ...........................................
Dean Witter Reynolds Inc. ......................................
A.G. Edwards & Sons, Inc. ......................................
Lehman Brothers Inc. ...........................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...............................................
PaineWebber Incorporated........................................
Prudential Securities Incorporated..............................
----------
Total........................................................ 20,000,000
==========
</TABLE>
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all such Series B Preferred
Securities offered hereby, if any are taken.
The Underwriters propose to offer the Series B Preferred Securities in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus Supplement, and in part
S-29
<PAGE>
to certain securities dealers at such price less a concession of $ per
Series B Preferred Security. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $ per Series B Preferred Security
to certain brokers and dealers. After the Series B Preferred Securities are
released for sale to the public, the offering price and other selling terms
may from time to time be varied by the Representatives.
In view of the fact that the proceeds from the sale of the Series B
Preferred Securities will be used to purchase the Series B Debentures issued
by ITT Hartford, the Underwriting Agreement provides that ITT Hartford will
pay as Underwriters' Compensation for the Underwriters arranging the
investment therein of such proceeds an amount of $ per Series B Preferred
Security for the accounts of the several Underwriters.
ITT Hartford and the Series B Issuer have agreed, during the period
beginning from date of the Underwriting Agreement and continuing to and
including the earlier of (i) the termination of trading restrictions on the
Series B Preferred Securities, as determined by the Underwriters, or (ii) 30
days after the closing date, not to offer, sell, contract to sell or otherwise
dispose of any Preferred Securities, any other beneficial interests in the
assets of the Series B Issuer, or any preferred securities or any other
securities of the Series B Issuer or ITT Hartford which are substantially
similar to the Series B Preferred Securities, including any guarantee of such
securities, or any securities convertible into or exchangeable for or
represent the right to receive securities, preferred securities or any such
substantially similar securities of either a Series B Issuer or ITT Hartford,
without the prior written consent of the Underwriters.
ITT Hartford and the Series B Issuer have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
Prior to this offering, there has been no public market for the Series B
Preferred Securities. The Series B Preferred Securities have been approved for
listing, subject to official notice of issuance, on the New York Stock
Exchange (the "Exchange"). In order to meet one of the requirements for
listing the Series B Preferred Securities on the Exchange, the Underwriters
will undertake to sell lots of 100 or more Series B Preferred Securities to a
minimum of 400 beneficial holders. Trading of the Series B Preferred
Securities on the Exchange is expected to commence within seven Business Days
after the initial delivery of the Series B Preferred Securities. The
Representatives have advised ITT Hartford that they intend to make a market in
the Series B Preferred Securities prior to commencement of trading on the
Exchange, but are not obligated to do so and may discontinue any such market
making at any time without notice.
Certain of the Underwriters or their affiliates have provided from time to
time, and expect to provide in the future, investment or commercial banking
services to ITT Hartford and its affiliates, for which such Underwriters or
their affiliates have received or will receive customary fees and commissions.
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Series B
Preferred Securities, the validity of the Trust Agreement and the formation of
the Series B Issuer are being passed upon by Richards, Layton & Finger,
special Delaware Counsel to ITT Hartford and the Series B Issuer. The validity
of the Series B Guarantee and the Series B Debentures will be passed upon for
ITT Hartford by Michael S. Wilder, General Counsel of ITT Hartford, and for
the Underwriters by Sullivan & Cromwell, New York, New York. Certain matters
relating to Federal income tax considerations are being passed upon by
Debevoise & Plimpton, special counsel to ITT Hartford and the Series B Issuer.
As of June 30, 1996, Mr. Wilder owned 367 shares of ITT Hartford common stock.
In addition, he held
S-30
<PAGE>
options to purchase 41,600 shares of ITT Hartford common stock; and had 4,115
shares credited to his account in ITT Hartford's Investment and Savings Plan
for Salaried Employees. This statement supersedes the "Legal Opinions" section
in the accompanying Prospectus.
EXPERTS
The audited consolidated financial statements and schedules of ITT Hartford
Group, Inc. and subsidiaries incorporated by reference in this Prospectus
Supplement and Prospectus and in the registration statement have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports. Reference is made to said reports, which include an
explanatory paragraph with respect to the changes in the methods of accounting
for certain investments in debt and equity securities and discounting certain
workers' compensation liabilities as discussed in the notes to consolidated
financial statements. This statement supersedes the section entitled "Experts"
in the accompanying Prospectus.
S-31
<PAGE>
HARTFORD CAPITAL II
ITT HARTFORD GROUP, INC. HARTFORD CAPITAL III
HARTFORD CAPITAL IV
JUNIOR SUBORDINATED DEFERRABLE
INTEREST DEBENTURES PREFERRED SECURITIES GUARANTEED TO THE
EXTENT
THE ISSUER HAS FUNDS AS SET FORTH
HEREIN BY
ITT HARTFORD GROUP, INC.
ITT Hartford Group, Inc., a Delaware corporation ("ITT Hartford"), may from
time to time offer in one or more series or issuances its junior subordinated
deferrable interest debentures (the "Junior Subordinated Debentures"). The
Junior Subordinated Debentures will be unsecured and subordinate and junior in
right to payment to Senior Debt (as defined in "Description of Junior
Subordinated Debentures--Subordination") of ITT Hartford. If provided in an
accompanying Prospectus Supplement, ITT Hartford will have the right to defer
payments of interest on any series of Junior Subordinated Debentures by
extending the interest payment period thereon at any time or from time to time
for such number of consecutive interest payment periods (which shall not
extend beyond the maturity of the Junior Subordinated Debentures) with respect
to each deferral period as may be specified in such Prospectus Supplement
(each, an "Extension Period"). See "Description of Junior Subordinated
Debentures--Option to Extend Interest Payments".
Hartford Capital II, Hartford Capital III and Hartford Capital IV, each a
trust formed under the laws of the State of Delaware (each, an "Issuer", and
collectively, the "Issuers"), may severally offer, from time to time, its
respective preferred securities (the "Preferred Securities") representing
preferred undivided beneficial interests in the assets of each Issuer. ITT
Hartford will be the owner of the common securities (the "Common Securities",
and together with the Preferred Securities, the "Trust Securities") of each
Issuer. The payment of periodic cash distributions ("Distributions") with
respect to the Preferred Securities of each Issuer and payments on liquidation
or redemption with respect to such Preferred Securities, in each case out of
funds held by such Issuer, are each irrevocably guaranteed by ITT Hartford to
the extent described herein (each, a "Guarantee"). See "Description of
Guarantee". The obligations of ITT Hartford under each Guarantee will be
subordinate and junior in right of payment to all Senior Debt of ITT Hartford.
Concurrently with the issuance by an Issuer of its Preferred Securities, such
Issuer will invest the proceeds thereof and any contributions made in respect
of the Common Securities in a corresponding series of ITT Hartford's Junior
Subordinated Debentures (the "Corresponding Junior Subordinated Debentures")
with terms corresponding to the terms of that Issuer's Preferred Securities.
The Corresponding Junior Subordinated Debentures will be the sole assets of
each Issuer, and payments under the Corresponding Junior Subordinated
Debentures and the related Expense Agreement (as defined herein) will be the
only revenue of each Issuer. Upon the occurrence of certain events as are
described herein and in the accompanying Prospectus Supplement, ITT Hartford
may redeem the Corresponding Junior Subordinated Debentures and cause the
redemption of the Trust Securities or may terminate each Issuer and cause the
Corresponding Junior Subordinated Debentures to be distributed to the holders
of Preferred Securities in liquidation of their interest in such Issuer. See
"Description of Preferred Securities--Liquidation Distribution Upon
Termination".
Holders of the Preferred Securities will be entitled to receive preferential
cumulative cash Distributions accruing from the date of original issuance and
payable periodically as specified in an accompanying Prospectus Supplement. If
provided in an accompanying Prospectus Supplement, ITT Hartford will have the
right to defer payments of interest on any series of Corresponding Junior
Subordinated Debentures by extending the interest payment period thereon at
any time or from time to time for one or more Extension Periods (which shall
not extend beyond the maturity of the Junior Subordinated Debentures). If
interest payments are so deferred, Distributions on the corresponding series
of Preferred Securities will also be deferred and ITT Hartford will not be
permitted, subject to certain exceptions set forth herein, to declare or pay
any cash distributions with respect to ITT Hartford's capital stock or debt
securities that rank pari passu with or junior to the Corresponding Junior
Subordinated Debentures. During an Extension Period, Distributions will
continue to accumulate (and the Preferred Securities will accumulate
additional Distributions thereon at the rate per annum set forth in the
related Prospectus Supplement). See "Description of Preferred Securities--
Distributions".
By separate prospectus, the form which is included in the Registration
Statement of which this Prospectus is a part, the Company may offer from time
to time debt securities (both senior and subordinated), Preferred Stock,
Common Stock, Depositary Shares, Warrants to purchase any of the foregoing,
Stock Purchase Contracts or Stock Purchase Units. The aggregate initial public
offering price of the securities to be offered by this Prospectus and such
other prospectus shall not exceed $1,750,000,000. Certain specific terms of
the Junior Subordinated Debentures or Preferred Securities in respect of which
this Prospectus is being delivered will be described in an accompanying
Prospectus Supplement, including without limitation and where applicable and
to the extent not set forth herein, (a) in the case of Junior Subordinated
Debentures, the specific designation, aggregate principal amount,
denominations, maturity, interest payment dates, interest rate (which may be
fixed or variable) or method of calculating interest, if any, applicable
Extension Period or interest deferral terms, if any, place or places where
principal, premium, if any, and interest, if any, will be payable, any terms
of redemption, any sinking fund provisions, terms for any conversion or
exchange into other securities, initial offering or purchase price, methods of
distribution and any other special terms, and (b) in the case of Preferred
Securities, the identity of the Issuer, specific title, aggregate amount,
stated liquidation preference, number of securities, Distribution rate or
method of calculating such rate, applicable Extension Period or Distribution
deferral terms, if any, place or places where Distributions will be payable,
any terms of redemption, initial offering or purchase price, methods of
distribution and any other special terms.
The Prospectus Supplement also will contain information, as applicable,
about certain United States Federal income tax considerations relating to the
Junior Subordinated Debentures or Preferred Securities.
The Junior Subordinated Debentures and Preferred Securities may be sold to
or through underwriters, through dealers, remarketing firms or agents or
directly to purchasers. See "Plan of Distribution". The names of any
underwriters, dealers, remarketing firms or agents involved in the sale of
Junior Subordinated Debentures or Preferred Securities in respect of which
this Prospectus is being delivered and any applicable fee, commission or
discount arrangements with them will be set forth in a Prospectus Supplement.
The Prospectus Supplement will state whether the Junior Subordinated
Debentures or Preferred Securities will be listed on any national securities
exchange. If the Junior Subordinated Debentures or Preferred Securities are
not listed on any national securities exchange, there can be no assurance that
there will be a secondary market for the Junior Subordinated Debentures or
Preferred Securities.
This Prospectus may not be used to consummate sales of Junior Subordinated
Debentures or Preferred Securities unless accompanied by a Prospectus
Supplement.
---------------
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 THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
The date of this Prospectus is October 2, 1996.
<PAGE>
No dealer, salesperson or other person has been authorized to give any
information or make any representations, other than those contained in this
Prospectus and the applicable Prospectus Supplement, and if given or made such
information or representations must not be relied upon as having been
authorized by ITT Hartford or any agent, underwriter or dealer. This
Prospectus and the applicable Prospectus Supplement do not constitute an offer
of any securities other than those to which they relate, or an offer to sell
or a solicitation of an offer to buy those to which they relate, in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. The delivery of this Prospectus and/or the
applicable Prospectus Supplement at any time does not imply that the
information herein or therein is correct as of any time subsequent to its
date.
----------------
FOR NORTH CAROLINA RESIDENTS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH CAROLINA,
NOR HAS THE COMMISSIONER OF INSURANCE RULED UPON THE ACCURACY OR THE ADEQUACY
OF THIS DOCUMENT.
AVAILABLE INFORMATION
ITT Hartford is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the Commission at Room 1024, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549 and at the regional offices of the
Commission located at 7 World Trade Center, 13th Floor, Suite 1300, New York,
New York 10048 and Suite 1400, Citicorp Center, 14th Floor, 500 West Madison
Street, Chicago, Illinois 60661. Copies of such material can also be obtained
at prescribed rates by writing to the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549.
The Commission maintains a Web site (http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. In addition, such
reports, proxy statements and other information concerning ITT Hartford can be
inspected at the offices of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
ITT Hartford and the Issuers have filed with the Commission a Registration
Statement on Form S-3 (together with all amendments and exhibits thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities offered hereby. This
Prospectus does not contain all the information set forth in the Registration
Statement, certain portions of which have been omitted as permitted by the
rules and regulations of the Commission. For further information with respect
to ITT Hartford and the securities offered hereby, reference is made to the
Registration Statement and the exhibits and the financial statements, notes
and schedules filed as a part thereof or incorporated by reference therein,
which may be inspected at the public reference facilities of the Commission,
at the addresses set forth above. Statements made in this Prospectus
concerning the contents of any documents referred to herein are not
necessarily complete, and in each instance are qualified in all respects by
reference to the copy of such document filed as an exhibit to the Registration
Statement.
No separate financial statements of any Issuer have been included herein.
ITT Hartford and the Issuers do not consider that such financial statements
would be material to holders of the Preferred Securities because each Issuer
is a newly formed special purpose entity, has no operating history or
independent operations and is not engaged in and does not propose to engage in
any activity other than its holding as trust assets the Corresponding Junior
Subordinated Debentures of ITT Hartford and its issuance of the Preferred and
Common Securities. See "The Issuers", "Description of the Preferred
Securities", "Description of Guarantee" and "Description of Corresponding
Junior Subordinated Debentures".
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by ITT Hartford with the Commission are
incorporated into this Prospectus by reference:
1. ITT Hartford's Annual Report on Form 10-K for the year ended December
31, 1995; and
2. ITT Hartford's Quarterly Report on Form 10-Q for the quarters ended
March 31, 1996 and June 30, 1996.
Each document or report filed by ITT Hartford pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to the
termination of the offering described herein shall be deemed to be
incorporated by reference into this Prospectus and to be a part of this
Prospectus from the date of filing of such document. Any statement contained
herein, or in a document all or a portion of which is incorporated or deemed
to be incorporated by reference herein, shall be deemed to be modified or
superseded for purposes of the Registration Statement and this Prospectus to
the extent that a statement contained herein or in any other subsequently
filed document which also is or is deemed to be incorporated by reference
herein 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 Registration Statement or this Prospectus.
ITT Hartford will provide without charge to any person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated by reference herein
(other than exhibits not specifically incorporated by reference into the texts
of such documents). Requests for such documents should be directed to: ITT
Hartford Group, Inc., Hartford Plaza, Hartford, Connecticut 06115, Attention:
Secretary (telephone: 860-547-5000).
ITT HARTFORD GROUP
ITT Hartford Group, Inc. ("ITT Hartford" and, together with its
subsidiaries, "ITT Hartford Group") is a holding company that owns, directly
or indirectly, a number of insurance companies, including Hartford Fire
Insurance Company ("Hartford Fire"). ITT Hartford Group, a diversified
international organization founded in 1810, is the seventh largest property
and casualty insurer and the eighth largest life insurer in the United States,
with total assets of $100.2 billion and equity of $4.4 billion at June 30,
1996.
The North American property and casualty operations, with premiums written
of $5.7 billion as of December 31, 1995, provide a wide range of personal,
commercial, specialty and reinsurance coverages. In personal lines, ITT
Hartford Group ranks among the 10 largest carriers and is the endorsed
provider of automobile and homeowners coverages to members of the American
Association of Retired Persons ("AARP"). Commercial insurance, the property
and casualty company's largest line with $2.8 billion in written premiums as
of December 31, 1995, offers an array of products to address customer needs,
including commercial multi-peril, general liability and workers' compensation.
Specialty lines provides the expertise necessary to meet the needs of
customers with sophisticated insurance, service or risk financing
requirements. ITT Hartford Group is also a major reinsurer, with subsidiaries
and operations located in Hong Kong, Spain, the United States, the United
Kingdom and Canada.
ITT Hartford Group also provides property and casualty and life products in
the European insurance market. The largest operations are London and Edinburgh
in the United Kingdom, Zwolsche Algemeene in The Netherlands and ITT Ercos in
Spain.
ITT Hartford Group's life insurance operations, with assets exceeding $68.0
billion at June 30, 1996, provide individual and group life and disability
insurance, asset accumulation products and financial services for individuals,
corporations and government entities. ITT Hartford Group ranks
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among the top providers of retirement planning products and services for
corporations and government entities, and, with $7.0 billion in new fixed and
variable annuity deposits in 1995, it continues to rank among industry leaders
in the sale of these products.
As a holding company with no significant business operations of its own, ITT
Hartford relies on dividends from its insurance company subsidiaries, which
are primarily domiciled in Connecticut, as the principal source of cash to
meet its obligations, including the payment of principal of (and premium, if
any) and any interest on debt obligations of ITT Hartford (including the
Junior Subordinated Debentures), and to pay dividends to holders of its
capital stock. The payment of dividends by Connecticut-domiciled insurers is
limited under the insurance holding company laws of Connecticut which require
notice to and approval by the state insurance commissioner for the declaration
or payment of any dividend, which together with other dividends or
distributions made within the preceding twelve months, exceeds the greater of
(i) 10% of the insurer's policyholder surplus as of December 31 of the
preceding year or (ii) net income for the twelve-month period ending on the
thirty-first day of December last preceding, in each case determined under
statutory insurance accounting policies. The insurance holding company laws of
the other jurisdictions in which ITT Hartford's insurance subsidiaries are
incorporated generally contain similar (although in certain instances somewhat
more restrictive) limitations on the payment of dividends.
ITT Hartford is a Delaware corporation. ITT Hartford's principal executive
offices are located at Hartford Plaza, Hartford, Connecticut 06115, and its
telephone number is (860) 547-5000.
THE ISSUERS
Each Issuer is a statutory business trust formed under Delaware law pursuant
to (i) a trust agreement executed by ITT Hartford, as sponsor of the Issuer,
and the Delaware Trustee (as defined herein) of such Issuer and (ii) the
filing of a certificate of trust with the Delaware Secretary of State. Each
trust agreement will be amended and restated in its entirety (each, as so
amended and restated, a "Trust Agreement") substantially in the form filed as
an exhibit to the Registration Statement of which this Prospectus forms a
part. Each Trust Agreement will be qualified as an indenture under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). Each Issuer
exists for the exclusive purposes of (i) issuing and selling its Preferred
Securities and Common Securities, (ii) using the proceeds from the sale of
such Preferred Securities and Common Securities to acquire a corresponding
series of Corresponding Junior Subordinated Debentures issued by ITT Hartford
and (iii) engaging in only those other activities necessary, convenient or
incidental thereto. Accordingly, the Corresponding Junior Subordinated
Debentures will be the sole assets of each Issuer, and payments under the
Corresponding Junior Subordinated Debentures and the related Expense Agreement
will be the sole revenue of each Issuer.
All of the Common Securities of each Issuer will be owned by ITT Hartford.
The Common Securities of an Issuer will rank pari passu, and payments will be
made thereon pro rata, with the Preferred Securities of such Issuer, except
that upon the occurrence and continuance of an event of default under a Trust
Agreement, the rights of ITT Hartford as holder of the Common Securities to
payment in respect of Distributions and payments upon liquidation, redemption
or otherwise will be subordinated to the rights of the holders of the
Preferred Securities of such Issuer. See "Description of Preferred
Securities--Subordination of Common Securities". ITT Hartford will acquire
Common Securities in an aggregate liquidation amount equal to not less than 3%
of the total capital of each Issuer.
Unless otherwise specified in the applicable Prospectus Supplement, each
Issuer has a term of approximately 45 years, but may terminate earlier as
provided in the applicable Trust Agreement. Each Issuer's business and affairs
are conducted by its trustees, each appointed by ITT Hartford as holder of the
Common Securities: Wilmington Trust Company as the Property Trustee (the
"Property Trustee") and as the Delaware Trustee (the "Delaware Trustee"), and
two individual trustees (the
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"Administrative Trustees") who are employees or officers of or affiliated with
ITT Hartford (collectively, the "Issuer Trustees"). Wilmington Trust Company,
as Property Trustee, will act as sole indenture trustee under each Trust
Agreement for purposes of compliance with the Trust Indenture Act. Wilmington
Trust Company will also act as trustee under the Guarantee and the Indenture
(each as defined herein). See "Description of Guarantee" and "Description of
Junior Subordinated Debentures". The holder of the Common Securities of an
Issuer, or the holders of a majority in liquidation preference of the
Preferred Securities if an event of default under the Trust Agreement for such
Issuer has occurred and is continuing, will be entitled to appoint, remove or
replace the Property Trustee and/or the Delaware Trustee of such Issuer. In no
event will the holders of the Preferred Securities have the right to vote to
appoint, remove or replace the Administrative Trustees; such voting rights are
vested exclusively in the holder of the Common Securities. The duties and
obligations of each Issuer Trustee are governed by the applicable Trust
Agreement. ITT Hartford will pay all fees and expenses related to each Issuer
and the offering of the Preferred Securities and will pay, directly or
indirectly, all ongoing costs, expenses and liabilities of each Issuer. The
principal executive office of each Issuer is Hartford Plaza, Hartford,
Connecticut 06115, Attention: Secretary, and its telephone number is (860)
547-5000.
USE OF PROCEEDS
Except as otherwise set forth in the applicable Prospectus Supplement, ITT
Hartford intends to use the proceeds from the sale of its Junior Subordinated
Debentures (including Corresponding Junior Subordinated Debentures issued to
the Issuers in connection with the investment by the Issuers of all of the
proceeds from the sale of Preferred Securities) for general corporate
purposes, including working capital, capital expenditures, investments in or
loans to subsidiaries, acquisitions, refinancing of debt, including
outstanding commercial paper and other short term bank indebtedness, the
satisfaction of other obligations or for such other purposes as may be
specified in the applicable Prospectus Supplement. A more detailed description
of the use of proceeds of any specific offering shall be set forth in the
Prospectus Supplement pertaining to such offering.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth ITT Hartford's ratios of earnings to fixed
charges for the years and periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
---------------- -------------------------
1996 1995 1995 1994 1993 1992 1991
------- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Consolidated Earnings to
Fixed Charges.................... 4.3 5.3 5.8 7.4 6.8 (3.1) 5.0
</TABLE>
For purposes of computing the ratio of earnings to fixed charges, "earnings"
consists of income from operations before Federal income taxes and fixed
charges. "Fixed charges" consists of interest expense, capitalized interest,
amortization of debt expense, an imputed interest component for rental expense
and dividend requirements on preferred stock of Hartford Fire.
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures are to be issued in one or more series
under a Junior Subordinated Indenture, as supplemented from time to time (as
so supplemented, the "Indenture"), between ITT Hartford and Wilmington Trust
Company, as a trustee (the "Debenture Trustee"). This summary of certain terms
and provisions of the Junior Subordinated Debentures and the Indenture does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to the Indenture, the form of which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, and to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). Whenever
particular defined terms of the Indenture (as supplemented or amended from
time to time) are referred to herein or in a Prospectus Supplement, such
defined terms are incorporated herein or therein by reference.
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GENERAL
Each series of Junior Subordinated Debentures will rank pari passu with the
7.70% Junior Subordinated Deferrable Interest Debentures, Series A, Due
February 28, 2016 and with all other series of Junior Subordinated Debentures,
and will be unsecured and subordinate and junior in right of payment to the
extent and in the manner set forth in the Indenture to all Senior Debt (as
defined below) of ITT Hartford. See "--Subordination". As a non-operating
holding company, most of the operating assets of ITT Hartford and its
consolidated subsidiaries are owned by such subsidiaries, and ITT Hartford
relies primarily on dividends from such subsidiaries to meet its obligations
for payment of principal and interest on its outstanding debt obligations and
corporate expenses. Accordingly, the Junior Subordinated Debentures will be
effectively subordinated to all existing and future liabilities of ITT
Hartford's subsidiaries, and holders of Junior Subordinated Debentures should
look only to the assets of ITT Hartford for payments on the Junior
Subordinated Debentures. The payment of dividends by ITT Hartford's insurance
company subsidiaries, including Hartford Fire, is limited under the insurance
holding company laws in which such subsidiaries are domiciled. See "ITT
Hartford Group". Except as otherwise provided in the applicable Prospectus
Supplement, the Indenture does not limit the incurrence or issuance of other
secured or unsecured debt of ITT Hartford, whether under the Indenture, any
other indenture that ITT Hartford may enter into in the future or otherwise.
See "--Subordination" and the Prospectus Supplement relating to any offering
of Securities.
The Junior Subordinated Debentures will be issuable in one or more series
pursuant to an indenture supplemental to the Indenture or a resolution of ITT
Hartford's Board of Directors or a committee thereof.
The applicable Prospectus Supplement or Prospectus Supplements will describe
the following terms of the Junior Subordinated Debentures: (1) the title of
the Junior Subordinated Debentures; (2) any limit upon the aggregate principal
amount of the Junior Subordinated Debentures; (3) the date or dates on which
the principal of the Junior Subordinated Debentures is payable or the method
of determination thereof; (4) the rate or rates, if any, at which the Junior
Subordinated Debentures shall bear interest, the Interest Payment Dates on
which any such interest shall be payable, the right, if any, of ITT Hartford
to defer or extend an Interest Payment Date, and the Regular Record Date for
any interest payable on any Interest Payment Date or the method by which any
of the foregoing shall be determined; (5) the place or places where, subject
to the terms of the Indenture as described below under "Payment and Paying
Agents", the principal of and premium, if any, and interest on the Junior
Subordinated Debentures will be payable and where, subject to the terms of the
Indenture as described below under "Denominations, Registration and Transfer",
the Junior Subordinated Debentures may be presented for registration of
transfer or exchange and the place or places where notices and demands to or
upon ITT Hartford in respect of the Junior Subordinated Debentures and the
Indentures may be made ("Place of Payment"); (6) any period or periods within
or date or dates on which, the price or prices at which and the terms and
conditions upon which Junior Subordinated Debentures may be redeemed, in whole
or in part, at the option of ITT Hartford or a holder thereof; (7) the
obligation or the right, if any, of ITT Hartford or a holder thereof to
redeem, purchase or repay the Junior Subordinated Debentures and the period or
periods within which, the price or prices at which, the currency or currencies
(including currency unit or units) in which and the other terms and conditions
upon which the Junior Subordinated Debentures shall be redeemed, repaid or
purchased, in whole or in part, pursuant to such obligation; (8) the
denominations in which any Junior Subordinated Debentures shall be issuable if
other than denominations of $25 and any integral multiple thereof; (9) if
other than in U.S. Dollars, the currency or currencies (including currency
unit or units) in which the principal of (and premium, if any) and interest,
if any, on the Junior Subordinated Debentures shall be payable, or in which
the Junior Subordinated Debentures shall be denominated; (10) any additions,
modifications or deletions in the Events of Default or covenants of ITT
Hartford specified in the Indenture with respect to the Junior Subordinated
Debentures; (11) if other than the principal
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amount thereof, the portion of the principal amount of Junior Subordinated
Debentures that shall be payable upon declaration of acceleration of the
maturity thereof; (12) any additions or changes to the Indenture with respect
to a series of Junior Subordinated Debentures as shall be necessary to permit
or facilitate the issuance of such series in bearer form, registrable or not
registrable as to principal, and with or without interest coupons; (13) any
index or indices used to determine the amount of payments of principal of and
premium, if any, on the Junior Subordinated Debentures and the manner in which
such amounts will be determined; (14) the terms and conditions relating to the
issuance of a temporary Global Security representing all of the Junior
Subordinated Debentures of such series and exchange of such temporary Global
Security for definitive Junior Subordinated Debentures of such series;
(15) subject to the terms described under "Global Junior Subordinated
Debentures", whether the Junior Subordinated Debentures of the series shall be
issued in whole or in part in the form of one or more Global Securities and,
in such case, the Depositary for such Global Securities, which Depositary
shall be a clearing agency registered under the Exchange Act; (16) the
appointment of any Paying Agent or Agents; (17) the terms and conditions of
any obligation or right of ITT Hartford or a holder to convert or exchange the
Junior Subordinated Debentures into Preferred Securities or other securities;
(18) the relative degree, if any, to which such Junior Subordinated Debentures
of the series shall be senior to or be subordinated to other series of such
Junior Subordinated Debentures or other indebtedness of ITT Hartford in right
of payment, whether such other series of Junior Subordinated Debentures or
other indebtedness are outstanding or not; and (19) any other terms of the
Junior Subordinated Debentures not inconsistent with the provisions of the
Indentures.
Junior Subordinated Debentures may be sold at a substantial discount below
their stated principal amount, bearing no interest or interest at a rate which
at the time of issuance is below market rates. Certain Federal income tax
consequences and special considerations applicable to any such Junior
Subordinated Debentures will be described in the applicable Prospectus
Supplement.
If the purchase price of any of the Junior Subordinated Debentures is
payable in one or more foreign currencies or currency units or if any Junior
Subordinated Debentures are denominated in one or more foreign currencies or
currency units or if the principal of, premium, if any, or interest, if any,
on any Junior Subordinated Debentures is payable in one or more foreign
currencies or currency units, the restrictions, elections, certain Federal
income tax considerations, specific terms and other information with respect
to such issue of Junior Subordinated Debentures and such foreign currency or
currency units will be set forth in the applicable Prospectus Supplement.
If any index is used to determine the amount of payments of principal of,
premium, if any, or interest on any series of Junior Subordinated Debentures,
special Federal income tax, accounting and other considerations applicable
thereto will be described in the applicable Prospectus Supplement.
DENOMINATIONS, REGISTRATION AND TRANSFER
Unless otherwise specified in the applicable Prospectus Supplement, the
Junior Subordinated Debentures will be issuable only in registered form
without coupons in denominations of $25 and any integral multiple thereof.
Junior Subordinated Debentures of any series will be exchangeable for other
Junior Subordinated Debentures of the same issue and series, of any authorized
denominations, of a like aggregate principal amount, of the same Original
Issue Date and Stated Maturity and bearing the same interest rate.
Junior Subordinated Debentures may be presented for exchange as provided
above, and may be presented for registration of transfer (with the form of
transfer endorsed thereon, or a satisfactory written instrument of transfer,
duly executed), at the office of the appropriate Securities Registrar or at
the office of any transfer agent designated by ITT Hartford for such purpose
with respect to any series of Junior Subordinated Debentures and referred to
in the applicable Prospectus Supplement, without service charge and upon
payment of any taxes and other governmental charges as described in the
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Indenture. ITT Hartford will appoint the Trustees as Securities Registrars
under the Indentures. If the applicable Prospectus Supplement refers to any
transfer agents (in addition to the Securities Registrar) initially designated
by ITT Hartford with respect to any series of Junior Subordinated Debentures,
ITT Hartford may at any time rescind the designation of any such transfer
agent or approve a change in the location through which any such transfer
agent acts, provided that ITT Hartford maintains a transfer agent in each
Place of Payment for such series. ITT Hartford may at any time designate
additional transfer agents with respect to any series of Junior Subordinated
Debentures.
In the event of any redemption, neither ITT Hartford nor the Debenture
Trustee shall be required to (i) issue, register the transfer of or exchange
Junior Subordinated Debentures of any series during a period beginning at the
opening of business 15 days before the day of selection for redemption of
Junior Subordinated Debentures of that series and ending at the close of
business on the day of mailing of the relevant notice of redemption or (ii)
transfer or exchange any Junior Subordinated Debentures so selected for
redemption, except, in the case of any Junior Subordinated Debentures being
redeemed in part, any portion thereof not to be redeemed.
GLOBAL JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures of a series may be issued in whole or in
part in the form of one or more Global Junior Subordinated Debentures that
will be deposited with, or on behalf of, a depositary (the "Depositary")
identified in the Prospectus Supplement relating to such series. Global Junior
Subordinated Debentures may be issued only in fully registered form and in
either temporary or permanent form. Unless and until it is exchanged in whole
or in part for the individual Junior Subordinated Debentures represented
thereby, a Global Junior Subordinated Debenture may not be transferred except
as a whole by the Depositary for such Global Junior Subordinated Debenture to
a nominee of such Depositary or by a nominee of such Depositary to such
Depositary or another nominee of such Depositary or by the Depositary or any
nominee to a successor Depositary or any nominee of such successor.
The specific terms of the depositary arrangement with respect to a series of
Junior Subordinated Debentures will be described in the Prospectus Supplement
relating to such series. ITT Hartford anticipates that the following
provisions will generally apply to depositary arrangements.
Upon the issuance of a Global Junior Subordinated Debenture, and the deposit
of such Global Junior Subordinated Debenture with or on behalf of the
Depositary, the Depositary for such Global Junior Subordinated Debenture or
its nominee will credit on its book-entry registration and transfer system,
the respective principal amounts of the individual Junior Subordinated
Debentures represented by such Global Junior Subordinated Debenture to the
accounts of persons that have accounts with such Depositary ("Participants").
Such accounts shall be designated by the dealers, underwriters or agents with
respect to such Junior Subordinated Debentures or by ITT Hartford if such
Junior Subordinated Debentures are offered and sold directly by ITT Hartford.
Ownership of beneficial interests in a Global Junior Subordinated Debenture
will be limited to Participants or persons that may hold interests through
Participants. Ownership of beneficial interests in such Global Junior
Subordinated Debenture will be shown on, and the transfer of that ownership
will be effected only through, records maintained by the applicable Depositary
or its nominee (with respect to interests of Participants) and the records of
Participants (with respect to interests of persons who hold through
Participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests
in a Global Junior Subordinated Debenture.
So long as the Depositary for a Global Junior Subordinated Debenture, or its
nominee, is the registered owner of such Global Junior Subordinated Debenture,
such Depositary or such nominee, as the case may be, will be considered the
sole owner or holder of the Junior Subordinated
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Debentures represented by such Global Junior Subordinated Debenture for all
purposes under the Indenture governing such Junior Subordinated Debentures.
Except as provided below, owners of beneficial interests in a Global Junior
Subordinated Debenture will not be entitled to have any of the individual
Junior Subordinated Debentures of the series represented by such Global Junior
Subordinated Debenture registered in their names, will not receive or be
entitled to receive physical delivery of any such Junior Subordinated
Debentures of such series in definitive form and will not be considered the
owners or holders thereof under the Indenture.
Payments of principal of (and premium, if any) and interest on individual
Junior Subordinated Debentures represented by a Global Junior Subordinated
Debenture registered in the name of a Depositary or its nominee will be made
to the Depositary or its nominee, as the case may be, as the registered owner
of the Global Junior Subordinated Debenture representing such Junior
Subordinated Debentures. None of ITT Hartford, the Debenture Trustee, any
Paying Agent, or the Securities Registrar for such Junior Subordinated
Debentures will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interest of the Global Junior Subordinated Debenture for such Junior
Subordinated Debentures or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
ITT Hartford expects that the Depositary for a series of Junior Subordinated
Debentures or its nominee, upon receipt of any payment of principal, premium
or interest in respect of a permanent Global Junior Subordinated Debenture
representing any of such Junior Subordinated Debentures, immediately will
credit Participants' accounts with payments in amounts proportionate to their
respective beneficial interest in the principal amount of such Global Junior
Subordinated Debenture for such Junior Subordinated Debentures as shown on the
records of such Depositary or its nominee. ITT Hartford also expects that
payments by Participants to owners of beneficial interests in such Global
Junior Subordinated Debenture held through such Participants will be governed
by standing instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name." Such payments will be the responsibility of such Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if a
Depositary for a series of Junior Subordinated Debentures is at any time
unwilling, unable or ineligible to continue as depositary and a successor
depositary is not appointed by ITT Hartford within 90 days, ITT Hartford will
issue individual Junior Subordinated Debentures of such series in exchange for
the Global Junior Subordinated Debenture representing such series of Junior
Subordinated Debentures. In addition, ITT Hartford may at any time and in its
sole discretion, subject to any limitations described in the Prospectus
Supplement relating to such Junior Subordinated Debentures, determine not to
have any Junior Subordinated Debentures of such series represented by one or
more Global Junior Subordinated Debentures and, in such event, will issue
individual Junior Subordinated Debentures of such series in exchange for the
Global Junior Subordinated Debenture or Securities representing such series of
Junior Subordinated Debentures. Further, if ITT Hartford so specifies with
respect to the Junior Subordinated Debentures of a series, an owner of a
beneficial interest in a Global Junior Subordinated Debenture representing
Junior Subordinated Debentures of such series may, on terms acceptable to ITT
Hartford, the Debenture Trustee and the Depositary for such Global Junior
Subordinated Debenture, receive individual Junior Subordinated Debentures of
such series in exchange for such beneficial interests, subject to any
limitations described in the Prospectus Supplement relating to such Junior
Subordinated Debentures. In any such instance, an owner of a beneficial
interest in a Global Junior Subordinated Debenture will be entitled to
physical delivery of individual Junior Subordinated Debentures of the series
represented by such Global Junior Subordinated Debenture equal in principal
amount to such beneficial interest and to have such Junior Subordinated
Debentures registered in its name. Individual Junior Subordinated Debentures
of such series so issued will be issued in denominations, unless otherwise
specified by ITT Hartford, of $25 and integral multiples thereof.
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PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of (and premium, if any) and any interest on Junior Subordinated
Debentures will be made at the office of the Debenture Trustee in the City of
New York or at the office of such Paying Agent or Paying Agents as ITT
Hartford may designate from time to time in the applicable Prospectus
Supplement, except that at the option of ITT Hartford payment of any interest
may be made (i) except in the case of Global Junior Subordinated Debentures,
by check mailed to the address of the Person entitled thereto as such address
shall appear in the Securities Register or (ii) by transfer to an account
maintained by the Person entitled thereto as specified in the Securities
Register, provided that proper transfer instructions have been received by the
Regular Record Date. Unless otherwise indicated in the applicable Prospectus
Supplement, payment of any interest on Junior Subordinated Debentures will be
made to the Person in whose name such Junior Subordinated Debenture is
registered at the close of business on the Regular Record Date for such
interest, except in the case of Defaulted Interest. ITT Hartford may at any
time designate additional Paying Agents or rescind the designation of any
Paying Agent; however, ITT Hartford will at all times be required to maintain
a Paying Agent in each Place of Payment for each series of Junior Subordinated
Debentures.
Any moneys deposited with the Debenture Trustee or any Paying Agent, or then
held by ITT Hartford in trust, for the payment of the principal of (and
premium, if any) or interest on any Junior Subordinated Debenture and
remaining unclaimed for two years after such principal (and premium, if any)
or interest has become due and payable shall, at the request of ITT Hartford,
be repaid to ITT Hartford and the holder of such Junior Subordinated Debenture
shall thereafter look, as a general unsecured creditor, only to ITT Hartford
for payment thereof.
REDEMPTION
Unless otherwise indicated in the applicable Prospectus Supplement, Junior
Subordinated Debentures will not be subject to any sinking fund.
Unless otherwise indicated in the applicable Prospectus Supplement, ITT
Hartford may, at its option, redeem the Junior Subordinated Debentures of any
series on any Interest Payment Date with respect thereto in whole at any time
or in part from time to time. Junior Subordinated Debentures in denominations
larger than $25 may be redeemed in part but only in integral multiples of $25.
Except as otherwise specified in the applicable Prospectus Supplement, the
redemption price for any Junior Subordinated Debenture so redeemed shall equal
any accrued and unpaid interest thereon to the redemption date, plus the
greater of (a) the principal amount thereof and (b) an amount equal to (i) in
respect of Junior Subordinated Debentures of any series bearing interest at a
fixed rate, the Discounted Remaining Fixed Amount Payments or (ii) in respect
of Junior Subordinated Debentures of any series bearing interest determined by
reference to a floating rate, the Discounted Swap Equivalent Payments
(calculated as described below to determine any redemption premium based upon
the value of interest payable on an equivalent fixed rate Junior Subordinated
Debenture). For purposes of this redemption provision, the following terms
have the meanings set forth below:
"Discounted Remaining Fixed Amount Payments" means, in respect of a Junior
Subordinated Debenture of any series bearing interest at a fixed rate, an
amount equal to the sum of the Current Values of the amounts of interest and
principal that would have been payable by ITT Hartford pursuant to the terms
of such Junior Subordinated Debenture on each Interest Payment Date after the
redemption date and at Stated Maturity of the final payment of principal
thereof (taking into account any required sinking fund payments but otherwise
assuming that ITT Hartford had not redeemed such Junior Subordinated Debenture
prior to such Stated Maturity).
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"Current Value" means, in respect of any amount, the present value of that
amount on the redemption date after discounting that amount on a monthly,
quarterly or semiannual basis (whichever corresponds to the Interest Payment
Date periods of the related series of Junior Subordinated Debentures) from the
originally scheduled date for payment on the basis of the Treasury Rate.
"Treasury Rate" means a per annum rate (expressed as a decimal and, in the
case of United States Treasury bills, converted to a per annum yield)
determined on the redemption date to be the per annum rate equal to the
semiannual bond equivalent yield to maturity (adjusted to reflect monthly or
quarterly compounding in the case of Junior Subordinated Debentures having
monthly or quarterly Interest Payment Dates, respectively) for United States
Treasury securities maturing at the Stated Maturity of the final payment of
principal of any series of Junior Subordinated Debentures redeemed pursuant to
the provisions described above, as determined by reference to the weekly
average yield to maturity for United States Treasury securities maturing on
such Stated Maturity if reported in the most recent Statistical Release
H.15(519) of the Board of Governors of the Federal Reserve, or, if no such
securities mature at such Stated Maturity, by interpolation between the most
recent weekly average yields to maturity for two series of United States
Treasury securities, (i) one maturing as close as possible to, but earlier
than, such Stated Maturity and (ii) the other maturing as close as possible
to, but later than, such Stated Maturity, in each case as published in the
most recent Statistical Release H.15(519) of the Board of Governors of the
Federal Reserve.
"Discounted Swap Equivalent Payments" means, in respect of a Junior
Subordinated Debenture of any series bearing interest determined by reference
to a floating rate, an amount equal to the sum of (i) the Current Value of the
amount of principal that would have been payable by ITT Hartford pursuant to
the terms of such Junior Subordinated Debenture at Stated Maturity of the
final payment of the principal thereof (taking into effect any required
sinking fund payments but otherwise assuming that ITT Hartford had not
redeemed such Junior Subordinated Debenture prior to such Stated Maturity and
(ii) the sum of the Current Values of the fixed rate payments that leading
interest rate swap dealers would require to be paid by an assumed fixed rate
payer having the same credit standing as ITT Hartford against floating rate
payments to be made by such leading dealers equal to the interest payments on
the Junior Subordinated Debenture being redeemed (taking into effect any
required sinking fund payment but otherwise assuming ITT Hartford had not
redeemed such Junior Subordinated Debenture prior to such Stated Maturity)
under a standard interest rate swap agreement having a notional principal
amount equal to the principal amount of such Junior Subordinated Debenture, a
termination date set at the Stated Maturity of such Junior Subordinated
Debenture and payment dates for both fixed and floating rate payers set at
each Interest Payment Date of such Junior Subordinated Debenture. The amount
of such fixed rate payments will be based on quotations received by the
Trustee (or an agent appointed for such purpose) from four leading interest
rate swap dealers or, if quotations from four leading interest rate swap
dealers are not obtainable, three such dealers.
Except as otherwise specified in the applicable Prospectus Supplement, if a
Debenture Tax Event (as defined below) in respect of a series of Junior
Subordinated Debentures shall occur and be continuing, ITT Hartford may, at
its option, redeem such series of Junior Subordinated Debentures in whole (but
not in part) on any Interest Payment Date within 90 days of the occurrence of
such Debenture Tax Event, at a redemption price equal to 100% of the principal
amount of such Junior Subordinated Debentures then outstanding plus accrued
and unpaid interest to the date fixed for redemption.
"Debenture Tax Event" means the receipt by ITT Hartford of an opinion of
counsel experienced in such matters to the effect that, as a result of any
amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein affecting taxation, or as a
result of any official
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administrative pronouncement or judicial decision interpreting or applying
such laws or regulations, which amendment or change is effective or such
pronouncement or decision is announced on or after the date of issuance of the
applicable series of Junior Subordinated Debentures under the Indenture, there
is more than an insubstantial risk that interest payable by ITT Hartford on
such series of Junior Subordinated Debentures is not, or within 90 days of the
date thereof, will not be, deductible, in whole or in part, for United States
Federal income tax purposes.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each Holder of Junior Subordinated
Debentures to be redeemed at his registered address. Unless ITT Hartford
defaults in payment of the redemption price, on and after the redemption date
interest ceases to accrue on such Junior Subordinated Debentures or portions
thereof called for redemption.
POSSIBLE TAX LAW CHANGES
On December 7, 1995, President Clinton proposed certain tax law changes
that, among other things, would deny interest deductions to corporate issuers
of debt under certain circumstances. As described in the President's proposal,
corporate issuers of debt would generally be denied interest deductions if the
debt instrument has a term exceeding 20 years and is not reflected as
indebtedness on the issuer's consolidated balance sheet. The same proposal was
included in President Clinton's Budget Plan, released on March 19, 1996.
However, the Chairman of the House Ways and Means Committee and the Senate
Finance Committee, as well as the Ranking Minority Member of the House Ways
and Means Committee, have publicly indicated their intent that the proposals,
if enacted, would not apply to debt issued prior to the date of "appropriate
Congressional action". No such Congressional action has yet occurred or is
expected to occur prior to the issuance of the Junior Subordinated Debentures.
Nevertheless, no assurance can be given that a Tax Event will not occur. If
ITT Hartford were to issue Junior Subordinated Debentures having these
characteristics and President Clinton's proposal was subsequently enacted in
its present form, ITT Hartford would be prevented from deducting interest on
such Junior Subordinated Debentures; this in turn would give rise to a Tax
Event, which would permit ITT Hartford to cause a redemption of the related
Preferred Securities or a distribution of such Junior Subordinated Debentures
in liquidation of the related Issuer, as described more fully under
"Description of Preferred Securities--Redemption--Special Event Redemption or
Distribution". The effect of such proposal, if any, on the Junior Subordinated
Debentures and related Preferred Securities will be described in the
applicable Prospectus Supplement.
OPTION TO EXTEND INTEREST PAYMENT DATE
If provided in the applicable Prospectus Supplement, ITT Hartford shall have
the right at any time and from time to time during the term of any series of
Junior Subordinated Debentures to extend the interest payment period for such
number of consecutive interest payment periods with respect to each deferred
period as may be specified in the applicable Prospectus Supplement (each, an
"Extension Period"), subject to the terms, conditions and covenants, if any,
specified in such Prospectus Supplement, provided that such Extension Period
may not extend beyond the maturity of the Junior Subordinated Debentures.
Certain Federal income tax consequences and special considerations applicable
to any such Junior Subordinated Debentures will be described in the applicable
Prospectus Supplement.
In the event that ITT Hartford exercises this right, during such Extension
Period ITT Hartford may not, and may not permit any subsidiary of ITT Hartford
to, (i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of ITT Hartford's
capital stock or (ii) make any payment of principal, interest or premium, if
any, on or repay, repurchase or redeem any debt securities that rank pari
passu with or junior in interest to the Corresponding Junior Subordinated
Debentures or make any guarantee payments with respect to the
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foregoing (other than (a) dividends or distributions in common stock of ITT
Hartford, (b) redemptions or purchases of any rights pursuant to ITT
Hartford's Rights Plan, or any successor to such Rights Plan, and the
declaration of a dividend of such rights in the future, and (c) payments under
any Guarantee).
MODIFICATION OF INDENTURE
From time to time ITT Hartford and the Debenture Trustee may, without the
consent of the holders of any series of Junior Subordinated Debentures, amend,
waive or supplement the Indenture for specified purposes, including, among
other things, curing ambiguities, defects or inconsistencies (provided that
any such action does not materially adversely affect the interest of the
holders of any series of Junior Subordinated Debentures or, in the case of
Corresponding Junior Subordinated Debentures, the holders of the corresponding
series of Preferred Securities so long as they remain outstanding) and
qualifying, or maintaining the qualification of, the Indenture under the Trust
Indenture Act. The Indenture contains provisions permitting ITT Hartford and
the Debenture Trustee, with the consent of the holders of not less than a
majority in principal amount of each outstanding series of Junior Subordinated
Debentures affected, to modify the Indenture in a manner affecting the rights
of the holders of such series of the Junior Subordinated Debentures; provided,
that no such modification may, without the consent of the holder of each
outstanding Junior Subordinated Debenture so affected, (i) change the stated
maturity of any series of Junior Subordinated Debentures, or reduce the
principal amount thereof, or reduce the rate or extend the time of payment of
interest thereon (except such extension as is contemplated hereby) or (ii)
reduce the percentage of principal amount of Junior Subordinated Debentures of
any series, the holders of which are required to consent to any such
modification of the Indenture, provided that, in the case of Corresponding
Junior Subordinated Debentures, so long as any of the corresponding series of
Preferred Securities remain outstanding, no such modification may be made that
adversely affects the holders of such Preferred Securities, and no termination
of the Indenture may occur, and no waiver of any Debenture Event of Default or
compliance with any covenant under the Indenture may be effective, without the
prior consent of the holders of at least a majority of the aggregate
liquidation preference of such Preferred Securities unless and until the
principal of the Corresponding Junior Subordinated Debentures and all accrued
and unpaid interest thereon have been paid in full and certain other
conditions are satisfied.
In addition, ITT Hartford and the Debenture Trustee may execute, without the
consent of any holder of Junior Subordinated Debentures, any supplemental
Indenture for the purpose of creating any new series of Junior Subordinated
Debentures.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to a series of Junior Subordinated Debentures that has
occurred and is continuing constitutes a "Debenture Event of Default" with
respect to such series of Junior Subordinated Debentures:
(i) failure for 30 days to pay any interest on such series of the Junior
Subordinated Debentures, when due (subject to the deferral of any due date
in the case of an Extension Period); or
(ii) failure to pay any principal or premium, if any, on such series of
Junior Subordinated Debentures when due whether at maturity, upon
redemption, by declaration or otherwise; or
(iii) failure to observe or perform in any material respect certain other
covenants contained in the Indenture for 90 days after written notice to
ITT Hartford from the Debenture Trustee or the holders of at least 25% in
principal amount of such series of outstanding Junior Subordinated
Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of ITT
Hartford.
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The holders of a majority in outstanding principal amount of such series of
Junior Subordinated Debentures have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Debenture
Trustee. The Debenture Trustee or the holders of not less than 25% in
aggregate outstanding principal amount of such series of Junior Subordinated
Debentures may declare the principal due and payable immediately upon a
Debenture Event of Default, and, in the case of Corresponding Junior
Subordinated Debentures, should the Debenture Trustee or such holders of such
Corresponding Junior Subordinated Debentures fail to make such declaration,
the holders of at least 25% in aggregate liquidation preference of the
corresponding series of Preferred Securities shall have such right. The
holders of a majority in aggregate outstanding principal amount of such series
of Junior Subordinated Debentures may annul such declaration and waive the
default if the default (other than the non-payment of the principal of such
series of Junior Subordinated Debentures which has become due solely by such
acceleration) has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration has
been deposited with the Debenture Trustee.
The holders of a majority in outstanding principal amount of the Junior
Subordinated Debentures affected thereby may, on behalf of the holders of all
the Junior Subordinated Debentures, waive any past default, except a default
in the payment of principal or interest (unless such default has been cured
and a sum sufficient to pay all matured installments of interest and principal
due otherwise than by acceleration has been deposited with the Debenture
Trustee) or a default in respect of a covenant or provision which under the
Indenture cannot be modified or amended without the consent of the holder of
each outstanding Junior Subordinated Debenture. ITT Hartford is required to
file annually with the Debenture Trustee a certificate as to whether or not
ITT Hartford is in compliance with all the conditions and covenants applicable
to it under the Indenture.
In case a Debenture Event of Default shall occur and be continuing as to a
series of Corresponding Junior Subordinated Debentures, the Property Trustee
will have the right to declare the principal of and the interest on such
Corresponding Junior Subordinated Debentures, and any other amounts payable
under the Indenture, to be forthwith due and payable and to enforce its other
rights as a creditor with respect to such Corresponding Junior Subordinated
Debentures.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of ITT Hartford to pay interest or
principal on the corresponding Junior Subordinated Debentures on the date such
interest or principal is otherwise payable, a holder of Preferred Securities
may institute a legal proceeding directly against ITT Hartford for enforcement
of payment to such holder of the principal of or interest on such
corresponding Junior Subordinated Debentures having a principal amount equal
to the aggregate Liquidation Amount of the related Preferred Securities of
such holder (a "Direct Action"). ITT Hartford may not amend the Indenture to
remove the foregoing right to bring a Direct Action without the prior written
consent of the holders of all of the Preferred Securities. If the right to
bring a Direct Action is removed, the applicable issue may become subject to
the reporting obligations under the Securities Exchange Act of 1934, as
amended. ITT Hartford shall have the right under the Indenture to set-off any
payment made to such holder of Preferred Securities by ITT Hartford in
connection with a Direct Action. The holders of Preferred Securities will not
be able to exercise directly any other remedy available to the holders of the
corresponding Junior Subordinated Debentures.
The holders of the Preferred Securities would not be able to exercise
directly any remedies other than those set forth in the preceding paragraph
available to the holders of the Junior Subordinated Debentures unless there
shall have been an Event of Default under the Trust Agreement.
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that ITT Hartford shall not consolidate with or merge
into any other corporation or convey, transfer or lease its properties and
assets substantially as an entirety to any
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Person, and no Person shall consolidate with or merge into ITT Hartford or
convey, transfer or lease its properties and assets substantially as an
entirety to ITT Hartford, unless (i) in case ITT Hartford consolidates with or
merges into another corporation or conveys or transfers its properties and
assets substantially as an entirety to any Person, the successor corporation
is organized under the laws of the United States or any state or the District
of Columbia, and such successor corporation expressly assumes ITT Hartford's
obligations on the Junior Subordinated Debentures issued under the Indenture;
(ii) immediately after giving effect thereto, no Debenture Event of Default,
and no event which, after notice or lapse of time or both, would become a
Debenture Event of Default, shall have happened and be continuing; (iii) in
the case of Corresponding Junior Subordinated Debentures, such transaction is
permitted under the related Trust Agreement or Guarantee and does not give
rise to any breach or violation of the related Trust Agreement or Hartford
Guarantee, and (iv) certain other conditions as prescribed in the Indenture
are met.
The general provisions of the Indenture do not afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged or other
transaction involving ITT Hartford that may adversely affect holders of the
Junior Subordinated Debentures.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all Junior
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation (i) have become due and payable or (ii) will become due and
payable at their Stated Maturity within one year, and ITT Hartford deposits or
causes to be deposited with the Debenture Trustee trust funds, in trust, for
the purpose an amount in the currency or currencies in which the Junior
Subordinated Debentures are payable sufficient to pay and discharge the entire
indebtedness on the Junior Subordinated Debentures not previously delivered to
the Debenture Trustee for cancellation, for the principal (and premium, if
any) and interest to the date of the deposit or to the Stated Maturity, as the
case may be, then the Indenture will cease to be of further effect (except as
to ITT Hartford's obligations to pay all other sums due pursuant to the
Indenture and to provide the officers' certificates and opinions of counsel
described therein), and ITT Hartford will be deemed to have satisfied and
discharged the Indenture.
CONVERSION OR EXCHANGE
Unless otherwise indicated in the applicable Prospectus Supplement, the
Junior Subordinated Debentures of any series may be convertible or
exchangeable into Preferred Securities or other securities. The specific terms
on which Junior Subordinated Debentures of any series may be so converted or
exchanged will be set forth in the applicable Prospectus Supplement. Such
terms may include provisions for conversion or exchange, either mandatory, at
the option of the holder, or at the option of ITT Hartford, in which case the
number of shares of Preferred Securities or other securities to be received by
the Holders of Junior Subordinated Debentures would be calculated as of a time
and in the manner stated in the applicable Prospectus Supplement.
SUBORDINATION
In the Indenture, ITT Hartford has covenanted and agreed that any Junior
Subordinated Debentures issued thereunder will be subordinate and junior in
right of payment to all Senior Debt to the extent provided in the Indenture.
Upon any payment or distribution of assets to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of ITT Hartford, the holders of Senior Debt will first
be entitled to receive payment in full of principal of (and premium, if any)
and interest, if any, on such Senior Debt before the holders of Junior
Subordinated Debentures or, in the case of Corresponding Junior Subordinated
Debentures, the Property Trustee on behalf of the holders, will be entitled to
receive or retain any payment in respect of the principal of (and premium, if
any) or interest, if any, on the Junior Subordinated Debentures.
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In the event of the acceleration of the maturity of any Junior Subordinated
Debentures, the holders of all Senior Debt outstanding at the time of such
acceleration will first be entitled to receive payment in full of all amounts
due thereon (including any amounts due upon acceleration) before the holders
of Junior Subordinated Debentures will be entitled to receive any payment upon
the principal of (or premium, if any) or interest, if any, on the Junior
Subordinated Debentures.
No payments on account of principal (or premium, if any) or interest, if
any, in respect of the Junior Subordinated Debentures may be made if there
shall have occurred and be continuing a default in any payment with respect to
Senior Debt, or an event of default with respect to any Senior Debt resulting
in the acceleration of the maturity thereof, or if any judicial proceeding
shall be pending with respect to any such default.
"Debt" means with respect to any Person, whether recourse is to all or a
portion of the assets of such Person and whether or not contingent, (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities
issued for the account of such Person; (iv) every obligation of such Person
issued or assumed as the deferred purchase price of property or services (but
excluding trade accounts payable or accrued liabilities arising in the
ordinary course of business); (v) every capital lease obligation of such
Person; and (vi) every obligation of the type referred to in clauses
(i) through (v) of another Person and all dividends of another Person the
payment of which, in either case, such Person has guaranteed or is responsible
or liable, directly or indirectly, as obligor or otherwise.
"Senior Debt" means the principal of (and premium, if any) and interest, if
any (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to ITT Hartford whether or not such
claim for post-petition interest is allowed in such proceeding), on Debt,
whether incurred on or prior to the date of the Indenture or thereafter
incurred, unless, in the instrument creating or evidencing the same or
pursuant to which the same is outstanding, it is provided that such
obligations are not superior in right of payment to the Junior Subordinated
Debentures or to other Debt which is pari passu with, or subordinated to, the
Junior Subordinated Debentures; provided, however, that Senior Debt shall not
be deemed to include (i) any Debt of ITT Hartford which when incurred and
without respect to any election under Section 1111(b) of the Bankruptcy code,
was without recourse to ITT Hartford, (ii) any Debt of ITT Hartford to any of
its subsidiaries, (iii) Debt to any employee of ITT Hartford, (iv) any
liability for taxes, (v) indebtedness or monetary obligations to trade
creditors or assumed by ITT Hartford or any of its subsidiaries in the
ordinary course of business in connection with the obtaining of materials or
services, and (vi) and other debt securities issued pursuant to the Indenture.
ITT Hartford is a non-operating holding company, and most of the assets of
ITT Hartford are owned by its subsidiaries. Accordingly, the Junior
Subordinated Debentures will be effectively subordinated to all existing and
future liabilities of ITT Hartford's subsidiaries, including liabilities under
contracts of insurance and annuities written by ITT Hartford's insurance
subsidiaries. Holders of Junior Subordinated Debentures should look only to
the assets of ITT Hartford for payments of interest and principal and premium,
if any.
The Indenture places no limitation on the amount of additional Senior Debt
that may be incurred by ITT Hartford. ITT Hartford expects from time to time
to incur additional indebtedness constituting Senior Debt.
The Indenture provides that the foregoing subordination provisions, insofar
as they relate to any particular issue of Junior Subordinated Debentures, may
be changed prior to such issuance. Any such change would be described in the
Prospectus Supplement relating to such Junior Subordinated Debentures.
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GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by and
construed in accordance with the laws of the State of New York.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the
Trust Indenture Act. Subject to such provisions, the Debenture Trustee is
under no obligation to exercise any of the powers vested in it by the
Indenture at the request of any holder of Junior Subordinated Debentures,
unless offered reasonable indemnity by such holder against the costs, expenses
and liabilities which might be incurred thereby. The Debenture Trustee is not
required to expend or risk its own funds or otherwise incur personal financial
liability in the performance of its duties if the Debenture Trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
DESCRIPTION OF PREFERRED SECURITIES
Pursuant to the terms of the Trust Agreement for each Issuer, the Issuer
Trustees on behalf of such Issuer will issue the Preferred Securities and the
Common Securities. The Preferred Securities of a particular issue will
represent preferred undivided beneficial interests in the assets of the
related Issuer and the holders thereof will be entitled to a preference in
certain circumstances with respect to Distributions and amounts payable on
redemption or liquidation over the Common Securities of such Issuer, as well
as other benefits as described in the corresponding Trust Agreement. This
summary of certain provisions of each Trust Agreement does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of each Trust Agreement, including the definitions therein
of certain terms, and the Trust Indenture Act. Wherever particular defined
terms of the Trust Agreement are referred to, such defined terms are
incorporated herein by reference. The form of the Trust Agreement has been
filed as an exhibit to the Registration Statement of which this Prospectus
forms a part. Each of the Issuers is a legally separate entity and the assets
of one are not available to satisfy the obligations of any of the others.
GENERAL
The Preferred Securities of an Issuer will rank pari passu, and payments
will be made thereon pro rata, with the Common Securities of that Issuer
except as described under "--Subordination of Common Securities". Legal title
to the Corresponding Junior Subordinated Debentures will be held by the
Property Trustee in trust for the benefit of the holders of the related
Preferred Securities and Common Securities. Each Guarantee Agreement executed
by ITT Hartford for the benefit of the holders of an Issuer's Preferred
Securities (each, the "Guarantee") will be a guarantee on a subordinated basis
with respect to the related Preferred Securities but will not guarantee
payment of Distributions or amounts payable on redemption or liquidation of
such Preferred Securities when the related Issuer does not have funds on hand
available to make such payments. See "Description of Guarantee".
DISTRIBUTIONS
Each Issuer's Preferred Securities represent preferred undivided beneficial
interests in the assets of such Issuer, and the Distributions on each
Preferred Security will be payable at a rate specified in the Prospectus
Supplement for such Preferred Securities. The amount of Distributions payable
for any period will be computed on the basis of a 360-day year of twelve 30-
day months unless otherwise specified in the applicable Prospectus Supplement.
Distributions that are in arrears may bear interest on the amount thereof at
the rate per annum if and as specified in the applicable Prospectus Supplement
("Additional Amounts"). The term "Distributions" as used herein includes any
Additional Amounts unless otherwise stated.
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Distributions on the Preferred Securities will be cumulative, will accrue
from the date of original issuance and will be payable on such dates as
specified in the applicable Prospectus Supplement. In the event that any date
on which Distributions are payable on the Preferred Securities is not a
Business Day (as defined below), payment of the Distribution payable on such
date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect to any such delay) except
that, if such Business Day is in the next succeeding calendar year, payment of
such Distribution shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date (each date on
which Distributions are payable in accordance with the foregoing, a
"Distribution Date"). A "Business Day" shall mean any day other than a
Saturday or a Sunday, or a day on which banking institutions in the City of
New York are authorized or required by law or executive order to remain closed
or a day on which the corporate trust office of the Property Trustee or the
Debenture Trustee (as defined herein) is closed for business.
If provided in the applicable Prospectus Supplement, ITT Hartford has the
right under the Indenture, pursuant to which it will issue the Corresponding
Junior Subordinated Debentures, to extend the interest payment period at any
time and from time to time on any series of the Corresponding Junior
Subordinated Debentures, to a period which will be specified in such
Prospectus Supplement relating to such series (each, an "Extension Period"),
provided that such Extension Period may not extend beyond the maturity of the
Junior Subordinated Debentures. As a consequence of any such extension,
Distributions on the corresponding Preferred Securities would be deferred (but
would continue to accumulate additional Distributions thereon at the rate per
annum set forth in the Prospectus Supplement for such Preferred Securities) by
the Issuer of such Preferred Securities during any such Extension Period. In
the event that ITT Hartford exercises this right, during such Extension Period
ITT Hartford may not, and may not permit any subsidiary of ITT Hartford to,
(i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of ITT Hartford's
capital stock or (ii) make any payment of principal, interest or premium, if
any, on or repay, repurchase or redeem any debt securities that rank pari
passu with or junior in interest to the Corresponding Junior Subordinated
Debentures or make any guarantee payments with respect to the foregoing (other
than (a) dividends or distributions in common stock of ITT Hartford, (b)
redemptions or purchases of any rights pursuant to ITT Hartford's Rights Plan,
or any successor to such Rights Plan, and the declaration of a dividend of
such rights in the future, and (c) payments under any Guarantee).
It is anticipated that the revenue of each Issuer available for distribution
to holders of its Preferred Securities will be limited to payments under the
Corresponding Junior Subordinated Debentures in which the Issuer will invest
the proceeds from the issuance and sale of its Preferred Securities and its
Common Securities. See "Description of Corresponding Junior Subordinated
Debentures". If ITT Hartford does not make interest payments on such
Corresponding Junior Subordinated Debentures, the Property Trustee will not
have funds available to pay Distributions on the corresponding Preferred
Securities. The payment of Distributions (if and to the extent the Issuer has
funds legally available for the payment of such Distributions and cash
sufficient to make such payments) is guaranteed on a limited basis as set
forth herein under "Description of Guarantee".
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the register of such Issuer on the relevant record
dates, which, as long as the Preferred Securities remain in book-entry form,
will be one Business Day prior to the relevant Distribution Date. Subject to
any applicable laws and regulations and the provisions of the applicable Trust
Agreement, each such payment will be made as described under "--Book-Entry
Issuance". In the event any Preferred Securities are not in book-entry form,
the relevant record date for such Preferred Securities shall be the date 15
days prior to the relevant Distribution Date.
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REDEMPTION
Mandatory Redemption. Upon the repayment or redemption, in whole or in part,
of any Corresponding Junior Subordinated Debentures, whether at maturity or
upon earlier redemption as provided in the Indenture, the proceeds from such
repayment or redemption shall be applied by the Property Trustee to redeem a
Like Amount (as defined below) of the corresponding Preferred Securities, upon
not less than 30 nor more than 60 days notice, at a redemption price (the
"Redemption Price") equal to the aggregate liquidation preference of such
Preferred Securities plus accumulated and unpaid Distributions thereon to the
date of Redemption (the "Redemption Date") and the related amount of the
premium, if any, paid by ITT Hartford upon the concurrent redemption of such
Corresponding Junior Subordinated Debentures. See "Description of
Corresponding Junior Subordinated Debentures--Optional Redemption". If less
than all of any series of Corresponding Junior Subordinated Debentures are to
be repaid or redeemed on a Redemption Date, then the proceeds from such
repayment or redemption shall be allocated to the redemption pro rata of the
Preferred Securities and the Common Securities. The amount of premium, if any,
paid by ITT Hartford upon the redemption of all or any part of any series of
any Corresponding Junior Subordinated Debentures to be repaid or redeemed on a
Redemption Date shall be allocated to the redemption pro rata of the Preferred
Securities and the Common Securities.
ITT Hartford will have the right to redeem any series of Corresponding
Junior Subordinated Debentures (i) in whole at any time or in part from time
to time, subject to the conditions described under "Description of
Corresponding Junior Subordinated Debentures--Optional Redemption", or (ii) at
any time, in whole (but not in part), upon the occurrence of a Tax Event or an
Investment Company Event (each as defined below, a "Special Event") and
subject to the further conditions described under "Description of
Corresponding Junior Subordinated Debentures--Optional Redemption", or (iii)
as may be otherwise specified in the applicable Prospectus Supplement.
Special Event Redemption or Distribution. If a Special Event in respect of a
series of Preferred Securities and Common Securities shall occur and be
continuing, ITT Hartford has the right to (i) redeem the Corresponding Junior
Subordinated Debentures in whole (but not in part) and therefore cause a
mandatory redemption of such Preferred Securities and Common Securities in
whole (but not in part) at the Redemption Price within 90 days following the
occurrence of such Special Event, or (ii) terminate the related Issuer and
cause such Corresponding Junior Subordinated Debentures to be distributed to
the holders of such Preferred Securities and Common Securities in liquidation
of the Issuer. If at any time an Issuer is not or will not be taxed as a
grantor trust but a Tax Event in respect of the related Preferred Securities
has not occurred, ITT Hartford has the right to terminate the Issuer and cause
the Corresponding Junior Subordinated Debentures to be distributed to the
holders of the Preferred Securities in liquidation of the Issuer. If ITT
Hartford does not elect either option (i) or (ii) above, the applicable series
of Preferred Securities will remain outstanding and, in the event a Tax Event
has occurred and is continuing, Additional Sums (as defined below) will be
payable on the Corresponding Junior Subordinated Debentures.
Extension of Maturity of Corresponding Junior Subordinated Debentures. If
provided in the applicable Prospectus Supplement, ITT Hartford shall have the
right to extend or shorten the maturity of any series of Corresponding Junior
Subordinated Debentures at the time that ITT Hartford exercises its right to
elect to terminate the related Issuer and cause such Corresponding Junior
Subordinated Debentures to be distributed to the holders of such Preferred
Securities and Common Securities in liquidation of the Issuer, provided that
it can extend the maturity only if certain conditions specified in the
applicable Prospectus Supplement are met at the time such election is made and
at the time of such extension.
"Additional Sums" means the additional amounts as may be necessary in order
that the amount of Distributions then due and payable by an Issuer on the
outstanding Preferred Securities and
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Common Securities of the Issuer shall not be reduced as a result of any
additional taxes, duties and other governmental charges to which the Issuer
has become subject as a result of a Tax Event.
"Tax Event" means the receipt by the Issuer of an opinion of counsel
experienced in such matters to the effect that, as a result of any amendment
to, or change (including any announced prospective change) in, the laws (or
any regulations thereunder) of the United States or any political subdivision
or taxing authority thereof or therein affecting taxation, or as a result of
any official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
such pronouncement or decision is announced on or after the date of issuance
of the Preferred Securities under the Trust Agreement, there is more than an
insubstantial risk that (i) the Issuer is, or will be within 90 days of the
date thereof, subject to United States Federal income tax with respect to
income received or accrued on the corresponding series of Corresponding Junior
Subordinated Debentures, (ii) interest payable by ITT Hartford on such series
of Corresponding Junior Subordinated Debentures is not, or within 90 days of
the date thereof, will not be, deductible, in whole or in part, for United
States Federal income tax purposes, or (iii) the Issuer is, or will be within
90 days of the date thereof, subject to more than a de minimis amount of other
taxes, duties or other governmental charges.
"Investment Company Event" means the occurrence of a change in law or
regulation or a change in interpretation or application of law or regulation
by any legislative body, court, governmental agency or regulatory authority (a
"Change in 1940 Act Law") to the effect that the applicable Issuer is or will
be considered an "investment company" that is required to be registered under
the Investment Company Act of 1940, as amended (the "Investment Company Act"),
which Change in 1940 Act Law becomes effective on or after the date of
original issuance of the series of Preferred Securities issued by the Issuer.
"Like Amount" means (i) with respect to a redemption of any series of
Preferred Securities, Preferred Securities of such series having a Liquidation
Amount (as defined below) equal to that portion of the principal amount of
Corresponding Junior Subordinated Debentures to be contemporaneously redeemed
in accordance with the Indenture and the proceeds of which will be used to pay
the Redemption Price of such Preferred Securities, and (ii) with respect to a
distribution of Corresponding Junior Subordinated Debentures to holders of any
series of Preferred Securities in connection with a dissolution or liquidation
of the related Hartford Trust, Corresponding Junior Subordinated Debentures
having a principal amount equal to the Liquidation Amount of the Preferred
Securities of the holder to whom such Corresponding Junior Subordinated
Debentures are distributed. "Liquidation Amount" means the stated amount of
$25 per Preferred Security and Common Security.
After the liquidation date fixed for any distribution of Corresponding
Junior Subordinated Debentures for any series of Preferred Securities (i) such
series of Preferred Securities will no longer be deemed to be outstanding,
(ii) The Depository Trust Company ("DTC") or its nominee, as the record holder
of such series of Preferred Securities, will receive a registered global
certificate or certificates representing the Corresponding Junior Subordinated
Debentures to be delivered upon such distribution and (iii) any certificates
representing such series of Preferred Securities not held by DTC or its
nominee will be deemed to represent the Corresponding Junior Subordinated
Debentures having a principal amount equal to the stated liquidation
preference of such series of Preferred Securities, and bearing accrued and
unpaid interest in an amount equal to the accrued and unpaid Distributions on
such series of Preferred Securities until such certificates are presented to
the Administrative Trustees or their agent for transfer or reissuance.
There can be no assurance as to the market prices for the Preferred
Securities or the Corresponding Junior Subordinated Debentures that may be
distributed in exchange for Preferred Securities if a dissolution and
liquidation of an Issuer were to occur. Accordingly, the Preferred Securities
that an investor may purchase, or the Corresponding Junior Subordinated
Debentures that
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the investor may receive on dissolution and liquidation of an Issuer, may
trade at a discount to the price that the investor paid to purchase the
Preferred Securities offered hereby.
REDEMPTION PROCEDURES
Preferred Securities redeemed on each Redemption Date shall be redeemed at
the Redemption Price with the applicable proceeds from the contemporaneous
redemption of the Corresponding Junior Subordinated Debentures. Redemptions of
the Preferred Securities shall be made and the Redemption Price shall be
payable on each Redemption Date only to the extent that the related Issuer has
funds on hand available for the payment of such Redemption Price. See also "--
Subordination of Common Securities".
If an Issuer gives a notice of redemption in respect of its Preferred
Securities, then, by 12:00 noon, New York City time, on the Redemption Date,
to the extent funds are available, the Property Trustee will deposit
irrevocably with the DTC funds sufficient to pay the applicable Redemption
Price and will give DTC irrevocable instructions and authority to pay the
Redemption Price to the holders of such Preferred Securities. See "--Book-
Entry Issuance". If such Preferred Securities are no longer in book-entry
form, the Issuer, to the extent funds are available, will irrevocably deposit
with the paying agent for such Preferred Securities funds sufficient to pay
the applicable Redemption Price and will give such paying agent irrevocable
instructions and authority to pay the Redemption Price to the holders thereof
upon surrender of their certificates evidencing such Preferred Securities.
Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date for any Preferred Securities called for redemption shall be
payable to the holders of such Preferred Securities on the relevant record
dates for the related Distribution Dates. If notice of redemption shall have
been given and funds deposited as required, then upon the date of such
deposit, all rights of the holders of such Preferred Securities so called for
redemption will cease, except the right of the holders of such Preferred
Securities to receive the Redemption Price, but without interest on such
Redemption Price, and such Preferred Securities will cease to be outstanding.
In the event that any date fixed for redemption of Preferred Securities is not
a Business Day, then payment of the Redemption Price payable on such date will
be made on the next succeeding day which is a Business Day (and without any
interest or other payment in respect of any such delay), except that, if such
Business Day falls in the next calendar year, such payment will be made on the
immediately preceding Business Day. In the event that payment of the
Redemption Price in respect of Preferred Securities called for redemption is
improperly withheld or refused and not paid either by the Issuer or by ITT
Hartford pursuant to the Guarantee as described under "Description of
Guarantee", Distributions on such Preferred Securities will continue to accrue
at the then applicable rate, from the Redemption Date originally established
by the Issuer for such Preferred Securities to the date such Redemption Price
is actually paid, in which case the actual payment date will be the date fixed
for redemption for purposes of calculating the Redemption Price.
Subject to applicable law (including, without limitation, United States
federal securities law), ITT Hartford or its subsidiaries may at any time and
from time to time purchase outstanding Preferred Securities by tender, in the
open market or by private agreement.
Payment of the Redemption Price on the Preferred Securities and any
distribution of Corresponding Junior Subordinated Debentures to holders of
Preferred Securities shall be made to the applicable recordholders thereof as
they appear on the register for such Preferred Securities on the relevant
record date, which shall be one Business Day prior to the relevant Redemption
Date or liquidation date, as applicable; provided, however, that in the event
that any Preferred Securities are not in book-entry form, the relevant record
date for such Preferred Securities shall be the date 15 days prior to the
Redemption Date or liquidation date, as applicable.
If less than all of the Preferred Securities and Common Securities issued by
an Issuer are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of such Preferred Securities
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and Common Securities to be redeemed shall be allocated pro rata among the
Preferred Securities and the Common Securities. The particular Preferred
Securities to be redeemed shall be selected on a pro rata basis not more than
60 days prior to the Redemption Date by the Property Trustee from the
outstanding Preferred Securities not previously called for redemption, by such
method as the Property Trustee shall deem fair and appropriate and which may
provide for the selection for redemption of portions (equal to $25 or an
integral multiple of $25 in excess thereof) of the Liquidation Amount of
Preferred Securities of a denomination larger than $25. The Property Trustee
shall promptly notify the trust registrar in writing of the Preferred
Securities selected for redemption and, in the case of any Preferred
Securities selected for partial redemption, the Liquidation Amount thereof to
be redeemed. For all purposes of each Trust Agreement, unless the context
otherwise requires, all provisions relating to the redemption of Preferred
Securities shall relate, in the case of any Preferred Securities redeemed or
to be redeemed only in part, to the portion of the aggregate Liquidation
Amount of Preferred Securities which has been or is to be redeemed.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions (including Additional Amounts, if applicable) on,
and the Redemption Price of, each Issuer's Preferred Securities and Common
Securities, as applicable, shall be made pro rata based on the Liquidation
Amount of such Preferred Securities and Common Securities; provided, however,
that if on any Distribution Date or Redemption Date a Debenture Event of
Default shall have occurred and be continuing, no payment of any Distribution
(including Additional Amounts, if applicable) on, or Redemption Price of, any
of the Issuer's Common Securities, and no other payment on account of the
redemption, liquidation or other acquisition of such Common Securities, shall
be made unless payment in full in cash of all accumulated and unpaid
Distributions (including Additional Amounts, if applicable) on all of the
Issuer's outstanding Preferred Securities for all Distribution periods
terminating on or prior thereto, or in the case of payment of the Redemption
Price the full amount of such Redemption Price on all of the Issuer's
outstanding Preferred Securities, shall have been made or provided for, and
all funds available to the Property Trustee shall first be applied to the
payment in full in cash of all Distributions (including Additional Amounts, if
applicable) on, or Redemption Price of, the Issuer's Preferred Securities then
due and payable.
In the case of any Event of Default resulting from a Debenture Event of
Default, ITT Hartford as holder of such Issuer's Common Securities will be
deemed to have waived any right to act with respect to any such Event of
Default under the Trust Agreement until the effect of all such Events of
Default with respect to such Preferred Securities have been cured, waived or
otherwise eliminated. Until any such Events of Default under the Trust
Agreement with respect to the Preferred Securities have been so cured, waived
or otherwise eliminated, the Property Trustee shall act solely on behalf of
the holders of such Preferred Securities and not on behalf of ITT Hartford as
holder of the Issuer's Common Securities, and only the holders of such
Preferred Securities will have the right to direct the Property Trustee to act
on their behalf.
LIQUIDATION DISTRIBUTION UPON TERMINATION
Pursuant to the Trust Agreement, each Issuer shall automatically terminate
upon expiration of its term and shall be terminated by ITT Hartford on the
first to occur of: (i) the occurrence of certain events of bankruptcy,
dissolution or liquidation of ITT Hartford; (ii) the distribution of a Like
Amount of the Corresponding Junior Subordinated Debentures to the holders of
its Preferred Securities and Common Securities following the occurrence of a
Special Event or in the event the Issuer is not or will not be taxed as a
grantor trust but a Tax Event has not occurred and in each case ITT Hartford
as Depositor has given written direction to the Property Trustee to terminate
such Issuer within 45 days of such event (which direction is optional and
wholly within the discretion of ITT Hartford as Depositor); (iii) the
redemption of all of the Issuer's Preferred Securities; and (iv) an order for
the dissolution of the Issuer shall have been entered by a court of competent
jurisdiction.
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If an early termination occurs as described in clause (i), (ii) or (iv)
above, the Issuer shall be liquidated by the Issuer Trustees as expeditiously
as the Issuer Trustees determine to be possible by distributing, after
satisfaction of liabilities to creditors of such Issuer as provided by
applicable law, to the holders of such Preferred Securities and Common
Securities a Like Amount of the Corresponding Junior Subordinated Debentures,
unless such distribution is determined by the Property Trustee not to be
practical, in which event such holders will be entitled to receive out of the
assets of the Issuer available for distribution to holders, after satisfaction
of liabilities to creditors of such Issuer as provided by applicable law, an
amount equal to, in the case of holders of Preferred Securities, the aggregate
of the Liquidation Amount plus accrued and unpaid Distributions thereon to the
date of payment (such amount being the "Liquidation Distribution"). If such
Liquidation Distribution can be paid only in part because such Issuer has
insufficient assets available to pay in full the aggregate Liquidation
Distribution, then the amounts payable directly by such Issuer on its
Preferred Securities shall be paid on a pro rata basis. The holder(s) of such
Issuer's Common Securities will be entitled to receive distributions upon any
such liquidation pro rata with the holders of its Preferred Securities, except
that if a Debenture Event of Default has occurred and is continuing, the
Preferred Securities shall have a priority over the Common Securities. A
supplemental Indenture may provide that if an early termination occurs as
described in clause (iv) above, the Corresponding Junior Subordinated
Debentures may be subject to optional redemption in whole (but not in part).
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default" under each
Trust Agreement (an "Event of Default") with respect to the Preferred
Securities issued thereunder (whatever the reason for such Event of Default
and whether it shall be voluntary or involuntary or be effected by operation
of law or pursuant to any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body):
(i) the occurrence of a Debenture Event of Default under the Indenture
(see "Description of Junior Subordinated Debentures--Debenture Events of
Default"); or
(ii) default by the Property Trustee in the payment of any Distribution
when it becomes due and payable, and continuation of such default for a
period of 30 days; or
(iii) default by the Property Trustee in the payment of any Redemption
Price of any Preferred Security or Common Security when it becomes due and
payable; or
(iv) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Issuer Trustees in such Trust Agreement
(other than a covenant or warranty a default in the performance of which or
the breach of which is dealt with in clause (ii) or (iii) above), and
continuation of such default or breach for a period of 60 days after there
has been given, by registered or certified mail, to the defaulting Issuer
Trustee or Trustees by the holders of at least 10% in aggregate Liquidation
Amount of the outstanding Preferred Securities of the applicable Issuer, a
written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" under such
Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by ITT Hartford to appoint
a successor Property Trustee within 60 days thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of such Issuer's Preferred
Securities, the Administrative Trustees and ITT Hartford, as Depositor, unless
such Event of Default shall have been cured or waived. ITT Hartford, as
Depositor, and the Administrative Trustees are required to file annually with
the Property Trustee a certificate as to whether or not they are in compliance
with all the conditions and covenants applicable to them under the Trust
Agreement.
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If a Debenture Event of Default has occurred and is continuing, the
Preferred Securities shall have a preference over the Common Securities upon
termination of each Issuer as described above. See "--Liquidation Distribution
Upon Termination". The existence of an Event of Default does not entitle the
holders of Preferred Securities to accelerate the maturity thereof.
REMOVAL OF ISSUER TRUSTEES
Unless a Debenture Event of Default shall have occurred and be continuing,
any Issuer Trustee may be removed at any time by the holder of the Common
Securities. If a Debenture Event of Default has occurred and is continuing,
the Property Trustee and the Delaware Trustee may be removed at such time by
the holders of a majority in Liquidation Amount of the outstanding Preferred
Securities. In no event will the holders of the Preferred Securities have the
right to vote to appoint, remove or replace the Administrative Trustees, which
voting rights are vested exclusively in ITT Hartford as the holder of the
Common Securities. No resignation or removal of an Issuer Trustee and no
appointment of a successor trustee shall be effective until the acceptance of
appointment by the successor trustee in accordance with the provisions of the
Trust Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default shall have occurred and be continuing, at any
time or times, for the purpose of meeting the legal requirements of the Trust
Indenture Act or of any jurisdiction in which any part of the Trust Property
may at the time be located, ITT Hartford, as the holder of the Common
Securities, and the Administrative Trustees shall have power to appoint one or
more persons either to act as a co-trustee, jointly with the Property Trustee,
of all or any part of such Trust Property, or to act as separate trustee of
any such property, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such person or persons in such
capacity any property, title, right or power deemed necessary or desirable,
subject to the provisions of the Trust Agreement. In case a Debenture Event of
Default has occurred and is continuing, the Property Trustee alone shall have
power to make such appointment.
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any corporation into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which such Trustee shall be a party, or
any corporation succeeding to all or substantially all the corporate trust
business of such Trustee, shall be the successor of such Trustee under the
Trust Agreements, provided such corporation shall be otherwise qualified and
eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE ISSUERS
An Issuer may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except as
described below. An Issuer may, at the request of ITT Hartford, with the
consent of the Administrative Trustees and without the consent of the holders
of the Preferred Securities, merge with or into, consolidate, amalgamate, or
be replaced by or convey, transfer or lease its properties and assets
substantially as an entirety to a trust organized as such under the laws of
any State; provided, that (i) such successor entity either (a) expressly
assumes all of the obligations of such Issuer with respect to the Preferred
Securities or (b) substitutes for the Preferred Securities other securities
having substantially the same terms as the Preferred Securities (the
"Successor Securities") so long as the Successor Securities rank the same as
the Preferred Securities rank in priority with respect to distributions and
payments upon liquidation, redemption and otherwise, (ii) ITT Hartford
expressly appoints a trustee of such successor entity possessing the same
powers and duties as the Property
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Trustee as the holder of the Corresponding Junior Subordinated Debentures,
(iii) the Successor Securities are listed, or any Successor Securities will be
listed upon notification of issuance, on any national securities exchange or
other organization on which the Preferred Securities are then listed, if any,
(iv) such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not cause the Preferred Securities (including any
Successor Securities) to be downgraded by any nationally recognized
statistical rating organization, (v) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the
rights, preferences and privileges of the holders of the Preferred Securities
(including any Successor Securities) in any material respect, (vi) such
successor entity has a purpose identical to that of the Issuer, (vii) prior to
such merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease ITT Hartford has received an opinion from independent counsel to the
Issuer experienced in such matters to the effect that (a) such merger,
consolidation, amalgamation, replacement conveyance, transfer or lease does
not adversely affect the rights, preferences and privileges of the holders of
the Preferred Securities (including any Successor Securities) in any material
respect, and (b) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease neither the Issuer nor such
successor entity will be required to register as an investment company under
the Investment Company Act and (viii) ITT Hartford or any permitted successor
or assignee owns all of the Common Securities of such successor entity and
guarantees the obligations of such successor entity under the Successor
Securities at least to the extent provided by the Guarantee. Notwithstanding
the foregoing, an Issuer shall not, except with the consent of holders of 100%
in Liquidation Amount of the Preferred Securities, consolidate, amalgamate,
merge with or into, or be replaced by or convey, transfer or lease its
properties and assets substantially as an entirety to any other entity or
permit any other entity to consolidate, amalgamate, merge with or into, or
replace it if such consolidation, amalgamation, merger or replacement would
cause the Issuer or the successor entity to be classified as other than a
grantor trust for Federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF TRUST AGREEMENT
Except as provided below and under "Description of Guarantee--Amendments and
Assignment" and as otherwise required by law and each Trust Agreement, the
holders of the Preferred Securities will have no voting rights.
The Trust Agreement may be amended from time to time by ITT Hartford and the
Issuer Trustees, without the consent of the holders of the Preferred
Securities (i) to cure any ambiguity, correct or supplement any provisions in
the Trust Agreement which may be inconsistent with any other provision, or to
make any other provisions with respect to matters or questions arising under
the Trust Agreement, which shall not be inconsistent with the other provisions
of this Trust Agreement, or (ii) to modify, eliminate or add to any provisions
of the Trust Agreement to such extent as shall be necessary to ensure that the
Issuer will be classified for Federal income tax purposes as a grantor trust
at all times that any Preferred Securities and Common Securities are
outstanding or to ensure that the Issuer will not be required to register as
an "investment company" under the Investment Company Act; provided, however,
that in the case of clause (i), such action shall not adversely affect in any
material respect the interests of any holder of Preferred Securities or Common
Securities, and any amendments of the Trust Agreement shall become effective
when notice thereof is given to the holders of Preferred Securities and Common
Securities. A Trust Agreement may be amended by the Issuer Trustees and ITT
Hartford with (i) the consent of holders representing not less than a majority
(based upon Liquidation Amounts) of the outstanding Preferred Securities and
Common Securities and (ii) receipt by the Issuer Trustees of an opinion of
counsel to the effect that such amendment or the exercise of any power granted
to the Issuer Trustees in accordance with such amendment will not affect the
Issuer's status as a grantor trust for Federal income tax purposes or the
Issuer's exemption from status of an "investment company" under the Investment
Company Act, provided that without the consent of each holder of Preferred
Securities and Common Securities, the Trust Agreement may not
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be amended to (i) change the amount or timing of any Distribution on the
Preferred Securities and Common Securities or otherwise adversely affect the
amount of any Distribution required to be made in respect of the Preferred
Securities and Common Securities as of a specified date or (ii) restrict the
right of a holder of Preferred Securities and Common Securities to institute
suit for the enforcement of any such payment on or after such date.
So long as any Corresponding Junior Subordinated Debentures are held by the
Property Trustee, the Issuer Trustees shall not (i) direct the time, method
and place of conducting any proceeding for any remedy available to the
Debenture Trustee, or executing any trust or power conferred on the Property
Trustee with respect to such Corresponding Junior Subordinated Debentures,
(ii) waive any past default that is waiveable under Section 513 of the
Indenture, (iii) exercise any right to rescind or annul a declaration that the
principal of all the Junior Subordinated Debentures shall be due and payable
or (iv) consent to any amendment, modification or termination of the Indenture
or such Corresponding Junior Subordinated Debentures, where such consent shall
be required, without, in each case, obtaining the prior approval of the
holders of a majority in aggregate Liquidation Amount of all outstanding
Preferred Securities; provided, however, that where a consent under the
Indenture would require the consent of each holder of Corresponding Junior
Subordinated Debentures affected thereby, no such consent shall be given by
the Property Trustee without the prior consent of each holder of the
corresponding Preferred Securities. The Issuer Trustees shall not revoke any
action previously authorized or approved by a vote of the Preferred Securities
except by subsequent vote of the holders of the Preferred Securities. The
Property Trustee shall notify all holders of the Preferred Securities of any
notice of default with respect to the Corresponding Junior Subordinated
Debentures. In addition to obtaining the foregoing approvals of the holders of
the Preferred Securities, prior to taking any of the foregoing actions, the
Issuer Trustees shall obtain an opinion of counsel experienced in such matters
to the effect that the Issuer will not be classified as a corporation or
partnership for United States Federal income tax purposes on account of such
action.
Any required approval of holders of Preferred Securities may be given at a
meeting of holders of Preferred Securities convened for such purpose or
pursuant to written consent. The Property Trustee will cause a notice of any
meeting at which holders of Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such holders is to be
taken, to be given to each holder of record of Preferred Securities in the
manner set forth in each Trust Agreement.
No vote or consent of the holders of Preferred Securities will be required
for an Issuer to redeem and cancel its Preferred Securities in accordance with
the applicable Trust Agreement.
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities that are owned by ITT Hartford, the Issuer Trustees or any
affiliate of ITT Hartford or any Issuer Trustees, shall, for purposes of such
vote or consent, be treated as if they were not outstanding.
GLOBAL PREFERRED SECURITIES
The Preferred Securities of a series may be issued in whole or in part in
the form of one or more Global Preferred Securities that will be deposited
with, or on behalf of, the Depositary identified in the Prospectus Supplement
relating to such series. Unless otherwise indicated in the applicable
Prospectus Supplement for such series, the Depositary will be DTC. Global
Preferred Securities may be issued only in fully registered form and in either
temporary or permanent form. Unless and until it is exchanged in whole or in
part for the individual Preferred Securities represented thereby, a Global
Preferred Security may not be transferred except as a whole by the Depositary
for such Global Preferred Security to a nominee of such Depositary or by a
nominee of such Depositary to such Depositary or another nominee of such
Depositary or by the Depositary or any nominee to a successor Depositary or
any nominee of such successor.
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The specific terms of the depositary arrangement with respect to a series of
Preferred Securities will be described in the Prospectus Supplement relating
to such series, ITT Hartford anticipates that the following provisions will
generally apply to depositary arrangements.
Upon the issuance of a Global Preferred Security, and the deposit of such
Global Preferred Security with or on behalf of the Depositary, the Depositary
for such Global Preferred Security or its nominee will credit, on its book-
entry registration and transfer system, the respective aggregate Liquidation
Amounts of the individual Preferred Securities represented by such Global
Preferred Securities to the accounts of Participants. Such accounts shall be
designated by the dealers, underwriters or agents with respect to such
Preferred Securities or by ITT Hartford if such Preferred Securities are
offered and sold directly by ITT Hartford. Ownership of beneficial interests
in a Global Preferred Security will be limited to Participants or persons that
may hold interests through Participants. Ownership of beneficial interests in
such Global Preferred Security will be shown on, and the transfer of that
ownership will be effected only through, records maintained by the applicable
Depositary or its nominee (with respect to interests of Participants) and the
records of Participants (with respect to interests of persons who hold through
Participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests
in a Global Preferred Security.
So long as the Depositary for a Global Preferred Security, or its nominee,
is the registered owner of such Global Preferred Security, such Depositary or
such nominee, as the case may be, will be considered the sole owner or holder
of the Preferred Securities represented by such Global Preferred Security for
all purposes under the indenture governing such Preferred Securities. Except
as provided below, owners of beneficial interests in a Global Preferred
Security will not be entitled to have any of the individual Preferred
Securities of the series represented by such Global Preferred Security
registered in their names, will not receive or be entitled to receive physical
delivery of any such Preferred Securities of such series in definitive form
and will not be considered the owners of holders thereof under the Indenture.
Payments of principal of (and premium, if any) and interest on individual
Preferred Securities represented by a Global Preferred Security registered in
the name of a Depositary or its nominee will be made to the Depositary or its
nominee, as the case may be, as the registered owner of the Global Preferred
Security representing such Preferred Securities. None of ITT Hartford, the
Property Trustee, any Paying Agent, or the Securities Registrar for such
Preferred Securities will have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial ownership
interests of the Global Preferred Security representing such Preferred
Securities or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests.
ITT Hartford expects that the Depositary for a series of Preferred
Securities or its nominee, upon receipt of any payment of Liquidation Amount,
premium or Distributions in respect of a permanent Global Preferred Security
representing any of such Preferred Securities, immediately will credit
Participants' accounts with payments in amounts proportionate to their
respective beneficial interest in the aggregate Liquidation Amount of such
Global Preferred Security for such Preferred Securities as shown on the
records of such Depositary or its nominee ITT Hartford also expects that
payments by Participants to owners of beneficial interests in such Global
Preferred Security held through such Participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name."
Such payments will be the responsibility of such Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if a
Depositary for a series of Preferred Securities is at any time unwilling,
unable or ineligible to continue as a depositary and a successor depositary is
not appointed by ITT Hartford within 90 days, ITT Hartford will issue
individual Preferred Securities of such series in exchange for the Global
Preferred Security representing such
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series of Preferred Securities. In addition, ITT Hartford may at any time and
in its sole discretion, subject to any limitations described in the Prospectus
Supplement relating to such Preferred Securities, determine not to have any
Preferred Securities of such series represented by one or more Global
Preferred Securities and, in such event, will issue individual Preferred
Securities of such series in exchange for the Global Preferred Security or
Securities representing such series of Preferred Securities. Further, if ITT
Hartford so specifies with respect to the Preferred Securities of a series, an
owner of a beneficial interest in a Global Preferred Security representing
Preferred Securities of such series may, on terms acceptable to ITT Hartford,
the Property Trustee and the Depositary for such Global Preferred Security,
receive individual Preferred Securities of such series in exchange for such
beneficial interests, subject to any limitations described in the Prospectus
Supplement relating to such Preferred Securities. In any such instance, an
owner of a beneficial interest in a Global Preferred Security will be entitled
to physical delivery of individual Preferred Securities of the series
represented by such Global Preferred Security equal in principal amount to
such beneficial interest and to have such Preferred Securities registered in
its name. Individual Preferred Securities of such series so issued will be
issued in denominations, unless otherwise specified by ITT Hartford, of $25
and integral multiples thereof.
PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities shall be made to DTC, which
shall credit the relevant accounts at DTC on the applicable Distribution Dates
or, if any Issuer's Preferred Securities are not held by DTC, such payments
shall be made by check mailed to the address of the holder entitled thereto as
such address shall appear on the Register. Unless otherwise specified in the
applicable Prospectus Supplement, the paying agent (the "Paying Agent") shall
initially be the Property Trustee and any co-paying agent chosen by the
Property Trustee and acceptable to the Administrative Trustees and ITT
Hartford. The Paying Agent shall be permitted to resign as Paying Agent upon
30 days' written notice to the Property Trustees and ITT Hartford. In the
event that the Property Trustee shall no longer be the Paying Agent, the
Administrative Trustees shall appoint a successor to act as Paying Agent
(which shall be a bank or trust company acceptable to the Administrative
Trustees and ITT Hartford).
BOOK-ENTRY ISSUANCE
DTC will act as securities depositary for all of the Preferred Securities.
The Preferred Securities will be issued only as fully-registered securities
registered in the name of Cede & Co. (DTC's nominee). One or more fully-
registered global certificates will be issued for the Preferred Securities of
each Issuer, representing in the aggregate the total number of such Issuer's
Preferred Securities, and will be deposited with DTC.
DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc. (the "New York Stock Exchange"), the American Stock Exchange,
Inc. and the National Association of Securities Dealers, Inc. Access to the
DTC system is also available to others such as securities brokers and dealers,
banks and trust companies that clear through or maintain custodial
relationships with Direct Participants, either directly or indirectly
("Indirect Participants"). The rules applicable to DTC and its Participants
are on file with the Commission.
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Purchases of Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser
of each Preferred Security ("Beneficial Owner") is in turn to be recorded on
the Direct and Indirect Participants' records. Beneficial Owners will not
receive written confirmation from DTC of their purchases, but Beneficial
Owners are expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the
Direct or Indirect Participants through which the Beneficial Owners purchased
Preferred Securities. Transfers of ownership interests in the Preferred
Securities are to be accomplished by entries made on the books of Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in Preferred Securities,
except in the event that use of the book-entry system for the Preferred
Securities of such Issuer is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities; DTC's records reflect only the identity of the Direct Participants
to whose accounts such Preferred Securities are credited, which may or may not
be the Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. as the registered holder of
the Preferred Securities. If less than all of an Issuer's Preferred Securities
are being redeemed, DTC's current practice is to determine by lot the amount
of the interest of each Direct Participant to be redeemed.
Although voting with respect to the Preferred Securities is limited to the
holders of record of the Preferred Securities, in those instances in which a
vote is required, neither DTC nor Cede & Co. will itself consent or vote with
respect to Preferred Securities. Under its usual procedures, DTC would mail an
omnibus proxy (the "Omnibus Proxy") to the Property Trustee as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts
such Preferred Securities are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
Distribution payments on the Preferred Securities will be made by the
Property Trustee to DTC. DTC's practice is to credit Direct Participants'
accounts on the relevant payment date in accordance with their respective
holdings shown on DTC's records unless DTC has reason to believe that it will
not receive payments on such payment date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices and will be the responsibility of such Participant and not of DTC,
the Property Trustee, the Issuer thereof or ITT Hartford, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of Distributions to DTC is the responsibility of the Property Trustee,
disbursement of such payments to Direct Participants is the responsibility of
DTC, and disbursements of such payments to the Beneficial Owners is the
responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depositary with
respect to any of the Preferred Securities at any time by giving reasonable
notice to the Property Trustee and ITT Hartford. In the event that a successor
securities depositary is not obtained, definitive Preferred Security
certificates representing such Preferred Securities are required to be printed
and delivered. ITT Hartford, at its option, may decide to discontinue use of
the system of book-entry transfers through DTC (or a successor depositary).
After a Debenture Event of Default, the holders of a majority in liquidation
preference of Preferred Securities may determine to discontinue the system of
book-entry transfers through DTC. In any such event, definitive certificates
for such Issuer's Preferred Securities will be printed and delivered.
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The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Issuers and ITT Hartford believe to be
accurate, but the Issuers and ITT Hartford assume no responsibility for the
accuracy thereof. Neither the Issuers nor ITT Hartford has any responsibility
for the performance by DTC or its Participants of their respective obligations
as described herein or under the rules and procedures governing their
respective operations.
REGISTRAR AND TRANSFER AGENT
Unless otherwise specified in the applicable Prospectus Supplement, the
Property Trustee will act as registrar and transfer agent for the Preferred
Securities.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of each Issuer, but upon payment of any tax or other
governmental charges that may be imposed in connection with any transfer or
exchange. The Issuers will not be required to register or cause to be
registered the transfer of their Preferred Securities after such Preferred
Securities have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than during the occurrence and continuance of an
Event of Default, undertakes to perform only such duties as are specifically
set forth in the Trust Agreements and, after such Event of Default, must
exercise the same degree of care and skill as a prudent person would exercise
or use in the conduct of his or her own affairs. Subject to this provision,
the Property Trustee is under no obligation to exercise any of the powers
vested in it by the Trust Agreement at the request of any holder of Preferred
Securities unless it is offered reasonable indemnity against the costs,
expenses and liabilities that might be incurred thereby. If no Event of
Default has occurred and is continuing and the Property Trustee is required to
decide between alternative causes of action, construe ambiguous provisions in
a Trust Agreement or is unsure of the application of any provision of a Trust
Agreement, and the matter is not one on which holders of Preferred Securities
are entitled under the Trust Agreement to vote, then the Property Trustee
shall take such action as is directed by ITT Hartford and if not so directed,
shall take such action as it deems advisable and in the best interests of the
holders of the Preferred Securities and the Common Securities and will have no
liability except for its own bad faith, negligence or willful misconduct.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Issuers in such a way that no Issuer will be
deemed to be an "investment company" required to be registered under the
Investment Company Act or taxed as a corporation for Federal income tax
purposes and so that the Corresponding Junior Subordinated Debentures will be
treated as indebtedness of ITT Hartford for United States Federal income tax
purposes. In this connection, ITT Hartford and the Administrative Trustees are
authorized to take any action, not inconsistent with applicable law, the
certificate of trust of each Issuer or each Trust Agreement, that ITT Hartford
and the Administrative Trustees determine in their discretion to be necessary
or desirable for such purposes, as long as such action does not materially
adversely affect the interests of the holders of the related Preferred
Securities.
Holders of the Preferred Securities have no preemptive or similar rights.
No Issuer may borrow money or issue debt or mortgage or pledge any of its
assets.
DESCRIPTION OF GUARANTEE
Each Guarantee will be executed and delivered by ITT Hartford concurrently
with the issuance by each Issuer of its Preferred Securities for the benefit
of the holders from time to time of such Preferred Securities. The Wilmington
Trust Company will act as indenture trustee ("Guarantee Trustee") under
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each Guarantee for the purposes of compliance with the Trust Indenture Act and
each Guarantee will be qualified as an Indenture under the Trust Indenture
Act. This summary of certain provisions of the Guarantees does not purport to
be complete and is subject to, and qualified in its entirety by reference to,
all of the provisions of each Guarantee Agreement, including the definitions
therein of certain terms, and the Trust Indenture Act. The form of the
Guarantee has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part. Reference in this summary to Preferred
Securities means that Issuer's Preferred Securities to which a Guarantee
relates. The Guarantee Trustee will hold each Guarantee for the benefit of the
holders of the related Issuer's Preferred Securities.
GENERAL
ITT Hartford will irrevocably agree to pay in full on a subordinated basis,
to the extent set forth herein, the Guarantee Payments (as defined below) to
the holders of the Preferred Securities, as and when due, regardless of any
defense, right of set-off or counterclaim that such Issuer may have or assert
other than the defense of payment. The following payments with respect to the
Preferred Securities, to the extent not paid by or on behalf of the related
Issuer (the "Guarantee Payments"), will be subject to the Guarantee: (i) any
accumulated and unpaid Distributions required to be paid on such Preferred
Securities, to the extent that such Issuer has funds on hand available
therefor, (ii) the Redemption Price with respect to any Preferred Securities
called for redemption to the extent that such Issuer has funds on hand
available therefor, or (iii) upon a voluntary or involuntary dissolution,
winding up or liquidation of such Issuer (unless the Corresponding Junior
Subordinated Debentures are distributed to holders of such Preferred
Securities), the lesser of (a) the Liquidation Distribution and (b) the amount
of assets of such Issuer remaining available for distribution to holders of
Preferred Securities. ITT Hartford's obligation to make a Guarantee Payment
may be satisfied by direct payment of the required amounts by ITT Hartford to
the holders of the applicable Preferred Securities or by causing the Issuer to
pay such amounts to such holders.
Each Guarantee will be an irrevocable guarantee on a subordinated basis of
the related Issuer's obligations under the Preferred Securities, but will
apply only to the extent that such related Issuer has funds sufficient to make
such payments, and is not a guarantee of collection.
If ITT Hartford does not make interest payments on the Corresponding Junior
Subordinated Debentures held by the Issuer, it is expected that the Issuer
will not pay Distributions on the Preferred Securities and will not have funds
legally available therefor. Each Guarantee will rank subordinate and junior in
right of payment to all Senior Debt. See "--Status of Guarantee". As a non-
operating holding company, most of the operating assets of ITT Hartford and
its consolidated subsidiaries are owned by such subsidiaries, and ITT Hartford
relies primarily on dividends from such subsidiaries to meet its obligations
for payment of principal and interest on its outstanding debt obligations and
corporate expenses. Accordingly, ITT Hartford's obligations under the
Guarantees will be effectively subordinated to all existing and future
liabilities of ITT Hartford's subsidiaries, and claimants should look only to
the assets of ITT Hartford for payments thereunder. The payment of dividends
by ITT Hartford's insurance company subsidiaries, including Hartford Fire, is
limited under the insurance holding company laws in which such subsidiaries
are domiciled. See "ITT Hartford Group". Except as otherwise provided in the
applicable Prospectus Supplement, the Guarantees do not limit the incurrence
or issuance of other secured or unsecured debt of ITT Hartford, whether under
the Indenture, any other indenture that ITT Hartford may enter into in the
future or otherwise. See the Prospectus Supplement relating to any offering of
Preferred Securities.
ITT Hartford has, through the Guarantee, the Trust Agreement, the Junior
Subordinated Debentures, the Indenture and the Expense Agreement, taken
together, fully, irrevocably and unconditionally guaranteed all of the
Issuer's obligations under the Preferred Securities. No single document
standing alone or operating in conjunction with fewer than all of the other
documents constitutes such guarantee. It is only the combined operation of
these documents that has the effect
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of providing a full, irrevocable and unconditional guarantee of the Issuer's
obligations under the Preferred Securities. See "Relationship Among the
Preferred Securities, the Junior Subordinated Debentures and the Guarantee--
General".
STATUS OF THE GUARANTEE
Each Guarantee will constitute an unsecured obligation of ITT Hartford and
will rank subordinate and junior in right of payment to all Senior Debt.
Each Guarantee will rank pari passu with the Guarantee issued by ITT
Hartford in respect of the 7.70% Cumulative Quarterly Income Preferred
Securities, Series A and with all other Guarantees issued by ITT Hartford.
Each Guarantee will constitute a guarantee of payment and not of collection
(i.e., the guaranteed party may institute a legal proceeding directly against
the Guarantor to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity). Each
Guarantee will be held for the benefit of the holders of the related Preferred
Securities. Each Guarantee will not be discharged except by payment of the
Guarantee Payments in full to the extent not paid by the Issuer or upon
distribution to the holders of the Preferred Securities of the Corresponding
Junior Subordinated Debentures. None of the Guarantees places a limitation on
the amount of additional Senior Debt that may be incurred by ITT Hartford. ITT
Hartford expects from time to time to incur additional indebtedness
constituting Senior Debt.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of the related Preferred Securities (in which case no
vote will be required), no Guarantee may be amended without the prior approval
of the holders of not less than a majority of the aggregate Liquidation Amount
of such outstanding Preferred Securities. The manner of obtaining any such
approval will be as set forth under "Description of the Preferred Securities--
Voting Rights; Amendment of Trust Agreement". All guarantees and agreements
contained in each Guarantee shall bind the successors, assigns, receivers,
trustees and representatives of ITT Hartford and shall inure to the benefit of
the holders of the related Preferred Securities then outstanding.
EVENTS OF DEFAULT
An event of default under each Guarantee will occur upon the failure of ITT
Hartford to perform any of its payment or other obligations thereunder. The
holders of not less than a majority in aggregate Liquidation Amount of the
related Preferred Securities have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Guarantee
Trustee in respect of such Guarantee or to direct the exercise of any trust or
power conferred upon the Guarantee Trustee under such Guarantee.
Any holder of the Preferred Securities may institute a legal proceeding
directly against ITT Hartford to enforce its rights under such Guarantee
without first instituting a legal proceeding against the Issuer, the Guarantee
Trustee or any other person or entity.
ITT Hartford, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not ITT Hartford is in compliance with
all the conditions and covenants applicable to it under the Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of a
default by ITT Hartford in performance of any Guarantee, undertakes to perform
only such duties as are specifically set forth in each Guarantee and, after
default with respect to any Guarantee, must exercise the same degree of care
and skill as a prudent person would exercise or use in the conduct of his or
her own affairs. Subject to this provision, the Guarantee Trustee is under no
obligation to exercise any of the
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powers vested in it by any Guarantee at the request of any holder of any
Preferred Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby.
TERMINATION OF THE GUARANTEE
Each Guarantee will terminate and be of no further force and effect upon
full payment of the Redemption Price of the related Preferred Securities, upon
full payment of the amounts payable upon liquidation of the related Issuer or
upon distribution of Corresponding Junior Subordinated Debentures to the
holders of the related Preferred Securities. Each Guarantee will continue to
be effective or will be reinstated, as the case may be, if at any time any
holder of the related Preferred Securities must restore payment of any sums
paid under such Preferred Securities or such Guarantee.
GOVERNING LAW
Each Guarantee will be governed by and construed in accordance with the laws
of the state of New York.
THE EXPENSE AGREEMENT
Pursuant to the Expense Agreement entered into by ITT Hartford under the
Trust Agreement (the "Expense Agreement"), ITT Hartford will irrevocably and
unconditionally guarantee to each person or entity to whom the Issuer becomes
indebted or liable, the full payment of any costs, expenses or liabilities of
the Issuer, other than obligations of the Issuer to pay to the holders of any
Preferred Securities or other similar interests in the Issuer the amounts due
such holders pursuant to the terms of the Preferred Securities or such other
similar interests, as the case may be.
DESCRIPTION OF CORRESPONDING JUNIOR SUBORDINATED DEBENTURES
The Corresponding Junior Subordinated Debentures are to be issued in one or
more series of Junior Subordinated Debentures under the Indenture with terms
corresponding to the terms of the related Preferred Securities. See
"Description of Junior Subordinated Debentures". This summary of certain terms
and provisions of relating to Corresponding Junior Subordinated Debentures and
the Indenture does not purport to be complete and is subject to, and is
qualified in its entirety by reference to the Indenture, the form of which is
filed as an exhibit to the Registration Statement of which this Prospectus
forms a part, and to the Trust Indenture Act. Whenever particular defined
terms of the Indenture (as supplemented or amended from time to time) are
referred to herein or in a Prospectus Supplement, such defined terms are
incorporated herein or therein by reference.
GENERAL
Concurrently with the issuance of each Issuer's Preferred Securities, the
Issuer will invest the proceeds thereof and the consideration paid by ITT
Hartford for the Common Securities in a series of Corresponding Junior
Subordinated Debentures issued by ITT Hartford to the Issuer. Each series of
Corresponding Junior Subordinated Debentures will be in the principal amount
equal to the aggregate stated Liquidation Amount of the related Preferred
Securities plus ITT Hartford's concurrent investment in the Common Securities
and will rank pari passu with the 7.70% Junior Subordinated Deferrable
Interest Debentures, Series A, Due February 28, 2016 and with all other series
of Junior Subordinated Debentures. The Corresponding Junior Subordinated
Debentures will be unsecured and subordinate and junior in right of payment to
the extent and in the manner set forth in the Indenture to all Senior Debt of
ITT Hartford. See "Description of Junior Subordinated Debentures--
Subordination" and the Prospectus Supplement relating to any offering of
corresponding Preferred Securities.
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OPTIONAL REDEMPTION
Unless otherwise specified in the applicable Prospectus Supplement, ITT
Hartford may, at its option, redeem the Corresponding Junior Subordinated
Debentures of any series on any Interest Payment Date (as defined herein) with
respect thereto, in whole at any time or in part from time to time. Except as
otherwise set forth in the applicable Prospectus Supplement, the redemption
price for any Corresponding Junior Subordinated Debentures so redeemed shall
be equal to any accrued and unpaid interest thereon to the date fixed for
redemption, plus the greater of (i) the principal amount thereof and (ii) an
amount equal to the Discounted Remaining Fixed Amount Payments. See
"Description of Junior Subordinated Debentures--Redemption".
If a Special Event in respect of an Issuer shall occur and be continuing,
ITT Hartford may, at its option, redeem the Corresponding Junior Subordinated
Debentures on any Interest Payment Date falling within 90 days of the
occurrence of such Special Event, in whole but not in part, subject to the
provisions of the Indenture. The redemption price for any Corresponding Junior
Subordinated Debentures shall be equal to 100% of the principal amount of such
Corresponding Junior Subordinated Debentures then outstanding plus accrued and
unpaid interest to the date fixed for redemption.
For so long as the applicable Issuer is the holder of all the outstanding
series of Corresponding Junior Subordinated Debentures, the proceeds of any
such redemption will be used by the Issuer to redeem the corresponding
Preferred Securities in accordance with their terms. ITT Hartford may not
redeem a series of Corresponding Junior Subordinated Debentures in part unless
all accrued and unpaid interest has been paid in full on all outstanding
Corresponding Junior Subordinated Debentures of such series for all interest
periods terminating on or prior to the Redemption Date.
CERTAIN COVENANTS OF ITT HARTFORD
ITT Hartford will covenant in the Indenture as to each series of
Corresponding Junior Subordinated Debentures, that if and so long as (i) the
Issuer of the corresponding series of Preferred Securities and Common
Securities is the holder of all such Corresponding Junior Subordinated
Debentures, (ii) a Tax Event in respect of such Issuer has occurred and is
continuing and (iii) ITT Hartford has elected, and has not revoked such
election, to pay Additional Sums in respect of such Preferred Securities and
Common Securities, ITT Hartford will pay to such Issuer such Additional Sums.
ITT Hartford will also covenant, as to each series of Corresponding Junior
Subordinated Debentures, that it will not, and will not permit any subsidiary
of ITT Hartford to, (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any
of ITT Hartford's capital stock or (ii) make any payment of principal,
interest or premium, if any, on or repay or repurchase or redeem any debt
securities (including other Corresponding Junior Subordinated Debentures) that
rank pari passu with or junior in interest to the Corresponding Junior
Subordinated Debentures or make any guarantee payments with respect to the
foregoing (other than (a) dividends or distributions in common stock of ITT
Hartford, (b) redemptions or purchases of any rights pursuant to ITT
Hartford's Rights Plan, or any successor to such Rights Plan, and the
declaration of a dividend of such rights in the future, and (c) payments under
any Guarantee) if at such time (i) there shall have occurred any event of
which ITT Hartford has actual knowledge that (a) with the giving of notice or
the lapse of time, or both, would constitute an "Event of Default" under the
Indenture with respect to Corresponding Junior Subordinated Debentures of such
series and (b) in respect of which ITT Hartford shall not have taken
reasonable steps to cure, (ii) ITT Hartford shall be in default with respect
to its payment of any obligations under the Guarantee relating to the
Preferred Securities of the Issuer to which Corresponding Junior Subordinated
Debentures of such series have been issued or (iii) ITT Hartford shall have
given notice of its selection of an Extension Period as provided in the
Indenture with respect to Corresponding Junior Subordinated Debentures of such
series and shall not have rescinded such notice, or such Extension Period, or
any extension thereof, shall be continuing. ITT Hartford will also covenant,
as to each series of Corresponding Junior Subordinated Debentures,
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(i) to maintain directly or indirectly 100% ownership of the Common Securities
of the Issuer to which Corresponding Junior Subordinated Debentures have been
issued, provided that certain successors which are permitted pursuant to the
Indenture may succeed to ITT Hartford's ownership of the Common Securities,
(ii) not to voluntarily terminate, wind-up or liquidate any Issuer, except (a)
in connection with a distribution of Corresponding Junior Subordinated
Debentures to the holders of the Preferred Securities in liquidation of such
Issuer, or (b) in connection with certain mergers, consolidations or
amalgamations permitted by the related Trust Agreement and (iii) to use its
reasonable efforts, consistent with the terms and provisions of the related
Trust Agreement, to cause such Issuer to remain a business trust and not to be
classified as an association taxable as a corporation for United States
Federal income tax purposes.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE CORRESPONDING JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEES
As long as payments of interest and other payments are made when due on each
series of Corresponding Junior Subordinated Debentures, such payments will be
sufficient to cover Distributions and other payments due on the corresponding
Preferred Securities, primarily because (i) the aggregate principal amount of
each series of Corresponding Junior Subordinated Debentures will be equal to
the sum of the aggregate stated liquidation amount of the corresponding
Preferred Securities and corresponding Common Securities; (ii) the interest
rate and interest and other payment dates on each series of Corresponding
Junior Subordinated Debentures will match the Distribution rate and
Distribution and other payment dates for the corresponding Preferred
Securities; (iii) ITT Hartford shall pay for all and any costs, expenses and
liabilities of such Issuer except the Issuer's obligations to holders of its
Preferred Securities under such Preferred Securities; and (iv) each Trust
Agreement further provides that the Issuer will not engage in any activity
that is not consistent with the limited purposes of such Issuer.
Payments of Distributions and other amounts due on the Preferred Securities
(to the extent the Issuer has funds available for the payment of such
Distributions) are irrevocably guaranteed by ITT Hartford as and to the extent
set forth under "Description of Guarantee". Taken together, ITT Hartford's
obligations under each series of Junior Subordinated Debentures, the
Indenture, the related Trust Agreement, the related Expense Agreement, and the
related Guarantee provide a full, irrevocable and unconditional guarantee of
payments of distributions and other amounts due on the related series of
Preferred Securities. No single document standing alone or operating in
conjunction with fewer than all of the other documents constitutes such
guarantee. It is only the combined operation of these documents that has the
effect of providing a full, irrevocable and unconditional guarantee of the
Issuer's obligations under the Preferred Securities. If and to the extent that
ITT Hartford does not make payments on any series of Corresponding Junior
Subordinated Debentures, such Issuer will not pay Distributions or other
amounts due on its Preferred Securities.
Notwithstanding anything to the contrary in the Indenture, ITT Hartford has
the right to set-off any payment it is otherwise required to make thereunder
with and to the extent ITT Hartford has theretofore made, or is concurrently
on the date of such payment making, a payment under the related Guarantee.
A holder of any related Preferred Security may institute a legal proceeding
directly against ITT Hartford to enforce its rights under the related
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee, the related Issuer or any other person or entity.
Each Issuer's Preferred Securities evidence the rights of the holders
thereof to the benefits of such Issuer, and each Issuer exists for the sole
purpose of issuing its Preferred Securities and Common Securities and
investing the proceeds thereof in Corresponding Junior Subordinated
Debentures. A
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principal difference between the rights of a holder of a Preferred Security
and a holder of a Corresponding Junior Subordinated Debenture is that a holder
of a Corresponding Junior Subordinated Debenture will accrue, and (subject to
the permissible extension of the interest period) is entitled to receive,
interest on the principal amount of Corresponding Junior Subordinated
Debentures held, while a holder of Preferred Securities is only entitled to
receive Distributions if and to the extent the Issuer has funds available for
the payment of such Distributions.
Upon any voluntary or involuntary termination, winding-up or liquidation of
any Issuer involving the liquidation of the Corresponding Junior Subordinated
Debentures, the holders of Preferred Securities will be entitled to receive,
out of assets held by such Issuer, the Liquidation Distribution in cash. See
"Description of Preferred Securities--Liquidation Distribution Upon
Termination". Upon any voluntary or involuntary liquidation or bankruptcy of
ITT Hartford, the Property Trustee, as holder of the Corresponding Junior
Subordinated Debentures, would be a subordinated creditor of ITT Hartford,
subordinated in right of payment to all Senior Debt, but entitled to receive
payment in full of principal and interest, before any stockholders of ITT
Hartford receive payments or distributions. Since ITT Hartford is the
guarantor under each Guarantee and has agreed to pay for all costs, expenses
and liabilities of each Issuer (other than the Issuer's obligations to the
holders of its Preferred Securities), the positions of a holder of such
Preferred Securities and a holder of such Corresponding Junior Subordinated
Debentures relative to other creditors and to stockholders of ITT Hartford in
the event of liquidation or bankruptcy of ITT Hartford would be substantially
the same.
A default or event of default under any Senior Debt would not constitute a
default or Event of Default under the Indenture. However, in the event of
payment defaults under, or acceleration of, Senior Debt, the subordination
provisions of the Indenture provide that no payments may be made in respect of
the Corresponding Junior Subordinated Debentures until such Senior Debt has
been paid in full or any payment default thereunder has been cured or waived.
Failure to make required payments on any series of Corresponding Junior
Subordinated Debentures would constitute an event of default under the
Indenture.
PLAN OF DISTRIBUTION
The Junior Subordinated Debentures and the Preferred Securities may be sold
in a public offering to or through underwriters or dealers designated from
time to time. ITT Hartford and each Issuer may sell its Junior Subordinated
Debentures and Preferred Securities as soon as practicable after effectiveness
of the Registration Statement of which the Prospectus is a part. The names of
any underwriters or dealers involved in the sale of the Junior Subordinated
Debentures and Preferred Securities in respect of which this Prospectus is
delivered, the amount or number of Junior Subordinated Debentures and
Preferred Securities to be purchased by any such underwriters and any
applicable commissions or discounts will be set forth in the Prospectus
Supplement.
Underwriters may offer and sell Junior Subordinated Debentures and Preferred
Securities at a fixed price or prices, which may be changed, or from time to
time at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices. In connection with the
sale of Preferred Securities, underwriters may be deemed to have received
compensation from ITT Hartford and/or the applicable Issuer in the form of
underwriting discounts or commissions and may also receive commissions.
Underwriters may sell Junior Subordinated Debentures and Preferred Securities
to or through dealers, and such dealers may receive compensation in the form
of discounts, concessions or commissions from the underwriters.
Any underwriting compensation paid by ITT Hartford and/or the applicable
Issuer to underwriters in connection with the offering of Junior Subordinated
Debentures and Preferred Securities, and any discounts, concessions or
commissions allowed by such underwriters to participating dealers, will be set
forth in a Prospectus Supplement. Underwriters and dealers participating in
the distribution of
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Junior Subordinated Debentures and Preferred Securities may be deemed to be
underwriters, and any discounts and commissions received by them and any
profit realized by them on resale of such Junior Subordinated Debentures and
Preferred Securities may be deemed to be underwriting discounts and
commissions, under the Securities Act. Underwriters and dealers may be
entitled, under agreement with ITT Hartford and the applicable Issuer, to
indemnification against and contribution toward certain civil liabilities,
including liabilities under the Securities Act, and to reimbursement by ITT
Hartford for certain expenses.
In connection with the offering of the Preferred Securities of any Issuer,
such Issuer may grant to the underwriters an option to purchase additional
Preferred Securities to cover over-allotments, if any, at the initial public
offering price (with an additional underwriting commission), as may be set
forth in the accompanying Prospectus Supplement. If such Issuer grants any
over-allotment option, the terms of such over-allotment option will be set
forth in the Prospectus Supplement for such Preferred Securities.
Underwriters and dealers may engage in transactions with, or perform
services for, ITT Hartford and/or the applicable Issuer and/or any of their
affiliates in the ordinary course of business.
The Junior Subordinated Debentures and the Preferred Securities will be a
new issue of securities and will have no established trading market. Any
underwriters to whom Junior Subordinated Debentures and Preferred Securities
are sold for public offering and sale may make a market in such Junior
Subordinated Debentures and Preferred Securities, but such underwriters will
not be obligated to do so and may discontinue any market making at any time
without notice. Such Junior Subordinated Debentures and Preferred Securities
may or may not be listed on a national securities exchange. No assurance can
be given as to the liquidity of or the existence of trading markets for any
Junior Subordinated Debentures or Preferred Securities.
LEGAL OPINIONS
Unless otherwise indicated in the applicable Prospectus Supplement, certain
legal matters will be passed upon for ITT Hartford and the Issuers by Michael
S. Wilder, General Counsel of ITT Hartford and for the Issuers by Richards,
Layton & Finger, special Delaware counsel to ITT Hartford, and for any
underwriters or agents by counsel to be named in the applicable Prospectus
Supplement.
EXPERTS
The audited consolidated financial statements and schedules of ITT Hartford
Group, Inc. and subsidiaries incorporated by reference herein and in the
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
incorporated by reference herein and in the Registration Statement in reliance
upon the authority of said firm as experts in accounting and auditing in
giving said report. Reference is made to said report, which includes an
explanatory paragraph with respect to the changes in the methods of accounting
for certain investments in debt and equity securities, and discounting certain
workers' compensation liabilities as discussed in the notes to consolidated
financial statements.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS
PROSPECTUS SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION
IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF ITT HARTFORD GROUP SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Prospectus Supplement.................................................... S-1
Risk Factors............................................................. S-5
Hartford Capital II...................................................... S-9
ITT Hartford Group....................................................... S-9
Recent Developments...................................................... S-11
Summary Financial Information............................................ S-15
Ratio of Earnings to Fixed Charges....................................... S-15
Use of Proceeds.......................................................... S-15
Capitalization........................................................... S-16
Accounting Treatment..................................................... S-17
Selected Financial Information........................................... S-17
Certain Terms of Series B Preferred Securities........................... S-19
Certain Terms of Series B Debentures..................................... S-21
Certain Federal Income Tax Considerations................................ S-26
ERISA Considerations..................................................... S-29
Underwriting............................................................. S-29
Validity of Securities................................................... S-30
Experts.................................................................. S-31
PROSPECTUS
Available Information.................................................... 2
Incorporation of Certain Documents by Reference.......................... 3
ITT Hartford Group....................................................... 3
The Issuers.............................................................. 4
Use of Proceeds.......................................................... 5
Ratio of Earnings to Fixed Charges....................................... 5
Description of Junior Subordinated Debentures............................ 5
Description of Preferred Securities...................................... 17
Description of Guarantee................................................. 30
Description of Corresponding Junior Subordinated Debentures.............. 33
Relationship Among the Preferred Securities, the Corresponding Junior
Subordinated Debentures and the Guarantees.............................. 35
Plan of Distribution..................................................... 36
Legal Opinions........................................................... 37
Experts.................................................................. 37
</TABLE>
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20,000,000 PREFERRED SECURITIES
HARTFORD CAPITAL II
% CUMULATIVE QUARTERLY INCOME PREFERRED SECURITIES, SERIES B (QUIPS SM)
GUARANTEED TO THE EXTENT THE ISSUER HAS FUNDS AS SET FORTH HEREIN BY
ITT HARTFORD GROUP, INC.
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GOLDMAN, SACHS & CO.
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
PAINE WEBBER INCORPORATED
PRUDENTIAL SECURITIES
INCORPORATED
REPRESENTATIVES OF THE UNDERWRITERS
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